Background 

Lifestyle Equities owns various trade marks, including word marks for BEVERLY HILLS POLO CLUB and devices based on horse-riding polo players. Lifestyle Equities brought a claim for trade mark infringement and passing off against a number of companies, including Hornby Street Limited, which manufactured and sold clothing, footwear and headgear bearing the signs SANTA MONICA POLO CLUB and pictures of polo players on horses, and also its directors Mr Kashif Ahmed and Ms Bushra Ahmed. 

At first instance, Hornby Street was found liable for trade mark infringement under ss. 10(2) and 10(3) of the Trade Marks Act 1994 (TMA), and the Ahmeds were found jointly liable as accessories to the infringement. However, the judge held that while the Ahmeds did not have to account for profits made by Hornby Street (which has since been dissolved) they did need to account for profits they had themselves made from the infringements. This included 10% of their salaries during the relevant period and a loan made by Hornby Street to Mr Ahmed.

Both parties appealed. The Court of Appeal allowed Mr Ahmed’s appeal in relation to the loan but otherwise agreed with and upheld the first instance decision, finding that, given primary liability for trade mark infringement is a matter of strict liability (meaning that no knowledge of the infringement is required), an accessory can be jointly liable without knowledge of the infringement. 

Both parties appealed again. This time, the Supreme Court unanimously dismissed Lifestyle Equities’ appeal but allowed the Ahmeds' appeal for the reasons discussed below. 

Knowledge requirement for accessory liability

Trade mark infringement is a strict liability tort, meaning that there is no need to prove knowledge or fault on the part of the infringer, providing the other essential elements are established. In the present case, the parties did not dispute that the Ahmeds' conduct as directors (i.e. giving instructions to manufacture, stock and sell infringing goods) induced Hornby Street to infringe Lifestyle Equities' trade marks. However, the Ahmeds were not themselves infringing Lifestyle Equities' trade marks, and claimed to have performed their duties in good faith and with reasonable care. The Supreme Court's decision therefore focused on the extent to which knowledge was required for the Ahmeds to be held liable as accessories to Hornby Street's infringements.

The Supreme Court ultimately found that an individual must have knowledge of the essential facts which make an act wrongful in order to be liable as an accessory for a tort, even if the tort is one of strict liability (as is the case for trade mark infringement). The Supreme Court considered that there was no reason why the required mental requirement for primary and accessory liability had to match – and this point was not specific to company directors but applied to anyone accused of accessory liability.

In considering the test for knowledge, the Supreme Court acknowledged that there are two distinct but overlapping bases of accessory liability through which a person may be held jointly liable with the infringer; namely, the torts of procuring a tort and committing a tort pursuant to a common design. In order to ensure consistency, the test of knowledge must apply equally to both.

On the facts of the present case, the Supreme Court found that the Ahmeds did not have the requisite knowledge and were therefore not liable as accessories: they had never heard of Lifestyle Equities' marks prior to receipt of a letter of claim, and had not known that a likelihood of confusion existed. 

Personal infringement in the course of employment

Although it did not arise in this claim, the Supreme Court considered whether the Ahmeds (as employees and/or directors of Hornby Street) could have personally infringed Lifestyle Equities' trade marks under s. 10 TMA, through acts done in the course of their employment and/or directorships. 

A requirement for trade mark infringement is that infringing acts are done "in the course of trade". The question was therefore whether this could relate to, for example, an employee's act in the course of their employer's trade. Whilst the language of the TMA does not specify to whose trade it relates, the Supreme Court reasoned that to impose such liability on employees or directors would be a "strong thing" that could result in, for example, shop assistants being liable for displaying infringing items in a store in the course of their employment. Instead, "in the course of trade" should be construed as "acts done by a person on their own account and not as an employee or agent of someone else".

Special protections for directors in tort

The Supreme Court rejected the Ahmeds' arguments that there was justification for special rules to apply generally to directors, agents or employees, so as to prevent accessory liability for trade mark infringement. In doing so, the Supreme Court rejected various attempts to draw parallels with other situations in which directors are protected. For example, the protection given to directors against liability for a company's breach of contract does not apply where the wrong is a tort, as there is no voluntary assumption of responsibility by the company, unlike where the company has entered a contract. Similarly, the protections contained in s. 172(1) of the Companies Act 2006, where a director acts in good faith to promote the success of a company, will not protect a director from liability for trade mark infringement, as a duty to someone other than a victim of a tort should not exclude liability to the victim.

Account of profits

Given that the Ahmeds were not found liable for the trade mark infringement of Hornby Street, the orders against them for an account of the profits made as a result of the infringement were wrongly made and were set aside.

In considering the issue of quantum, the Supreme Court identified some key principles regarding how profits are to be accounted for in the case of accessory liability:

Knowledge: The Supreme Court rejected arguments that a lack of knowledge should defeat a claim for an account of profits. The purpose of an account of profits is not to punish or deter wrongdoing, but rather to allocate profits made by the infringement to the owner of the rights. The effect is simply to put the infringer back in the same position as if the infringement had not occurred – which is fair irrespective of whether the infringer had knowledge of the infringement.

Personal or company profits: A person should only be liable for their own profits made from an infringement. To be liable for someone else's would amount to a penalty or fine, rather than the reallocation of profits to their rightful owner. Therefore, even if a director is found to be jointly liable for the IP infringement of a company, profits can only be accounted for by the defendant that actually received those profits, so a director will not be liable for the profits earned by the company.

Company loans: A loan on normal commercial terms does not amount to profit, even if it subsequently is forgiven or ceases to be repayable. If a loan was provided to the borrower on overly generous terms, then the borrower may be held to have made a profit from the loan, which needs to be accounted for. Similarly, if the loan was in fact a disguised dividend, then it may be considered profit to be accounted for. However, in the present case, despite the fact that the loan ceased to be repayable upon the dissolution of Hornby Street, the Court of Appeal and the Supreme Court agreed that it was not profit.

Salaries: The Supreme Court considered the Court of Appeal erred in holding that an employee paid for their labour is in principle no different from a sole trader, in the sense of the profits received from the infringing activity. The Supreme Court held that the employee's remuneration is not necessarily a profit and the two situations are not alike. Therefore, salaries paid as ordinary remuneration for services provided will not be considered profits to be accounted for. In light of this finding, it was not necessary to consider whether deductions should be made for any income or other tax payable.

Comment

This decision should provide welcome relief to directors and employees that they will not automatically be held liable for the acts of their companies/employers. However, it does not absolve them of liability entirely – particularly if they have knowledge of the wrongful acts, such as where counterfeit goods are being manufactured, sold, imported and/or exported. Directors and employees should therefore continue to be vigilant as to the acts being committed by their businesses.

While we expect claimants to continue to pursue directors in their personal capacity (if nothing else, to apply strategic pressure), they should be aware that to succeed with accessory liability claims, they will need to prove (with evidence) that the accessories in question had knowledge of the wrongful acts. Failing on such a claim may result in adverse costs consequences for claimants. Claimants should therefore consider putting directors of allegedly infringing companies on notice of the infringements as early as possible, via letters before action and/or take-down notices, as (at least) from that point it may help to demonstrate that directors had knowledge of the infringement(s), to assist with accessory liability claims.

The Supreme Court's decision shows that even where accessory liability can be established, the "profits" attributable to accessories to an infringement are rather limited, and so may not provide a claimant with the financial remedies hoped for. However, to the extent liability can be established against a director as an accessory, non-monetary relief, such as an injunction, may be beneficial in preventing the individuals involved from continuing the infringing activity via phoenix companies – particularly where the defendant company may be dissolved shortly after trial or judgment. As has long been the case, claimants (and their advisors) often need to get creative when seeking to prevent IP infringements.

This article was written for Entertainment Law Review

In a unanimous decision¹, the Supreme Court has dismissed Amazon's appeal against a Court of Appeal (CoA) decision, which found that the sale of branded goods on Amazon's US site, amazon.com, infringed UK and EU trade marks by virtue of the fact that UK consumers had been targeted. 

In reaching its decision, the Supreme Court noted that it is not the role of an appellate court to interfere with the evaluation of a lower Court, unless the judge has made an error of law or principle, or there is a flaw in their evaluation. The Supreme Court further noted that the mere fact that the appellate court would have reached a different decision was not sufficient to prompt an overturn. 

The dispute

As those that have been monitoring the case, as it made its way through the courts will know, Lifestyle Equities (Lifestyle) is the owner and exclusive licensee of various UK and EU trade marks relating to the 'Beverley Hills Polo Club' brand (BHPC). Those marks are registered in the UK and EU for various goods, including clothing. The appellants are five members of the Amazon group.

The dispute began when Lifestyle brought a claim against Amazon, alleging that its trade marks had been infringed by Amazon advertising and selling US branded goods to consumers in the UK and EU. Amazon argued that amazon.com was only targeted at US consumers and that the UK and each EU country had its own targeted website (amazon.co.uk etc.). 

Previous decisions

The High Court rejected Lifestyle's claims. Specifically, it agreed with Amazon’s argument that amazon.com had not targeted UK and EU consumers and therefore, that Amazon’s use of signs identical to the BHPC marks did not amount to 'use' of the trade marks, in the course of trade, in the UK or EU. The rationale for this conclusion was (amongst other things) that: 

• amazon.com advised UK consumers about the availability of amazon.co.uk; 
• amazon.co.uk would, for UK consumers, undercut delivery times and prices on amazon.com; and
• there were (statistically) very few sales of the US branded goods to the UK (albeit, the Supreme Court placed very little weight on this evidence, on the basis that this information would not be available to the average consumer, whose eyes targeting must be assessed through).

Lifestyle successfully appealed, with the CoA reversing the first instance decision and finding that UK and EU consumers had indeed been targeted via amazon.com. The reasons for this finding included that: 

• The homepage of amazon.com notified consumers that they could buy in eight different languages, in over 60 different countries and that goods could be delivered to the UK;
• The search result webpages and product detail webpages indicated that goods could be delivered and shipped to the UK; and 
• The "review your order" webpage showed that the potential buyer was located in the UK, with a UK shipping address, a UK billing address, the currency of payment was pounds sterling, and Amazon would make all of the necessary arrangements for the goods to be shipped to and imported into the UK (including a pre-estimate of import duties) and delivered to the consumer in the UK.

Amazon duly appealed the CoA's decision to the Supreme Court and that appeal was heard in March 2024. 

The concept of targeting 

Trade marks are territorial, meaning that they can only be enforced in the jurisdiction(s) where they are registered. In the digital age, this creates a mismatch, as while trade marks have geographical limits, websites typically do not. To address this, the concept of targeting has emerged through case law, and the right to bring a UK or EU infringement claim depends on whether consumers in those territories have been 'targeted' in the context of ads, or other offers of sale, for trade marked goods. It is now well-established that the mere availability of a website to consumers in a particular jurisdiction is not enough to create a cause of action – some form of active targeting is required.  

To determine whether the advertising of goods on a website operated from outside the jurisdiction (here, US operated amazon.com) is targeted at consumers within the 'relevant territory', the key question for the court is whether the average consumer, being someone who is reasonably well informed and reasonably observant, would consider that the website is directed at them. The court must carry out a multifaceted assessment of all relevant circumstances to determine this and to assess the reaction of the average consumer. 

The Supreme Court's decision

In the present case, the test essentially required the court to conduct a close review of how amazon.com presented itself to UK consumers. The lower courts had done so when reaching their decisions and the Supreme Court did likewise. As a result of this exercise, the Supreme Court concluded that an average UK and/or EU consumer would consider that amazon.com was directed at them. Decisive factors included: (i) messages on the amazon.com landing page offering to deliver goods to the UK, with similar messages shown on a high percentage of subsequent pages – all such messages were generated automatically where there was an enquiry from a UK IP address and this, the Supreme Court found, indicated that Amazon has thought about whether it was seeking sales to UK consumers and had decided that it was; (ii) specifying which goods could be 'shipped to the UK'; and (iii) a “Review your order” page offering to sell the relevant goods to consumers with UK addresses, with UK specific delivery times and the option to pay in £GBP. Following the Supreme Court's decision, these are all features that website operators should be mindful of, if they are to stay on the right side of trade mark infringement allegations. 

The Supreme Court did find that there were some 'contrary indicators' (for example, the option to use amazon.co.uk and the default display of prices in $USD) that pointed against targeting but considered that these were 'greatly outweighed' by the factors which pointed in the other direction. Interestingly and perhaps surprisingly, although the Supreme Court found that it could not be 'ruled out as a relevant factor', it was not inclined to treat the delivery of goods to the UK alone as weighty evidence of targeting: instead, it found that whether or not targeting had occurred depended more on what had happened up to the point that consumers placed orders (i.e. at the point of sale).

Key takeaways

The upholding of the CoA's decision (which provides a final decision on this matter), will have a significant impact on the liability of businesses operating websites across borders and their potential liability for IP infringements. Such businesses will now need to consider:

• Implementing geo-blocking measures, to ensure that websites are only accessible in target markets where IP rights have been cleared or do not exist;
• Making changes to their website content (including ads and sales information) to avoid being caught out for inadvertently targeting consumers in different territories;
• Carrying out enhanced due diligence before working with third party suppliers; and 
• Including warranties and indemnities in contracts, requiring confirmations that goods can be sold in all markets in which the business operates, and addressing liability where issues arise.

¹ Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8

Background 

Thatchers is a Somerset-based cider maker, who in 2020 launched its Cloudy Lemon Cider product in UK supermarkets (Thatchers Lemon Cider). Thatchers Lemon Cider is sold in cans decorated with illustrations of lemons, and a UK trade mark was registered by Thatchers in May 2020 for the Thatchers Lemon Cider logo (Thatchers trade mark). Thatchers Lemon Cider had achieved £20.7 million in sales from launch until September 2022. Two years after the launch of Thatchers Lemon Cider, Aldi launched a newly branded version of its own product, which is part of its "Taurus" cider range (Taurus Lemon Cider). Soon after, in September 2022, Thatchers started legal action against Aldi in the High Court for trade mark infringement and passing off. 

Thatchers' claims, Aldi's defence

In its claim, Thatchers alleged that Aldi had infringed the Thatchers trade mark and was passing off its Taurus Lemon Cider as licensed, approved by, or otherwise connected in trade with Thatchers, causing damage to Thatchers. The two trade mark infringement claims were:

• that the overall appearance of a single can of the Aldi Taurus Lemon Cider (the Aldi sign) was similar to the Thatchers trade mark, giving rise to a likelihood of confusion (under the Trade marks Act 1994 (TMA), s10(2)(b));
• use of the Aldi sign caused a link in the mind of the average consumer between the Aldi sign and the Thatchers trade mark, taking unfair advantage of, and/or being detrimental to the distinctive character and/or repute of, the Thatchers trade mark (under TMA, s10(3)), without due cause or the benefit of a defence.

Aldi's position was that it accepted that it had used the Thatchers Lemon Cider as a "benchmark" when developing the Taurus Lemon Cider, but it denied infringement of the Thatchers trade mark or passing off. 

In support of the s10(3) unfair advantage claim, Thatchers alleged that Aldi deliberately designed the packaging for the Taurus Lemon Cider to be less visually similar to other Taurus branded ciders and more visually similar to Thatchers Lemon Cider. This allegedly intentional design choice, Thatchers said, showed that Aldi intended to take unfair advantage of the Thatchers trade mark by deliberately creating a link between the products in the minds of consumers.

Thatchers also ran an argument that the taste of the Taurus Lemon Cider was different to the Thatchers Lemon Cider due to their different compositions and that this was "detrimental to the distinctive character" of its Thatchers trade mark leading to the dilution of the Thatchers trade mark. Thatchers expressed concern that its brand may be "tarnished" by consumers that did not like the taste of Taurus Lemon Cider then considering Thatchers Cloudy Lemon in a negative light. 

In its defence, Aldi argued that the Thatchers trade mark, packaging and the words "Cloudy Lemon Cider" for its Thatchers Lemon Cider were not sufficiently distinctive to be considered an "indication of origin". Aldi submitted that the lemon designs on a white background used on the Thatchers Lemon Cider can were not distinctive, and that the only distinctive element of the Thatchers trade mark indicating origin was the Thatchers brand name, which bore no resemblance to Taurus Lemon Cider. 

The decision

After she had conducted her own blind taste test, the judge who declared herself to be no expert having never tried cloudy lemon cider before, found the taste of the two products to be very similar but accepted they are different. 

S 10(2) TMA

While the judge found the overall appearance of the Taurus Lemon Cider can (as the Aldi sign), was similar to the Thatchers trade mark, this was only to a low degree. There was no real evidence of actual confusion of a direct or indirect nature, despite very high volumes of sales of both products. 

Although the Thatchers trade mark was found to have gained some enhanced distinctiveness through use, the principal dominant features of both marks were found to be the “THATCHERS” brand in the Thatchers trade mark and the “TAURUS” brand and bulls head device on the Aldi sign, which are dissimilar. Of those elements of the marks where there was some similarity, in relation to the colour palette the judge was satisfied that the use of the colour yellow on both cider products and lemon products was ubiquitous, and the use of lemons and lemon leaves on lemon-flavoured beverages including lemon ciders was very common.

The fact that the average consumer might look at the Aldi sign and bring to mind the Thatchers trade mark was not sufficient for a finding of confusion. The average consumer would not be confused and so the s10(2) claim was dismissed.

S10(3) TMA – Unfair advantage and/or detriment

The judge found that Thatchers had a reputation throughout the UK in relation to the Thatchers trade mark, at the relevant time. On the evidence provided by Thatchers, taken from consumer comments on social media about the Taurus Lemon Cider, for example: “not quite Thatchers Lemon but for half the price there's not much to complain about,” the judge found it was clear that for the average consumer, seeing the Aldi sign would call to mind the Thatchers trade mark. 

However, the judge decided that Thatchers' claim for unfair advantage failed because she was not satisfied that Aldi had an intention to exploit the reputation and goodwill of the Thatchers trade mark or that the use of the Aldi sign, objectively, had that effect. 

Thatchers' tarnishment case regarding the different taste of the Taurus product also failed. The judge was not convinced by Thatchers' argument that those consumers, (who were found not to be confused between the Thatchers trade mark and the Aldi sign, but who had linked the two products, and knew that they are drinking the Taurus Lemon Cider), who did not like the taste of the Taurus product would consider the Thatchers Lemon Cider sold under the Thatchers trade mark to be a less attractive proposition. 

Passing off

For the reasons given when reaching a finding of no likelihood of confusion, the judge was satisfied that there was no misrepresentation that Aldi is connected in trade with Thatchers. The claim in passing off therefore failed.

Key takeaways

This decision is largely unsurprising in that it confirms that a monopoly cannot be claimed over elements on packaging which indicate the nature of the goods contained within (in this case lemons, lemon leaves and the colour yellow for lemon-flavoured drinks). However, the dismissal of this claim in its entirety shows yet again that trade marks and rights in passing off offer little protection to brands when it comes to copycat products. Instead, where it is feasible, brands should think creatively about registering and enforcing alternative IP rights, such as copyright (as Charlotte Tilbury did) or design rights (in the case of M&S), which have proven to have greater success against copycats.

Of particular interest in this judgment is the fact that the judge accepted that the Thatchers Lemon Cider was being used by Aldi as a benchmark, not just for quality and price but also for packaging (eg the use of whole, not sliced, lemons on it). This decision therefore raises interesting questions as to where the fine line between "benchmarking" and free-riding will be drawn. Further, the judge noted that there was "relatively little in the way of documentary evidence arising from the Aldi side relating to design of the packaging,…. because the majority of the design decisions were communicated orally in accordance with Aldi's deliberately lean and efficient business model". Brands should therefore be alive to the fact that if they are hoping to rely on evidence coming to light during the disclosure phase, it may simply not exist – and that such conduct does not always result in criticism and adverse inferences being drawn.

¹ Thatchers Cider Company Ltd v Aldi Stores Ltd [2024] EWHC 88 (IPEC)

1. Autumn 2020: M&S registered four designs for a 'snow globe' range of gin.
2. November 2021: Aldi began distributing a bottle that shared several similar features, namely: (i) the shape and contour of M&S's bottle and cork stopper; (ii) the illumination of the bottle; (iii) the gold leaf flakes; and (iv) the bottle's winter forest silhouette design.
3. December 2021: M&S brought an action in the IPEC for infringement of its registered designs.
4. February 2023: HHJ Hacon found at first instance that Aldi had infringed Aldi's registered designs.
5. January 2024: In a trial before the Court of Appeal, Aldi submitted that the first instance judge had reached the wrong decision on the basis of seven grounds.

The grounds of appeal

Given that the grounds on which the Court of Appeal rejected the appeal are technical, a few key points of design law are worth keeping in mind when considering the court's reasoning:

• Grace period: A 12-month period after a designer has first disclosed a design to the public in which they may apply to register the design.
• Priority date: The date of a foreign application filing to which a subsequent UK filing within 6 months for the same design can be backdated.
• Design corpus: A body of designs for similar products that existed at the date of creation of a registered design which will affect the overall impression a design has on the informed user.

In simple terms, the Court of Appeal's responses to the various points of appeal were as follows:

Ground 1: Should disclosures of a design during the grace period be considered when assessing infringement?

No. The purpose of the grace period is to enable designers to test their designs on the market before undertaking the time and expense of obtaining registered designs. It would undermine the purpose of the grace period if disclosing a design during this time would weaken subsequent infringement claims by owners of the same design.

In any event, only one overall impression can be created on the informed user with respect to both validity and infringement.

Ground 2: Should disclosures of different designs during the grace period be considered when assessing infringement?

Designers should be protected with respect to both validity and infringement where they have disclosed different iterations of a design during the grace period that do not create a different overall impression, as was the case here. However, regard may be paid to designs disclosed during the grace period that create a different overall impression to the registered design.

Ground 3: Was it procedurally unfair for the judge to assess infringement at the priority date when it was common ground between the parties that assessment was at the filing date (particularly where the judge did not raise this issue at trial)? 

No. Whilst ideally the judge would have raised at trial his intention to assess infringement at the priority date, no argument was raised at appeal that the evidence or arguments at trial were different as a result of assessment at the priority date, meaning Aldi was not prejudiced by the decision. 

Ground 4: Was the judge wrong at law to assess infringement at the priority date on the basis that it would be it illogical to assess the overall impression at a point where there could have been no infringement?

No. The priority date, like the grace period, is relevant to both validity and infringement, and it is logical that the date at which an overall impression of a design is created on the informed user might predate the date from which it can be infringed.

Ground 5: If one of appeal grounds 1 to 4 succeeded, would the design corpus have been different such that the overall impression of the design would have been different?

No. The only design that might have been included if grounds 1 to 4 had succeeded was less similar to the registered designs than a design already included in the design corpus. The inclusion of the additional design would therefore have had no effect on the overall impression of the registered designs on the informed user.

Ground 6 (and M&S' respondent's notice): (Aldi's ground) Did the judge provide adequate reasons for concluding two designs were images created against a dark background (rather than that the bottles, or the liquid they contained, were themselves dark)? (M&S' ground) What about for the two designs that were found not to incorporate a light? In either case, if not, had the judge reached the correct decision?

The Court of Appeal accepted that it should reconsider both findings due to the lack of reasons provided in the first instance decision. In its consideration, the Court of Appeal set out several pertinent principles:

• Designs must be interpreted objectively; the intention of the designer is not relevant.
• Where the designs are photos, the design claim consists of the visible features of the product.
• Where registrations are distinct (M&S registered four designs for the same product), each cannot be interpreted by reference to the others.
• Contrary to the finding of the first instance judge, a product manufactured to the design can be relevant to the interpretation of the design in so far as to "confirm conclusions already drawn", so long as the product does not differ from the design. Here, the Court of Appeal considered a sample of M&S' gin bottle.
• The 'indication of product' section of the application can be used to resolve ambiguities regarding the design. Here, "light up gin bottle" appeared under the heading 'indication of product', which could be used to resolve ambiguity as to whether the design incorporated a light.

The Court of Appeal also agreed that two of M&S' registered designs did feature a dark background (rather than a dark bottle or dark liquid) as clear glass was visible in the photo, and there was no gap between the dark colouring and the stopper that you would expect to see if the image depicted a dark liquid.

The Court of Appeal overturned the finding that two of M&S' registered designs did not incorporate a light as various visible features in the photos indicated the presence of a light: gold flakes in the bottle were illuminated; there was a golden shimmer to the neck of the bottle; and although the scene depicted on the outside of the bottle appeared continuous, the colouring differed on either side of the bottle.

Ground 7: Did the judge err in principle or law in finding Aldi's product created the same overall impression as the registered designs?

This ground consisted of two objections:

1. Did the judge consider the impact of the lack of 'snow' and integrated lights in some registered designs on the comparison?

   The Court of Appeal overturned the finding that any of M&S' bottles did not include light features so this element fell away. For registered designs including photographs in which the 'snow' had settled to the bottom of the bottle, the proper comparison was to Aldi's bottle in an equivalent state, which the judge had done, albeit implicitly.

    

2. Did the judge attach undue weight to the shape of the bottle and stopper in the registered designs, where (i) the shape of the bottle was a registered third party design; and (ii) other designs in the corpus featured similar stoppers?

No. The stoppers and shape of the bottle were part of the corpus and taken into account by the judge in his finding such that the judge had not erred in principle. It was irrelevant that the bottle was a registered third party design apart from the fact that the design therefore formed part of the design corpus which, as mentioned, the judge took into account.

Key takeaways

Although the Court of Appeal ultimately largely affirmed the IPEC decision, the judgment provides helpful points for product owners to consider when developing their strategies for IP protection and useful technical guidance on the operation of registered design law. Key takeaways are as follows:

• There have been a series of judgments in which major brand product owners have struggled to protect against lookalikes because trade mark infringement and passing off have been too difficult to prove. This case raises the possibility of a new avenue to explore using registered design protection.

• Photos which clearly set out the features of a design can be an effective tool in infringement claims. It is important that photos are comprehensive as they will be considered objectively, without reference to the intention of the designer. Consider including multiple photos with an application as these will be assessed collectively.
• The overall impression created by multiple registrations for the same product will not be assessed by a court by reference to one another - each should be capable of standing on its own.
• The 'indication of product' field of an application should contain a description of the features of a design, as a court may consider this when interpreting a design.
• Products manufactured to a design may be considered by a court to confirm conclusions already drawn regarding features of the design, provided the products correspond to the design.
• Applicants for registered designs may continue to make use of the grace period without fear that this may damage their defence to infringement claims. Protection will extend to similar designs disclosed in this period provided they do not create a different overall impression on the informed user.
• Where a registrant has backdated registration of a design to the priority date, the overall impression of a design will be assessed at the date from which the design claims priority.

If the topics discussed in this article are relevant to issues that you or your business face, you may also be interested in our recently published designs text "Designs Law and Practice" (Third Edition, LexisNexis).

In the present case, M&S alleged that five of its UK registered design rights (the UKRDs) in its 'snow globe' liquor bottle were infringed by Aldi. M&S argued that the UKRDs protected: (i) the shape and contour of M&S's bottle and cork stopper; (ii) the illumination of the bottle; (iii) the gold leaf flakes; and (iv) the bottle's winter forest silhouette design.

The IPEC's decision

Although Judge Hacon found there to be several differences of "relatively minor detail" between Aldi's bottle and the UKRDs (such as the presence of "Infusionist" branding and colouring on the Aldi bottle), he determined that Aldi's bottle infringed the UKRDs because the overall impression it created was not different - the designs shared too many notable features. In reaching this decision, the judge considered the 'corpus' of other bottles in the UK spirit and liquor industry in the 12 months prior to the application date of the UKRDs and noted that the overall impression need only be "different" and not "clearly different".

Despite Aldi's arguments that the design of the bottle was dictated by technical requirements, Judge Hacon noted that M&S' designer had a considerable degree of freedom in designing the bottle. For example, the designer had freedom to decide the shape of the bottle and stopper and the integration of the light feature. Each of these features was considered by the Court to be aesthetic rather than technical, although the Court did accept Aldi's submission that the designer's use of gold flakes was restricted by technical requirements as the only suitable method by which snow could be represented.
 
Issues before the Court of Appeal

The Court of Appeal is now tasked with determining whether Judge Hacon correctly applied the law across the seven points of appeal raised by Aldi. Aldi's points of appeal are broadly split into two categories of argument: (i) the incorrect application of the relevant date for assessment of infringement, and (ii) the insufficient assessment of various elements of the UKRDs and allegedly infringing products and/or insufficient reasons given for the conclusions reached.

The relevant date for assessment of infringement

Aldi submitted in its appeal that the judge had erred in assessing infringement of the UKRDs as he had used the incorrect "relevant date". Aldi submitted that, while the key test for both infringement and validity was assessment of the overall impression on the informed consumer, the judge should have assessed infringement from the date on which the application to register the designs was submitted, rather than from the priority date. Aldi argue that the priority date only exists so as to exclude certain prior art from the design corpus for the consideration of validity, but only validity. The philosophy of the priority date since its inception in the 1800s was to enable the owner of the design enough time to register their designs in different jurisdictions. Without this period, the earlier registration of a design in one jurisdiction might invalidate the subsequent registration of the design in a different jurisdiction. Lord Justice Lewison summarised Aldi's argument on this point, that "although the legal test may be the same, the background against which the legal test is applied differs or may differ as between validity on one hand and validity on the other". Aldi submitted that if the judge had taken the application date as the relevant date for assessment of infringement, the design corpus would have been different such that no finding of infringement would have been reached. 

Assessment of specific elements of the UKRDs

Aldi submitted that Judge Hacon had not properly assessed the impact of the dark colour of the bottle in two of the UKRDs, or alternatively, had not provided proper reasons for his decision on this point. 

Aldi argued that if an applicant for a registered design chooses to include colour in the image, that colour is part of the design unless it is excluded. On the other hand, M&S argued that the dark colour in the UKRDs was simply the background behind the bottles when the photograph was taken and did not form part of the designs. While the first instance judge did comment on the "dark background" of these UKRDs, Aldi argued that, in context, this was merely a passing comment and he had not properly reasoned or assessed whether the dark colour formed part of the designs.

Aldi also submitted that, in making his comparison of the overall impressions of the UKRDs and the allegedly infringing product, Judge Hacon had not properly considered the impact of the incorporated light feature and gold flakes elements for those designs in which these features were not visible. Similarly, Aldi argued that undue weight had been attached by the judge to the shape of (i) the bottle, in circumstances where the bottle shape was a registered third party design; and (ii) the stopper, given its similarity to a number of other products that made up the design corpus.

Significance of the Court of Appeal's decision

The Court of Appeal's decision will be particularly important as the case represents a threat to the business strategy of discount retailers like Aldi, which have profited for years from selling lookalike products at discount prices. Discount retailers have generally been able to escape liability for trade mark infringement and passing off on the basis that their customers are not likely to be confused as to the origin of the product they are buying - they know that it is the supermarkets' 'own brand' product. However, this "get out of jail free" card is not available to discount retailers in registered design right infringement claims where there is no requirement to show likelihood of customer confusion in order to prove infringement.

If the Court of Appeal upholds the first instance decision, we may see more retailers and product owners seek to register their products through registered design rights, in an attempt to take advantage of these additional protections.

However, it should be noted that M&S' gin bottle has very particular aesthetic elements to its design, such as the shape, integration of a light, and use of gold flakes, which impact the Court's assessment of the degree of freedom of the designer. Designers may struggle to persuade the Court that less distinctive designs are the result of aesthetic rather than technical considerations, and discount retailers are likely to fight tooth and nail to prevent further damaging precedents. For now though, Aldi will be keen to overturn the IPEC decision to prevent the risk of a flood of such design right infringement claims. 

The Court of Appeal's judgment will also provide helpful general guidance to owners of UKRDs and practitioners given that claims for design right infringement seldom reach trial, with parties usually opting for commercial settlement instead.

We will provide a further update once the Court of Appeal has reached its decision, in the meantime, the IPEC judgment can be found here.

The Swatch group of watchmakers, known for brands such as Swatch, Tissot, Omega and Longines (Swatch) brought a claim against Samsung for infringement of 23 of its registered trade marks between October 2015 and February 2019. Swatch alleged that the marks were infringed by 30 watch face apps, which users could download from the Samsung Galaxy app store (the SGA store) to use on Samsung smartwatches. Samsung acknowledged that the disputed apps were downloaded approximately 160,000 times by users in the UK and EU. Despite each of the apps being developed by third party app developers, Swatch claimed that "Samsung was intimately involved in, and controlled, the whole process by which the apps were made available."

High Court decision 

At first instance the High Court allowed Swatch's claim for trade mark infringement, with the judgment focusing on the following:

Use in an online environment – Samsung argued that it did not use the signs, but rather provided a mere vehicle, in the form of the SGA store, through which app developers provided apps. However, the judge rejected this argument and instead considered Samsung's conduct as a whole in determining that it had used the signs in the course of trade for the purposes of Article 9 of the EU Trade Mark Regulation (EUTMR). Key to the finding were that Samsung: (i) marketed its smartwatches as "truly watch-like"; (ii) advertised the availability of a wide range of watch face apps in the SGA store; (iii) provided material assistance to developers of watch face apps via the Galaxy Watch Studio tool; and (iv) reviewed all apps for functionality and content before they were made available in the SGA store. Additionally, the apps in question were designed exclusively for, and operated only on, Samsung smartwatches. As such, Samsung had taken more than a passive role when it came to the distribution of the watch face apps. 

Identity and similarity of goods – It was held that watch face apps were not identical goods to those covered by Swatch's registered marks, specifically, "computers worn on the wrist", "electronic apparatus incorporating a time display", "smartwatches" or "smartphones in the shape of a watch". As an aside, this is an interesting finding in itself, particular in an NFT context where digitalised versions of real world goods are created and sometimes promoted under registered trade marks. However, on the basis of complementarity, the watch face apps were considered to be similar goods to the smartwatches listed in Swatch's trade mark registrations as each are essential for the other's operation. 

Use "in relation to" the goods – The judge held that the average consumer would understand that a sign in an app name within the SGA store would: (i) be used in relation to that app; and (ii) signal what would be represented once downloaded. By way of example, it was considered that an app with the name "Tissot Watch Face" would be understood to denote that the app would produce a Tissot watch face when downloaded to the smartwatch. This analysis also applied to any preview of the watch face that a consumer could view before downloading the app. As such, the judge concluded that signs that appear on watch faces produced by watch face apps are used in relation to smartwatches, which are at least highly similar to watches. 

Article 14 of the e-Commerce Directive ("ECD") – Article 14 of the ECD protects hosting providers from financial remedies for content shared on their sites, if they have no knowledge of their illegal nature or if they act expeditiously to remove or disable access to that content as soon as they become aware of it. Samsung argued that this "safe harbour" provision provided a complete defence to Swatch's claims. However, the judge rejected this argument and instead relied on L’Oréal v eBay, which outlined that the test is one of whether a diligent economic operator should have identified the illegality by reference to facts or circumstances of which they are actually aware. The content review process would have resulted in the reviewer, and through it Samsung, becoming aware of the app name and the appearance of the watch face. The judge was critical of Samsung's content review process, which was carried out by a small team of Vietnamese software engineers, who had limited knowledge of luxury brands and had no international or European market experience. In fact, Samsung itself acknowledged that the apps in question would not have passed the review process if the review team had been aware of the Swatch brand. 

Court of Appeal decision

Samsung appealed to the Court of Appeal, claiming that the judge had erred in three main respects. Each was dismissed by the Court of Appeal for the following reasons:

'Use' of the signs complained of was 'use' by Samsung, as opposed to by the relevant app developer – Samsung's appeal contended that the judge had taken an "overly broad" approach by considering certain irrelevant factors which the average consumer would not be aware of, and not considering other relevant factors. The Court of Appeal rejected this, finding that the judge had been entitled to conclude that there had been 'use' by Samsung for the following reasons:

• Samsung's actions went well beyond merely creating the technical conditions for use of the signs, allowing use of the signs and receiving payment. The factors the judge relied on (Samsung's marketing of its wide range of smartwatch faces, encouragement of app developers to create the watch faces, commercial interests in hosting third-party apps and review of all apps for both functionality and content before they were made available on the SGA store) were not inherent in the operation of an app store and did have a bearing on the context in which the signs were used.
• The judge was correct to consider matters which, even if unknown to consumers, nevertheless affected the average consumers' perception of the signs, including the presentation of the disputed apps in the SGA store and the grouping together of Samsung-developed and independently developed apps. While the judge did not have the benefit of the CJEU's decision in Louboutin at the time of her decision, the Court of Appeal considered that her approach was "entirely consistent" with that test. 
• The judge had not failed to take into account relevant factors such as: that the price of the app would be set by the developer; how the customer would encounter the signs; or that Samsung discouraged app developers from infringing third party IP rights. While the judge had in fact considered the first two of these factors explicitly, the Court of Appeal concluded that these were not factors which the average consumer would be aware of, and so would not impact their perception of the signs.

'Use' of the signs complained of included 'use' in relation to smartwatches – Samsung argued that the judge had been wrong to find use in relation to smartwatches because there was no realistic likelihood of persons other than the wearer of the smartwatch perceiving the signs to denote the origin of the smartwatch. This ground of appeal essentially challenged a finding of fact, yet Samsung failed to demonstrate that the judge's finding was not open to her and the Court of Appeal held that the judge was correct to make the finding she did. Whether such use in relation to smartwatches amounted to use by Samsung was also considered. However, the Court of Appeal agreed with the judge that the definition of "use" in Article 9(3) of the EUTMR is open-ended, and so it did not matter whether Samsung affixed the signs to smartwatches, provided that they used the signs in relation to smartwatches in some way.

Samsung could not rely on Article 14 of the ECD – Samsung appealed the judge's finding that it was "aware of facts or circumstances from which the illegal activity…is apparent", and, as such, was unable to rely on the hosting defence, pursuant to Article 14(1)(a). Swatch contended that Samsung's acts were not within Article 14(1) at all, on the basis that Samsung's role was an active one, rather than "merely technical, automatic and passive" with "no knowledge of or control over the content it stores". 

Samsung argued: (i) that app stores were not specifically excluded from Article 14(1) by an operator deciding whether an app could appear in its store or by reviewing for illegality; and (ii) that it should not be penalised for undertaking content review, as opposed to only implementing a notice and take down procedure. The Court of Appeal rejected Samsung's first point on the basis that Article 14(1) is concerned with the acts in issue, not the type of business carrying out such acts. The key question was whether Samsung's acts were active, which the Court of Appeal found they were and therefore gave Samsung knowledge of, and control over, the content on the SGA store. Samsung was therefore not entitled to benefit from the hosting defence as its role went beyond the parameters of this. 

On Samsung's second point, the Court of Appeal acknowledged this "familiar conundrum" with the exemptions in the ECD. In the UK, as the law currently stands, an intermediary service provider is not obliged to undertake content review and may choose simply to implement a notice-and-take down process. However, if content is reviewed, the Court of Appeal said that the provider has to accept the risk that they may lose their ability to rely on the hosting defence.

Comment 

This is the latest in a recent string of decisions in which online platforms have been held liable for third-party IP infringements. For many years, online platforms have been able to rely on the ECD defences in avoiding financial remedies where they are a mere conduit of, or are caching or hosting, third party IP infringing content. ECD defences apply only where the service provider is not actively involved in the wrongdoing. The result is that brand owners often find themselves engaged in a costly and time-consuming game of "whack-a-mole" when tackling online infringements (as opposed to be able to successfully pursue the platform so as to cut infringement off at source). Recent decisions suggest that the courts are redressing the balance between rights holder and online platform, by shifting the burden onto online platforms to take greater responsibility for illegal content. The alternative is that the cases merely complement the swathes of new regulation targeting online platforms and online content such as the Online Safety Act 2023 and the Digital Markets, Competition and Consumers Bill in the UK and the Digital Services Act and the Digital Markets Act in the EU.

Whatever the rationale, these recent cases show that the courts will not shy away from scrutinising the approach taken by online platforms in relation to third-party content. Online platforms will therefore need to weigh up whether to: (i) implement a content review process in a bid to weed out infringing content pre-distribution but accept that doing so may negate reliance on the hosting defence if infringement nevertheless occurs; or (ii) rely on a notice-and-take down process, in the hopes of being able to benefit from the hosting defence but accept the risks associated with not reviewing third-party content in advance, which could result in an uptick of infringing content making its way onto platforms, causing both financial and reputational damage. That decision is likely to be platform-specific, based on risk appetite and profile and above all difficult as neither option carries a certain outcome.

1. An 'inventor' within the meaning of the Patents Act 1977 must be a natural person. Dr Thaler's AI, Dabus, is not a person at all, let alone a natural person
2. There was, as such, no 'inventor' through whom Dr Thaler could claim any right to obtain a patent, and the fact that Dr Thaler was Dabus' owner did not assist him
3. The Hearing Officer for the comptroller was entitled to hold that Dr Thaler's patent applications were taken to be withdrawn for failure to satisfy the relevant provisions of the Act

The court addressed the 'qualified requirements' of the relevant provisions of the 1977 Act. Under those provisions, an applicant for a patent must (if not themselves an inventor) identify the person whom they believe to be (rather than who is) the inventor. Similarly, such an applicant must only indicate (rather than establish) the derivation of their right to be granted the patent. However, the court held that these qualifications did not save Dr Thaler's patent applications, which identified Dabus as the inventor and claimed that Dr Thaler's rights derived from his ownership of Dabus. The purpose of the qualifications is to ensure that genuine errors made by the applicant purporting to identify the inventor or explaining how the applicant derived the right to make the application should not prevent the applicant from being granted a patent, but they do not give the applicant free rein to provide uninformative or incomplete information in their patent applications.

To my mind, though, the real conclusion of the judgment comes around four-fifths of the way through, in a paragraph that quotes the Court of Appeal judgment:

"If patents are to be granted in respect of inventions made by machines, the 1977 Act will have to be amended."

In other words, the real question is: will legislators in the UK (and elsewhere) now seek to change the law to allow AI to be named as an inventor on patent applications, or to allow some other mechanism by which developments generated by AI might be afforded patent protection?

The Supreme Court judgment itself explicitly mentions "policy issues about the purpose of a patent system, the need to incentivise technical innovation and the provision of an appropriate monopoly in return for the making available to the public of new and non-obvious technical advances, and an explanation of how to put them into practice across the range of the monopoly sought", even though addressing those issues formed no part of the judgment.

Some commentators have asked whether legislators will want to reward AI owners for merely building and feeding better AI systems by granting patents for the output from those systems.

However, to my mind, the key question is whether the legislators are happy to allow potentially innumerable new and non-obvious technical developments generated by ever-improving AI to fall between the cracks of current patent law and be unpatentable. If that happens, those developments, some of which may be valuable to society at large, might simply be kept secret by the owners of the AI that generated them. While some of those developments may be amenable to reverse engineering, some of them will not. Those developments may then be lost forever, like flexible glass and Greek fire.

Is that a desirable outcome for legislators and society, particularly where the law relating to novelty and inventive step is completely agnostic to what the inventor did when formulating the invention, and indeed to what the inventor is? All that matters for novelty and inventive step is what the notional skilled person, which is a legal construct, would have thought about the claimed invention.

First published in The Patent Lawyer, 9 January 2024.

The techniques used and outputs of generative AI systems are bringing into sharp focus important issues regarding infringement of works protected by intellectual property rights, content licensing and authorship and ownership of AI works.

Text and data mining—the current position

Text and data mining (TDM) refers to the automated computational analysis of information in digital form, such as text, sounds and images (often copyright protected works) to obtain data about those works. Machine learning is then applied to the data to enable dynamic learning from this input data. TDM is a hugely important element in advancing AI applications and the technique can often result in unauthorised use of copyright protected works leading to infringement. Consequently, there has been a TDM copyright exception in the UK since 2014, but only where access to the copyright protected work is lawful and where the computational analysis is for the purposes of research for a non-commercial purpose.

In June 2022, the UK Intellectual Property office (IPO) signalled its intention to introduce a new copyright and database exception that would allow TDM for any purpose including commercial use. The proposal did not permit rights holders to contract or opt out of the exception or to charge for UK licences for TDM. There was subsequent outcry by rightsholders, particularly from the publishing and creative industries sector, on the breadth of the exception and the proposal has been withdrawn pending an impact assessment on the implications for the creative industries.

The current position in the UK is therefore that AI systems trained on data protected by intellectual property rights such as copyright and database rights must do so under a valid licence or face the possibility of infringement proceedings.

Text and data mining—UK reforms

Alongside the March 2023 Spring budget, the government published Sir Patrick Vallance's Pro-Innovation Regulation of Technologies Review (PIRT) setting out his recommendations, as well as publishing the government's response to support innovation in generative AI. The PIRT acknowledged that government engagement with stakeholders had shown that the relationship between intellectual property law and generative AI is unclear and there was a lack of regulatory clarity as to the direction of UK reforms, particularly for AI firms deploying TDM techniques to generate new content.

The PIRT suggested TDM should be permitted for any purpose to include the use of publicly available content protected by intellectual property as an input to TDM (including databases). Intellectual property rights would apply to the output of any product. It also recommended a code of practice, a requirement for altered images to be labelled as generated or assisted by AI and the use of technological solutions for ensuring attribution and recognition, such as watermarking.

In its response and in support of the PIRT recommendations, the government proposed that the IPO will produce a code of practice by the summer that will provide guidance to support AI firms in accessing copyright protected works as an input to their models, while ensuring there are protections (e.g. labelling) on generated output. An AI business that commits to the code of practice will be offered a reasonable licence by the rights holder. If the code of practice is not adopted or if agreement is not reached, targeted legislation may follow. It will be interesting to see how this proposal impacts on the High Court copyright infringement proceedings commenced by Getty Images against Stability AI in January of this year (and other similar proceedings). In the proceedings Getty Images alleges that Stability AI unlawfully copied and processed millions of images protected by copyright and the associated metadata.

The attribution or labelling of works can be challenging as AI systems can produce new works from mere fragments of other works, such as words or parts of images, so the labelling of those words or sections will be a challenge. Any licence fees will also have to account for the degree of use, as a blanket fee for any labelled content could result in AI system developers paying costly licence fees for generated works.

The IPO is also to take forward the PIRT's enforcement recommendation to provide guidance (again, by the summer) to AI firms encouraging the development of AI tools which assist with enforcement. No indication has currently been given on any enforcement mechanisms and/or any penalties for the misuse of protected works in AI generated works.

The government's pro-innovation AI White Paper

At the end of March 2023, the UK government released its pro-innovation AI White Paper setting out the government's future intentions for the regulation of AI systems. For more detail on the AI White Paper and the UK's proposed approach to regulating AI, see our earlier post.

Intellectual property is mentioned only once in the White Paper, with the government repeating its intention to take forward Sir Patrick Vallance’s PIRT recommendations relating to intellectual property law and generative AI.  The main message of the AI White Paper, as set out firmly in the title, is of the government's desire to remove barriers to innovation in order to drive growth and prosperity and to strengthen the UK's position as a global leader in AI.

Since TDM plays such a significant role in advancing AI applications it will be interesting to see how the government marries this pro-innovation approach with the PIRT/government's licensing proposals for AI firms accessing copyright protected works as an input to their models, as mentioned above.  The UK government's commercial text and data mining exception was axed as a result of the robust response it received to its incredibly broad proposal and it has since promised to "engage seriously, cross-party and with the industry, through the IPO, to ensure that we can, when needed, frame proposals that will command the support required". The tension between those providing protected content and those using it is likely to remain until there is more flesh to the bones of the new TDM exception and licensing options.

Generative AI holds tremendous promise for a wide range of applications, but it also raises important questions about the applicability of intellectual property rights and ownership of generated works. As this technology continues to evolve, it will be important to develop new ownership models and explore where the infringement risks are in relation to this emerging technology.

The dispute

There continue to be many widely publicised examples of retailers taking legal action to protect their much-loved products against 'lookalikes' circulating in the market.  Discount supermarkets are adept in their ability to toe the line in this space and as a result many 'lookalikes' cases settle – take last year's spat between M&S and Aldi in relation to their respective caterpillar cakes (as covered extensively in RPC Bites here). For this reason, judgments in the 'lookalikes' arena are hotly anticipated and, in this case, M&S and Aldi are once again at loggerheads.

M&S's revised 2020 'Snow Globe' gin range, incorporating edible gold flakes suspended in the gin, a bottle with a built-in light in the base, and a festive winter themed silhouette design around the outside went to market in Autumn 2020. In November 2021, Aldi launched its 'Infusionist' gin liqueur, which also incorporated edible gold flakes, a light-up bottle and wintery tree silhouettes.

                M&S UKRD 613428                                                                    Aldi's infringing product

M&S issued design right infringement proceedings against Aldi in December 2021, alleging that Aldi's 'Infusionist' gin liqueur, infringed 5 of its UK registered design rights (the UKRDs) for a light-up gin bottle registered in April 2021, with a priority date of 15 December 2020. The relevant designs for the purposes of these proceedings protect (i) the shape and contour of M&S's bottle and cork stopper; (ii) the illumination of the bottle; (iii) the gold leaf flakes; and (iv) the bottle's winter forest silhouette design.

The IPEC's decision

The court first considered whether M&S's 'Snow Globe' bottle clearly displayed all of the features protected by its UKRDs, and then turned to the application of the legal test for design right infringement i.e. whether, for an informed user, the design of Aldi's 'Infusionist' gin liqueur bottle created a sufficiently different "overall impression" to M&S's UKRDs.

Did M&S's 'Snow Globe' bottle clearly display its UKRDs?

The images used for the registration of M&S's UKRDs were photographs of its 'Snow Globe' gin bottles (as shown above). Since two of M&S's UKRDs showed the product against a light background (causing the light up feature of the bottle to be less clear) and two showed it against a dark background (see UKRD 613428 shown above), there was a dispute as to whether the integrated light feature inside M&S's 'Snow Globe' gin bottle had been successfully incorporated in all of M&S's UKRDs.

Although Judge Hacon noted that M&S had included the description 'Light Up Gin Bottle" when registering each of its UKRDs (and each of the parties noted that there was some ambiguity over whether this had any legal effect), Judge Hacon confirmed that registered designs are to be interpreted objectively by the court without having regard to the intention of the owner of the registered designs. In doing so, he found that only the UKRDs showing the bottle against a dark background had successfully incorporated the integrated light feature. A consideration for design rights owners, is therefore that descriptions of the design may not on their own confirm the scope of protection offered by the registered design but at the same time they are not entirely irrelevant as contrary to the position in the EU, descriptions are published alongside design registrations in the UK. In this example, had M&S only registered its designs on a light background, it may have run into difficulty relying on the integrated light feature as a registered design for want of this being sufficiently clear on the face of the design drawing.

Did Aldi infringe M&S's UKRDs?

In assessing whether Aldi had infringed M&S's UKRDs, the court followed the well-established test for comparing an allegedly infringing design with a UKRD as set out in Cantel Medical (UK) Limited v ARC Medical Design Limited [2018] EWHC 345 (Pat).

1. The sector in which the UKRDs are applied
   M&S sought to argue that the relevant sector should be 'Christmas liqueur in the UK' as sales figures for its 'Snow Globe' gin range were highest in December. However, highlighting the importance of applying an objective assessment, Judge Hacon confirmed that the relevant sector was the UK spirit and liqueur sector generally – the decorative aspects of M&S's UKRDs depicting winter did not limit the months of year in which sales could be made and the main features of the UKRDs existed in the wider UK spirit and liqueur market.
   
   
2. The 'informed user
   Design right infringement is assessed from the perspective of the informed user i.e.  a "particularly observant" user of the product in which the designs are intended to be incorporated, who pays a "relatively high degree of attention" to the product, has knowledge of the design features existing in the sector and "conducts a direct comparison of the designs in issue". The informed user was therefore identified as the UK consumer who purchases spirits and liqueurs for use in the home, as opposed to a supermarket buyer.
   
   
3. The designer's degree of freedom in creating its design
   Generally speaking, the higher the degree of freedom of the designer, the easier it may be to demonstrate design rights infringement. Further, design rights cannot subsist in features of a product which are solely dictated by the product's technical function. Although Aldi sought to argue that the distribution and use of gold flakes, the integrated light feature at the base of the bottle and the upper curved portion of M&S's bottle being free of markings were solely dictated by technical function, Judge Hacon found that each of these features (although practical in nature) were aesthetic choices rather than technical requirements and that the designers of M&S's 'Snow Globe' bottle had "considerable freedom, particularly with regard to the shape of the bottle and the design to be printed on it" which was distinct from other bottles on the market.
   
   
4. The "overall impression" on the informed user
   This is the essence of design rights infringement cases – a comparison of the overall impression conveyed by, in this case, M&S's UKRDs with the design of Aldi's 'Infusionist' gin liqueur bottle, on the informed user. This exercise includes consideration of the 'corpus' of other designs available in the relevant sector (including designs by the Claimant) at the relevant date i.e., 12 months prior to the application or priority date for the UKRDs (which was 15 December 2019 in this case). Although four bottles within the design corpus included an integrated light feature, five had some form of snow effect, and two bottles incorporated both of those aspects, none (aside from the M&S 2019 'Snow Globe' gin bottle), featured the 'botanics' bottle shape and snow effect similar to M&S' UKRDs. The M&S 'Snow Globe' gin bottle was therefore notably different from the corpus of existing designs.  Where this is the case, it is usually more difficult for subsequent designs to create a different overall impression to the registered designs.

Aldi, however, sought to emphasise several differences between its design and M&S's UKRDs, including the use of the words "The INFUSIONIST Small Batch" on its bottle (M&S's UKRDs featured no words), the brighter and busier winter scenery, and the fact that its stopper was darker in colour. However, Judge Hacon found that these differences were "of relatively minor detail" in comparison to the significant similarities, which would be striking to the informed user, namely: (i) the identical 'botanics' shape of the two bottles, (ii) the identical shape of the stoppers, (iii) the wintry tree scenes over the sides of the bottles, (iv) the 'snow effect' created by the gold flakes, and (v) the integrated light feature in the base of the bottles. As such, Aldi's 'Infusionist' gin liqueur bottle failed to produce a different overall impression to M&S' UKRDs and Aldi was found to have infringed those UKRDs.

Key takeaways

For lookalike products in the food and drink sector, demonstrating a likelihood of confusion for trade mark infringement and passing off claims can be an uphill battle, particularly when up against discount supermarkets: it will inevitably be tricky to prove a likelihood of a consumer entering Aldi and purchasing an Aldi product under the confusion of it being an M&S product. Brands face this issue time and time again. Consequently, the reliance on registered designs in this case (where likelihood of confusion is irrelevant) demonstrates the value of registering designs to combat lookalike products when protection pursuant to other IP rights falls short.

 The Au Vodka brand was launched in 2015 as a premium brand. It launched flavoured vodkas in 2019/2020 and saw its annual revenue exceed £40m in the year 2020/2021. Au Vodka markets heavily via social media using celebrity endorsement and has a current annual marketing budget of £3.6m.

NE10 Vodka (graphite bottle in image) launched a new range of vodka in late August 2022 via a website, Instagram page and Facebook.  Au Vodka reacted swiftly and within two weeks they'd applied for an interim injunction to stop the marketing and sale of NE10 Vodka's new range until trial. The claim is for passing off, based on the allegedly deceptively similar get-up of NE10 Vodka to the get-up used by Au Vodka. 

The interim injunction application

 In considering American Cyanamid principles, the High Court recognised that in assessing the balance of justice in passing off cases it is frequently necessary to "form a view as to the strength of the claimant's claim in order to understand the scale of any likely damage".  In forming that view the court has dropped some markers on its thinking on the law of passing off as applied to the facts of this case and on the evidence submitted with the application. This may, subject to further arguments and evidence, provide some clues as to where the court may be headed at trial. 

Turning to the Jif Lemon passing off case, the court considered the three elements required to prove passing off of goodwill, misrepresentation and damage. It noted that "at the heart of passing off lies deception or its likelihood, deception of the ultimate consumer in particular". 

The court also considered the EU IPO Board of Appeal decision (R 1839/2021-5, 3 June 2022) cited by Au Vodka which concerned an application to register as a 3D mark the shape of a bottle for alcoholic beverages. Following the appeal, the shape mark was allowed to proceed to registration. In response to Au Vodka citing the Board of Appeal decision, the court clarified (quoting the Mag Instrument case) that only marks that depart significantly from the norm or customs of the sector and thereby fulfil their essential function of indicating origin, are not devoid of distinctive character. 

The court proposed to proceed "on the common sense basis that generally, consumers are not in the habit of making assumptions about the origin of products on the basis of the shape of goods in the absence of any graphic or word element." The word/graphic elements on the respective bottles: Au79 and NE10 would therefore be taken into account in establishing Au Vodka's reputation (the foundation for misrepresentation) with the name 'Au' and the gold coloured bottle the most significant features. 

The court then turned to the arguments on misrepresentation and the instances of actual consumer confusion, submitted by Au Vodka. It decided (acknowledging that it had strayed into mini-trial territory) that these did not amount to instances of actual deception. However, overall there was a serious issue to be tried on passing off with a finely balanced case. It stressed that the evidence that would emerge between now and trial could swing the case one way or the other. 

The court declined to grant an interim injunction.  When considering the American Cyanamid criteria and specifically whether damages would be an adequate remedy for NE10 Vodka if an injunction was granted pending trial, the judge appeared to take on board NE10 Vodka's claim that an injunction would 'kick the legs out from underneath [them] after a successful launch'. It focussed on the fact that NE10 Vodka's range had already been launched and that the grant of an injunction would result in new employees being laid off. Consequently, it found that damages would not be an adequate remedy. 

NE10 Vodka's defence to passing off claim

 Following the unsuccessful application, NE10 Vodka filed their defence on 17 October 2022. In their defence they adopt the position that it is common in the trade for vodka to be sold in tall elongate bottles, that 'Au' and the gold colour are the dominant and distinctive component of the getup, that upper and lower plates are common on bottles, and that NE10 Vodka sourced the bottles in China and the shape was available “off the shelf". They claim there is no deception.

The trial, directed by the court to be as early as possible in the term starting in January 2023, is eagerly awaited.

Au WaterRower 

 Au Vodka's claim has been pleaded based on passing off. This is definitely the key right to plead in this case, but it is arguable that Cofemel may also be triggered here. It is recognised that as part of retained EU law, Cofemel provides for the protection of any 'identifiable' work of applied art using only the ‘author’s own intellectual creation’ originality test. Remember—first instance courts are bound by retained EU case law; the Court of Appeal may depart from it for good reason while the Supreme Court is not bound by it at all.

Under Cofemel, categorisation of a work (as is the case currently under CDPA 1988) is not required. The Brompton Bicycle case extended this reasoning holding that a product whose shape is, at least in part, necessary to obtain a technical result may be protected by copyright where it is an original work resulting from the author’s own intellectual creation in that, through its shape, the author expresses their creative ability in an original manner by making free and creative choices in such a way that that shape reflects their personality.

These cases and unsettled issues were raised again in the WaterRower case in a strike out application in August 2022.  The court declined to strike out WaterRower’s claim for infringement of copyright in its water resistance rowing machine (the WaterRower) on the basis that the WaterRower did not meet the requirements to be a ‘work of artistic craftsmanship’. Instead, the judge held that the claimant had a real prospect of demonstrating at trial that the WaterRower meets the requirements of Hensher and Cofemel/Brompton and is a work of artistic craftsmanship. There was a real prospect of success under Cofemel/Brompton since the claimant could demonstrate that while the creator worked within the design constraints for a water resistance rowing machine, they were still able to exercise their free and creative choices.

For Au Vodka, a copyright claim would certainly bring evidential focus to copying allegations (which are alleged in the Particulars of Claim and which NE10 Vodka deny with there being 'no intentional copying') and away from deception which so far has produced a lukewarm response from the court.  

While there may be a sense of anticipation with the prospect of a successful copyright claim in more utilitarian object cases, the Retained EU Law (Revocation and Reform) Bill lurks in the background having just had its second reading on 25 October 2022. On the one hand this might mean that if the Bill passes, the courts of England and Wales will no longer feel compelled to follow Cofemel. On the other hand, there have been hints that due to large numbers of staff required to examine the huge swathes of EU retained law, the government might exercise the Bill's power of extension and push back the sunset clause to as late as 2026. Within that time frame, it is likely that the courts will need to address the Cofemel shaped elephant in the court room. 

Key takeaways on the passing off claim

The launch of NE10 Vodka was in late August and the interim injunction was sought on 16 September 2022 but even in this short period of time the court felt that NE10 Vodka had established a working trade that would be wrong to unravel. This case shows how important it is for brands to monitor the market and take action promptly to prevent the launch of an allegedly infringing product before it is on the market.

The court also spent some time commenting on Au Vodka's letter before action, sent the day following NE10 Vodka's launch (not ten days before when an image of the NE Vodka bottle was posted on Instagram).  Although Au Vodka's claim was discernible in the letter it was "not very well articulated" and was "buried in amongst a series of hopeless allegations which, understandably, have not been pursued." The judge also described it as "highly aggressive". These negative comments act as a reminder for brands to seek legal advice early from advisors experienced in lookalike claims and to take a measured, reasonable approach in the letter before action which can come back to bite at a later date.  

The case also shows how challenging it can be to collate, in a passing off action as opposed to a case of trade mark infringement, the right kind of evidence of confusion to show consumers are deceived into thinking that the defendant's goods are from a source they recognise, which is the claimant.  

Lifestyle Equities CV is the owner and exclusive licensee of various UK and EU trade marks relating to the BHPC brand. These include word and logo marks relating to various goods, including clothing. BHPC Associates LLC owns the corresponding BHPC trade mark rights in the US. The defendants are members of the Amazon group, which requires no introduction.

Lifestyle brought a claim against Amazon, alleging that its trade marks had been infringed by Amazon advertising, offering for sale and selling US branded goods to consumers in the UK and the EU. Lifestyle also claimed that Amazon was jointly liable with the end seller of the products, for the importation of US branded goods into the UK and EU. Lifestyle argued that it had never consented to US-branded goods being placed on the market in the UK or EU.

Amazon argued that its US website, www.amazon.com (the US website), was only targeted at US consumers, and that the UK and each EU country had their own targeted website.

High Court decision

The High Court dismissed Lifestyle’s claims (www.practicallaw.com/w-029-7710). It was necessary for the court to consider whether the adverts and offers for sale complained of constituted use in the course of trade in the relevant territory; that is whether they were targeted at the UK and the EU, under Article 9(2)(a) of the retained EU version of the EU Trade Marks Regulation (2017/1001/EU) (UK EUTM). Under Article 9(3) of the UK EUTM, adverts, offers for sale, sales and importations will constitute “use” of a sign. The court then had to consider whether, even if the adverts and offers were not so targeted, sales made to UK and EU consumers would constitute use of the sign in the UK and the EU.

The High Court agreed with Amazon’s argument that the US website had not targeted UK and EU consumers and therefore held that Amazon’s use of signs identical to the BHPC marks did not amount to use in the course of trade in the UK and the EU. It held that factors such as the average consumer, advert viewing figures, volume of website traffic and the subjective intent of Amazon were relevant and could be taken into account.

Targeting and context

Lifestyle appealed, arguing that the High Court had erred in law, by wrongly:

• Stating that the US website should uniquely target the territory in question.
• Imposing a requirement that the US website operator should subjectively intend to target the territory in question.
• Assessing the contexts of the various uses complained of.
• Treating highly relevant factors relied on by Lifestyle as largely irrelevant.
• Proceeding on the basis that Lifestyle’s case was that the US website targeted the world.

Court of Appeal decision

The Court of Appeal allowed the appeal. It confirmed that the question of whether there has been use of a sign in the relevant territory should be assessed objectively but that the following factors will also be relevant:

• Any evidence as to the subjective intention of the user in question.
• The perspective of the average consumer of the relevant goods.
• The different specific types of use complained of (Merck KGaA v Merck Sharp & Dohme Corp [2017] EWCA Civ 1834; Argos Ltd v Argos Systems Inc [2018] EWCA 2211, www.practicallaw.com/w-017-7490).

Adverts and offers for sale

The court disagreed with Amazon’s argument that the US website was only targeted at US consumers, and the UK and each EU country has their own targeted websites. Even if the US website was primarily directed at US consumers, as it was not restricted to them alone, the possibility that specific uses on the US website also amounted to targeting the UK and EU markets was not precluded.

The court found that all adverts and offers for sale in evidence constituted infringing uses of the relevant signs in the UK and the EU. In reaching this conclusion, the following factors were relevant:

• The homepage of the US website notified consumers that they could buy in eight different languages, in over 60 different countries and that goods could be delivered to the UK.
• The search result webpages and product detail webpages indicated that goods could be delivered and shipped to the UK.
• The order review webpage showed that where a potential buyer was located in the UK, with the shipping address in the UK, the billing address in the UK and the currency of payment as pounds sterling, Amazon would make all of the necessary arrangements for the goods to be shipped to and imported into the UK (including a pre-estimate of import duties) and delivered to the consumer in the UK.

Sales and importation

The court reiterated the words of the European Court of Justice in Blomqvist v Rolex SA, that in the case of a sale to a person in the EU it is not necessary to consider whether there has been prior targeting of EU consumers (C-98/13). Therefore, Amazon’s sales of US branded goods to UK and EU consumers constituted use of the signs in the relevant territory, and therefore amounted to infringing uses, even if the adverts and offers for sale did not.

At first instance, the parties had disagreed as to whether Amazon was jointly liable with the delivery carriers for the importation of US branded goods into the EU and the UK. However, during the appeal, Lifestyle had accepted that, if it was successful on the issues of targeting and sales, it was unnecessary for the court to determine this issue. The court, in declining to make a decision either way, noted that this is an important but not straightforward issue and so “should be decided in a case where it matters”.

Impact on businesses

Lifestyle Equities will have a significant impact on the liability of businesses operating websites across borders and their potential to be liable for intellectual property infringements. Going forwards, businesses will need to consider:

• Carrying out enhanced due diligence before working with third parties.
• Implementing geo-blocking on websites, to ensure that they are only accessible to the target market.
• Making changes to their websites to avoid being caught out for inadvertently targeting consumers in different territories. In this regard, Lifestyle Equities provides plenty of detail on what is likely to amount to targeting, and the correct legal tests to be used to assess whether this use may amount to an infringement.
• Including warranties and indemnities in contracts with third parties, requiring confirmations that goods can be sold in all markets in which the business operates, and addressing liability where issues arise.

© 2022 Thomson Reuters (Professional) UK Limited. This article first appeared in the June 2022 issue of PLC Magazine: http://uk.practicallaw.com/resources/uk-publications/plc-magazine.

 In December 2019, Unilever filed a UK trade mark application for 'WONDER MUM', in class 3, for a range of toiletry products. The application was published in February 2020, at which point DC filed an opposition on three grounds under the Trade Marks Act 1994 (TMA).

DC argued that registration and use of the WONDER MUM mark by Unilever would:

• create a likelihood of confusion on the part of the public in relation to DC’s own WONDER WOMAN trade mark, which is registered in the UK for goods and services in multiple classes including class 3 (the Confusion Ground);
• enable Unilever to take unfair advantage of the reputation of DC’s WONDER WOMAN trade mark in the UK (the Reputation Ground); and
• give rise to a claim for passing off by damaging the goodwill that DC had built up in the WONDER WOMAN mark (and the superhero character more generally) in the UK (the Passing Off Ground). 

The IPO’s Decision 

In a decision published on 21 June 2021, the IPO Hearing Officer rejected all three of DC's grounds of opposition. 

The Confusion Ground 

When assessing the similarity of the marks, the Hearing Officer considered that there was no likelihood of confusion amongst the public. The Hearing Officer found there was a "low degree" of conceptual similarity between the two marks and “no more than a medium degree” of visual and aural similarity. On that basis, the Hearing Officer concluded that consumers were unlikely to be confused between the two marks or to wrongly associate Unilever’s WONDER MUM products with DC.

The Reputation Ground

Having assessed the evidence submitted by DC, the Hearing Officer concluded that it was insufficient to establish the reputation of the WONDER WOMAN mark amongst a significant part of the UK public. In relation to its evidence on the sales of Wonder Woman comics in the UK, DC had failed to provide any detailed revenue figures, instead stating in witness evidence that UK sales made up a "notable proportion" of worldwide sales. 

According to the Hearing Officer, DC’s witness evidence contained merely generalised statements and opinions on the fame of Wonder Woman, including an assertion that she was the "most famous female comic book hero in the world". Such comments were not sufficient to prove the reputation of the WONDER WOMAN mark. Similarly, in relation to goods in classes 9 and 41 (entertainment related goods and services), DC failed to evidence that the average UK consumer would view WONDER WOMAN as a recognisable trade mark (i.e. as a badge of origin), rather than simply a film title.

The Passing Off Ground

DC submitted that it owned the relevant goodwill in the WONDER WOMAN name and the WONDER WOMAN character more generally, due to its longstanding use in the UK in connection with merchandising products for films, publications and entertainment services. 

The Hearing Officer dismissed this ground on the basis that DC had again failed to properly evidence such alleged goodwill in the UK: many of the products that DC relied on to evidence this goodwill did not, in fact, contain the words WONDER WOMAN at all. Instead, the products featured logos or references to the character's costume. Even where products did use the words WONDER WOMAN, they were merely decorative and did not indicate the products’ commercial origin.  In any event, regardless of the decision on goodwill, the Hearing Officer confirmed that DC’s opposition on this ground would still have failed due to the differences between the marks, which meant that DC’s customers were unlikely to be misled into thinking that Unilever’s products were commercially linked to DC. 

The High Court's Decision

On appeal, the High Court agreed with the findings of the IPO, dismissing all of DC’s grounds of appeal. 

The High Court found that the Hearing Officer had correctly applied the legal tests relating to the assessment of similarity between marks and the likelihood of confusion. The judge disagreed with DC that the Hearing Officer had wrongly considered the marks to be both similar and dissimilar when she had said "there is more that is different about the respective concepts of the mark than is the same"; instead the High Court found that the Hearing Officer had merely explained the thought process that led her to conclude that there was a low level of conceptual similarity between the marks. According to the judge, the Hearing Officer had also correctly carried out the global assessment of the likelihood of confusion: given the low conceptual similarity between the marks, the Hearing Officer was entitled to find that the likelihood of confusion between the marks was low, even in relation to identical goods. 

The High Court also agreed with the Hearing Officer’s assessment of the inadequacy of DC’s evidence on the reputation and goodwill associated with the WONDER WOMAN mark in the UK. The judge clarified that the Hearing Officer had not sought to comment on the success of the Wonder Woman film franchise or whether Wonder Woman is a house-hold name. Instead, she was assessing whether the mark WONDER WOMAN had sufficient reputation / goodwill in the minds of UK consumers as a badge of origin. DC had failed to provide evidence to show that it did.

Key takeaways

This case is an important reminder of the need to submit sufficiently detailed, robust and relevant evidence to demonstrate any alleged reputation / goodwill when seeking to oppose (or indeed defend) a trade mark. Opponents relying on these grounds must ensure that any supporting evidence is: (1) factual (rather than a statement of opinion); (2) precise (e.g. tangible sales figures, instead of estimates); (3) directly linked to the relevant market in which the reputation is alleged to exist; and (4) demonstrative of the mark being used as a badge of origin, rather than any other tangential use, such as decoration or the subject matter of a film of comic.

Background

In July 2014, after filing an international application in 2012 and designating the EU in 2013, the Proprietors obtained an EU trade mark for the Master's Mark, for gin, in class 33. Following the expiry of the Brexit transition period on 31 December 2020, a comparable UK trade mark was automatically created by the UKIPO, adopting the filing date of the original international application (the Contested Mark). In March 2021, Inver sought to revoke the Contested Mark under section 46 of the Trade Marks Act 1994 (TMA) on grounds of non-use. 

Under section 46(1)(a) TMA, marks that have been registered for more than 5 years become vulnerable to revocation if they have not been put to genuine use, in the UK, within the 5 years following their registration or for any other continuous 5-year period. Inver asserted two periods of alleged non-use: July 2014 to July 2019 or alternatively, March 2016 to March 2021. 

Inver's submissions

Inver made various submissions in support of revocation: 

(i) Figurative image mark or shape mark

Firstly, Inver submitted that the Contested Mark should be treated as a figurative image, rather than a shape mark, as to do otherwise would give it a wider scope than its parent EU registration. The UKIPO accepted this, on the basis that the original international application had been for a figurative mark.

(ii) Distinctive character

Secondly, Inver submitted that certain evidence submitted by the Proprietors did not demonstrate genuine use of the Contested Mark, as there were certain variances between the mark as registered and the mark as used. 

Under section 46(2) TMA, the use of a trade mark includes "use in a form differing in elements which do not alter the distinctive character of the mark in the form in which it was registered". In considering the Proprietors' evidence, the UKIPO noted that this indeed showed minor variances. However, it also found that the distinctive character of the Contested Mark, in relation to spirits, lay in the word "Master's", the lion device and the unique shape of the bottle. Minor differences in the arrangement of these distinctive elements on the Proprietor's products were acceptable and the omission of words like "London Dry Gin" and "Tridistilled Gin" were negligible, as they were merely descriptive of the Proprietors' goods. 

The UKIPO's decision

The UKIPO found various deficiencies in the advertising and marketing evidence submitted by the Proprietors. It also found sales evidence (which amounted to just 17 invoices) "far from overwhelming", particularly in the context of the UK's thriving gin market.

Despite this, the UKIPO noted that genuine use requires a global assessment of the evidence and concluded that there was a "consistent and repeated pattern of sales to an exclusive retailer throughout the relevant periods" and that the Proprietors had "attempted to create and maintain a market for their goods under their mark". The UKIPO was therefore satisfied that the Contested Mark had been put to genuine use, in the UK, and Inver's revocation application was rejected.

Takeaways? 

The decision will provide comfort to brand owners, in that it demonstrates that use of a trade mark does not have to be quantitively significant to be genuine. Again, to the relief of brand owners but perhaps more surprising is the finding that minor discrepancies between logos as used vs as registered, even where those discrepancies concern the arrangement of distinctive elements, will not necessarily be fatal and may be taken into account when determining genuine use.  

We will closely monitor any appeal of the decision by Inver. In the meantime, the full decision can be downloaded from the UKIPO's website. 

On 2 December 2021, Nintendo filed an application seeking an injunction against six major UK broadband and mobile internet service providers (including BT, Sky and Virgin Media) (the "ISPs"). The application sought the blocking, or attempted blocking, of access to two websites by the ISPs (the "Target Websites").  The Target Websites permitted access, via links, to third party websites that allowed visitors to download pirate copies of Nintendo Swich games (the "Unauthorised Nintendo Games"). 

The application was not opposed by the ISPs who, after a long line of cases in which similar orders have been successfully obtained, will be very familiar with such actions and their likely outcome.

Law

Under section 16 of the Copyright, Designs and Patents Act 1988 (the "CDPA 1988"), copyright is infringed if works are communicated to the public in the UK, including by electronic transmission (section 20(2)),  or by authorisation of the infringing act. 
In addition to pursuing infringers themselves, copyright owners can seek to obtain website blocking orders against ISPs whose services have been used to commit the infringing act. To succeed, the copyright owner must establish that: 

• the ISP is a service provider; 
• the users or operators of the websites infringed copyright by using the ISP's services; and
• the ISP has actual knowledge of the infringement (which includes it having been put on notice by the copyright owner).   

Decision

In the present case, an order was granted requiring the ISPs to block access to the Target Websites, under section 97A of the CDPA 1988 and section 37(1) of the Senior Courts Act 1981. 

Copyright infringement by users

The court found that subscribers of the ISPs in the UK (the "Users") had infringed the copyright in Nintendo's works (specifically, the source and object code of the game and certain text and graphic within it) (the "Works").  The Users performed acts of copying when: (i) connecting to the Target Websites; and (ii) using them to access and download files containing the Unauthorised Nintendo Games onto electronical devices located in the UK.  Due to the large number of visitors to, and the obvious purpose of, the Target Websites, the Judge inferred that downloading was taking place and thus infringing copies of the Works were being created in the memory of those devices.  

Copyright infringement by operators 

In line with previous decisions, the operators of the websites authorised and/or were liable as joint tortfeasors for the Users' copying.  
The Court found that the act of posting a link was capable of falling within communication of the Works by "electronic transmission" to each User who clicked on that link.  This effectively widens the scope of website blocking orders to include not only those actually providing access to pirate copies, but also the wider circle of websites redirecting/linking to the original piracy sites. 

Here, evidence indicated that the Target Websites were being operated for profit, so it was presumed that the act amounted to "communication with the public" (GS Media BV v Sanoma Media Netherlands BV).

Although actual knowledge was required, there was clear evidence in this case that the operators knew about their engagement in illegal activity, as steps were being taken to preserve their anonymity and circumvent enforcement steps taken by Nintendo.  

Communication to the UK public

In considering whether infringement had occurred in the UK, it was necessary for the Court to consider if UK consumers had been targeted. The Unauthorised Nintendo Games were available online but it is well documented in case law that the mere accessibility of a website to consumers in a particular locale is not enough to establish a territorial link and consequently, a cause of action, in that jurisdiction.  In the present case however, the Court was satisfied that UK consumers would regard the Target Websites' content as directed at them for the following reasons:

(i) the UK was a substantial market for Nintendo Games; 

(ii) the Target Websites included games extremely popular in the UK; and

(iii)  a substantial number of visits to the Target Websites were by UK consumers, with one website reaching 434,000 total visits (including repeats) since January 2021.   

Proportionality of the Injunction 

Despite extensive efforts by its solicitors, Nintendo had failed to identify the operators of the Target Websites.  The injunction was therefore necessary to prevent further damage and was held to be proportionate on the grounds that: (i) the ISPs' rights to carry on business would be unaffected; (ii) the ISPs already had the technology necessary to block access; (iii) Nintendo would bear the costs of implementing the injunction; and (iv) the public had no legitimate interest in being informed about, or gaining access to, websites operated for the sole purpose of providing access to the Unauthorised Nintendo Games. 

Importance

The UK courts have been granting website blocking orders for some time now but the decision in Nintendo expands this helpful tool, confirming that its scope extends not only to piracy sites themselves but also, to websites that simply post hyperlinks to them. The case also reiterates the flexible approach adopted by the courts in assisting rights holders to navigate and tackle the complexities of online infringement.

The Application was filed in March 2019 in classes 29, 32 and 33 for a range of meat-alternatives, health foods and vegan drinks. The products were to be made using Scottish produce, with the proceeds of sale used to support families affected by childhood cancer. A CCA director also planned to create a McVegan character for a book and cartoon series in which the products were to be promoted. 

McDonald's opposed the Application based on its portfolio of earlier 'Mc' prefixed trade marks (including, but not limited to, MCDELIVERY, MCVEGGIE, MCSALAD and MCCHICKEN). McDonald's asserted that these registrations constituted a "family" of trade marks (the Mc Family). 

McDonald's alleged that CCA's use of the 'MCVEGAN' sign created a likelihood of confusion on the part of the public, in relation to each of its earlier marks and the Mc Family, in general. McDonald's also argued that CCA's 'MCVEGAN' sign took unfair advantage of the reputation of its earlier marks, as well as alleging passing off and bad faith.

Although McDonald's does not currently use 'McVegan' to promote its plant-based range in the UK (opting to use 'McPlant' instead), it does use the term in European outlets and there has been reported use in the UK (albeit such use was described by the hearing officer as "very thin").

Decision

McDonald's opposition succeeded on unfair advantage and bad faith, such that the hearing office found there was no need to consider any other grounds.

(i) Bad faith (section 3(6) Trade Marks Act 1994 (TMA))

Under section 3(6) TMA, a trade mark will not be registered if the application is made in bad faith.

CCA and its director had previously applied for a number of trade marks featuring the 'Mc' prefix, including 'McDracula'. Prior to the filing of 'McVegan', CCA had suggested to McDonald's that the companies collaborate or that McDonald's make an offer to purchase the 'McDracula' trade mark.

McDonald's declined and in the days following the conclusion of these business discussions, CCA filed the Application. CCA then threatened to collaborate with McDonald's' competitors, if McDonald's did not comply with CCA's requests regarding the McVegan mark.   

The UKIPO hearing officer stated that "whilst raising charitable funds is a laudable aim, leveraging a trade mark for compensation, even for a good cause, is not an aim which falls within the functions of a trade mark." The hearing officer considered it "implausible" that the Application had been filed for any purpose other than to obtain financial benefit from McDonald's and stated that the Application constituted a "paradigm example of bad faith."

(ii) Reputation (section 5(3) TMA)

Section 5(3) TMA provides that a trade mark which is similar to an earlier mark will not be registered if the earlier mark has a reputation in the UK and the use of the later mark would take unfair advantage of, or be detrimental to, the character or repute of the earlier trade mark. 

The hearing officer stated that the earlier marks relied on had a "sizeable reputation" and described McDonald's' general reputation as "enormous". That said, it was found that this reputation did not extend to all of the goods and services relied on for the purposes of the opposition (hot cakes, for example).

The hearing officer also stated that the extensive use of the earlier marks would have "cemented the public's perception" of the 'Mc' marks as a family of marks, indicating common origin. 

Whilst some of the goods listed in McDonald's' specifications were deemed dissimilar to those listed in the Application (although not "strikingly dissimilar", given they related to the food and drink sector), the hearing officer commented that where the contested mark is used for goods which are highly similar or identical, it "would be taken to be an extension of the earlier family of marks and that there would be indirect confusion."

The UKIPO therefore found in favour of the fast food giant, refusing the Application registration on the basis that the repute and distinctiveness of McDonald's' earlier family of marks would result in confusion amongst a significant number of consumers.

The decision is a useful reminder that even where an applicant has good intentions per se (in this case, to raise money for a children's cancer charity), bad faith will be assessed in a purely trade mark sense and applications which fall foul of the absolute grounds under s3 TMA will be refused registration. 

The full decision can be read here.

The Report explains that the most significant impact of the COVID-19 pandemic was to expedite already emerging trends. This includes the shifting of trade from physical bricks and mortar outlets to online. The Report is definitive on this point, stating that the pandemic has "turbocharged" online trade and consequently, online crime. This finding will come as no surprise to many brand owners, who will be all too familiar with the complexities of tackling infringements perpetrated online, particularly following the implementation of the GDPR and the redaction of domain name search results. 

Some notable headline statistics from the Report are summarised below, with the full version available to read here. 

• Younger consumers (defined as those aged 35 and under) are more likely to purchase counterfeit goods. However, a large proportion of people said they would be likely to stop purchasing counterfeit goods, if exposed to campaigns explaining the significant consequences of doing so;
• According to the Organisation for Economic Co-operation and Development, trade in counterfeit, pirated/copied goods is 3.3% of world trade and rising;
• The top three counterfeit/pirate products investigated by Trading Standards are currently cigarettes/tobacco, clothing and alcohol; and 
• There is evidence that engagement with IP crime prevention has increased. The IPO reported an increase in submissions to its intelligence hub, with a 13% rise in referrals relating to online crime.

In terms of how to change consumer perception of copyright theft, the Report suggests that focusing on individuals' circumstances, rather than consequences to the industry, is key. The IP Minister states that there is a need to implement strategies that: (1) deter criminals, through apprehension and prosecution; (2) raise consumer awareness to disincentivise demand for counterfeit goods; (3) disrupt illegal supply chains; and (4) disable illegal websites.

The Report was issued shortly before the implementation of new sentencing guidelines, for offenders who make unauthorised use of trade marks (the Guidelines). Published by the Sentencing Counsel on 5 August 2021, the Guidelines came into force on 1 October 2021. In line with risks highlighted in the Report, the Guidelines were introduced to enhance protection for both trade mark owners and consumers, in relation to dangerous and/or substandard goods. 

The Guidelines provide Magistrates and Crown Courts with a structure for sentencing offenders who use trade marks without the proprietor's consent. Whereas the previous 2008 Magistrates Court guidelines only applied to individuals, the Guidelines impose a dual system, which extends to both private persons and organisations. Penalties in the Guidelines for sentencing organisations are purely financial, whereas the penalties that may be imposed on individuals are both financial and custodial.

Counterfeiting offences cover a huge scale, ranging from low-level offences, such as the sale of small quantities of cheap, and obviously fake, products from temporary stalls, to extremely sophisticated and organised operations involving the production of high-quality, lookalike designer goods (i.e. genuine fakes). In acknowledgement of this, the Guidelines introduce a sliding scale of fines, which ranges from £250 to £450,000. 

In determining what level of fine to impose, the courts are required to consider:

1. Culpability (high, medium or lesser). The applicable level will depend on factors such as the role played by the offender (e.g. leading, peripheral), the degree to which the offence was planned and whether the offender coerced others into participating in the offence or was themself coerced; and 
2. Harm to the trade mark owner. This involves putting a monetary figure on the offence by reference to the value of equivalent genuine goods and assessing any significant harm suffered by the trade mark proprietor and by purchasers and/or end users of the counterfeit goods.

The Guidelines encourage fines that are "substantial enough to have a real economic impact" and which will "bring home to both management and shareholders the need to operate within the law".

Both the Report and the Guidelines send a strong signal that counterfeiting is high on the agendas of both the IPO and enforcement authorities. It will be interesting to see whether the Guidelines have a meaningful impact and if they provide the deterrent that they are intended to. A detailed assessment will no doubt follow, when the 2021 – 2022 version of the Report is published next year, with authorities and brand owners alike hoping to see a turning of the tide.  

Almost three years after proceedings were commenced, a settlement has now been reached between the parties and the claim has been discontinued. Whilst no financial aspects of the settlement have been disclosed, this article provides:

• A brief recap of the litigation.
• An examination of some aspects of the settlement.
• Key points to consider when settling trade mark disputes.

This piece was written for and first published by LawInSport. The full version is available to view here [paywall for if reading more than a certain number of articles per month].

RRA's claims related to LME's development of a holiday village, known as 'Silverlake' and a contract for the production of a sketch design in relation to it (the Contract). The Contract was entered into between LME and architecture firm, WFA Associates Limited ("WFA"), which is now in liquidation.

The sketch design was originally produced in April 2012, by one of WFA's then employees, Richard Reid. As the design was produced in the course of Mr Reid's employment, the copyright in it automatically vested in WFA. WFA subsequently assigned the copyright in the sketch design to LME and received a fixed fee in return.

Some years later, in a Deed of Assignment between WFA and RRA dated 19 October 2018, WFA assigned its rights in the Contract to RRA. RRA alleged that this included an assignment of moral rights in the sketch design. 

By reproducing (or procuring the reproduction of) the design sketch online and in planning submissions, RRA claimed:

(i) that its moral rights in the sketch design had been infringed; and

(ii) passing off, through the failure of LME, and the proposed additional defendants, to identify RRA as the original author of the sketch design.

Decision

With limited exceptions, under CPR 17 and 19, the court's permission is required to add additional claims and/or to join additional parties to ongoing proceedings, once those proceedings have been served. In determining the Claimant's application, the key question for the court was whether the claims had a realistic prospect of success against LME, or any of the proposed additional defendants. 

Permission to add the moral rights infringement claim was refused for the following reasons:

1. Mr Reid, and not WFA, was the original author of the sketch design. Under section 94 of the Copyright, Designs and Patents Act 1988 (CDPA), moral rights are a personal, non-assignable right. As such, it was simply not possible that the moral rights in the sketch had passed to RRA (through the Deed of Assignment or otherwise). 
2. There had been no assertion of any moral rights in the sketch design. As per s78 CDPA, moral rights cannot be infringed unless they have been expressly asserted. RRA attempted to argue that the use of its initials in a title block of the drawing amounted to an assertion but this was rejected by the court.  
3. Where the copyright in a work vests in an author's employer under s11(2) CDPA (i.e. by virtue of their employment), moral rights do not apply to anything done by, or with the authority of, the employer or any subsequent owner of copyright. The sketch design had been produced in the course of Mr Reid's employment with WFA and the copyright in it therefore vested in WFA. Copyright was subsequently assigned to LME by WFA and, as the legitimate owner of the copyright in the sketch design, LME had a complete defence to any moral rights claim. 

The Court also refused permission to add claims in passing off for the following reasons:

1. It was unable to determine whether RRA had acquired the goodwill in WFA's business; whilst the assignment of goodwill was pleaded, no evidence was provided in support and the Deed of Assignment was limited to an assignment of contractual rights alone; and
2. There could be no misrepresentation by LME as to the commercial source of the sketch design, by virtue of the fact that it owned the copyright in it. As the additional proposed defendants had produced the sketch design under LME's authorisation and direction, there could likewise be no misrepresentation on their parts.

Comment

The decision reiterates the well-known principle that moral rights are personal to the author of a work and cannot be assigned.  It also serves as a reminder of the limitations of moral rights: To be actionable, moral rights must be asserted and cannot be enforced against the legitimate copyright owner of the work, or those acting with its authority.

The full judgment, The Front Door (UK) Limited t/a Richard Reid Associates v The Lower Mill Estate and others [2021] EWHC 2324 (TCC), is available here. 

Kelly-Marie Smith composed and wrote a song called "Can You Tell Me" which had never been released commercially, but which was acoustically recorded for a promotional video in October 2007. 

Various members of Rudimental, together with James Newman and Edward Harris, composed and wrote the song "Waiting All Night" which was released as a single and in an album by Rudimental in April 2013. 

Smith alleged that the defendants copied the lyrics and melody of the chorus from Can You Tell Me. During the trial, it transpired that the copying allegation actually related only to James Newman, as the other defendants' contributions related to aspects of the song which were not said to have been 'copied'.

The decision – band new or copied? 

(i) similarities

The Court held that, despite the similarities, including repetition of the same phrase ("tell me that you")  sung to four semi-quavers and the melody placing stress on certain words, there are important differences between the two songs; such as, for example, the same words being sung to different notes in each song. It was also held that the phrase "tell me that you need me" was a commonplace expression and not particularly original, making it unsurprising that two people writing a popular song would use that phrase. The melody was also simple and primarily driven by the words. 

(ii) availability of and access to Can You Tell Me

Although the promotional video containing Smith's song was available on social media sites, the clip of the video which contained the song only started 12 minutes into the video. The judge saw no direct evidence that James Newman ever heard Can You Tell Me before composing Waiting All Night – it was highly unlikely that the video created in 2007 was being promoted in 2012 when Waiting All Night was composed and the suggestion that Newman would have heard the claimant's song through "overlapping circles" was based on tenuous connections. 

(iii) evolution of Waiting All Night

James Newman provided contemporaneous evidence by way of a voice memo as to how he composed the song; he wanted to compose a hit song for Rudimental, similar to that recently composed for Rudimental by his brother, John, called "Feel The Love". The judge held that Newman had a basic idea for the start of the song before recording the voice memo, but made up the rest on the spot, with the allegedly copied phrase "tell me that you need me" and melody emerging through trial and error. 

Comment

When considering whether a defendant has copied a copyright work, the Court must determine whether the works are sufficiently similar and (assuming they are) consider which of the following four possible explanations as to what has caused the two works to be so similar is most likely:  (a) the defendant has copied the claimant; (b) the claimant has copied the defendant; (c) both parties have used a common source to create their works; (d) complete coincidence.  

Where there is a sufficiently high level of similarity, and it can be shown that the defendant had access to the claimant's work whilst creating its own, there is a presumption (that can be rebutted with evidence) that the defendant has copied the claimant.  From a practical perspective, these cases often turn on the documentary evidence available in relation to the origin or creation of the works in question.

In reaching its decision in this case, the Court was clearly persuaded by the evidence that Newman adduced regarding his independent creation of his work.  It is not enough to merely show that the relevant lyrics or melodies of a song are materially similar (or even the same).  It is a timely reminder that all composers should maintain a contemporaneous record of their creative process in order to demonstrate exactly how a song was composed. This is particularly important where simpler or more common phrases or melodies are used, as that may present more of a risk of two or more composers creating the same or similar works.

Following an appeal by UKG, the Court of Appeal (CoA) has now upheld the IPEC's decision through a unanimous judgment. The scope of the injunction granted in favour of British Gymnastics at first instance has however been narrowed. 

The Competitors

The Claimant, British Gymnastics, is the only recognised NGB for gymnastics in the UK. As outlined in our previous blog, British Gymnastics has traded under the name ‘British Gymnastics’ and built substantial goodwill in that name since the mid-nineties. In 2017 and 2018, British Gymnastics registered a series of two UK trade marks for 'British Gymnastics, More than a sport' and 'British Gymnastics' (Claimant’s TMs).

Since about 2012, UKG has advertised, offered and provided membership, education and competition services to individual gymnasts, gymnastic clubs and coaches under both word and logo signs for ‘UK Gymnastics’ (Defendants’ Signs).  

The Appeal (grounds)

The Defendants challenged the IPEC's finding on the following grounds:

1. the IPEC erred in its finding that UKG was not an NGB;
2. the IPEC specifically erred in its finding that UKG had passed off that a particular status had been conferred on it by British Gymnastics;
3. at least part of the injunction granted to British Gymnastics should be set aside;
4. the IPEC erred in its assessment of the level of similarity between the Claimant's TMs and the Defendants' Signs; and
5. the IPEC was wrong to find that there was a likelihood of confusion with the Claimant's TMs.

The Appeal (the outcome)

NGB status and passing off (appeal grounds 1 and 2)

The CoA rejected the first NGB related ground but found that HHJ Clarke had erred in her finding of one of the three counts of passing off (ground 2). 

In relation to NGB status, the IPEC’s decision was found to be correct: not only did UKG not comply with the definition of an NGB in the Sports Councils' Recognition Policy 2017, it didn't even comply with its own definition.

In relation to UKG's appeal against the IPEC's finding that it had passed itself off as having a particular status conferred on it by British Gymnastics, the CoA found that the IPEC had made an error and allowed the appeal on that ground.  This was because British Gymnastics had not pleaded that UKG had misrepresented that it was an NGB for the sport of gymnastics. Rather, it had pleaded that UKG had misrepresented that NGB status had been conferred on it by British Gymnastics. As the IPEC had not tried the issue as pleaded, the CoA held that that finding of passing off had been made in error. However, the CoA did find passing off on other grounds, including that UKG had misrepresented that the services it provided were connected to British Gymnastics, when, in fact, they were not. 

Injunction (appeal ground 3)

As a result of the finding on appeal ground 2, the CoA set aside part of the injunction that had been granted by the IPEC, in particular the prohibition on UKG passing off any goods or services as "otherwise denoting some form of official or approved status upon the Defendants or otherwise asserting to be a National Governing Body contrary to fact". 

It was accepted by the CoA that these words extended beyond what British Gymnastics had pleaded in its case. Furthermore, the wording was ungrammatical and unclear, and the scope of the last part of the injunction was uncertain as "National Governing Body" was not defined. Consequently, that part of the injunction was discharged and the part that remained was limited to: "otherwise pass off any business or goods or services as being the business or goods or services of the Claimant or otherwise associated or connected with the Claimant or otherwise the subject of some commercial arrangement involving the Claimant." 

Trade mark infringement (appeal grounds 4 and 5)

In relation to the IPEC's decision on trade mark infringement, UKG argued that the IPEC: 

• should have reached the conclusion that both of the Defendants’ Signs had a low degree of similarity as the assessment for both signs was the same; and 
• should not have made any finding of a likelihood of confusion between the marks in question. 

Both grounds of appeal were dismissed by the CoA. The CoA was satisfied that the IPEC had correctly considered the differences between the Defendants’ Signs. Furthermore, even if a low degree of similarity had been found, this would not have altered the IPEC’s assessment on likelihood of confusion.  

The CoA also confirmed that the IPEC had considered the level of attention of the average consumer correctly by pointing out that children and spectators at sporting events were likely to pay a low degree of attention to the marks in question. On the other hand, coaches, sports club owners and NGBs would pay a high degree of attention to the marks in question. Both categories of consumers needed to be considered. 

The Judging Panel: Final Comments 

This case neatly demonstrates the Court's approach in offsetting a low degree of similarity in two marks against a high degree of similarity in services. It also sheds light on the fact that there may be more than one 'level' of attention that should be considered when assessing the relevant average consumer. In this instance, the wide scope of who the average consumer was meant that both a high and low degree of attention would be paid to the marks in question.  

The case is also a timely reminder of the well-established principle that injunctions need to be drafted precisely enough so as to be clear as to what the defendant can and cannot do.

The full decision can be read here: UK Gymnastics Ltd & Ors v British Amateur Gymnastics Association [2021] EWCA Civ 425 (24 March 2021)

Background

For many, the dispute will need little introduction: In May 2016, media and telecoms conglomerate, Sky issued proceedings against cloud management software solution provider, Skykick. Sky's claims were based on various EU trade marks (the EUTMs), registered (amongst other things) for 'computer software' and 'electronic mail services'. Sky argued that by using 'Skykick' in relation to its 'Cloud Migration' and 'Cloud Backup' services, Skykick had infringed the EUTMs. Sky also claimed passing off.

Skykick disputed the allegations and counterclaimed for a declaration of invalidity in respect of the EUTMs. Specifically, Skykick argued that the filing of marks for broad categories of goods and services (e.g. 'computer software' and 'electronic mail services') amounted to bad faith, on the basis that Sky had deliberately adopted an expansive strategy to restrict third parties.

After referring various questions to the CJEU, the High Court held that Sky had indeed acted in bad faith. This was in two ways: (1) by applying for trade marks in circumstances where Sky had no intention of using them for all goods and services covered by the specifications, and had no foreseeable prospect of ever doing so (the No Prospect Ground); and (2) by seeking broad protection, regardless of whether it was commercially justified (the No Commercial Justification Ground). As a result, the High Court declared the EUTMs partially invalid and ordered that they be cut down, to remove the offending goods and services. Whilst Sky's infringement claims were upheld (to the extent that Skykick's activities infringed the reduced registrations), its passing off claim was dismissed.

Sky appealed both the finding of partial invalidity and the dismissal of its passing off claim to the CoA. SkyKick cross-appealed against the finding of infringement and argued that Sky's trade marks should be more heavily restricted that the High Court had ordered.

The CoA decision

Following detailed consideration of both the High Court's decision and the applicable case law, Sir Christopher Floyd (providing the leading judgment in the CoA) said he was "in no doubt that Sky's appeal on the issue of bad faith should be allowed" and that the order cutting down the EUTMs should be set aside.

No Prospect Ground

On the evidence, the CoA found that it was "implicit" that Sky's applications were made (at least in part), with the intention of protecting the use of the mark in relation to goods and services in which Sky had a substantial present trade and a future expectation of trade. On that basis, the case was distinguishable from cases where the sole objective of the application is to stop third party use (e.g. trade mark squatting scenarios).

Whilst Sky's specifications included broad categories of goods and services (i.e. 'computer software') and whilst the CoA noted that "Sky had no prospect of using the mark in relation to every conceivable sub-division of computer software" it held that this was neither a "relevant or objective indication of bad faith". The High Court's finding of bad faith based on the No Prospect Ground was therefore overturned: There was no requirement for Sky to demonstrate an intention to use the EUTMs for every sub-set of the broad categories of goods and/or services that featured in the specifications (i.e. for every type of 'computer software').

No Commercial Justification Ground

The High Court's finding of bad faith under the No Commercial Justification Ground was also overturned. In reaching this conclusion, the CoA emphasised that:

"an applicant for a trade mark does not have to formulate a commercial strategy for using the mark in relation to every species of goods or services falling within a general description. Such an applicant is entitled to say "I am using the mark for specific goods falling within description X. I have no idea precisely where my business in goods of that description will develop in the next 5 years, but there will undoubtedly be more such goods than there are now."… Such an applicant could not, however, be accused of bad faith in the light of its strategy for applying for protection of sufficient width to cover some further, as yet unformulated, goods within the same category."

As an entity with a "very substantial business in computer software", the CoA found that there was an "obvious commercial justification" as to why Sky had included the term 'computer software' in the specifications.

Comments

The CoA's decision will bring much relief to brand owners who, following the High Court's decision, were left questioning their filing strategies, including how precise specifications must be to avoid falling foul to invalidity on grounds of bad faith.

A principle of use it or lose it (whereby trade marks that have been registered for more than 5 years are liable to revocation, if they have not been put to genuine use) already exists under UK law. Some therefore considered that this already provided adequate protection against non-use abuses and that the High Court's decision cut across the long-established "express grace period" that is afforded to trade mark proprietors.

The CoA's decision has not been universally welcomed however. Some have expressed concerns that the judgment will result in a 'cluttering' of the register and an increase in monopolistic filings.

The CoA's full decision (Sky Ltd & Ors v Skykick, UK Ltd & Anor (Rev2) [2021] EWCA) can be read here. 

By now, most people in the art world, at least, have heard of non-fungible tokens (NFTs). NFTs are a certificate of title of the most original version of a digital asset, minted (certified) by blockchain. Blockchain, a digital ledger, provides a transparent trail of activity. The digital asset is tied to a blockchain location (the token). This uniquely identifies the digital asset and provides it with a non-fungible authenticity certificate (here, non-fungible means unique). 

A copy of the original NFT would not have the same blockchain details (or certificate) so would be recognisable as a fake. Digital art and other items can be backed by an NFT, ranging from animations, songs and videos to virtual handbags (Gucci) and racehorses (Zed Run, beer brand Stella Artois' virtual horseracing collaboration). Insightful actors, artists and creators are using NFTs to protect their digital property, with creatives like Emily Ratajkowski taking it to the next level – using NFTs to protect and monetise their own image. 

What happens to the IP rights in NFTs?

Digital assets only have value in their intellectual property (IP) as there is no tangible property; assets can be infinitely copied, replicated and forwarded (e.g. by downloading and saving an image with a new name). NFTs and the underlying agreements can protect the IP rights in digital assets – preventing NFT buyers from monetising and licensing the digital asset without permission. Unless ownership rights or use-permissions are granted, the copyright in the NFT-backed asset is not transferred to the buyer, and the agreement merely provides a licence to display the digital asset or artwork.

There can be multiple levels to copyright protections afforded in a single digital artwork. Emily Ratajkowski recently sold, for $140,000, an NFT of a photograph of herself standing next to a re-claimed Instagram photograph of herself from a Sports Illustrated shoot in 2014. 

Potential copyright protections may have been afforded to the original owners/authors of the first (and second) photograph, including Sports Illustrated and/or its photographer, and Richard Prince (who used the original photo and Instagram screenshot in his own "New Portraits" series). The story of how Ratajkowski had previously purchased the "New Portraits" canvas from Prince was detailed in her first published essay in The Cut in 2020. 

Photographers with rights to licence their photos have regularly challenged their muses over copyright infringement for re-posting on Instagram. Ratajkowski is one of many public facing individuals to have been challenged for re-posting pictures of themselves online. Ariana Grande, Gigi Hadid, Khloé Kardashian and Jenifer Lopez have all faced copyright infringement actions when re-posting pictures of themselves on Instagram. NFTs have provided an opportunity for such celebrities to 're-claim' their images. 

Protecting and purchasing (IP) rights

To protect the creator or rights-holder of the underlying work in an NFT, the purchase agreement should clearly outline the rights which it is intended that the buyer should obtain (e.g. whether the buyer should be permitted to copy, edit, adapt or distribute that work).  The terms governing an NFT are often set out in digital "smart contracts" which are written in code and embedded within the token itself, meaning that they should operate automatically, based on certain pre-defined triggers (for example, making any royalty payments automatically upon an onward sale of the NFT). Some NFT marketplaces have standard terms of sale, whereas others allow sellers to determine the terms in the relevant smart contract. It is worth noting however that the legal status of smart contracts is yet to be tested by the courts!  

Further protections which may be useful include indemnifying the rights-holder against any unauthorised use or breach. Royalty clauses can ensure the creator or rights-holder receives payment for any licensed activities, sub-licensing or onward transfers. 

For onward sales, would-be sellers should ensure they have all the rights necessary to transfer ownership. If a digital asset-creator has entered a robust agreement with no reserved rights and all the image rights cleared and moral rights waived, there should be little issue with selling the rights to an artwork-based NFT. For a video-form or music-based NFT, a seller will need to ensure that all underlying rights were cleared when the NFT was created, including composition/recording rights in music, the chain of title in films, as well as permissions from any actors/performers involved to use their likeness or performance. It is worth noting that film marketing and ancillary content rights often remain with the distributor.

Caution must be taken to avoid misleading advertising regarding the sale of the digital asset or artwork. Potential buyers should be notified where the digital authentication certificate alone is being sold – as opposed to the rights in and to use the underlying work. Increasing advertising, financial and tax regulation is likely and must be carefully navigated alongside consumer protection law (NFTs can be bought by the public!).

Comments

Having been faced with a copyright infringement lawsuit for posting an image of herself on Instagram, it is no surprise that Emily Ratajkowski was one of the celebrities who harnessed the power of NFTs to reclaim her image. 

When we spoke to Ellie Heisler (partner and Entertainment group lead at Nixon Peabody, a fellow TerraLex member) who advised Emily Ratajkowski on the legal aspects of her NFT, she remarked: "this digital marketplace allows creators to participate in the exploitation of their name, image and likeness on a perpetual basis, giving them proper credit and consideration". 

Unsurprisingly, other actors, artists and creatives have followed suit. Lindsey Lohan has also sold an NFT portrait containing the word Lightning, and "Lullaby" an NFT music single. Snoop Dogg, Damien Hirst, Kings of Leon, Grimes and John Cleese have also taken advantage of NFTs to protect their digital property. We will likely see more involvement from innovative companies like AB InBev (the owners of various brands including Stella Artois), looking to keep up with ever increasing digitalisation and the movement towards a virtual economy.

Following the split of their music group, 'Love Injection' or 'Luv Injection', in 2016, two half-brothers, Ian Thomas (IT) and Winston Thomas (WT), formed separate groups, using similar names.  IT started to perform under 'Love Injection' and, more infrequently 'Luv Injection', whilst WT (along with other members of the original group), used 'Luv Injection Sound'.

In February and October 2017, WT made two applications to register 'Luv Injection Sound' and 'Love Injection Sound' as trade marks. The applications were filed in classes 9 and 41, for hi-fi systems, music recordings and entertainment services. The first application proceeded to registration but IT opposed the second and sought to invalidate the registration, on grounds of bad faith and passing off. 

The UK Intellectual Property Office (UKIPO) upheld IT's opposition and invalidity claim, finding that the original 'Luv Injection' group had been a partnership. This meant that the goodwill in the name was not owned by WT alone, but by all members of the partnership (at least up until the split).  Therefore, at the relevant date of the proceedings, IT owned the necessary goodwill to oppose the application and registration.

WT did not appeal the decision.

Passing Off Claim

Armed with the UKIPO's decision, IT sued WT for passing off in the Intellectual Property Enterprise Court (IPEC). WT filed both a defence and counterclaim arguing that: (1) between the split of the group and issue of the claim, IT and WT had continued to trade under the name and so it designated the business of the brothers (rather than the partnership); and (2) if the partnership had not already been dissolved, it should be declared as such, with its assets, including the goodwill, disposed of and any proceeds split between the brothers.

Following an application by IT, the IPEC struck out almost the entirety of WT's defence.  Under the principle of issue estoppel, the Court held that both WT and IT were estopped from denying the findings of the UKIPO, noting:

"neither the court nor the parties should be vexed with rehearing matters that have been heard and determined by a tribunal of competent jurisdiction". 

The IPEC therefore granted an injunction, preventing WT from using the name.  WT appealed to the CoA.  

Court of Appeal's Decision

The CoA noted that almost all of WT's defence had been struck out by the IPEC, even though certain of WT's arguments were not necessarily at odds with the UKIPO's findings. The CoA therefore held that WT should be permitted to advance his alternative defences.

The CoA noted that the UKIPO's decision had been based on two separate grounds (i.e. passing off and bad faith) and it was therefore "doubtful" that the UKIPO's decision had created issue estoppel. Further, even if there had been issue estoppel, WT would be entitled to challenge IT's standing to bring proceedings in passing off due to various special circumstances (including WT's lack of opportunity to appeal against the objection based on passing off, WT's future ability to trade under the name and the IPEC's failure to appreciate that the partnership had been dissolved).

The CoA commented that as at the date the partnership was dissolved, both IT and WT were entitled to ask for the partnership assets (including goodwill in the name) to be realised and divided between them; neither was solely entitled to the goodwill. 

The Court of Appeal therefore allowed the appeal; WT could pursue his defences against IT's passing off claim in the IPEC.

Comment

The case raises interesting legal questions concerning the scope of issue estoppel and the extent to which it may arise where a decision of a court has been reached on two grounds.

It also serves as a useful reminder of the need to consider and agree the position regarding ownership of intellectual property rights at the outset of any commercial venture. Had the members of the original 'Luv Injection' group done so the dispute (and associated costs) could likely have been avoided.

The full IPEC and CoA judgments are available here and  here.

Steve Jones and Paul Cook (the former guitarist and drummer of the Sex Pistols, respectively) have accused John Lydon (AKA Johnny Rotten) of living up to his moniker in refusing to authorise a licence of the band's music for Danny Boyle's new six-part FX series, Pistol. 

The series, revolving around Jones' memoir, Lonely Boy: Tales From A Sex Pistol, has Disney's backing, but has been snubbed by Lydon, who claims that he is portrayed (in the book) in a "hostile and unflattering light", and that the series script had been written, and an actor chosen to play him, without his participation or consent. 

Jones and Cook have asked the High Court to permit the licensing of the music (mainly from the album Never Mind The B******s) arguing that, pursuant to a band agreement made in 1998, any licensing requests would be dealt with on a "majority rules basis", and that they have the support of the estate of the late Sid Vicious, as well as the original bassist Glen Matlock. Lydon contends that no licence can be granted without his consent. 

On Monday 23 August, Sir Anthony Mann ruled that the band agreement was both valid and active. Mann agreed that the "majority voting rules" could overrule Lydon's attempt to do things "My Way". 

Mann found it likely that Lydon had been fully advised about the band agreement and its consequences, as he had English and US lawyers as well as his manager on his side, who would have undoubtedly explained the effects of such agreement. 

Regardless of whether Lydon had read the agreement itself, Mann stated that it was "highly likely" that Lydon would have understood its effects, having been fully advised, and in light of the fact that Lydon's evidence revealing that the protection of the Sex Pistol's legacy was important to him.

In any event Lydon's rights had "No Future" as Mann observed that he had previously "signed away his power to control the use of music rights" to BMG and Warner Chappell Music, and only retained qualified rights of approval as a result. The record companies could, in effect, act as they saw fit, even if they had previously elected to seek Lydon's permission to use the music.

Whilst not a particularly surprising decision, the following take-away points arise, particularly for artists: 

1. when licensing rights to your work, don't assume that you will still have the ability to restrict how it is used because you are the artist / author, unless this is expressly stated in the relevant contract; 
2. in the case of joint authors (such as band members), it is worth bearing in mind when entering into agreements regarding jointly-owned rights (such as band agreements) that the state of affairs can change, and it may be worth including a clause allowing the parties to re-consider, every few years (for example), whether the arrangements are still suitable for them; 
3. even if such agreements are put in place, disputes may still arise (as in this case) and it is worth thinking about (and drafting into the contract) how you would like them to be resolved; and 
4. finally, if you instruct lawyers or other advisors to help you on a deal, do make sure you take note of their advice, as the Court will assume that you have!

Background

In November 2015, Swatch filed the OMT Applications for a variety of goods, including watches and consumer electronic products.  Apple opposed the OMT Applications on two grounds. Firstly, that under s5(4)(a) of the Trade Marks Act 1994 (TMA), Apple could prevent Swatch from using the signs through passing off. Secondly, that the OMT Applications had been filed in bad faith, due to Swatch’s knowledge of Apple’s reputation in the phrase and Swatch’s likely intention to use the marks to parody Apple.

In the background, there was a long running dispute between the parties. This, along with other Swatch trade mark applications, had generated what the judge referred to as "bad blood”.

Hearing Officer

At first instance, the Hearing Officer rejected Apple’s opposition under s5(4)(a) TMA (i.e. passing off).  Whilst he accepted that a non-trivial number of people in the UK would be aware of Apple’s use of 'ONE MORE THING', he did not consider this sufficient to turn a common phrase into a “distinguishing sign”, capable of indicating the trade origin of Apple’s goods. 

The oppositions were however upheld under s3(6) TMA, the Hearing Officer having considered it no coincidence that the OMT Applications had been filed at a time when the parties were “already at loggerheads”.

Grounds of appeal

Swatch appealed the first instance decision on three grounds. Firstly, that Apple’s case under s3(6) TMA was predicated on the proposition that it owned enforceable unregistered rights in 'ONE MORE THING' and that the Hearing Officer, having rejected the oppositions under s5(4)(a) TMA, should also therefore have rejected the oppositions under s3(6) TMA.

Secondly, that the Hearing Officer did not have adequate evidence for his findings regarding Swatch’s intentions when it applied for the marks, at all or in relation to parody.

Thirdly, that an intention to parody was not sufficient to constitute bad faith, particularly bearing in mind the principle of freedom of expression. 

Decision

Bad faith

'Bad faith' has no prescribed definition under English law. The Court considered that it requires consideration of the applicant's state of mind and intentions regarding their application. It referred to Sky v SkyKick, noting that bad faith arises where:

“…the proprietor of a trade mark has filed the application for registration of that mark not with the aim of engaging fairly in competition but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties."

No evidence of intention to parody

On the above basis, the judge was clear that the Hearing Officer had been wrong to uphold the opposition under s3(6) TMA.  Whilst he had no difficulty finding that the OMT Applications were at least partially designed to “upset” Apple, he was unconvinced that that led to the conclusion that parodic use was intended. Indeed, he noted that any attempt to register the marks (regardless of intention) would have likely upset Apple and that the simple fact that Swatch wanted to annoy Apple could not alone amount to bad faith.

There was also a distinct lack of evidence that Swatch intended to parody Apple when the OMT Applications were filed. Swatch stayed silent on the point and Apple placed heavy reliance on online commentary. Since the authors of the comments had no knowledge of Swatch’s intentions or any apparent expert insight, the judge considered them of no evidential value. Whilst the Hearing Officer was entitled to be unimpressed by Swatch's failure to explain its intentions, that alone did not prove anything.

Ultimately, the judge found no evidence to support Apple's assertion that Swatch intended to use the OMT Applications to undermine Apple by parodic use.  That was sufficient for Swatch’s appeal to succeed, but the judge was also clear that even a proven intention to “poke fun at Apple in a manner akin to parody”, would not, of itself, amount to bad faith.  It was not an inherently dishonest practice to use a sign which brings another trader to mind in an amusing but inoffensive way, albeit the judge did accept that parody might transgress the boundaries of honest business practices in certain circumstances.

Comment

The decision is the latest in a spate of recent cases concerning 'bad faith' but as the first reported case to consider parody in the context of bad faith, it offers some interesting insights.

Unlike some jurisdictions (such as the US), when applying to register a UK trade mark, there is no requirement for the applicant to confirm that its mark is either already in use or will be used in the near future: A bona fida intention to use the mark is sufficient. With this in mind, the judge considered it perfectly reasonable (and consistent with the evidence) to suppose that Swatch had not given much thought to exactly what it would do with the marks, if they achieved registration. 

To succeed in establishing bad faith, a party typically has to evidence that the applicant had a dishonest state of mind or intention when its applications were filed. Whilst the Court acknowledged that each case turns on its facts and suggested that the severity and offensiveness of the parody is a relevant factor, the decision suggests that a light-hearted intention to parody would be unlikely to result in a finding of bad faith.

It is interesting to consider whether the outcome would have been different, had this been a claim for passing off, which required the parties to undergo disclosure. Here, the complete lack of evidence regarding Swatch's intention to use the mark to parody Apple was a decisive factor, albeit it seems Apple may have struggled to evidence the necessary goodwill in 'ONE MORE THING' to establish a claim in passing off.

It is also interesting to consider whether Apple would have been successful, had it pleaded a 'blocking' case. The OMT Applications will now proceed to registration but that may not be the end of the story. Under s47(1) TMA, a registered trade mark may be declared invalid on the ground that it was registered in breach of s3 (including s3(6)). This, in effect, means that Apple may decide to have another bite at the cherry (or perhaps the apple is more apt!) and to challenge the registration on grounds of bad faith. If Apple does so, it will also be at liberty to formulate its case as one of 'blocking' or so-called 'trade mark squatting', which the judge intimated could well have better prospects of success.

Swatch AG v Apple Inc [2021] EWHC 719 (Ch). The High Court's full decision can be read here. A fuller article, which takes a more in depth look at the decision, will appear in Entertainment Law Review in due course. 

Background - William Grant & Sons

WGS' 'Hendrick's' gin brand is protected by the UK trade mark shown below. The mark is registered in class 33 for "alcoholic beverages":

Hendrick's gin was first launched in 2000. It is now sold in most major UK supermarkets (not including Lidl) in the following apothecary style bottle:

Background - Lidl

Discount supermarket Lidl is well-known for primarily stocking own-brand goods. In terms of spirits, Lidl has sold its 'Hampstead gin' for approximately 10 years. The product was originally sold in the bottle on the left (below) but following a redesign in December 2020, Lidl launched the bottle on the right (below) across stores in England, Scotland and Wales: 

In April 2021, WGS issued proceedings for trade mark infringement and passing off and lodged a motion for interim interdict with the SCOS. In considering whether to grant interim relief, the SCOS noted that it was not its responsibility to determine whether trade mark infringement and/or passing off had occurred but rather, whether the claims made by WGS has a reasonable prospect of success.

WGS's claims were three-fold: (1) so-called 'confusion' infringement under s10(2) TMA; (2) so-called 'reputation' infringement under s10(3) TMA; and (3) passing off under common law. In determining whether to grant an interim interdict, the SCOS considered each claim separately. 

The SCOS decision

(i) Confusion (s10(2) TMA)

Under s10(2) TMA, a person infringes a registered trade mark if, in the course of trade, they use an identical or similar sign in relation to identical or similar goods and where because of those similarities, there exists a likelihood of confusion amongst the public.

In considering WGS' arguments under s10(2) TMA, the SCOS noted (as per Pfizer Ltd and Pfizer Incorporated v Eurofood Link (United Kingdom) Ltd) that “it must however be remembered at all times that the nature of the confusion that must be proved is confusion as to origin.”  On the evidence before it, the SCOS did not consider that a likelihood of confusion between the parties' respective gins existed. This was partly due to social media evidence, which clearly showed that consumers knew 'Hampstead' was a Lidl product and partly due to Lidl's reputation for predominately stocking own-brand goods.

On that basis, the SCOS found that it was "unable to conclude that the average consumer would be likely to be confused as to common commercial origin" of the products and declined to grant an interim interdict in relation to the claims made under s10(2) TMA. 

(ii) Passing off

To succeed in a claim for passing off, the claimant must satisfy the well-established Jif Lemon trilogy of goodwill, a misrepresentation on the part of the defendant and damage.

In considering whether a misrepresentation had been made by Lidl, the SCOS considered a range of factors including the product names (which it found were distinguishable), the location where Hampstead was sold (Lidl stores only) and the price of both gins (£15.99 for Hampstead and c£30 for Hendrick's). The SCOS also noted that for the purposes of passing off, the fact that one product merely brings another to mind is not enough.

That being the case and bearing in mind the above factors, the SCOS held "there is currently no reasonable prospect that the test for a misrepresentation required for passing off will be met".  It therefore declined to grant an interim interdict in relation to the claims made in passing off. 

(iii) Reputation (10(3) TMA)

Claims under s10(3) TMA are reserved for trade marks with a reputation. Under that section, a person infringes a registered trade mark if they use an identical or similar sign in relation to any goods and/or services if the use takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.

The bar for establishing reputation is not especially high and the SCOS was therefore in "no doubt" that WGS' mark had the necessary reputation in the UK. It then moved on to consider unfair advantage and/or detriment, which ordinarily requires a claimant to show that a change in consumer behaviour has occurred or is likely.  

In the present case, the SCOS found that WGS had a reasonable prospect of showing that there was a real likelihood of a change in the economic behaviour of consumers, causing an unfair advantage to Lidl. On the balance of convenience, the SCOS found that an interim interdict should therefore be granted in relation to the claims made under s10(3) TMA. 

Although a Scottish decision, the case serves as a useful reminder that the mere calling to mind of another product is not sufficient to succeed in establishing passing off. Likewise, the case also demonstrates that establishing a likelihood of confusion is extremely difficult where consumers perceive similarities between two products but clearly appreciate their separate origins (as the social media evidence demonstrated here).

The full judgment of William Grant & Sons Irish Brands Ltd v Lidl Stiftung & Co Kg and others [2021] CSOH 55 (25 May 2021) is available here.

PWS is a family run butchers which can trace its origins back to 1880. Based in Launceston, Cornwall, it trades at the higher-end of the local retail and wholesale market. The brand name 'PHILIP WARREN & SON' (often simplified to 'PHILIP WARREN') has been used by PWS since 1980. In recent years, PWS has also traded under the following logo:

When Lidl began using its 'WARREN & SONS' brand in 2015, PWS was already well established, particularly in and around Launceston. PWS was also well-known as a wholesale business, a supplier of luxury restaurants and was regularly promoted in the food press. In 2007, PWS had even been approached by US organic food giant Wholefoods, in connection with teaching staff how to set up butchers' counters in its UK stores.

Background - Lidl

Between 2015 – 2020, Lidl sold fresh meat products under the brand 'WARREN & SONS', largely using the following logo:

It was clear from the evidence that Lidl had not chosen the brand as a result of wanting to make any connection with PWS.

During this five year period, Lidl sold significant quantities of product under its 'Warren & Sons' brand. In PWS' initial letter to Lidl, its claim was valued at around £47M.

The dispute

Shortly after Lidl launched its 'WARREN & SONS' brand, PWS began to receive communications suggesting that some of its customers may have been confused into thinking that Lidl had started to sell PWS products. Whist the Court heard that PWS found this irritating, as a family business unfamiliar with IP law and with no trade mark registrations, PWS did not believe anything could be done.

After receiving legal advice, a letter before action was eventually sent to Lidl in late 2019 but by this time, Lidl was already phasing out its 'WARREN & SONS' brand. The last branded products were sold by Lidl in 2020. In the same year, Lidl also surrendered its 'WARREN & SONS' trade mark registration.

Passing off

To succeed in a claim for passing off, a claimant must satisfy the three requirements outlined in the famous Jif Lemon case: (1) Goodwill in the goods / services in question; (2) a misrepresentation leading (or likely to lead) the public to believe that the goods or services offered by the defendant are the goods or services of the claimant; and (3) damage to the claimant as a result of the defendant's misrepresentation.

(i) Goodwill

Lidl did not dispute that PWS had generated goodwill in relation to meat products or that this was significant in and around Launceston and in relation to PWS' wholesale business. The Court found however that there would likely be limited customer overlap (except for potentially in Launceston), as PWS and Lidl operated at very different ends of the market.

(ii) Misrepresentation

When considering misrepresentation, the Court considered the impact of Lidl's activities on PWS' customers. It held that the evidence of confusion was "at best, thin" and that it was unlikely that Lidl customers who were also aware of PWS would have been confused into believing the two retailers were associated. This was particularly so, given Lidl's strong reputation for primarily selling Lidl and other house branded goods.

Furthermore, whilst the two brands had traded side by side for 5 years, there had only been limited instances of actual confusion.

(iii) Damage

Lidl's use of the 'WARREN & SONS' brand was also found to have had no significant commercial impact on PWS' business. This was supported by the fact that PWS' claim for compensation was predominantly based on Lidl's sales as opposed to damage to PWS' business, which PWS had in fact been able to expand from 2015 onwards.

Accordingly, PWS' claim failed.   

Comment

The case reinforces the inherent difficulties of basing a passing off claim on a localised reputation and of demonstrating that a misrepresentation has occurred, or is likely to occur, where the businesses in question are known to operate at different ends and in different areas of the market.

The decision also serves as a reminder of the need to act quickly when the activities of another business potentially conflict with your intellectual property rights. As a general rule, the longer two businesses have coexisted, the more evidence of actual confusion will be required to convince the court that a misrepresentation occasioning damage has occurred.

In this case, it is unlikely that trade mark registrations would have altered PWS' fate. This is because the substantial period of coexistence, coupled with the limited evidence of actual confusion would have likewise undermined any claim that PWS could have sought to bring under s10(2) of the Trade Marks Act 1994.  

The full judgment, Philip Warren and Son Ltd v Lidl Great Britain Ltd [2021] EWHC 1097 (Ch), is available here.

Steven Makin (Makin) and Timofei Yeremeyev (Yeremeyev) supplied products (mainly roofing) to the construction industry through a group of companies, including the Claimants, Permavent and Greenhill. Makin invented and patented roofing products under the name 'Easy Roof System' and, in 2014, he granted a licence to Permavent to manufacture, use, sell and supply the Easy Roof System products.

In 2016, the relationship between Makin and Yeremeyev broke down. Makin left the business in 2017, purporting to terminate the patent licences and withdrawing permission for suppliers of certain Easy Roof System products to produce patented products.

Permavent brought a claim against Makin in July 2017 and sought (i) a declaration that Permavent owned the patents and patent applications (the IP Rights); and (ii) an injunction preventing Makin from transferring or licensing the IP Rights. The parties subsequently entered into a settlement agreement under which Makin assigned the IP Rights to Greenhill. Additionally, in return for his agreement not to challenge the ownership/validity of the IP Rights, Makin would be entitled to various payments, which would be forfeited/repayable in the event of a breach. Permavent stopped making the payments when Makin sought to register an interest in the IP Rights.

Makin was found to be in breach by way of summary judgment so the issue before the Court was whether the clauses constituted an unenforceable penalty.

The decision

The Patents Court held that the relevant clauses were not unenforceable as penalties.

Referring to the Supreme Court decision in Cavendish Square Holding BV v Talal El Makdessi (Cavendish), the judge noted that whether an obligation amounts to a penalty depends on (i) whether legitimate business interests are served and protected; and (ii) whether the

detriment imposed on Makin was extravagant, exorbitant, unconscionable or out of all proportion to that interest. The Court found in the Claimants’ favour.

The IP Rights were of vital importance to the business and any challenge could affect profitability through loss of sales and lead to reputational damage as it would damage the business’ ability to source, manufacture and sell products. Whilst the clauses were "undoubtedly harsh" on Makin, the detriment was not considered extravagant, exorbitant or unconscionable, nor were they disproportionate – a breach could cause significant harm to Permavent.

In reaching its decision, the Court also took into account other factors. This included Makin’s aggressive and hostile behaviour in the period leading up to the settlement agreement being signed (which demonstrated that he was likely to challenge the IP Rights and would maximise costs) and the fact that he had received legal advice on the settlement agreement.

Why is this important?

This decision provides helpful guidance on the application of the Cavendish test on penalty clauses in a different context.

It also highlights the importance of the factual matrix as at the date of an agreement when assessing proportionality; considering the potential consequences of a breach at that time, as opposed to assessing the harm caused by an actual breach.

The full judgment of Permavent Ltd and another v Makin [2021] EWHC 467 (Ch) is available (here).

In April 2010, Hasbro applied to register an EU trade mark (EUTM) (in classes 9, 16, 28 and 41) for 'MONOPOLY'. When the application was made, Hasbro already owned three other 'MONOPOLY' EUTMs.  Whilst the application partially designated new goods and services, there was considerable overlap with earlier marks. The application achieved registration in March 2011.

In August 2015, Croatian company Kreativni Dogadaji d.o.o (Kreativni) applied to the EUIPO for a declaration that the most recent 'MONOPOLY' EUTM was invalid, on the ground that Hasbro's repeat filing of 'MONOPOLY' applications, designating broadly the same goods and services, constituted bad faith.   

With EUTMs, a principle of 'use it or lose it' applies. EUTMs that have been registered for over five years become liable to revocation on grounds of non-use, unless genuine use of the mark can be evidenced. To side-step this, some businesses file new applications when their existing registrations are approaching the five-year mark. This process is known as evergreening and has been the subject of various disputes, including the high profile Sky v Skykick litigation (you can read our commentary on this here and here). 

Hasbro gets out of jail free

At first instance, the EUIPO's Cancellation Division rejected the application. It found that protecting the same mark for 14 years was not, per se, an indication of an intention to evade the genuine use regime and that Kreativni had not evidenced that Hasbro had acted in bad faith when its application was filed. Kreativni appealed the decision to the EUIPO Second Board of Appeal (BoA).

In a reversal of the first instance decision, the BoA granted the invalidity declaration, finding that it was Hasbro's intention "to take advantage of the EU trade mark rules by artificially creating the situation where it would not have to prove genuine use of its earlier marks for the goods and services".

General Court takes its turn

Hasbro appealed to the General Court (GC), which subsequently affirmed the BoA's decision.  

The GC held that repeat filings to avoid consequences of non-use of earlier marks is a relevant factor for assessing bad faith. The GC relied on its decision in Pelikan (T-136/11), in which it held that bad faith can be found in circumstances where an EUTM application is filed to avoid the consequences of total or partial revocation of earlier registrations for non-use.  

Comment

This decision expands guidance in earlier case law (see C-529/07 Chocoladenfabriken Lindt & Sprüngli) regarding when an application is deemed to have been made in bad faith.

Whilst the concept of 'evergreening' constituting bad faith is nothing new, the decision is a useful reminder to brand owners that the EUIPO (and indeed, its UK counterpart) is very much alive to the tactic of repeat applications and will not shy away from declaring marks that are filed on this basis as invalid.

Trade mark applicants should be mindful of this when re-filing applications that are broadly in line with earlier registrations that they hold and that such practices could lead to the partial or even total cancellation of their registrations.

The full judgment, Case T-633/19, Hasbro, Inc v European Union Intellectual Property Office (12 April 2021), is available here. 

In 2017, the Second Defendant acquired Axnoller Farm, a celebrity wedding venue owned by the Claimants until their bankruptcy in 2015.  The Claimants were subsequently employed by the Third Defendant and occupied a cottage on the Farm. In late 2018, their employment and entitlement to occupy the cottage was terminated following a dispute.

The parties subsequently brought a number of claims against each other. This included an action for misuse of private information and breach of confidence regarding the Defendants' alleged accessing and use of the Emails. The Emails were held in three accounts operated by the Claimants at the time of their dismissal.

The Defendants denied the claims and argued that, even if the factual elements for either of the two claims were present, they would be entitled to rely on the defence that there was a public interest in accessing, retaining and sharing the emails and the data contained in them. This required the Court to consider whether, as a matter of principle, such a defence was available in circumstances where information had been (as was alleged) unlawfully received by the Defendants.

Misuse of private information claims

To comply with the right to respect for private life under Article 8 of the European Convention on Human Rights (the Convention), the courts have developed the law relating to the protection of confidential commercial information to protect the privacy rights of individuals. This has led to the establishment of a tort of misuse of private information.

The Claimants argued that, whilst the public interest defence had been available to defend a breach of privacy claim before the Convention was incorporated into English law, that defence could no longer be sustained and that the only defences now available were those provided for in Article 8 or elsewhere in the Convention (such as the right to freedom of expression under Article 10).

The judge rejected these arguments (and others), holding that:

1. Articles 8 and 10 were wide enough to cover the parameters of the public interest defence in relation to claims for breach of confidence;
2. it was formalistic to worry about whether there was such a defence under that name in relation to claims for misuse of private information or whether, strictly speaking, it was only the terms of Articles 8 or 10 (or some other Convention article) that could provide a defence;
3. the real point was that the same facts being proved would potentially serve as a defence in both kinds of claim;
4. it was incorrect that allowing the public interest defence would be unlawful under Article 8, because it did not fulfil the requirement of foreseeability set out in Copland v United Kingdom (2007) 45 EHRR 37 (which held that the law must be sufficiently clear to give individuals an adequate indication as to the circumstances in which it will be applied); and
5. various cases relied on by the Claimants to support their assertion that there was no public interest defence to Article 8 claims did not establish that proposition, since none of them turned on that point.

Breach of confidence claims

The Claimants also argued that the public interest defence was only available in relation to a claim for breach of confidence if the information had been lawfully received by the defendant. However, the judge held that there was no basis to support any distinction between lawful and unlawful acquisitions of confidential information. 

Comment

The decision confirms that the public interest defence is available in relation to the relatively newly recognised – and still very much developing – tort of misuse of private information. It also confirms that the defence is available, regardless of the manner in which the information was obtained (in particular, its lawfulness). 

DO: Consider what intellectual property rights (IPR) you own or might create and how those IPR might need to be protected. 

Companies often create more IP than they expect. The main categories are:

• Trade marks: A trade mark can consist of any sign that can be represented clearly and precisely. Whilst packaging shapes, colours and even sounds are capable of protection as trade marks, they are typically comprised of signs and/or symbols. The core function of a trade mark is to allow consumers to identify the origin of a product or service and to differentiate it from those of third parties. Items commonly protected by trade marks include company and product names, logos, product packaging (including, for example, the shape of spirit bottles), and slogans. 

Trade marks are useful as they allow their owner to prevent competitors from using the same or similar marks which might confuse consumers or suggest an association between the two businesses.         

Although trade marks can be registered or unregistered, it is desirable to obtain registration as this provides certainty over when the right came into existence and avoids disputes regarding who began using an unregistered right first. It is also desirable to obtain trade mark protection at an early stage, to avoid a situation where time and expense has been invested in a brand, only for a third party to later dispute its use or to apply for registration itself. 

• Copyright: Copyright arises automatically and protects traditionally 'creative' works. Copyright will therefore usually exist in company logos and in any artwork present on product packaging or in marketing materials. Copyright also protects literary work (i.e. text), as long as it meets the test of being the author's own intellectual creation. Marketing slogans, website content and even product descriptions may therefore be capable of attracting copyright protection.

Copyright does not need to be registered, and generally lasts for 70 years from the end of the year in which its creator dies. The owner can use their copyright to prevent any unauthorised use or copying of the works. 

• Design rights: Design rights protect the appearance of more functional articles, provided they are novel. This could apply, for example, to the various parts of a spirit bottle, such as its overall shape, or just the shape of a particular feature, such as the neck. Certain design rights are also capable of protecting two dimensional products such as patterns and layouts. 

Design rights can be registered or unregistered, and allow their owners to prevent the manufacture and/or sale of lookalike products. 

• Patents: these generally protect technical "inventions", for example a new technology which allows a distillery to make products faster or using an improved process. 

The registration of a patent can be a long and expensive process, but once granted, patents provide inventors with a 20 year monopoly. 

It is therefore worth any new business considering what IP it may own or create and how best to protect it. This will also be helpful if/when that business wants to seek further investment or to fundraise, as prospective investors will take comfort in knowing that the company's IP is protected.

DO: make sure you have appropriate contractual arrangements in place to ensure that any IP created for the company (in particular, by third party contractors) belongs to it, so that you can use it and deal with it as you wish. Again prospective investors will be keen to see that these types of arrangements are in place, to avoid future disputes regarding ownership.

DO: Make sure, when developing your new brand, that its use would not infringe someone else's IPR. The main things to check, before a brand is selected, are that the proposed company name and any logo are clear and not in use by a third party, particularly one that operates in the same sector. This will help to avoid disputes and wasted costs on brands that subsequently need to be abandoned.

Equally, when producing any marketing materials, do make sure that you have appropriate permissions to use all content (e.g. stock photos, which can often be licensed online for the payment of a small fee).

DON'T: share information about your company and/or its IPR with third parties, unless that information is publicly available or you have appropriate documentation in place to protect confidentiality (e.g. a Non-Disclosure Agreement).

DON'T: assume that because materials are available online, they are free to use or copy! Be careful where you take your inspiration from.

2. What about launching new product lines? What are the key things that distilleries should be aware of?

When new trends take off, it can (understandably) be tempting to develop and launch new products as quickly as possible, to satisfy and capitalise on demand. When it comes to naming and promoting a new product, there are however various pitfalls that it can be easy to fall into. The following are most relevant to distilleries:

• Naming: When deciding on the all-important name of a product, care must be taken to ensure that it does not sound too similar to goods that are already protected. Only recently, an alcohol-free sparkling wine dubbed 'Nosecco' was required to undergo a rebrand as its name was deemed too similar to 'Prosecco', which is a protected designation of origin product. 'Low-alcohol' or 'alcohol-free' claims must also comply with Regulation (EU) No 1169/2011.
• Health claims: When preparing marketing materials and advertising their products, distilleries should be particularly wary of making health related claims, which are heavily regulated under the CAP Code. Under section 15.6, claims that either state or imply that a person's health could be affected by not consuming a drink are prohibited, as are claims which state or imply that a drink prevents, treats or cures human disease. The Advertising Standards Authority (ASA) has published detailed guidance on this, a selection of which can be viewed here and here.
• Green claims: Care should also be taken when making 'green' claims about products. The ASA released useful guidance in 2020, which highlighted the importance of being able to properly substantiate any sustainability claims. The Competition and Markets Authority (CMA) is taking a similarly robust stance, announcing that it will investigate descriptions and labels used to promote products and services claiming to be ‘eco-friendly’, and whether they could mislead consumers.
• Packaging: Under European law, no alcoholic beverage containing more than 1.2 % ABV may make health claims in the EU. Whilst EU law ceased to apply to the UK, following the expiry of the Brexit transition period, on 1 January 2021, this continues to be a relevant restriction for distilleries wishing to sell and promote their products in the Eurozone.
• Allergens: With any consumable products, it is essential that all possible allergens are identified, appropriately verified and labelled.

If distilleries are uncertain or have any questions regarding the applicable regulatory landscape, we would recommend that they seek pre-product launch legal advice.

3. Has the IP landscape changed in recent years and if so, how has this impacted brands?

One of the most significant changes to the IP landscape in recent years has been the broadening of the scope of copyright protection, through a string of EU cases. You can find some of our commentary on these cases here and here, but essentially their effect is that even more functional (as opposed to artistic) designs can now benefit from copyright protection.

The threshold for a 'work' to benefit from copyright protection is now relatively low, so it is worth being especially cautious when copying anything from the internet, even if it is not obviously an artistic work. For example, Ts & Cs may appear purely functional but may still constitute literary works protected by copyright. Similarly, the design of a functional item like a spirit bottle may now be protected by copyright as well as by design rights. This is significant because copyright protection lasts for much longer.

Also and although not strictly IP-related, many businesses will be aware of the General Data Protection Regulation or 'GDPR', which came into force in April 2016. Any business that processes customer data (including distilleries) should ensure that they understand and comply with the requirements of the GDPR, to avoid the sanctions and significant financial penalties that data breaches can carry.

4. 2020 was undeniably a very challenging year. What advice would you give distilleries on how best to move forwards?

2020 was challenging across the board but for businesses operating within, or servicing, the hospitality sector, the impact of the COVID-19 pandemic was felt particularly acutely. When bars, restaurants and pubs were forced to close for the first-time, in March 2020, many distilleries saw a significant percentage of their business dry up overnight. Whilst various relief packages were offered and emergency legislation passed, second and third lockdowns at traditionally busy times of the year dealt a heavy blow to the already strained sector.

Whilst certain factors like consumer confidence and the progress of the COVID-19 vaccination scheme are outside the control of businesses, innovation and versatility will be key components of future success. Health and wellbeing has been a huge trend in recent years and the desire to obtain and maintain a healthy mind and body has only been exacerbated by the pandemic. For the food and drink sector, this has resulted in many alcohol brands creating or adding to their low and no-alcohol offerings. A recent poll, commissioned by The Portman Group (the social responsibility and regulatory body for alcohol in the UK), found that UK consumers are embracing no and low products like never before. Of those surveyed, 62.5% reported having sampled a low or no product and a quarter regard themselves as 'semi-regular consumers'.

Year on year, consumers are also becoming increasingly ethically and environmentally conscious. To satisfy the growing demand for products that are made in a responsible and sustainable way, distilleries should consider who and where they source their ingredients, services and labour from. Cross-sector collaborations between likeminded businesses are also on the increase and distilleries should give careful thought to the image and message that both they, and those that they work with, present.

Recent events have also changed (possibly forever) the ways in which many businesses operate. For the food and drink sector, this has meant a huge surge in home delivery services (independent and through platforms like Deliveroo). In the current climate, distilleries should consider the channels through which their products are sold and any direct to customer routes that are available. 

In the post COVID-19 world, greater attention is also being paid to contractual provisions that were previously thought of as largely boilerplate and innocuous. Where new contractual arrangements are entered into or when new agreements are negotiated with key suppliers and customers, it will be important, at the outset, for the parties to consider the risk that some or all of them may be unable to perform their obligations, in the event of further lockdowns or other force majeure events. Ensuring that this risk is properly and fairly apportioned and that appropriate contingency plans are in place will help to ensure (as much as is possible) the continuance of both the contract and the parties' ability to do business with each other.   

This article first appeared in Distillers Journal Summer 2021.

This case attracted a lot of media attention in 2019, particularly in the music industry, when TuneIn, a US-based digital radio aggregator, was found by the High Court to have infringed the copyright of Warner Music and Sony Music Entertainment (which, between them, account for about 43% of the global market for digital sales of recorded music).

TuneIn had argued that TuneIn Radio was nothing more than a directory or search engine, which indexed and aggregated links to digital radio stations which were already freely available online, and that a finding against it would "break the internet".

However, the Court considered that TuneIn was different from a conventional search engine as (amongst other things) users could stream music from the various radio stations directly on TuneIn's website (as a 'one-stop shop', rather than being forwarded on) and TuneIn played its own advertisements.

The High Court therefore found that TuneIn's links, which it had repackaged and commercialised, amounted to a "communication to the public" for the purposes of copyright infringement, and - where the relevant radio station was not licensed in the UK - this was a communication to a "new public" which was not authorised by the copyright owner.

Only the links to radio stations which were licenced in the UK by PPL (e.g. BBC Radio 2 and Classic FM) were found not to be infringing, as TuneIn was simply connecting UK users to licensed UK radio stations.

TuneIn appealed to the Court of Appeal, which handed down its judgment last month essentially upholding the High Court's judgment, to the record labels' great relief. 

This decision, although unsurprising, highlights to a certain extent the tension between music licensing, which is still carried out to a large extent on a territory-by-territory basis by local collecting societies, and the increasingly globalised music streaming landscape.

For those unfamiliar with fashion terminology, 'bodycon' dresses emphasise body contours. 'Bandage' dresses have a similar effect and are made of thick, stretchy bandage-like material.

Original Beauty sell bodycon and bandage dresses mostly online, but with some physical stores in the UK and US. Their main brand is 'House of CB' but certain lines are sold under its sister brand, 'Mistress Rocks'. Oh Polly is a direct competitor of Original Beauty and sells bodycon and bandage dresses online.

In this case, Oh Polly's designer took images of certain House of CB garments and sent them to factories to be reproduced. Oh Polly also copied House of CB's business model, social media, marketing, packaging and presentation. It had even used the same models and the same locations for some of its photoshoots.

Original Beauty claimed that Oh Polly had infringed its unregistered design rights (the flagrancy of which, it argued, justified an award of additional damages). Original Beauty also claimed that the extent to which Oh Polly had copied its business model, social media, marketing etc. amounted to passing off, on the basis that this was sufficient to deceive consumers into thinking that Oh Polly was a sister brand of House of CB.

Unregistered Design Rights

Under s.226(2) of the Copyright, Designs and Patents Act 1988 (the Act), primary infringement of a design right arises where articles have been reproduced by copying the design. A simple, causal link is enough to establish copying. Therefore, if House of CB's designs contributed to Oh Polly's creation of its design, there was copying. Whether such copying amounts to infringement will depend on whether or not what has been reproduced is sufficient.

Under the Community Design Regulation (EC) No.6/2002 (the Regulation), David Stone (sitting as Deputy High Court Judge) focused on each design's individual character and whether the allegedly infringing item produced a different overall impression.

The court compared 20 garment designs and concluded that all were valid and that seven of House of CB's garments had been copied by Oh Polly.

Given that the garments were made either exactly or substantially to House of CB's unregistered design, the court held that there was infringement of House of CB's UKUDR.  As Oh Polly's garments produced the same overall impression as the House of CB's garments, there was also infringement of House of CB's CUDR.

In his judgment, David Stone stated that Oh Polly's designer of the garments had a 'couldn’t care less' attitude about the rights of others and, as a designer, she ought to have known that such activity was not lawful. He also held that as Oh Polly's designer took an image of House of CB's garments and sent it to factories to be reproduced, this was sufficient to award additional damages, for flagrancy, in relation to those designs.

Passing Off

In relation to the copying of House of CB's business model, social media, marketing, packaging and presentation, the court found that rather than spending money trialling garments and packaging, Oh Polly had ridden on the coat tails of House of CB's success, and obtained an advantage by copying a competitor.

However, while House of CB and Oh Polly customers noticed the many similarities between the brands, with one social media user stating "Oh Polly fully copying House of CB designs" and another stating "Oh Polly wanna be House of CB so bad," the court concluded that there was insufficient evidence that a substantial number of consumers had been deceived into thinking that there was a connection between the parties or that Oh Polly and House of CB were sister brands.

Several social media posts were provided by House of CB as evidence of confusion, including: "Do you own "Oh Polly"? they have a very similar style to House of CB" and "See a lot of similarities between you & "ohpolly" (models, style, insta) are you sister cos?". However, the court held that this evidenced only that the writer had been 'caused to wonder' rather than being deceived or misled into considering that Oh Polly was a sister brand of House of CB.

The claim for passing off, therefore, failed.

Comment

This case serves as a useful reminder of the importance of evidence of confusion in a passing off claim. Even where there is flagrant copying of much of a brand's products and packaging and/or an attempt to ride on a competitor's success, a claim in passing off is likely to fail unless the claimant can show that consumers have been deceived or misled to believe that the brands are connected. Here, given Oh Polly's flagrant actions, the court noted that passing off was not a tort of unfair competition and expressed its reluctance in reaching the conclusion that the claim for passing off failed.

The full judgment for Original Beauty Technology Co Ltd and others v G4K Fashion Ltd and others [2021] EWHC 294 (Ch) is available here.

Lifestyle Equities owns the UK and EU trade marks relating to "BEVERLY HILLS POLO CLUB" (BHPC) brand, including the word and logo mark (see below).  BHPC Associates LLC owns the corresponding BHPC trade mark rights in the US. 

By way of background, BHPC products were listed on amazon.com in the US with the consent of BHPC Associates.  The four business models by which BPHC products are sold via Amazon to UK and EU consumers are as follows:

1. Amazon Exports-Retail - customers purchased products from Amazon via amazon.com to be shipped to the UK/EU;
2. FBA Export - third parties sell via amazon.com and Amazon handles the logistics of the transaction;
3. MFN Export - third parties sell via amazon.com but Amazon does not handle the logistics of the transaction; and
4. Amazon Global Store - consumers on amazon.co.uk can access listings for products on amazon.com.

In short, Lifestyle Equities wished to prevent the UK and EU market from seeing the price at which such BHPC-branded products were being sold in the US, and therefore brought an action against Amazon claiming trade mark infringement.

Decision

Michael Green J dismissed the action, commenting that this was "not a normal case of trade mark infringement".

Sale of BHPC products

Despite Amazon admitting there were a handful of listings on the Amazon Global Store that were targeted at the UK before 2019, Michael Green J held that Amazon had not infringed the BHPC trade marks owned by Lifestyle Equities.  In his judgment, Michael Green J referred to the fact that, following allegations of trade mark infringement made by Lifestyle Equities back in 2018 / 2019, Amazon had successfully implemented technical restrictions that prevented BHPC products from being sold from amazon.com to UK and EU customers. 

Visibility of BHPC products

Given this, Michael Green J held that the only ongoing possible infringement was the visibility of BHPC products on amazon.com.  Therefore, the issues centred around whether using a sign on the internet meant using the sign in a relevant territory (i.e. targeting).

Michael Green J held that, whilst the traditional "average consumer" test is important to examine targeting, "all relevant factors" must be considered, including viewing figures, volume of traffic and the "subjective intent of Amazon".  Michael Green J also dismissed reliance on the "troublesome" Blomqvist decision to suggest that sales of BHPC products via Amazon Exports-Retail would establish use in the UK and EU, as there were only a handful of sales and Amazon's technical restrictions prevented sales in the UK and EU. 

Business models

Notwithstanding the minimal sales, to the extent that any damage suffered would be "almost de minimis", Michael Green J held that:

• the sales of BHPC products through Amazon Exports-Retail and Amazon Global Store and did not infringe as Amazon's contractual Ts&Cs stated that the consumer was the 'importer of record' and gained title to the products in the US; and
• Amazon was not the seller of BHPC products for FBA Export and MFN Export, so Amazon could not be liable for any trade mark infringement.

Comment

The decision provides an interesting analysis on the split in ownership of trade mark rights between the US and the UK and/or the EU.

Companies should be aware that, when examining targeting for trade mark law purposes, the Court will look beyond the "average consumer" test – seeking to refer to all relevant circumstances, including (but not limited to) data and subjective intention.

Further, companies should take the opportunity to consider their standard terms and conditions and specifically provisions relating to the transfer of title and import duties, which could ultimately assist in responding to a trade mark infringement claim.

The Racing Partnership Ltd (TRP) provided live betting services at racecourses across the UK. Arena Leisure Ltd (AL), owned six courses and in 2016, it entered into a contract with TRP to collect data from those racecourses in 2017.

Sports Information Services (SIS), the defendant, had previously held the right to collect and distribute data from AL's racecourses. After the expiry of its contract in December 2016, SIS continued to provide data from unofficial feeds.  TRP brought a claim alleging that SIS had unlawfully supplied data to the Betfred Group and the Ladbrokes Coral Group and that the three companies, together with Tote (Successor Company) Ltd, trading as 'Totepool' (the Tote) had conspired to cause injury to TRP by unlawful means.

At first instance, the High Court held that the information supplied by SIS was confidential to TRP and AL – it had the necessary quality of confidence and was given in circumstances importing confidentiality obligations. By supplying the information to off-course bookmakers, SIS had therefore acted in equitable breach of confidence. However, TRP’s unlawful conspiracy claim was rejected as TRP failed to demonstrate knowledge between SIS and at least one other conspirator that the means was unlawful. 

Both SIS and TRP appealed and, in majority decisions, the Court of Appeal allowed both, with each judge providing an alternative basis for their decision.

TRP's claim for misuse of confidential information by SIS was dismissed. The majority held that no duty of confidence was imparted in the circumstances, as the races were broadcast live and so data (such as the winner and non-riders) would be known in real-time.

The question to be answered was whether a reasonable person would expect to understand whether SIS understood that the Tote was bound by confidence obligations in the circumstances. As SIS did not receive the information under an obligation of confidence, the majority found that no equitable duty was owed. Arnold LJ disagreed with this conclusion, finding that there was a misuse of confidential information. In doing so, he noted that the doctrine of misuse of confidential information is about the control of information (i.e. its accessibility), not its secrecy and that it was a type of unfair competition.

SIS was however found liable for conspiracy to injure by unlawful means. This occurs where two or more parties act together, unlawfully, with the intention of doing damage to a third party and doing so. On majority, the Court of Appeal held that knowledge of the unlawfulness of the means employed was not required.

The various diverging views in the judgment and the fact that the decisions were reached on a majority basis could well mean that the dispute is destined for the Supreme Court.

In the meantime, it should be remembered that a contract is not the totality of the relevant parties' relationships with one another. There are equitable rights (e.g. obligations of confidence) and tortious duties (e.g. economic torts) that may also be relevant, and the scope of these duties may change, depending on the circumstances.

Companies dealing with commercial data (e.g. financial / market data, advertising metrics, sports data, etc.) should:

• review and vet their data / information sources / feeds;
• ensure their sources / suppliers have the necessary rights to supply the data (backed by appropriate warranties and indemnities);
• ensure that any data usage is within the scope of the applicable licences and rights granted; and
• ensure that any onward licensing / commercial arrangements are 'back to back' and have suitable restrictions and protections in place.

From the start of 2021, this will change and over the coming years, with the UK and EU acting autonomously, it is likely that the two regimes will begin to diverge, possibly significantly.

Whilst some changes will take time to manifest, the key areas of change to expect from 1 January 2021 are:

• The scope of registered and unregistered EU rights.
• Parallel imports and the exhaustion of rights
• The enforceability of judgments granted by the UK Courts, and
• The ability of the UK Courts to grant pan-European remedies, including injunctions.

Whilst the Withdrawal Agreement that was agreed between the UK and the EU (Withdrawal Agreement) contains some IP specific provisions, uncertainty remains in some areas. 

The purpose of this note is to inform businesses what we know for certain, what we can perhaps expect, from both 1 January 2021and in the longer term, and to provide practical tips on how best to prepare for the forthcoming changes.

]]>{25D09F91-58E0-4D68-B408-BF6E8B213532}https://www.rpclegal.com/thinking/ip/ferrari-slams-the-breaks-on-trade-mark-revocation-as-the-cjeu/Wed, 09 Dec 2020 12:46:21 ZIP hubSarah MountainBackground

Between 1984 and 1991, Ferrari SpA, the well-known Italian luxury car manufacturer, produced a sports car model, which it sold under the following 'testarossa' figurative mark (the Mark):

In 1987, the Mark was registered as an international trade mark for goods in class 12 ("Vehicles"). Three years later, the Mark was registered in Germany, for the same class of goods. From 1991 onwards, Ferrari mainly used the Mark to identify spare and replacement parts for Testarossa models and to sell vehicles from that range. 

Under Article 19 of the Trade Mark Directive (Directive (EU) 2015/2436), a trade mark is liable to be revoked if, within a continuous period of five years, it has not been put to 'genuine use' in connection with the goods for which it is registered. In 2017, an individual successfully applied to the Düsseldorf Court for the revocation of the German trade mark registration, on grounds that Ferrari had fallen foul of the 'use it or lose it principle'. 
 
Ferrari appealed the decision, and the appellate court referred the following questions to the CJEU (amongst others): 

1. When assessing genuine use in relation to a trade mark that is registered for a broad category of goods, can you take into account the fact that those goods are only used in respect of a particular market segment as opposed to the overall market? 
   
   
2. Does the sale of used goods, which have already been released onto the EEA market by the trade mark owner, constitute genuine use of the trade mark?
   
   
3. If a trade mark is registered not only for a product, but also for parts relating to that product, do sales of trade marked spare and replacement parts for previously sold products constitute 'genuine use'?
   
   
4. Should consideration be given to whether the trade mark proprietor offers services which are targeted at previously sold goods, which bore the relevant marks, even if the services themselves do not use the marks? 

Decision

Questions 1 and 3

In respect of the first and third questions, the CJEU found that the fact that the products in question were sold at a particularly high price point did not mean that they could be regarded as an independent subcategory of the broader class of "motor cars" for which the Mark was registered. 

Similarly, the mere fact that the relevant cars were referred to as "sports cars" did not mean that they belonged to an independent subcategory of cars. This was because their use for motor sports was only one of their intended purposes (they were also capable of being used like any other everyday car). 

The CJEU reiterated that the key question was whether the use of the Mark was in accordance with its essential function, as opposed to token use. It followed that only Ferrari's use of the Mark for high-priced luxury sports cars (or their replacement parts) could constitute 'genuine use' for the entire category of goods for which the Mark was registered.

Question 2

The CJEU held that even if a trade mark owner has 'exhausted its rights' by putting goods bearing the mark onto the EEA market, that does not mean that no further 'genuine use' of the mark itself can be made. The resale of second-hand goods by a trade mark owner can therefore constitute 'genuine use', even if the relevant rights have been exhausted. 

Question 4

In relation to the fourth question, the CJEU held that the provision of services by a trade mark owner in respect of goods previously sold under their mark, can only constitute 'genuine use' if the services are also provided under that mark. 

Comment

This is an important decision, particularly for car manufacturers, who may want to seek to preserve trade marks which relate to discontinued models. The decision is particularly pertinent given the recent trend of relaunching older models which have since cultivated 'vintage' or 'cult' status. The decision will also be welcomed by luxury brands in general, whose iconic goods typically remain in circulation long after production stops. A further coup for luxury brands is the finding that the re-sale of second-hand goods by brand owners will likewise constitute 'genuine use', thereby contributing towards continued trade mark protection. With the resale of luxury goods online and in luxury department stores now commonplace, the impact of the decision should not be underestimated. 

The ECJ's ruling can be read, in full, here. 

The Claimants produce Eagle Rare bourbon whiskey, a high-end product established in the market for almost 20 years. Eagle Rare draws its history and heritage from the well-known Buffalo Trace Distillery in Kentucky, U.S.A., where Eagle Rare is produced. Eagle Rare comes in two expressions: a 10-year-old whiskey, of which there is a deliberately limited supply, and a 17-year-old whiskey, which is even rarer and is considered to be highly desirable, amongst bourbon connoisseurs.  

The Claimants registered the words 'EAGLE RARE' as a UK trade mark (UKTM) in 1981 and as an EU trade mark (EUTM) in 2002. Both registrations are in class 33, for "whiskey" and "all non-beer alcoholic beverages, including whiskey" respectively.

The Defendants produce American Eagle bourbon whiskey at an unknown distillery in Tennessee. Launched in February 2019, American Eagle is a relatively new brand. It comes in three expressions: a 4-year-old whiskey, an 8-year-old whiskey and a 12-year-old whiskey.

In June 2018, the Defendants applied to register the words 'AMERICAN EAGLE' as a UKTM. That application was unopposed and duly proceeded to registration but when, in October 2018, the Defendants applied to register an EUTM for the same words, the Claimants filed an opposition. The application was subsequently withdrawn.

Not content to leave matters there, the Claimants applied to invalidate the Defendants' 'AMERICAN EAGLE' UKTM and issued trade mark infringement proceedings in the High Court. Infringement was alleged under the EU Trade Mark Regulation (the Regulation) on two grounds: likelihood of confusion (article 9(2)(b)) and unfair advantage and/or detriment (article 9(2)(c)). The Defendants denied the claims.

Finding

The Court held that the Defendants' use of 'AMERICAN EAGLE' infringed the Claimants' 'EAGLE RARE' trade marks, under both articles 9(2)(b) and 9(2)(c) of the Regulation.

Infringement under article 9(2)(b) of the Regulation 

In relation to a likelihood of confusion, one of the central factors was the Court's finding that a commercially significant proportion of average consumers in the bourbon whiskey market would be likely to mistakenly believe that American Eagle whiskey was produced by the same company (or group) as Eagle Rare whiskey (so-called 'indirect confusion'). This was so even though the Court accepted that the average bourbon customer would be unlikely to think that American Eagle and Eagle Rare were the same product (so-called 'direct confusion').  

Based on both parties’ expert evidence, the Court found that:

1. there are different 'tiers' of bourbon whiskey in the market, ranging from mass-market to 'super premium' products;
2. consumers in both the mass and premium bourbon markets have a notable degree of brand loyalty, but mass-market drinkers (representing around 90% of sales) are also motivated by price, and are not particularly knowledgeable; and
3. it was well-known in the spirits market that brands will often release different varieties with similar but different names (such as Gentleman Jack and Winter Jack, both under the Jack Daniels brand), indicating that those sub-brands are connected. A similar concept exists within the wine industry: When, in 2015, Champagne Louis Roederer, the producers of iconic champagne brand Cristal, pursued the producers of 'Cristalino', a similar finding of infringement was unsurprisingly made.  

Applying these factors, the Court determined that the average bourbon whiskey consumer cares about the brand they are buying and that their knowledge is sufficient to mean that they would not assume that American Eagle and Eagle Rare were the same product. However, the Court concluded that the same average consumer's knowledge was insufficient to allow them to appreciate that American Eagle and Eagle Rare were produced by different entities who were not economically connected. 

Infringement under article 9(2)(c) of the Regulation 

In relation to detriment, as the Court had found that a likelihood of (indirect) confusion existed, the Defendants' use of 'AMERICAN EAGLE' was found to have diluted the 'EAGLE RARE’ brand - We should emphasise that whilst diluting a whiskey brand is unacceptable, diluting whiskey itself can be very beneficial!

Whilst 'EAGLE RARE' was an exclusive and niche whiskey brand, the Court was also keen to reiterate the established principle that, in the context of luxury goods, a small market share does not equal a lack of brand awareness.

In relation to unfair advantage, the Court acknowledged that the Defendants might gain additional sales from being associated with the 'EAGLE RARE' brand, due to its aura, reputation, heritage and history.  However, as the Defendants were not actively intending to gain an advantage from that association and as Eagle Rare’s marketing budget was very small (around £10,000 per year), the Defendants could not be said to be “getting a free ride” or to be taking advantage of any significant financial investment made by the Claimants. This was so even though the Defendants had clearly been aware of the 'EAGLE RARE' brand before their brand launched and had been reckless as to whether 'AMERICAN EAGLE' would take advantage of 'EAGLE RARE'.

Comments

The case highlights the considerable impact that sector or product-specific practices can have on the Court’s assessment of trade mark infringement:  Here, the common practice of releasing multiple expressions of the same brand with similar and connected names.

The decision also reinforces the importance of performing clearance checks. Learning that a new brand conflicts with established rights is a far less costly discovery if it is made early on, before both time and money have been incurred in establishing a name or logo that ultimately has to be abandoned.

Sazerac Brands LLC v Liverpool Gin Distillery Ltd [2020] EWHC 2424 (Ch)

The Claimant in this case was the British Amateur Gymnastics Association (“British Gymnastics”) – the UK’s national governing body for gymnastics.  It owns registered trade marks for:

• “British Gymnastics, More than a sport”; and
• “British Gymnastics”.  

Both trade marks were registered in class 28 (gymnastics and sporting articles) and class 41 (education, provision of training, entertainment, sporting activities). 

Sometimes the trade mark “British Gymnastics” was used on its own, and sometimes it was used with “More than a sport” as a strapline. 

UK Gymnastics Limited (“UKG”) was offering gymnastic club memberships, competitions and courses under the sign “UK Gymnastics” (sometimes as a pure word sign, other times as a logo combined with an image of the Union Jack).  

British Gymnastics brought claims against UKG for trade mark infringement under the Trade Marks Act 1994 (the “Act”), and for passing off. 

Decision

Trade mark infringement:  Was there a likelihood of confusion?

The Court was asked to decide whether (under s. 10(2)(b) of the Act), UKG’s sign was similar to the British Gymnastics marks, whether it was used in relation to identical or similar goods or services and whether this caused a likelihood of confusion. 

The Court decided that there was medium similarity between “UK Gymnastics” as a word sign and “British Gymnastics”.  Whilst the words “UK” and “British” were obviously visually and aurally distinct, the conceptual similarity was strong. The two words denote a similar geographical area and convey an official status. When UKG used the logos of the Union Jack with the word sign “UK Gymnastics”, the Court found that the similarity decreased significantly.

In either case, however, the Court relied upon the fact that the services being offered by British Gymnastics and UKG were highly similar.  The services in class 28 (gymnastics and sporting articles) were held to be similar, but importantly services in class 41 (education, provision of training, entertainment, sporting activities) were held to be identical.

The Court also placed significant weight on the fact that British Gymnastics’ marks were particularly distinctive given that it had been the sole NGB for gymnastics for many years.  UKG tried to argue that it was in fact an NGB, but the Court found that it was not for several reasons – including that there was no real evidence of governance of the sport, no real evidence of UKG acting as either a custodian or guardian of the sport, a lack of rules governing membership until very recently and no governance structure.

British Gymnastics’ status as the sole NGB meant that the average consumer would pay less attention when purchasing or using the relevant services.  The Judge also provided a useful reminder that the relevant “average consumer” is fact specific – here, children and parents were the users of the services.  Children were likely to have difficulty distinguishing between British Gymnastics and UKG (and parents were likely to pay minimal attention compared with coaches, owners of clubs and other NGBs of international federations).

Overall, the Court found that there was a likelihood of confusion, and therefore the UKG signs did infringe British Gymnastics’ marks.

Trade mark infringement: unfair advantage or detrimental to distinctive character or repute?

When combining the degree of similarity between the marks and signs, the enhanced distinctiveness of the marks resulting from British Gymnastics’ status as the only NGB for gymnastics and its long-standing reputation in the UK, the Court held that the relevant public would establish a link to British Gymnastics when they encountered UKG’s signs. 

This link meant that the public would expect a certain quality in the services provided.  On the facts, it was found that UKG’s services fell far below the standard of British Gymnastics, causing a detrimental effect to the distinctive character and reputation of British Gymnastics’ marks.

It was also found that UKG knew of British Gymnastics’ reputation and deliberately used similar signs to generate more business, changing the economic behaviour of the average consumer and ‘riding on the coattails’ of British Gymnastics. 

Combined, the Court determined that this amounted to a further infringement under s.10(3) of the Act, meaning that British Gymnastics was successful on both counts of trade mark infringement.

Passing Off:

Relying on the same reasons, the Court upheld the passing off claim, concluding that British Gymnastics had established goodwill, UKG’s actions amounted to a misrepresentation that the services were those of British Gymnastics and that this caused damage.

Key comments 

The case is important for NGBs, many of whom may have encountered similar issues with organisations using “GB [Sport]” or “UK [Sport]” to sell goods and services.
In this case, the important point was that British Gymnastics was the only NGB for the sport, giving its marks distinctive character. For the few sports where there are multiple NGBs, it would be important to show that those NGBs had clear and delineated roles which were understood.

It was less important that the signs themselves were of medium similarity (or even low similarity when logos were included) – what was vital was that the services were so similar that it created a real likelihood of confusion.

More broadly, the case serves as a useful reminder that even though a mark may appear generic, it can still enjoy a great deal of protection if it has long standing use / its owner occupies a unique position in the field. 

British Amateur Gymnastics Association v UK Gymnastics Ltd & Ors [2020] EWHC 1678 (IPEC) (26 June 2020).

The claims included the use of the club’s name without a licence, and interestingly not using the club crest when consumers would have expected to see it.

After almost a year-long stay of proceedings to try and reach a settlement, the case was thrust back into the spotlight in recent weeks, as the Court heard Man United’s application for permission to amend its claim.  The new claims relate to Sega and SI’s alleged liability for “acting in common design” with third parties to provide “patches” for Football Manager – i.e. downloadable files containing content that should be licensed such as player images, club logos and crests (which are trade marked).  When a user downloads a patch, they can essentially upgrade their game and play it as though it had been fully licensed by the relevant rightsholders.  The application failed – and this article explores why it failed and considers the underlying trade mark action.  More specifically, it looks at:

• the registered trade marks that Man United seeks to rely on
•  the alleged infringements (use of club name and removal of club crest);
•  Sega and SI’s defence; and
•  the recent judgment on Man United’s application to amend their claim.

 This piece was written for and first published by LawInSport. The full version is available to view here [paywall for if reading more than a certain number of articles per month].

In August 2017, Global Brand filed an application with the EUIPO for the registration of "XOXO", as an EUTM, in various classes. Following publication, an EUIPO examiner raised objections to the registration under Article 7(1)(b) of Regulation (EU) 2017/1001 (the Regulation), in all but one class. As readers may be aware, Article 7(1)(b) provides an absolute ground for refusal of registration, where a trade mark is devoid of any distinctive character.

Global Brand appealed to the Boards of Appeal (BoA) but in April 2019, the appeal was dismissed on grounds that "XOXO" would be perceived by the relevant public as "a promotional statement... offered to express love and affection". The BoA also found that "XOXO" lacked inherent distinctive character as many of the goods listed in Global Brand's specification were offered as gifts. As such, consumers would perceive "XOXO" not as an indication of origin but as "a banal and merely promotional indication about feelings that those goods convey, namely love and affection".

General Court

Global Brand appealed the BoA's decision to the General Court (GC) on three grounds:

1. Alleged infringement of Article 7(1)(b) of the Regulation
   
   

   Ground 1: only "teenagers and very young women" use "XOXO" to mean "hugs and kisses". Such people only represent a small part of the relevant public and, therefore, "XOXO" has intrinsic distinctive value amongst the majority.

   GC response: Dismissed - teenagers and very young women constitute a "non-negligible part" of the relevant public. In any case, the wider public attributes "hugs and kisses" to the sign "XOXO" and it is generally used to express love and affection. The "XOXO" sign also does not include elements indicating commercial origin, or which enable consumers to distinguish goods as those of Global Brand. It is therefore unable to perform one of the main functions of a trade mark (i.e. enabling the public to identify Global Brand as the source of goods that bear the "XOXO" mark).
   
   

2. Alleged infringement of equal treatment principles and sound administration

   
   Ground 2: the BoA disregarded previous EUIPO decisions, which allowed registrations including "XOXO". 

   GC response: Dismissed - the legality of decisions must be assessed "solely" on the basis of the Regulation. Although earlier decisions regarding similar applications could be considered, the BoA was not bound by them.
   
   

3. Alleged infringement of Article 7(3) of the Regulation
   
   Ground 3: "XOXO" had acquired distinctive character through use and was therefore registrable. 
   
   GC response: Dismissed – the purpose of the GC was to assess the legality of the BoA's decisions, not to review new evidence of fact that was presented for the first time. Global Brand had not previously put forward a case under Article 7(3) of the Regulation and was not at liberty to do so now.

Comment

The decision illustrates the difficulty of attempting to register signs, which inherently lack distinctive character, as trade marks. It also reinforces the position that whilst trade mark law is harmonised across the EU, the EUTM regime works autonomously and is independent of national systems. Here, the GC made clear that third-party registrations for "XOXO" (and variants of it), which had been registered in various EU member states were irrelevant, for the purposes of the EUIPO, BoA and GC's decision-making processes.

Although Global Brand's acquired distinctiveness argument was not considered (due to the timing of its submission), demonstrating acquired distinctiveness through use can be a tricky and onerous process – this was highlighted in the long running saga regarding Nestlé's four finger Kit Kat EUTM shape. When brands are conceived, it therefore remains desirable to use distinctive words, fonts and images, to increase the distinctiveness of signs that would otherwise be potentially lacking. Where that is not possible or where simply a word mark is preferred, businesses should keep contemporaneous records, showing the evolution of their marks and their recognition by the public.

XOXO.

The case concerns the iconic Brompton folding bicycle (the Brompton).

The Brompton was created in 1975 and has been sold, in its current form, since 1987. It has become a firm favourite with commuters due to its compact size and famous folding mechanism. The mechanism, which was previously protected by a patent, facilitates the Brompton being folded into three positions: folded; unfolded; and 'stand-by'. The latter enables the bike to stay balanced, on the ground, unsupported.

In recent years, Korean sports equipment company, Get2Get began marketing its own foldable bicycle, dubbed the "Chedech" (the Chedech). The Chedech bears a striking resemblance to the Brompton and folds into the same three positions.

In November 2017, Brompton sought a ruling from the Companies Court of Liege, Belgium, that the Chedech infringed the copyright in the appearance of the Brompton.

In its defence, Get2Get argued that the Chedech's appearance was dictated by its desired function (i.e. that the Chedech had to look a certain way, in order to fold into three positions). In those circumstances, Get2Get said that the Brompton could be protected by a patent but not under copyright law. Brompton disputed this, saying that the three folded positions could be achieved through the use of differently shaped components: as such, the appearance of the Brompton could, and indeed did, attract copyright protection.

The Liege Court stayed the Belgium proceedings and referred two questions to the CJEU. Most interesting was the question of whether EU law had to be interpreted as excluding works whose shape is necessary to achieve a technical result, from copyright protection.

Judgment

The CJEU held that in accordance with "settled case-law", a work only has to meet two conditions, to be protected under EU copyright law, namely:

1. originality of subject matter which is the author’s own intellectual creation; and
2. the expression of the creation referred to in (1).

The CJEU's judgment leans heavily on its previous decision in Cofemel v G-Star Raw, which we covered in an earlier post.

If originality is satisfied, the CJEU held that it must follow that the subject matter is eligible for copyright protection, "even if its realisation has been dictated by technical considerations, provided that its being so dictated has not prevented the author from reflecting his personality in that subject matter, as an expression of free and creative choices."

In plain language, even if the appearance of an original work has been dictated by its technical features, it will nevertheless attract copyright protection, unless those features have forced its author down a specific path, leaving no space for creative freedom. Where the shape of a product is solely dictated by its technical function however, the CJEU made clear that it cannot be covered by copyright protection.

In the present case, the CJEU noted that the shape of the Brompton appears necessary to obtain the technical result of folding the bike into three positions, one of which allows it to balance on the ground. Ultimately, it will be for the referring Court to decide whether, in spite of this, the Brompton is an original work, resulting from intellectual creation.

Comment

It seems that EU law is now 'settled' on the fact that designs, even functional ones, can benefit from copyright protection, as long as they are 'works' for the purposes of EU copyright law. The duration of copyright (70 years from the end of the year in which the author dies, for artistic works) considerably exceeds that of other intellectual property rights. As such, the apparent scope, which the decision appears to create, for technical objects to attract copyright protection, will be welcomed by product designers.

It remains to be seen however, if and how the decision will be implemented at Member State level (particularly in the UK, post-Brexit).

Background 

Coty is a global beauty company. Its impressive portfolio of luxury skincare and fragrance brands includes Marc Jacobs, Chloé, Gucci, Balenciaga, Bottega Veneta, Alexander McQueen, Davidoff, Burberry, Miu Miu and Lancaster. Through its German distribution company (the claimant in this case), Coty distributes perfumes, including under the 'Davidoff' brand and holds an EU trade mark (EUTM) licence for the sign DAVIDOFF. 

Coty claimed that two Amazon companies had infringed its rights in the EUTM by storing and dispatching bottles of 'Davidoff Hot Water', that were offered for sale by third-party sellers via Amazon-Marketplace. As Coty had not consented to the bottles being put on the EU market, their sale constituted an infringing act. Coty wrote to the third-party seller in question and obtained a cease-and-desist declaration. Coty then wrote to Amazon, to request the return of all bottles offered by the seller. Amazon sent a package containing 30 bottles to Coty. When Coty learned that some of these were offered for sale by a different third-party seller, it asked Amazon to disclose their contact details. Amazon however declined. 

Although contracts for the sale of goods via Amazon-Marketplace are concluded between third-party sellers and end-purchasers, Coty believed that Amazon's actions infringed the EUTM and that Amazon should be ordered to cease and desist from storing and dispatching bottles via its "Fulfilled by Amazon" (FBA) service.   

The litigation

Coty's claim began life in the German national courts but failed at first instance and on appeal. Coty subsequently appealed to Germany's highest court (the Federal Court) on a point of law. The Federal Court stated that it agreed with the previous decisions (i.e. that Amazon had not infringed) but sought input from the CJEU on the interpretation of EU trade mark law.

Specifically, it asked:

"Does a person who, on behalf of a third party, stores goods which infringe trade mark rights, without having knowledge of that infringement, stock those goods for the purpose of offering them or putting them on the market, if it is not that person himself but rather the third party alone which intends to offer the goods or put them on the market?"

In plain language: does someone who stores infringing goods for a third party, without knowing about the infringement, store the goods for the purpose of selling them (which is itself an infringing act) if only the third party intends to sell them?

The CJEU held that the answer was no: the provision of storage alone was not enough. For infringement to arise, the storage company must also pursue the aim of offering the goods for sale or putting them on the market. Amazon's lack of intent to offer the goods for sale meant that it had not used (and had therefore not infringed) the EUTM. 

The decision

The decision (whilst consistent with previous case law) will raise eyebrows. EU trade mark law does not define 'use' but in reaching its decision, the CJEU surmised that some form of "active behaviour" was required, along with the ability to control the act which constitutes the use (in this case, the selling of goods). As many will be quick to point out, it is arguable that Amazon plays far more than a passive role when goods are offered and ultimately sold via its Marketplace and that Amazon effectively steps into the shoes of the third-party seller. This is particularly persuasive in the case of FBA, which Amazon promotes under the strapline: 

"Simply send us your products, and we take care of storage, delivery to customers, customer service and returns handling".

The position is further clouded by the fact that Amazon provides the platform (and therefore the means) from which goods are sold and that a chunk of its considerable revenues is derived from cuts of seller sale proceeds. 

The "without having knowledge" element is also interesting. Many businesses that trade in third party goods routinely undertake supply chain due diligence to ensure that infringing and/or so-called grey goods are not inadvertently offered for sale. Whilst Amazon presumably does likewise, the platform has famously struggled to control the sale of counterfeit, grey and mislabelled products on its site. 

What this means for brands  

The decision, which is the latest in a long line of disputes that have seen brand owners (unsuccessfully) attempt to challenge Amazon's business practices, will not have been well received by the luxury market. 

It may not be the end of the story however. In its decision, the CJEU (although only asked to opine on a particular question) referred to other provisions of EU law, which allow proceedings to be brought against intermediaries who have enabled economic operators to use trade marks unlawfully. The mixing of products belonging to different third-party sellers could also prove problematic for Amazon: The CJEU accepted that if someone is unable to identify the third party on whose behalf goods are stored, the storing party itself would be offering the goods for sale (and therefore infringing). 

It seems likely, therefore, that this case does not mark the end of litigation involving online marketplaces. Whilst the law can be slow to adapt, particularly in response to advances in technology, it will be interesting to see whether the current law (or how it is interpreted) changes over time. 

Looking to the future

The fractious relationship between Amazon and certain luxury brands is well-documented. The position is not universal though and some brands see real benefit in selling via the platform. For some, it may be the ability to more effectively remove counterfeit goods (a "keep your friends close and your enemies closer" approach). For others, it may be Amazon's sheer popularity amongst consumers: ft.com recently reported that Amazon's sales have surged to $11,000 a second. 

That said, joining forces with Amazon will not be for everyone and whilst some luxury brands may be prepared to sell only limited items via the platform, it seems unlikely that we will see entire product lines and/or collections appearing. For many brands, the understandable desire to retain cachet and exclusivity and to therefore limit distribution channels will prevail over pure financial considerations. 

As well as creating an extremely testing environment for much of the luxury retail sector, the COVID-19 outbreak has shone a light on what has been known for some time: consumer habits have shifted. Whilst we do not know how or when some form of normality will be restored, spending habits indicate that for those understandably wishing to retain a physical store presence (and consumer experience), a clicks and mortar business model will likely be more futureproof. This presents an opportunity for greater collaboration between luxury brands and online marketplaces (whether through the release of more extensive collections or new partnerships) and undoubtedly acts as an incentive for brands to develop and extend their digital presence. 

Whilst the current climate is unprecedented and riddled with uncertainty, one thing is certain - the ability of luxury brands to flex and innovate will be key to their continued success as we journey forward to more prosperous times.

Sky had taken an expansive approach to trade mark filings and had used extensive specifications to seemingly protect a wide range of goods and services (some of which, it was found Sky had no intention of using its marks for). Today's judgment saw both this approach and Sky criticised for filing trade mark applications "purely as a legal weapon against third parties". As a result, large sections of Sky's specifications have been declared invalid, on grounds of bad faith. This also resulted in Sky being unable to rely on those invalidated goods and services, for the purposes of its infringement claims against SkyKick.

The decision may initially trouble brand owners. However, it will not affect a trade mark's ability to protect either core goods and services or goods and services that brand owners believe they may use their marks for. Going forwards, a trade mark filing strategy that reflects this should avoid similar judgments.

For existing trade mark registrations, the Court made clear that a mixed specification (i.e. one which contains both goods and services that the applicant did and did not intend to use its mark for) will not taint or invalidate the registration, as a whole.

A full copy of today's judgment is available here

For the foreseeable future, while COVID-19 restrictions remain in place, the CJEU will give priority to cases that are particularly urgent, such as urgent, expedited or interim hearings.

In the absence of urgency (for example the types of cases given priority as above), time limits in respect of on-going proceedings are extended by one month.  Those time limits will expire at the end of the day with the corresponding date in the following month, as the day on which the time-limit should have expired; or if the relevant date does not exist in the following month, the last day of that following month applies as the deadline.

Procedural time limits for starting proceedings and for lodging appeals continue to run, although it is recognised that the second limb of Article 45 of the Protocol on the Statute of the Court of Justice of the EU may possibly apply in some cases; that is that no right shall be prejudiced by the expiry of a time-limit if the party concerned can prove the existence of unforeseeable circumstances or of force majeure.

Hearings prior to 30 April  2020 have been adjourned, and affected parties have been asked to consult the information page for the Court of Justice of the European Union (here) for updates and further alterations to working arrangements.

Comment

On 16 March 2020 the Executive Director of the EU Intellectual Property Office (the EUIPO) issued Decision No EX-20-3 which stated, essentially, that in light of the recent outbreak of COVID-19 having disrupted global communications: "all time limits expiring between 9 March 2020 and 30 April 2020 inclusive that affect all parties in proceedings before the [EUIPO] are extended until 1 May 2020."

Update

The EUIPO has now issued a further clarification in respect of Decision No EX-20-3, making the following key points:

• The reference to ‘all time limits’ is to be read literally and encompasses all procedural deadlines in proceedings before the EUIPO, irrespective of whether they have been set by the EUIPO or are statutory in nature (i.e. stipulated in the EU Trade Mark Regulation and/or the Community Designs Regulation (together, the Regulations)).
• Time limits which relate to proceedings before other authorities are not extended by Decision No EX-20-3, even if such time limits are mentioned in the Regulations.
• The extension only applies to EUIPO proceedings which relate to trade mark and design matters, and so any EUIPO proceedings to which the Regulations do not apply or which relate to other matters (e.g. EUIPO governance) are not covered by Decision No EX-20-3.
• The effect of the extension is automatic, and parties do not therefore need to file a request. All deadlines which would have lapsed during the relevant period will not lapse on 1 May 2020 (in practice 4 May 2020).
• As the effect of the extension is automatic, parties subject to relevant time limits will not be informed individually about their deadline being extended.  

Comment

This helpful clarification will hopefully provide assurance to any parties to EUIPO trade mark or design proceedings affected by COVID-19, that they do not need to take any further steps (which may be particularly difficult in this period) in order to secure an extension of time until 1 May 2020 (in practice 4 May 2020). 

A copy of Decision EX-20-3 in English is here.

The clarification is found here.

Arnold LJ rejected Glaxo's application. The overriding objective of CPR 1.1, to deal with cases "justly and at proportionate cost", means that parties cannot simply put all the evidence they want before the court, even in a high-value dispute. Turning to the costs/benefit analysis from Interflora, the further surveys would almost double the costs and, as a matter of general principle, parties should only conduct one survey per territory. 

This judgement will encourage practitioners to think hard about which methodology to use. Beware of the three-step method in particular. The survey questions in Enterprise v Europcar appear to be a better model.

Click here to read the previous article.

We covered the heavily debated CJEU decision in Cofemel in an IP Hub post on 23 September 2019 (link).

Much of the debate in the UK has centred around whether certain elements of English law and of the Copyright, Designs and Patents Act 1998 (the "CDPA") remain compatible with EU law in light of the ECJ's recent case-law, culminating in Cofemel, which suggests that there is a harmonised EU-wide definition of "work" for copyright purposes which is not restricted by any pre-specified categories and should not take into account any aesthetic considerations.

The relevant elements of English law are:

1. The "closed-list" of categories of works which can benefit from copyright protection under the CDPA;
   
   
2. The concepts of "sculptures" and "works of artistic craftmanship" as found in section 4 of the CDPA and developed over time by the English courts; and
   
   
3. Section 51 of the CDPA, which provides that "it is not an infringement of any copyright in a design document or model recording or embodying a design for anything other than an artistic work or a typeface to make an article to the design or to copy an article made to the design."

It appears that we now have the first judgment of a UK court following Cofemel, in the IPEC case of Response Clothing Limited v The Edinburgh Woollen Mill Limited.

Judgment of HHJ Hacon

This case concerned the supply from 2009 to 2012, by Response Clothing ("Response") to Edinburgh Woollen Mill ("EWM"), of certain ladies' tops made of a jacquard fabric of a design referred to as a "wave arrangement", consisting of multiple lines woven into the fabric in a wave pattern.

In 2012, following an attempt by Response to increase its prices, EWM supplied a sample of Response's top to other garment suppliers with an invitation to supply tops made from a similar fabric.

Response brought a claim of copyright infringement against EWM, alleging that copyright subsisted in its wave arrangement design, including on the basis that it was a work of artistic craftsmanship.

HHJ Hacon turned to the New Zealand High Court's decision in Bonz Group (Pty) Ltd v Cooke [1994] 3 N.Z.L.R. 216, which had been referred to by Mann J in the first instance decision in Lucasfilm Ltd v Ainsworth and established that for a work to be regarded as one of artistic craftsmanship the author must have been both a craftsman and an artist.

HHJ Hacon found that, in his view, the wave fabric could be a work of artistic craftsmanship following Bonz, despite being made with a machine rather than by hand, on the grounds that the relevant employee who designed the fabric would have been a craftsman working in a skilful way, and the  primary goal was presumably to make something aesthetically pleasing to customers.

HHJ Hacon then turned to EU law, and found that he was satisfied that the wave fabric was also original in that "its design was its author's own intellectual creation" and if "no sufficiently similar design existed before it was created, it must have been the expression of the author's free and creative choices."

HHJ Hacon accepted that, pursuant to the Marleasing principle he was required to interpret the CDPA, so far as is possible, in conformity with the Information Society Directive (2001/29/EC), and therefore "in conformity with the way in which that Directive has been interpreted by the CJEU".  

The most interesting passage for copyright practitioners in the UK is that which followed at paragraph 63 of the Judgment:

"The issue I have to resolve is not whether Directive 2001/29 has the effect of removing all the gaps there may be in copyright protection available from a court at first instance for 'works' within the meaning of art.2 of the Directive, but whether it is possible to interpret s.4(1)(c) of the 1988 Act in conformity with art.2 of Directive 2001/29 such that the Wave Fabric qualifies as a work of artistic craftsmanship and thereby its design becomes entitled to copyright protection. In my view it is, up to a point. Complete conformity with art.2, in particular as interpreted by the CJEU in Cofemel, would exclude any requirement that the Wave Fabric has aesthetic appeal and thus would be inconsistent with the definition of work of artistic craftsmanship stated in Bonz Group. I need not go that far since I have found on the facts that the Wave Fabric does have aesthetic appeal."

Conclusion

Because HHJ Hacon found that that the wave pattern had, in fact, aesthetic appeal, he did not need to go as far as to test the impact which EU law might have had on the UK copyright protection of a "functional" item lacking such appeal.

Importantly, however, it appears we now have express acceptance from an English judge that the practical impact of the Cofemel decision is to exclude any requirement for a work to have aesthetic appeal. It follows that English law, as it has been interpreted to date, is incompatible with EU law in this respect.

This issue with undoubtedly be tested soon in the English courts (and/or by the lawmakers following Brexit) – so watch this space.

Judgment of HHJ Hacon in Response Clothing Limited v The Edinburgh Woollen Mill Limited [2020] EWHC 148 (IPEC)

However, departing from Advocate General Tanchev's Opinion, the CJEU ruled that (i) an EU trade mark will not be declared wholly or partially invalid on the ground of lack of clarity and precision of its specifications, and (ii) a lack of intention to use an EU trade mark is not in itself a ground for bad faith.  This decision should be a welcome relief for brand owners seeking to maintain broader protection (albeit less so for companies seeking to clear new brands, as this decision will do little to "de-clutter" the trade mark register).

A full copy of the judgment is available here.

The parties were established businesses, both of which had been using "Bentley" trade marks for several decades. This case concerned whether the Defendants' use of a particular mark constituted trade mark infringement of the Claimants' (arguably less well-known) trade marks. 

The Claimants were Bentley 1962 Limited and Brandlogic Limited, collectively known as 'Bentley Clothing'. The Second Claimant sells clothing under the BENTLEY brand as the exclusive licensee of the First Claimant, which holds the relevant intellectual property rights. The companies are closely linked, also sharing the same directors.  

Bentley Clothing was acquired by the Claimants from a line of predecessors, having begun trading in 1962. Bentley Clothing has three UK registered trade marks for BENTLEY dating back to 1982, including a word mark for BENTLEY and the 'Lozenge' mark – both individually and as a series mark - as depicted below: 

By the time the relevant period began in November 2011, registrations for both the BENTLEY Series Mark and the Word Mark had been granted to Bentley Clothing.

The Defendant was Bentley Motors - the famous manufacturer of luxury cars. Since around 1987, Bentley Motors began to market a variety of goods under its name and logos, including clothing and headgear (and allegedly was unaware of Bentley Clothing when the decision was taken to sell clothing and headgear). 

In 1998, Bentley Clothing contacted Bentley Motors to advise them of their rights and negotiations followed with little result. The parties had subsequently engaged in litigation over the 'BENTLEY' name in the UK and European Intellectual Property Offices and now in the High Court.

The main questions for the Court were:

1. whether Bentley Motors had infringed any of Bentley Clothing's marks by using the 'Combination Mark' - a combination of a 'B-in-Wings device' and the word Bentley – during the relevant period from November 2011 to November 2017, as seen below:

2. whether Bentley Motors' use of the Combination Mark constituted use of BENTLEY alone. 

The decision
The Court found that Bentley Motors had infringed both Bentley Clothing's Series and Word marks.  In reaching its decision, the Court considered the following key issues in detail:

(1) Issue Estoppel – whether Bentley Motors' Combination Mark was one sign or two?

Bentley Clothing argued that this question had already been decided by the UK Intellectual Property Office. However, the Court decided that the Hearing Officer did not consider whether the average consumer would have perceived the Combination Mark to be one or two and consequently there was no finding which created an issue estoppel. For the purposes of these proceedings it was agreed that the average consumer is "a member of the public who buys clothing and/or head gear." 

(2) The Combination Sign – One sign or two?

The Court noted that from the evidence provided, the distinction between one sign and two was of no concern to Bentley Motors up until 2014. In fact swing tags from 2005, terms and conditions dated 2012, and licences granted up until January 2014 suggested that Bentley Motors' own view was that the Combination Mark consisted of two marks used together. 

The Court therefore concluded that the average consumer would perceive the Combination Mark to be two distinct marks. As a result, use of the Combination Mark constituted use of BENTLEY alone, amounting to infringement of Bentley Clothing's Word and Series Marks pursuant to section 10(1) of the Trade Mark Act 1994 (the 1994 Act).

(3) Likelihood of Confusion under s.10(2) of the 1994 Act

Bentley Clothing had argued that, if the Combination Mark was considered a single mark, its use would still amount to infringement under s.10(2) of the 1994 Act. Although the Court had decided that s.10(1) infringement had occurred, it nevertheless decided to consider this argument in case it was wrong about s.10(1) infringement. 

The Court considered that there was no doubt that the dominant component of the Combination Mark was the word BENTLEY. With that in mind and when applying the principles set out by the Court of Appeal in Maier v ASOS Plc , there was a likelihood of confusion between the Combination Mark and Bentley Clothing's Word and Series marks for BENTLEY.

(4) Transitional Provisions of the 1994 Act

Bentley Motors relied on two defences, the first of which concerned the entitlement of a party to continue acts which were lawful under the Trade Marks Act 1938 but which then ceased to be lawful under the 1994 Act, on the basis that, until October 1994, Bentley Motors was selling jackets, silk ties, caps and scarves.  The evidence produced indicated that BENTLEY was not used on the goods themselves at that time but they were advertised in a catalogue under the heading "The Bentley Selection". 

In the Court's view, Bentley Motors did have a continuing right to sell garments of the type sold before November 1994 under the banner "The Bentley Selection". However, the question was then whether the transitional provisions provided a wider defence, covering a greater scope of clothing and headwear. 

Bentley Motors submitted that they did and that the defence applied even if the manner of use of BENTLEY by Bentley Motors had varied.  The court disagreed. It did not believe that Parliament intended the provisions to extend so widely. As a result, whilst Bentley Motors was entitled to continue selling jackets, silk ties, caps and scarves, the right did not extend to other types of clothing or headgear.

(5) Honest Concurrent Use

Bentley Motors' second defence was honest concurrent use. However, the Court found that this defence was not available, as they had engaged in a policy of "grandmother's footsteps" whereby they made a conscious decision to develop the prominence of the BENTLEY sign in incremental stages, to try to avoid provoking Bentley Clothing.

(6) Exclusive licence

Finally, Bentley Motors sought to argue that the Second Claimant was not the exclusive licensee of the First Claimant as the agreement between them was a management or agency agreement and this was briefly considered by the Court. Whilst the agreement was a management agreement, the commercial arrangements between the parties meant that the Second Claimant exclusively carried out all acts in relation to the BENTLEY brand and so was best construed as an exclusive licence.

Comment

Whilst it is natural for famous brands to want to expand beyond their established offering into other goods and services and take advantage of the cachet afforded to their name, this decision demonstrates that even well-known, established brands need to tread carefully to avoid falling foul of earlier rights. 

In this case, it would have been prudent for Bentley Motors to carry out trademark searches before launching its products and to develop its products in a manner which avoided infringement. Both parties clearly had existing rights and one can't help thinking that early engagement and a well-drafted co-existence agreement could have saved both parties a lot of cost and pain. 

The Background

Balema have been producing vinegar-based products from the Baden region for over 25 years, some of which are labelled as 'Balsamico' or 'Deutscher balsamico'. 

The Consortium, who are an association of manufacturers of the product whose name was registered as a PGI 'Aceto Balsamico di Modena', believed that the use of the word 'balsamico' by Balema infringed their PGI. 

In response to the claim, Balema sought a declaration from the German courts that they be permitted to use the term 'balsamico'. After dismissal at first instance, Balema appealed and it was held on appeal that there was no infringement as they were not using the PGI as a whole. The Consortium appealed this decision to the Federal Court who then deferred to the CJEU on the following question:

'Does the protection of the entire name "Aceto Balsamico di Modena" extend to the use of the individual non-geographical components of the term as a whole ("Aceto","Balsamico","Aceto Balsamico")?'

The Decision

Although it was held that the PGI has an 'undeniable reputation on the national and international market' the CJEU found that it did not extend to protect the individual non-geographic words. The Court looked at Article 13 (1) of Regulation 2081/92 which essentially states that protection will not be afforded to 'foodstuff which is considered generic'. As a result, the Court found that, 'aceto' meaning oil, and 'balsamico' an adjective meaning bitter-sweet (which is commonly associated with vinegar) were generic words and so were therefore not protected under the Regulation. 

Furthermore, as detailed in Recital 10 of Regulation 583/2009, the registration of 'Aceto Balsamico di Modena' as a PGI was originally objected to by Germany and Greece. They argued that the words 'balsamico' and 'aceto' were generic and that 'aceto balsamico' was already an established product on the market outside of Modena. The Recital responds to these objections by stating that the protection would be granted on the basis that:

1) the protection is granted to the term…as a whole; and 

2) individual non-geographical components of that term may be used…throughout the Community.

This Recital unequivocally clarifies that the protection is solely granted to the PGI as a whole. Finally, using another Italian-associated product as an example, Advocate General Hogan opined that although 'Prosciutto di Parma' is registered as a PGI, there was hardly an argument for preventing other producers from using the word prosciutto or ham!

Comments / Practical Tips

The ruling is important as it highlights the limitations of the protection that is afforded under PGIs.  Any business that has registered a compound PGI may want to consider whether its constituent parts will be covered by the relevant regulations.

In addition, the ruling clears the way for producers to clearly indicate to customers their product's characteristics. If the Court had found in favour of The Consortium, a number of products with labels containing terms forming parts of PGIs, such as 'balsamic' or 'prosciutto' would have had to be changed. Businesses should not however see this as an opportunity to mislead customers - it is still an infringement of the regulations to evoke the PGI by other means, such as through pictures (even if the PGI is not used).

Finally, the European Commission has launched a public consultation on geographical indications and traditional specialities guaranteed. The commission is seeking feedback from any interested party from producers to researchers so do get involved or get in touch to discuss. 

In late 2017, the Austrian politician, Mme Eva Glaswichnig-Pieszcek, brought a claim against Facebook Ireland Ltd (Facebook) for an order that Facebook remove a public comment that a user had posted on the platform and which, Ms Glaswichnig-Pieszcek claimed, defamed her.  The Vienna Commercial Court and, on appeal, the Vienna Higher Regional Court agreed and Facebook was ordered to remove the post. However, the exact scope of the order was disputed. The case was appealed to the Austrian Supreme Court which then made a reference to the CJEU.

The key questions for the CJEU to consider were: in addition to removing the original post itself, could host providers be ordered to remove other identical content from their platforms? Could the order go one step further and require host providers to remove equivalent content too and, if so, what exactly was meant by the term ‘equivalent’? Finally, should the order only apply in the country in which proceedings were brought or could it have wider geographical reach?

The relevant law

At issue was the interpretation of the E-Commerce Directive (200-31-EC) (the Directive). Under the Directive:

• a host provider (such as Facebook) is not liable for information shared on its sites if it has no knowledge of its illegal nature or if it acts expeditiously to remove or disable access to that information as soon as it becomes aware of it (Article 14(1))). However, this doesn't prevent a host provider from being ordered to remove or block access to illegal information (Art 14(3)); and
• host providers have no general obligation under the Directive to monitor their platforms for illegal content (Article 15(1)) however there may be exceptions to this in "specific case[s]" (Rectial 47).

The main consideration for the CJEU, then, was just how far an online intermediary's removal obligations go before breaching the no general monitoring obligation in the Directive.

Judgment

In a decision handed down on 3 October, the CJEU ruled that the Directive does not prevent a court from ordering a host provider to:

1. remove or block access to content that is identical to the original unlawful content;
2. remove or block access to content that is equivalent to the original unlawful content. Equivalent means content which is “essentially unchanged” from the original unlawful content such that the host provider does not have to carry out an independent assessment of that content (thereby enabling it to use automated search tools/technologies), and where the content contains the specific elements specified in the order; and
3. remove of block access to the content referred to in 1 and 2 above worldwide within the framework of relevant international law.

Comment

The CJEU's ruling is significant in further clarifying the obligations of online intermediaries under the Directive in respect of the content they host. The ruling is another example of the general movement by the courts and regulators to define the obligations of online platforms and the extent to which they are liable for such content. In the UK, the decision follows other attempts to draw these lines such as the government's Online Harms White Paper which was published earlier this year (see RPC's commentary on this here). 

The decision has attracted some criticism because, on the face of it, it gives European courts the power to apply takedown requests internationally, including in countries where the original content may not itself be illegal. However, the CJEU did caveat this part of their decision by saying that such worldwide orders are permissible "within the framework of international law", although just what international laws the CJEU was referring to is unclear. Further, from a practical perspective there may well still be difficulties in trying to enforce these kinds of orders outside of the EU and EEA (if there aren't the same mutual recognition systems for court orders).

Going forwards, the courts will need to set out clearly and carefully in the order what content they consider to be 'equivalent' to the original illegal content. Quite where the line is draw in relation to a host provider’s obligations to monitor and search their platforms in relation to specific content is likely to be subject to further litigation. 

GlaxoSmithKline has sold a purple seretide inhaler since 1999 (seretide is a drug for treating asthma). Until 2015 these were the only purple inhalers on the market. After Glaxo's patent expired, Sandoz Ltd. released a generic alternative, also coloured purple. Glaxo originally brought a claim against Sandoz for trade mark infringement, but switched to passing off when its trade mark was revoked.

The test for passing off has three elements. The claimant must show:

• Goodwill or reputation in the goods/services;
• Misrepresentation by the defendant likely to lead the public to believe that the defendant's goods/services are those of the claimant; and
• Damage to the claimant caused by that misrepresentation.

Glaxo claimed goodwill in the purple colour of its inhaler, citing high sales over a number of years. It argued that Sandoz's use of purple was a misrepresentation, leading patients to believe that Sandoz's inhaler was a Glaxo product (misrepresentation as to trade origin); and leading healthcare professionals / patients to believe the Sandoz inhaler would provide the same treatment in terms of dose and delivery mechanism (misrepresentation as to equivalence). Glaxo claimed resulting damage to its goodwill. 

Decision of the High Court

The judge hearing the application recognised an element of speculation in the questions. Nevertheless, he noted that this method was widely used in European courts and felt the trial judge could find "some assistance" in the answers. The judge found no serious problems with the 2016 surveys. Though admitting the surveys would result in substantial costs, he deemed this was justified by the high value of the dispute.

Trial

By contrast, the trial judge was highly critical of the surveys. He found that the 2015 survey questions were leading. The first step was undermined by a preceding question, where subjects were asked what came to mind when they saw purple in connection with inhalers. The judge found the second step "both leading and misleading". Even though it provided different options, it still planted the suggestion that the colour may indicate trade origin. It was misleading because at the time only Glaxo was offering purple inhalers, and so the colour could not indicate a number of companies. The 2016 surveys were of greater value. Questions 1-3 were found to be open in their wording, though the fourth question, which asked how patients 'typically' refer to purple inhalers, was too vague to be of value.

Stepping back from the detail of the questions, Glaxo's case was seriously undermined by the fact that no patients were consulted, and none of the questions dealt with misrepresentation as to equivalence. All the surveys showed was that healthcare professionals associated purple with a seretide inhaler, but not any particular company, nor a particular dose or delivery mechanism. There was no evidence that patients made these connections either. Even if the surveys had fully complied with the Whitford guidelines, they would not have supported Glaxo's claim to goodwill. 

Ultimately, Glaxo failed to prove its claims.

Conclusion

To succeed on a passing off claim, it is not enough to show that the relevant public is drawn to a particular product feature. That feature must indicate the company's identity, or the specific way the product works. 

Surveys may seem like a natural way of proving these elements, but they can run into serious difficulties. Much care is required to satisfy the Whitford guidelines, especially on avoiding leading questions. An overarching problem is that interviewees can see surveys as a quiz, where they try to double-guess what answer is being sought. If you do opt for surveys, tailor them to specific submissions. 

High Court judgement in Glaxo Wellcome UK Limited and Anor v Sandoz Limited and Ors [2019] EWHC 2545 

Liverpool Football Club (LFC) filed an application to register the trade mark 'LIVERPOOL' at the Intellectual Property Office of the United Kingdom (UKIPO) on 20 June 2019. The application was made in relation to a wide number of goods and services including toys, photographs, clothing and broadcasting services. LFC stated that the application was strictly to protect the club and supporters from buying counterfeit Liverpool FC products; a registered trade mark would make it easier to curb counterfeit merchandise products and protect their brand internationally.

Shortly after LFC filed its original application, it was split into two separate applications. The first application (covering scientific apparatus, clothing, footwear, games and toys) is still under consideration.  The second application, (covering office materials, business management services, telecommunication, education and services for providing food and drink) was refused by the UKIPO in a high profile decision.

Reasons for refusal

Although LFC stressed that it wanted to register the name as a trade mark "only in the context of football products and services", its application was unsuccessful. The UKIPO found that Liverpool could not monopolise the name 'Liverpool' due to its "geographical significance" as a city. If the UKIPO had granted LFC the rights for the geographical location, it would have granted LFC sole use over the words or images associated with Liverpool (the city), and the capability to prevent anyone else's use.

Interestingly, this application and subsequent resistance mirrors a similar dispute from over 10 years ago, when LFC overcame criticism from local politicians concerning their application to register a component of its crest; a depiction of the liver bird. Alfie Hincks, local businessman and supporter of rivals Everton Football Club, strongly opposed the application and, on the grounds that the liver bird was well recognized as an emblem of the city of Liverpool, filed an opposition to LFC's trade mark registration.  However, the arrangement of the trade mark, featuring both the liver bird as well as the name of the club and the iron gates of Anfield, meant that the trade mark was considered a distinct and stylised mark and therefore it was registered. 

What's next?

What has gone unnoticed by many is that the first application was approved for publication by the UKIPO, published on 8 August 2019 and remains pending. The application is still open for opposition and to date there have been over 100 notices of intended opposition filed. As mentioned above, the goods in this surviving application all fall into the "merchandising" category, which  perhaps gives LFC a better chance at a successful registration, given than it would be more realistic to associate merchandising goods exclusively with LFC. Interestingly, Southampton FC's 'SOUTHAMPTON' EU trade mark covers three almost identical classes; so perhaps this is more of a promising position for LFC. 

Conclusion

The move is not unprecedented and other Premier League clubs such as Tottenham Hotspur and Chelsea have successfully managed to trade mark place names in relation to their commercial businesses. Essentially, clubs want to register marks across a wide variety of classes, with as wide-ranging specifications as possible in order to limit the number of counterfeit products and to cover different types of merchandising or sponsorship agreements.

But it is not all doom and gloom for LFC, as they have in their line-up the marks for "LIVERPOOL FC", "LIVERPOOL FOOTBALL CLUB" and their emblem design, amongst a host of others on the UK and EU trade mark registers. It will be interesting to see whether the latest application is added to the squad or whether LFC will concede another penalty from the UKIPO.   

There has been some tension between national law and EU law as to whether Member States can require a design to constitute a 'work of art' or an 'artistic creation' in order to also benefit from copyright protection.

In the Flos ruling (C-168/09), the CJEU held that Member States cannot exercise their discretion in setting the conditions for designs to additionally be eligible for copyright protection under national law.

Various Member States (including the Italian, Czech and British Government) suggested that this decision ran contrary to Article 17 of the Design Directive and Article 96(2) of the Community Design Regulation, which effectively state that designs shall also be eligible for protection under the law of copyright of Member States, and that the extent of, and conditions for, cumulative protection shall be determined by each Member State. 

The Member States in question have incorporated into their national law the requirement for a design to have a higher level of artistic quality (e.g. creating a distinct and noticeable visual/aesthetic effect extending beyond the utilitarian purpose of the design) over and above the relatively low level of 'originality' required for a 'work' to attract copyright protection under EU law.

Decision of the CJEU

In the Cofemel case, the Claimant (G-Star Raw) alleged that the defendant (Cofemel) had created clothing which imitated the Claimant's products, namely its "Rowdy" t-shirts and sweat shirts, and its "Rotor" jeans, and that such products ought to be considered to be protected by copyright.

Portuguese law, however, only conferred copyright protection on works of applied art, industrial design and works of design if, upon an analysis of their artistic character and the dominant trends in "cultural and institutional circles", they qualified as an "artistic creation" or a "work of art".

The Portuguese Court of Appeal referred the question of compliance with EU law to the CJEU.

The CJEU held, on 12 September 2019, following the Opinion of AG Szpunar, that the concept of a 'work' must be applied uniformly across Member States, and so the only requirement for designs to enjoy copyright protection is their originality, without any higher test being required by Member States.

There is no conflict with Article 96(2) of the Community Design Regulation, as this provision was only relevant pending harmonisation of the position across all Member States (which the CJEU suggests was the effect of the InfoSoc Directive having been transposed into national law by December 2002).

The CJEU also noted, however, that while the aesthetic effect of a design could not constitute a factor relevant to the determination of whether it constitutes a 'work' (being a subjective criterion), there must have been room for intellectual creation which was not merely dictated by technical considerations. 

Conclusion

It seems that, following this decision, it will be easier for designs to benefit from wider protection (given the longer duration of copyright protection). 

In the UK, there is now a question mark over the compatibility of section 51(1) of the CDPA 1988, which excludes copyright protection for works that record designs for anything apart from artistic works or typefaces, with EU law (subject, of course, to Brexit).

CJEU Judgment in Case C-683/17 Cofemel - Sociedade de Vestuário, SA v G-Star Raw CV (ECLI:EU:C:2019:721)

The claimants, Invista Textiles UK Ltd ("Invista"), are part of one of the world's largest textile groups – specifically making polymers, chemical intermediates and fibres including nylon.  Most notably, Invista is known for the brand LYCRA.

Between March and October 2016, a number of employees within Invista's Sustainability Group (the "Defendants") gave notice of their resignations and, shortly after, set up a new venture.  In February 2017, Invista issued proceedings against the Defendants after discovering various files relating to the new venture on a work computer.  The proceedings were based on allegations of breach of contract or breach of equitable obligations, predominantly in relation to misuse of confidential information and inducing a third party breach of contact. 

Main Proceedings

In January 2019, Birss J handed down judgment in favour of the Defendants.   In his judgment, Birss J considered various issues related to the employment agreements, including, but not limited to misuse of confidential information, non-compete clauses and non-solicitation.

By way of brief summary, Birss J held that the contractual position went far beyond what was necessary to protect Invista's legitimate interests and handed down judgment in favour of the Defendants.

See main judgment: Invista Textiles (UK) Ltd & Anor v Botes & Ors [2019] EWHC 58 (Ch) (21 January 2019)

Costs Proceedings and Part 36 Offer

Invista obtained limited relief at first instance against the Defendants as a result of the breach of the non-solicitation provisions: however, Birss J held that the "real winners" [51] were the Defendants as the predominant claim for misuse of confidence was "dismissed altogether" [18].

In assessing overall costs, Birss J was obliged to take into account a Part 36 offer made by Invista in June 2018.  The Part 36 offer requested that the Defendants "agree to the delivery up or deletion of documents in a schedule" [5] and pay Invista’s costs on the standard basis.   As a brief reminder, Part 36 offers are a tactical procedural step aimed at encouraging parties to settle a dispute pre-trial and are designed to "put the cost risk on the offeree if they fail to accept the offer" [25].

Following the first costs judgment, Birss J held that Invista had in fact obtained "a more advantageous position in terms of the relief actually sought" despite the value being "inherently unquantifiable" [22].  However, Birss J analysed the Part 36 offer by Invista as really being "an admission of defeat" [35] as Invista’s case was far wider than the forensic deletion of documents as it included serious allegations of breach of confidence and misuse of confidential information. 

Decision

Ultimately, the Part 36 offer was an offer which the Defendants could not accept as they “would have to pay all the costs to the case up to that date" [32], not just the costs relating to documents.  As a result, Birss J concluded that it would be “unjust” to enforce the consequences of the Part 36 offer as:

“…the Part 36 offer itself was not a genuine offer to settle.  In fact, if anything, I think the offer has proved to be a barrier to settlement of this dispute because since the offer was made and not accepted and then the admissions were made, the claimants seem to have been approaching this case as if they were entirely protected as to costs.” [43] (emphasis added)

Birss J concluded that Invista should pay 71% of the Defendants' costs assessed on a standard basis. The 29% reduction in the percentage of costs awarded was to take into account that Invista had limited success in relation to documents in the main proceedings.

See costs judgment: Invista Textiles (UK) Ltd & Anor v Botes & Ors [2019] EWHC 1086 (Ch) (12 April 2019)

Comment

This case provides a useful reminder of the importance of Part 36 offers in settlement negotiations and the potential costs consequences associated with these offers.   Regardless of whether a party has obtained relief, there continues to be significant weight given to whether or not the offeree accepted the Part 36 offer.

Furthermore, parties must ensure that all Part 36 offers are a genuine offer to settle; the court will not order costs where it considers it unjust to do so, for example where a Part 36 offer is a barrier to settlement.

Finally, and on a slightly separate note, this case highlights how it may be difficult for an employer to impose restrictions on former employees post-termination.  Companies may therefore wish to review their non-compete clauses in employment contracts and obtain advice as to whether any revisions are necessary.

The first claimant, Media Agency Group Ltd (MAG), had been incorporated in 2009 under the name "Transport Media" and was associated with the domain www.transportmedia.co.uk. MAG provided advertising services, including advertising on different forms of transport such as buses, trains and the London underground. In 2012 the second claimant was incorporated within the same group and the two companies swapped names – the second claimant adopted the Transport Media name (becoming Transport Media Limited (TML)) and MAG took on its current name. TML remained dormant.

In 2014, MAG registered the trade mark "Traccountable" for a product that was, at that time, under development however this product was never launched and, as a result, the "Traccountable" mark was never used.

In 2016, a former MAG employee set up a new advertising company, Space Media Agency (SMA), which operated under the trade name "Transport Media Agency" and was owned by two shareholders - Mr Shafiq and Mr Buksh. Mr Buksh registered the domain names www.transportmediaagency.co.uk and www.trackaccountableadvertising.com.

The claimants issued proceedings against SMA, Mr Shafiq and Mr Buksh for passing off and Mr Buksh admitted to cybersquatting. The judge at first instance held, in reliance on British Telecommunications plc v One in a Million Ltd [1999] 1 WLR 903, that MAG owned the necessary goodwill in the "Transport Media" and "Traccountable" marks and that the defendants' registration of both of the domain names above amounted to an actionable passing off.

Appeal

Mr Buksh appealed the High Court's decision on three grounds:

1. MAG should not have succeeded in its claim for passing off as it was TML that owned the relevant goodwill;
2. the mark "Transport Media" was purely descriptive and was therefore not protectable; and
3. "Traccountable" was an unused mark and so could not support a claim for passing off.

Decision

Rejecting the Appellant's grounds 1 and 2 but allowing the appeal on ground 3, the Court of Appeal held that:

1. goodwill in the "Transport Media" and "Traccountable" marks vested in MAG. This was because customers who sought out services via the TML www.transportmedia.co.uk website were channelled to MAG and it was MAG who actually contracted with the customer and whose services were supplied;
2. "Transport Media" was not so descriptive so as to make it incapable of supporting a claim to passing off, particularly given its significant use by the claimants; and
3. the judge at first instance had misinterpreted the court's decision in British Telecommunications plc v One In a Million Ltd. In that case, the issue was whether cybersquatters were using (or threatening to use) a trade mark merely by registering well-known domain names. That decision does not remove the general requirement in a passing off action to demonstrate goodwill in the mark relied upon. Given that the Traccountable mark had not been used by the claimants they could not possibly claim to have acquired goodwill in it and their passing off claim must fail.

Comment

This case provides a useful reminder that where a mark has not been used, a passing off action (including one based on cybersquatting) is likely to fail for lack of goodwill. Cybersquatting does not itself amount to passing off. For rightsholders that own a registered trade mark, demonstrating goodwill in the mark will be less of an issue when it comes to pursuing cybersquatters - under WIPO's Domain Name Dispute Resolution Service, rightsholders can apply to transfer a domain name to themselves where that domain name is identical or confusingly similar to their mark and where the registrant registered the domain name in bad faith (ie for the purposes of cybersquatting).

For the full case see: Media Agency Group Ltd, Transport Media Limited v Space Media Agency & Ors [2019] EWCA Civ 712

PulseOn (a developer of heart rate monitor wrist watches) alleged infringement of its Registered Community Design (RCD) for those watches by one of Garmin's sports watches, the 'Forerunner 235'. PulseOn's RCD sought to protect specific design features of the watch – in particular the shape and arrangement of three oblong LED sensors around a rectangular photo sensor. A comparison of PulseOn's RCD and Garmin's design is below.

Under EU design law, PulseOn's RCD allows it to prevent third parties (including Garmin) from using any design which does not create a "different overall impression" on the informed user. When considering the overall impression of the designs, the informed user will consider the degree of design freedom involved in the design and will place less weight on aspects where there is little or no design freedom (eg due to technical constraints).

In conducting that overall assessment, the High Court concluded that, whilst there was limited design freedom in relation to the placement of the LEDs and sensor (which needed to be placed in such a way so as to detect a person's heart rate), on the balance of the similarities and differences between the respective designs, Garmin's Forerunner design did not infringe PulseOn's RCD.

Decision

PulseOn appealed the High Court's decision on four grounds and the Court of Appeal found:

Why is this important?

The decision confirms a number of key principles of European registered design law – both the correct test for infringement of RCDs and also the impact that the degree of design freedom can have on the overall impression of the designs.

In highly technical products (where design freedom is limited) smaller design differences are likely to be required for a design to create a "different overall impression" on the informed user. This is because the informed user will be taken to know, and will attach less weight to, the features of a design for which the designer has a limited degree of design freedom.  As a result, technical designs and products will need to be more similar to each other for there to be an infringement than purely aesthetic designs where there is more potential for creative endeavour.

For the full case see: PulseOn OY v Garmin (Europe) Limited [2019] EWCA Civ 138).

Supermac's (Holdings) Ltd (Supermac's) applied to revoke McDonald's International Property Company Ltd's (McDonald's) EU trade mark registration for 'BIG MAC' covering classes 29 and 30 (sandwiches etc) and class 42 (services associated with operating and franchising restaurants etc) (EUTM) on the basis that the EUTM was not put to genuine use during a continuous period of five years following the date of registration in relation to any of the registered goods and services.

McDonald's filed evidence of use demonstrating that the mark has been used in advertising and on the packaging of the goods that have been marketed. It is also claimed that ‘as commonly known and attested to in the affidavits’ millions of products were sold under the EUTM. McDonald's concluded that if the Cancellation Division considered the evidence to be insufficient to show genuine use for all of the contested goods and services, then the application for revocation has to be rejected at least in so far as it is directed against some of the goods and services (eg sandwiches).

Supermac argued that the evidence of use submitted by McDonald's was insufficient to prove that the EUTM was put to genuine use for anything other than sandwiches.

Decision

McDonald's had sought to rely on three affidavits, signed by representatives of McDonald’s companies in Germany, France and the United Kingdom. They claimed significant sales figures in relation to ‘Big Mac’ sandwiches for the period between 2011 and 2016 and attached examples of the packaging of the sandwich (boxes), promotional brochures and what appeared to be menus. McDonald's also submitted printouts from its websites and from the "Big Mac" Wikipedia page.

The Cancellation Division held that the evidence filed by McDonald's was insufficient to establish genuine use of the EUTM. In particular, it was held that:

• Affidavits: statements drawn up by the interested parties themselves or their employees are generally given less weight than independent evidence. This is because the perceptions of a party involved in a dispute may be more or less affected by its personal interests in the matter; the probative value of such statements depends on whether or not they are supported by other types of evidence (labels, packaging, etc.) or evidence originating from independent sources.

• Extent of use: Although some of the evidence referred to the relevant time period (eg some of the brochures and printouts from websites) and to some of the Member States of the EU, and the EUTM is referred to in relation to at least some of the relevant goods (eg sandwiches), McDonald's failed to prove the extent of use of its mark.

• Websites: the presence of the trade mark on websites can show, inter alia, the nature of its use or the fact that products or services bearing the mark have been offered to the public. However, the mere presence of a trade mark on a website is, of itself, insufficient to prove genuine use unless the website also shows the place, time and extent of use or unless this information is otherwise provided.

• Brochures: although the submitted packaging materials and brochures depict the EUTM, there was no information provided about how these brochures were circulated, who they were offered to, and whether they have led to any potential or actual purchases. There was also no independent evidence submitted that could show how many of the products for which the packaging was used (if that is the case) were actually offered for sale or sold.

The Cancellation Division concluded that the evidence did not provide sufficient details concerning the extent of use; other than exhibiting the sign in relation to goods which could be considered to be part of the relevant goods, these materials do not give any data for the real commercial presence of the EUTM for any of the relevant goods or services, including sandwiches. It followed that the submitted brochures, packaging and printouts did not give sufficient information to support the sales and turnover figures claimed in the affidavits.

Why is this important?

This decision is not on its face particularly remarkable – the evidence filed by McDonald's did not satisfy the stringent criteria for demonstrating genuine use – yet viewed against the background that "Big Mac" is one of the most recognised brands in the world and the apparent acceptance by Supermac that 'Big Mac' had been used in respect of sandwiches, it is very surprising that McDonald's has not been able to demonstrate genuine use, at least in respect of the sandwiches/burgers for which it is so well known.

Any practical tips?

The Claimant, Reformation Publishing Company Ltd, owns the copyright in the two well-known Spandau Ballet songs, "Gold" and "True" (the Songs). The First and Second Defendants, Cruiseco Ltd and Discovery Travel Centre Pty Ltd, are part of the same group of companies and operate cruise holidays (the Defendants).

In June 2017, the Defendants posted on their websites and a file sharing platform (a link to which was shared with 257 travel agents) a short publicity clip to promote their "Back to the 80's" themed cruise which featured extracts of the Songs without a licence from the Claimant (the Publicity Clip).

The Defendants accepted that their Publicity Clip infringed the Claimant's copyright in the Songs and, as such, they promptly removed it from their websites and told the travel agents not to use it. However, they failed to remove the Publicity Clip from the file sharing platform.

The question for trial was therefore what damages should be paid for the Defendant's infringement, to be assessed on the basis of a "reasonable licence fee". Moreover, the Claimant sought additional damages under section 97(2) of the Copyright, Designs and Patents Act 1998 owing to the "flagrancy" of the Defendant's infringement.

Decision

Duration of copyright infringement

The Defendant's infringement was assumed to be over a period of 5 days in June 2017, i.e. from when the Publicity Clip was posted on the Defendants' websites and the file sharing platform link sent to the travel agents, to when instructions were given by the Defendants to take it down once they were aware of their infringement. However, the Claimant's lawyers discovered that the Publicity Clip was still available via the file sharing platform, which remained live until two days before trial.

Therefore, in respect of how long the infringement lasted for and how long a "reasonable licence fee" should be calculated for, the Claimant argued that the Defendants had committed copyright infringement for over a year, as they had made the Publicity Clip "available to the public" via the file sharing platform within the meaning of section 20(2)(b) of the Copyright, Designs and Patents Act 1988.

However, the court found that (i) the travel agents were not an indeterminate number of potential recipients and this recipient group was not sufficient to constitute the "public", and (ii) it was only speculative that the Publicity Clip would be sent on to members of the public by the travel agents and this was not strong enough evidence.

The court therefore held that the Defendants had not continued to make the Publicity Clip available to the public and, as such, the infringement lasted for 5 days only.

Damages for copyright infringement on the basis of a "reasonable licence fee"

The court took the view (following previous decisions) that a reasonable licence fee should be calculated by reference to the period of copyright infringement rather than the duration of a licence term that would have been negotiated should the Defendants have sought a licence from the Claimant for the Songs.

As for the terms of a hypothetical licence under which a reasonable fee would be charged it was decided that it would have been for both Songs, it would have covered internet usage, it would have covered point of use sale, and it would not have extended to television usage.

The court lacked comparator licenses as evidence, but established that there was substantial value in the Songs even for a short 5 day period owing to their iconic status. It therefore awarded the Claimant £38,750 in ordinary damages.

Additional damages under section 97(2) of the Copyright, Designs and Patents Act 1998

By section 97(2) of the Copyright, Designs and Patents Act 1998, the courts had the ability to award the Claimant additional damages owing to the apparent "flagrancy" of the Defendants' conduct, being its careless, reckless and/or deliberate actions leading to infringement.

The Publicity Clip was in fact produced for the Defendants by Artists Network Australia (ANA). Given ANA's experience in the music industry the court found that it should likely have known of the consequences of using the Songs without licence and had "decided to chance it", amounting to (at the least) a reckless attitude. This reckless attitude was assigned to the Defendants as principal and therefore an award of £25,000 in additional damages was given to the Claimant.

Why is this important?

The Claimant, KBF Enterprises Ltd, manufactured and sold sports nutrition products and supplements. It had used marks including the word WARRIOR since November 2010, and applied to register the following UK marks in Class 5 for nutritional supplements before 2015: WARRIOR SUPPLEMENTS, WARRIOR BLAZE and WARRIOR FAT BURNER. It applied to register the word WARRIOR in 2016.

The Third Defendant, Mr Daniel Singh, was a bodybuilder, fitness instructor and professional wrestler who had performed under the stage name 'Warrior' in episodes of the Sky TV programme 'Gladiators' shown in 2009. Following his appearance in Gladiators, Mr Singh carried on a variety of promotional activities in the UK and abroad. There was a dispute between the parties as to what extent Mr Singh used the name Warrior in relation to his own trading activities. In July 2015, the domain name warriorproject.co.uk was registered in the name of the Fifth Defendant. In October 2015, an application was made to the EUIPO to register the device trade mark 'The Warrior Project' for certain goods, including nutritional supplements in Class 5. In 2015, 'The Warrior Project' ("TWP") and 'The Warrior Project' logo ("TWP logo") started to be used by the Defendants in relation to nutritional supplements aimed at serious bodybuilders.

The Claimant alleged that it had goodwill and reputation in the marks WARRIOR and WARRIOR SUPPLEMENTS and that the Defendants were infringing all four registered marks in breach of s.10(2) of the Trade Marks Act 1994. In addition, the Claimant alleged that the Defendants were passing off their goods as those of the Claimant or as connected with the Claimant by the use of TWP and the TWP logo.

The Defendants alleged that the Claimant's use post-dated the commencement of use of the 'Warrior' name by Mr Singh and relied on the defence under s.11(2) of the 1994 Act of use of Mr Singh's own trade name. The Defendants also counterclaimed for a declaration of invalidity of all four of the Claimant's trade marks by reason of Mr Singh's alleged rights in the 'Warrior' name in connection with fitness and/or bodybuilding activities acquired prior to the Claimant's first use of the marks. They also alleged that the Claimant had been passing off.

Trade mark infringement and passing off

The Claimant argued that 'Warrior' was the most distinctive part of all of the marks, whilst the Defendants submitted that 'Warrior' would not be seen by the public as the distinctive element of any of the marks because it is essentially descriptive or a common element of low distinctiveness, which pointed away from a likelihood of confusion. The Court found that whilst the word 'Warrior' may have some allusive or evocative qualities when used in relation to nutritional goods, those allusions were at too general a level and/or too far removed from the goods to be descriptive or of inherently low distinctiveness. It concluded that the Claimant's mark WARRIOR and the word 'Warrior' used as a part of its other marks and TWP had an average rather than a low or minimal level of distinctiveness.

Whilst noting that it was important not to dissect marks in an artificial way, the Court found that the dominant element of the WARRIOR and WARRIOR SUPPLEMENTS marks was the word 'Warrior'. It was also more dominant than the word 'Project' in the TWP marks. However, the additional words in WARRIOR BLAZE and WARRIOR FAT BURNER led to significant conceptual differences from the TWP marks (although the inclusion of the word 'Warrior' meant that they were not dissimilar). Accordingly, overall, the TWP marks had a high level of similarity to WARRIOR, an average level of similarity to WARRIOR SUPPLEMENTS, and a low level of similarity to WARRIOR BLAZE and WARRIOR FAT BURNER.

The Court went on to find that, taking into account the identical or highly similar goods, there was a likelihood of confusion between WARRIOR and WARRIOR SUPPLEMENTS and the TWP marks. There was no likelihood of confusion with WARRIOR BLAZE or with WARRIOR FAT BURNER.

The Court was not persuaded that Mr Singh was trading under the name 'Warrior' before November 2010. Although he (and others) made frequent references to his role in the TV show in the course of his trading activities, the evidence of his use of the name 'Warrior' alone (without the use of his full name) was not sufficiently consistent to show that 'Warrior' was his trade name. Accordingly, the own name defence was not made out.

Finally, the Court found that the Claimant's evidence was inadequate to prove that it had goodwill in the Warrior marks by 2015, and rejected the Claimant's claim based on passing off.

Counterclaim

The questions of (a) whether the Claimant's registrations were invalid because they had been registered despite Mr Singh's alleged earlier unregistered rights in the Warrior name and/or (b) whether the Claimant was passing off its goods as those of Mr Singh (or as goods connected with him) had to be tested as at the date when the Claimant started to make use of the various Warrior marks in about November 2010. At that date, Mr Singh had completed his appearances as 'Warrior' in the Gladiators and had carried out some other promotional activities.

Whilst being satisfied that Mr Singh believed that he was known to those in the fitness/bodybuilding industry as 'Warrior' or Dan 'Warrior' Singh, the Court found that his evidence fell short of proving that he was known as Warrior before November 2010. It was not satisfied that any reputation that Mr Singh had acquired through appearing on the TV show would have led to him acquiring the goodwill in the name 'Warrior' for fitness and bodybuilding. Accordingly, the Court dismissed the counterclaim. 

Conclusion

The interesting message from this case is that, in relation to a mark deemed to have only an average level of distinctiveness (eg 'Warrior'), the use of that mark in conjunction with other arguably descriptive words (eg 'fat burner') may be sufficient to negate a likelihood of confusion where those additional words are found to create significant conceptual differences.

KBF Enterprises Ltd v Gladiator Nutrition 3.0 Ltd & Others [2018] EWHC 3041 (IPEC)

The Claimant, Link up Mitaka Ltd operates a translation and interpretation service in the UK and the EU under the trade marks ‘THEBIGWORD’ and 'thebigword' (the Trade Marks). The First Defendant, Language Empire Ltd, is a UK business also providing translation and interpretation services in the UK and the Second Defendant, Yasar Zamen, is the sole director and shareholder of the First Defendant (the Defendants).

In August 2010, the First Defendant, registered two similar domains www.thebigwordtranslation.co.uk and www.bigwordtranslation.co.uk (the Websites).  Between May and December 2014 these websites went live and displayed a similar logo ‘Big World Translation’. The Websites also contained text that suggested the sites were linked to the Claimant.

The Claimant issued and served proceedings on 10 March 2017 alleging trade mark infringement and passing off.

On 4 May 2017, the Claimant obtained judgment in default after no Acknowledgment of Service or Defence was filed. The court order provided for an inquiry as to damages or an account of profits and the transfer of the domain names to the Claimant.

Decision

On October 9 2018 Her Honour Judge Melissa Clarke, upon determination of the issues, awarded damages of £142,044 to the Claimant. HHJ Clarke considered the defendants' evidence as unreliable and gave an untrue picture of the level of enquiries made on the websites during the 34 month period in operation. It was considered that the Defendants conduct both at trial and during the inquiry process was intended to hinder the Claimants effort to quantify the claim, and the Courts efforts to fairly and justly assess damage. The Judge found that if there had been no sales, there would be no reason to make those efforts.

The two key issues determined in the inquiry were:

1. Did the Defendants (or others acting as their agents) make any sales of translation and/or interpretation services as a result of enquiries made from potential customers who had visited the Websites?

2. Was the Claimant deprived of the sales identified at Issue 1 above? If not, what is the reasonable royalty that would have been payable on those sales as between a willing licensor in the position of the Claimant and willing licensee in the position of the First Defendant (and if and to what extent a reasonable royalty would have included an amount to reflect the matters set out at paragraphs 21-22 of the Points of Claim)?

Assessment of Damages

The challenge for the Judge was that there was a lack of information from the Defendants in order to determine the actual loss. The Claimants evidence was that the conversion rate of enquiries to sales was around 75%.  The judge accepted this evidence and fairly assumed that the Defendants would have also converted a similar number of enquiries to sales. Other relevant evidence was that there was a 50% increase in the Claimants websites traffic after the Websites were taken down. However, any figures that derived from this would be purely speculative.

The Judge considered that the only starting point to quantify sales over the 34 month period was to use the limited information provided by the Defendants over a 9 month period which they alleged did not convert to sales. The Claimant provided an estimated value of each enquiry provided and applied their profit rates for 2016, this amounted to £28,200. The Judge divided the figure by 9 (months) and multiplied by 34 (months), giving the total of £106,533. In addition, the Judge also agreed to a 33% uplift of this figure to account for the likelihood that the real value given over the 9 months was not accurate, and the expected repeat work from having built relationships with the clients.

Conclusion

To most people with a rough understanding of copyright law, that may seem like the correct outcome: the school used on its website a photograph benefitting from copyright protection without the permission of the copyright owner – why shouldn't that be an infringement?

The problem lies in the route through which the CJEU came to this conclusion, which displays the tortured state of European copyright law at the moment. To find that the school had made a 'communication to the public', the CJEU had to distinguish the formative earlier decision in Svensson[2] from the facts of this case, in so doing leaving significant questions in the theory behind the law in this area, which shouldn't have been necessary.

The CJEU had to determine whether the school's actions amounted to a 'communication to the public'. That is because the Copyright Directive[3] contains a "right of communication to the public of works and of making available to the public other subject matter", and it was a question as to the correct interpretation of this right that was referred to the CJEU.

The CJEU summarised the "settled case law" on the requirements of a 'communication to the public' as being as follows:

"In order to be treated as a ‘communication to the public’, the protected work must be communicated using specific technical means, different from those previously used or, failing that, to a ‘new public’, that is to say, to a public that was not already taken into account by the copyright holders when they authorised the initial communication to the public of their work."

In this case the communications were made with the same technical means – through websites, so the remaining question was whether the communication was to a 'new public'.

In Svensson, a case involving hyperlinks, the effect of the CJEU's decision was that if a website communicated a copyright work to the internet at large, then it was not an infringement of the 'communication to the public' right to hyperlink to that copyright work using the same technical means (i.e. on a different website). That was because the hyperlinks in question were communicated to the same public that was taken into account by the copyright holders when they authorised the initial 'communication to the public', i.e. all Internet users had free access to both the original works and the hyperlinks, so there was no communication to a new public as a result of the hyperlink.

In the present case, the CJEU felt it had to somehow get around the clear statement in Svensson about what a 'communication to a new public' means in the context of a website.

Background

The Claimant, Frank Industries PTY Ltd, is an Australian company which designs and sells sportswear for women and owns UK and EU trade marks for the letters LNDR.  In January 2018, its solicitors wrote to Nike complaining of the use of the sign “LDNR” in Nike’s “Nothing beats a Londoner” advertising campaign. 

As Lewison LJ observed, that sign used the same upper case letters as Frank Industries’ marks, but in a slightly different order.  Nike did not use these letters as a stand-alone sign but used them in conjunction with the "Nike Swoosh" and the words “Nothing beats a”.

Nike did not immediately respond to the letter but continued its activities and launched a video on YouTube the following week which incorporated the sign.  On 19 February, Frank Industries duly issued proceedings seeking an injunction restraining Nike from infringing its marks and from passing off, and an order for delivery up or destruction of infringing material. 

At first instance, His Honour Judge Hacon granted an interim injunction. The injunction consisted of two parts – firstly, an order prohibiting Nike from using LDNR and secondly, a mandatory order requiring Nike to take all reasonable steps to delete all references to LDNR from social media accounts within its reasonable control, including Twitter, Facebook, Instagram and YouTube. 

Nike appealed, arguing that, in granting the prohibitory injunction, the judge had failed to take into account the desirability of preserving the status quo in accordance with the principles laid down in American Cyanamid Company v Ethicon [1975] AC 296.  In relation to the mandatory order, Nike argued that it would suffer irremediable damage because deleting social media posts on Instagram and Twitter would also permanently delete all user comments, likes and re-tweets. The whole conversation would be lost. In the case of a YouTube video, Nike argued that re-editing was not as simple as the judge was led to believe because the video would need to be re-posted with a different URL - again with the consequent loss of all comments, links and shares associated with the original, which apparently ran into millions.

Decision

The order prohibiting Nike from using LDNR

As far as the prohibitory part of the injunction was concerned, Lewison LJ made it clear that the appeal court was not considering whether it would have made the same order as the judge, but whether the judge was wrong to make the order that he did and that, even where a trial judge evaluates evidence given in writing without the benefit of live evidence, an appeal court should generally respect his evaluation (see DB v The Chief Constable for Northern Ireland [2017] UKSE 7).

As for the desirability of preserving the status quo, Lewison LJ referred to Garden Cottage Foods Ltd v The Milk Marketing Board [1984] AC 130 in which Lord Diplock had clarified that "status quo" meant the position immediately before the issuing of proceedings (or the application notice if substantially later), rather than the status quo when the conduct complained of began. 

In Lewison LJ’s view, the interval between the start of the Nike advertising campaign and Frank Industries’ cease and desist letter was so short that the relevant status quo was in any event that which pertained before the start of Nike’s campaign.  In those circumstances, Lewison LJ did not consider that there was any flaw in the judge’s reasoning. 

The mandatory order requiring Nike to delete all references to LDNR from social media accounts

The mandatory injunction was a different matter and, in Lewison LJ’s view, none of the judge’s reasoning at first instance appeared to address explicitly this part of the order.  As Megarry J observed in Shepherd Homes Ltd v Sandham [1971] Ch 340, “there are important differences between prohibitory and mandatory injunctions”.  A prohibitory injunction looks to the future whereas “a mandatory injunction tends at least to look in part to the past, in that it is often a means of undoing what has already been done so far as that is possible”.  Furthermore, “a mandatory injunction requires the taking of positive steps”. 

At first instance, the judge dealt with the mandatory part of the order in one short passage of his judgment, saying that - so far as the YouTube video was concerned - “LDNR is only used, or only significantly used, right at the end of the video… Therefore all that Nike would have to do would be to remove that small last section…”  Lewison LJ considered that the judge was not entitled to form those views on the basis of no real evidence and without giving any explicit consideration to the potentially irreversible consequences of that aspect of the order.

Lewison LJ therefore held that the terms of the mandatory order should be varied so that Nike was not obliged to delete Instagram posts or the YouTube video if, as Frank Industries agreed, the Instagram posts were archived, no further Instagram posts made between the hearing and trial and the YouTube video was blurred and retitled. 

As for Nike’s Twitter feed Lewison LJ considered it debateable, on the evidence, whether confusion arose.  He also accepted that to delete existing Tweets would have irreversible and far-reaching consequences for Nike, and on an interlocutory application of this kind, “it would not be right to deprive Nike of the benefit of continuing conversations between young Londoners”.  On the basis that the prohibitory part of the injunction would stop Nike from adding more posts featuring the offending signs between the hearing and trial but would not prevent Nike from responding to queries arising out of existing Tweets, Lewison LJ concluded that the judge’s order that the signs be deleted from Nike’s Twitter feed should be discharged.

Comment

Lewison LJ came up with an interim order that seeks to address the practicalities of social media and offer a balanced compromise in the digital age.  The revised injunction seeks to restrain Nike from compounding the alleged harm to Frank Industries’ marks between the hearing and trial while, at the same time, recognising the value of a successful social media advertising campaign and the elements from which much of that value is derived - namely comments, links, likes and dislikes generated by users who have engaged and interacted with Nike's campaign.

However, issues remain for both claimants and defendants in injunction proceedings and it is arguable that, in some aspects, social media advertising exacerbates those.

Timing has always been key to injunctions. The principle that the court should assess the "status quo" as the position immediately before the issuing of proceedings is not a new one. Any potential claimant seeking to ensure that they do not suffer irremediable harm resulting from dilution or confusion of their trade marks has always been advised to act quickly.  However, the speed at which social media campaigns can take hold represents a step up and potential claimants must now be prepared to act increasingly swiftly to counter the potential impact of a social media campaign which they believe to be infringing. As digital expert Jay Baer observed "Content is fire, Social Media is gasoline".

Of course, the revised terms of the injunction also cannot alter the fact that Nike is likely to suffer a degree of irremediable harm caused by the interruption to its campaign by these proceedings. That will generally be the case for defendants in injunction cases and it cannot be avoided altogether (notwithstanding, in this case, the revised terms of the injunction and the fact that the judge has ordered an expedited trial), but the speed of social media marketing may make the delay arising from court proceedings feel more acute.

As far as the variation of the mandatory order is concerned, there are also practical concerns as to how the terms will work in practice. The parties seemed to agree that the terms regarding Instagram provide a working solution as, if Nike is found not to have infringed, the archived Instagram posts can be resurrected and the advertising campaign along with them.  The practicality of the blurring or pixelating of the YouTube video, however, is more debatable.  As counsel for Nike suggested, while technically possible, putting out a video with a sign blurred or pixelated “falls so seriously short of Nike’s standards that Nike would take down the video rather than allow it to be viewed in a mutilated form”.

In May 2013, Christian Louboutin brought proceedings in the District Court in The Hague against a retailer called Van Haren, who had been selling women's high-heeled shoes with red soles in the Netherlands, where Louboutin has the following trade mark registered:

This sign is for high-heeled women's shoes (other than orthopaedic shoes) with the colour red (Pantone 18-1663TP) applied to the sole.  In the application for the registration, it was made clear that 'the contour of the shoes is not part of the trade mark but is intended to show the positioning of the mark'.

Louboutin's claim was upheld, but Van Haren challenged the judgment on the grounds of invalidity, citing the provisions from the Benelux Convention that mirror Article 3 of the Trade Mark Directive.  After some exchanges of submissions and evidence, the District Court in The Hague stayed the proceedings and referred the following question to the CJEU:

Is the notion of “shape”, within the meaning of Article 3(1)(e)(iii) of [Directive 2008/95] (respectively referred to in the German-, [Dutch-] and French-language versions of [that directive] as “Form”, “vorm” and “forme”), limited to the three-dimensional properties of the goods, such as their contours, measurements and volume (expressed three-dimensionally), or does it include other (non-three-dimensional) properties of the goods, such as their colour?

The law

The core issue at the heart of this referral was the interpretation of Article 3 of the Trade Mark Directive.  This states the following:

1.      The following shall not be registered or, if registered, shall be liable to be declared invalid:

...

          e)      signs which consist exclusively of:

          i)      the shape which results from the nature of the goods themselves;

          ii)      the shape of goods which is necessary to obtain a technical result;

          iii)      the shape which gives substantial value to the goods.

In the context of the dispute between Louboutin and Van Haren, it was the final limb of this Article that was most pertinent, i.e. whether a red sole falls within the scope of meaning of a 'shape which gives substantial value to the goods'.  If the answer was yes, Louboutin's sign would be vulnerable to attack on the grounds of invalidity.  Significantly, the Trade Mark Directive itself provides no definition (conceptual or otherwise) of the meaning of the word 'shape'.

The ruling

The CJEU ruled that a sign such as Louboutin's did not fall within the meaning of the word 'shape' under Article 3.  In reaching this conclusion, they made three key points:

1. For the purposes of trade mark law, a 'shape' is 'usually understood as a set of lines or contours that outline the product concerned'.  Boiled down – to be a shape, you need to have an outline.

2. Commenting upon the dispute between Louboutin and Van Haren, they noted that Louboutin's application for registration had explicitly excluded the contour (i.e. outline) of the sole, merely identifying it in order to show the positioning of the colour – which was the primary protection sought.

3. The word 'exclusively' needs to be taken into account when interpreting Article 3, so where a sign has a core element (e.g. a particular colour) that does not fall within the definition of 'shape', such a sign does not fall within the scope of Article 3 as it does not consist 'exclusively' of any shape.

Comment

This could well be considered to be a landmark ruling in terms of the potential for enhanced protection available for rights holders, and certainly the effect on the overall commercial market would be huge if there were a sudden rush of brands filing marks for the colour associated with their most iconic product.  However, Article 3(1)(e)(iii) will be replaced by Article 4(1)(e)(iii) of Directive 2015/2436 on 15 January 2019.  In the replacement provision, the shape exclusions are expanded in order to apply to 'the shape, or another characteristic, which gives substantial value to the goods' (emphasis added). 

The Court was required to interpret various clauses in a services contract entered into by Health and Case Management Ltd (HCML) and Physiotherapy Network Ltd (TPN), under which HCML referred patients to TPN (a nationwide network of physiotherapy practitioners) in return for payment of fees (the Referral Contract).

After the conclusion of the Referral Contract, and over a period of several years, HCML started building its own network of physiotherapy clinics that acted in competition with TPN clinics.  Unaware that HCML were building this competing network of clinics, TPN provided information about its own network to HCML on request, ostensibly for HCML to create a geographic pricing model of the network.  However, when referrals from TPN tailed off, TPN claimed that the information provided from its database had been used, in breach of the Referral Contract, to recruit clinics from the TPN network to the HCML network.

HMCL asked the court for a declaration that it had not acted in breach of contract or of confidence. In response TPN claimed that HMCL had breached obligations in the contract including (i) breach of an obligation to provide a minimum number of referrals; (ii) contractual breach of confidence; (iii) breach of its stated obligation to act in good faith; (iv) infringement of database right; and (v) passing off (this last of which failed entirely for lack of evidence of deception or confusion).

Obligation to provide minimum number of referrals

The agreement provided for HCML to provide in the region of 700 referrals a month to PNL, however, this clause ("HCML anticipates making circa 700 referrals per month to TPN") was deemed too uncertain to bind the parties.  In particular the use of "anticipates" and "circa" was found to inject uncertainty into the clause, and rendered it non-binding on the parties. 

In interpreting this clause the court also considered a prior "pilot" project that the parties had entered into and which included a similar clause with the addition of the words "but there are no guaranteed minimum volumes".  The court noted that care must be taken when attributing significance to the deletion of a previously included phase in a newer contract, and in this case it was found that no there was no material significance to the deletion of that phase – the meaning of the clause was unchanged, and it did not need to import an obligation on HCML to provide a designated number of referrals in order to give business efficacy to the contract.

Although HCML's claims in relation to this clause failed, its inclusion was found to give weight to the good faith provisions of the contract (discussed below).

Infringement of database right

The creation and maintenance of the TPN database was considered sufficient, qualitatively and/or quantitatively, to represent a substantial investment and to create a database right under Directive 96/9 article 7(1).  HCML were found to have extracted a substantial part of the valuable data from TPN's database by virtue of their request for data; their request having been made under false pretences - i.e. to create a geographical pricing model.  It was found that had HCML given the true reason for requesting the data (to assist their intention to set up a competing network), TPN would not have handed it over.  A breach of TPN's database right was upheld.

Breach of confidence

The confidential information clause of the contract was drafted so that although it restricted the disclosure of confidential information, it failed to restrict the use of that information.  TPN's claim was that HCML had misused their confidential information (rather than disclosed it to third parties), and so their claim failed – the use of the confidential information did not fall within the confines of the clause.

Breach of obligation of good faith

HCML had an express contractual obligation of good faith towards TPN, which had been breached by HCML giving a dishonest reason for its request for data from TPN's database.  It had used the information obtained in an underhand way to divert referrals away from TPN and into its own newly established network of clinics.  There was no defence to a duty of good faith to say that the information used was publicly available.

Mr Justice Nicklin found that "…HCML has failed to act in good faith towards TPN".  He also stated that the inclusion of the clause indicating an intended number of referrals meant that while "…there was no contractual obligation to make referral,…there was an expectation by both parties that HCML would do so; that was the shared commercial objective", thus lending further importance to the good faith clause.

Conclusion

This case is an interesting example of the application of a "Good faith" clause, and demonstrates where such a clause can "rescue" a claim where other grounds fail.  In this case the deficiencies in the drafting of the confidentiality clause meant that the "Good faith" clause provided a successful claim for misuse of the TPN data where the confidentiality claim failed. 

The Court also offered useful guidance on the interpretation of "Good faith" clauses with reference to established case law, namely that the obligation might include: (i) acting honestly; (ii) adhering to the spirit of an agreement; (iii) observing reasonable commercial standards of fair dealing; (iv) being faithful to a common purpose; and (v) acting consistently with the parties' justified expectations.

A geographical indication is a distinctive sign used to identify a product as originating in the territory of a particular country, region or locality where its quality, reputation or other characteristic is linked to its geographical origin, such as Cognac or Champagne. The Regulation is designed to protect both producers and consumers against potential misuse.

The CJEU reference came from the Hamburg Regional Court in proceedings concerning indication 'Scotch Whisky' which is registered in Annex III of the Regulation in relation to 'whisky/whiskey' products with the 'United Kingdom (Scotland)' listed as the country of origin.

The defendant, Mr Klotz, was an online distributor of whisky. He marketed a whisky which was produced in Germany under the designation 'Glen Buchenbach'. The Scotch Whisky Association (SWA) sought an order that Mr Klotz cease to market the whisky under the designation 'Glen Buchenbach' on the ground that its use infringed Article 16(a) to (c) of the Regulation.

The SWA argued that Article 16(a) to (c) ensures that geographical indications are protected not only against the use of such indications but also against references that suggest the geographical origin of the indication. It argued that because 'Glen' is widely used in Scotland instead of the word 'valley' and, in particular, as an element of the trade mark in the names of many Scottish whiskies, it evoked in the relevant public an association with Scotland and Scotch Whisky despite the inclusion of other information on the label which specified that the product was of German origin.

Decision

The CJEU ruled that Article 16(a) of the Regulation meant that, for the purpose of establishing that there is "indirect commercial use" of a geographical indication, the disputed element must be used in a form that is either identical to that indication or phonetically and/or visually similar to it. It is not sufficient that the disputed element is liable to evoke some kind of association with the indication or the geographical area it relates to.

It is not all bad news for the SWA. In relation to Article 16(b) of the Regulation, the CJEU ruled that:

• For the purpose of establishing that there is an 'evocation' of a geographical indication, the referring court is required to determine whether, when the average European consumer is confronted with the disputed element (ie "Glen"), the image triggered directly in his mind is that of the product whose geographical indication is protected (ie Scotch Whisky).

• In the absence of (i) any phonetic and/or visual similarity between the disputed element and the indication and (ii) any partial incorporation of the indication, the referring court must take account of the conceptual proximity between the indication and the disputed element.

• The referring court must not take into account either the context surrounding the disputed element, or, in particular, the fact that the disputed element is accompanied by an indication of the true origin of the product.

  Finally, the CJEU ruled that Article 16(c) meant that, for the purpose of establishing that there is a 'false or misleading indication', account must not be taken of the context in which the disputed element is used. The CJEU noted that if a false or misleading indication could be permitted because it is accompanied by additional information relating, in particular, to the true origin of the product, the provision would be deprived of practical effect.

  The case will now be referred back to the Hamburg Regional Court for a decision on the facts.

Comment

This ruling provides helpful clarification on the scope of the geographical indication protections under the Regulation. In particular, it confirms that you do not necessarily need to use the actual geographical indication on your product to contravene the Regulation and that the inclusion of information on the product label which specifies the true origin of the product will not be a defence against misuse of geographical indications.  

This is good news for manufacturers of Scotch Whisky (and indeed manufacturers of other products protected by geographical indications, such as Irish Whiskey, Cognac and Champagne) who need to protect their collective goodwill in the indication from mischievous market entrants. 

Case: Scotch Whisky Association v Klotz (Case C-44/17) (7 June 2018)

How are trade secrets protected now?

There is currently no statutory definition as to what constitutes a trade secret in the UK.  Instead, the protections of trade secrets have evolved through a variety of legal cases.  In essence, a trade secret is a form of confidential information (all trade secrets will be confidential information, but not all confidential information need be a trade secret).  The basic requirements to establish that the information is confidential are required, namely that

1. the information should have the "necessary quality of confidence"; and
2. the information should be subject to an obligation of confidence.

For confidential information to be regarded as a trade secret, however, there is an additional requirement; if such information was disclosed to a competitor, it would need to cause real or significant harm to the owner.  A trade secret is therefore a rarefied form of confidential information.

What does the Directive change?

From a legal perspective, the Directive is actually unlikely to change much.  The UK is seen internationally as one of the torch bearers in the EU when it comes to protecting trade secrets and confidential information generally.

What the Directive does seek to do, is harmonise the definition of trade secrets across the EU.  That proposed definition brings the definition of trade secrets closer to the UK's existing definition of confidential information.  It provides that a trade secret must be information which is:

• confidential;
• of commercial value because of its confidentiality; and
• the trade secret holder must have made reasonable efforts to keep it confidential.

The Directive will also provide a statutory footing to claims which could constitute unlawfully acquiring a trade secret, secondary liability, and wider protections for whistle-blowers.

Why is this important, and what effect will it have on the insurance industry?

Trade secrets and confidential information constitute an extremely valuable part of many business models, particularly those companies that are know-how and data-driven.  The protections required are therefore increasingly being prioritised by companies around the world, particularly in the era where cybercrime and data liability is at the forefront of people's minds.  The change brought about by the Directive is therefore a timely reminder to ensure that policies are excluding risks that underwriters want to be excluding, and are covering risks that are acceptable to underwriters.

We are already seeing an increase in general breach of confidence claims (both insured and uninsured).  These are particularly common when directors or officers leave one company and move to a competitor, and are often a mix of breach of contract claims (in the employment context) with common law breach of confidence.  They also arise when individuals seek to blackmail ex-employers by threatening a data breach, where customers take ideas from suppliers in a tender process, or where a business seeks to re-use or disclose another's confidential information for its own purposes.

We anticipate that the upward trend in breach of confidence cases will continue, not necessarily because the legal position has changed, but because the publicity surrounding the Directive will highlight to businesses (especially SMEs) the ways in which they can seek to legally protect their valuable intangible assets.

These claims may arise under a range of policies, including more traditional D&O risks where an ex-employee joins as a director of a competing business, but also under specialist intellectual property policies (and/or extensions), which can typically provide pursuit and defence cover. 

As the Directive is intended to harmonise the position across the whole EU, for those in the market dealing with international risks within the EU, we anticipate a possible rise in international and/or cross-jurisdictional issues.

Practical tips

There are some practical steps which insureds and insurers can take in anticipation of the Directive.  These could include:

• ensuring definitions of confidential information and trade secrets in policy wordings (whether for use as in insuring clauses or exclusion clauses) are updated;
• increasing security and protections around confidential information (including the use of non-disclosure agreements, increasing IT security and limiting accessibility); and
• updating relevant confidentiality provisions in employment contracts;
• conducting regular confidential information audits.

Whilst no article involving the implementation of new EU law would be complete without a cursory mention of Brexit, we expect any impact to be minimal.  The 9 June 2018 implementation date is far in advance of the date the UK will leave the EU.  In reality, UK businesses will likely benefit from the rest of the EU harmonising their respective frameworks, which should provide more credible and robust protections for trade secrets and confidential information in the future.

1. Whether Mr Martinez's goodwill associated with signs incorporating the word 'Prick' extended beyond tattooing and piercing services (and, if so, to what extent); and

2. Whether the use of the word 'Prick' by the Defendant was a material misrepresentation of those goods and services offered by Mr Martinez, or were somehow authorised by or connected with him.

Goodwill

The Claimant asserted that goodwill subsisted in the use of the word 'Prick' in connection with all his various artistic ventures and collaborations as well the tattoo parlour itself.  Her Honour Judge Clarke was not persuaded by this.  She accepted the Defendant's submission that 'although Mr Martinez and the Tattoo Parlour may have a reputation which extends more widely than London, goodwill attaches to trading and not mere reputation' (emphasis added).  So, the fact that Mr Martinez may well have a kind of 'cult status' in the world in which he operates did not affect the extent of the goodwill that subsisted in the tattoo parlour itself, which was geographically limited to 'a relatively local area around the Tattoo Parlour'.  However, as it happened, this area did incorporate the location of Ms Leon's cactus shop.

Material misrepresentation

Having established this limited – though geographically relevant – subsistence of goodwill in Mr Martinez's tattoo parlour, Her Honour Judge Clarke moved on to the question of whether Ms Leon's use of the word 'Prick' in her cactus shop was a material misrepresentation of Mr Martinez's store.  The burden of proof for the Claimant was 'a heavy one' here, since there was no overlap in the goods and services offered by the two stores – in fact, it was concluded that 'it is difficult to imagine two businesses with two less closely related activities'.

Her Honour Judge Clarke was unable to find that there was any material misrepresentation by the Defendant.  The physical stores and online get ups of the Claimant and Defendant were polar opposite, the former being dark, eclectic, full of rock and roll and other memorabilia; the latter being bright, minimalist, and (unsurprisingly) full of plants.  The only similarity was the black painted woodwork on the outside of the store fronts, but even that had an effect that was 'quite different' on a potential customer.

She was also alive to the fact that both companies were relying on the humour inherent in using the word 'prick' to draw customers in, but that it was equally and differently applicable to both companies: the prick of the tattoo needle and the prick of a cactus frond.  Ultimately, customers were 'more likely to come very quickly to an appreciation that the name refers to the specific properties of Cacti or Tattooing, as the case may be, appreciate the humour, and so not go on to assume that there must be a connection.'

The evidence

Her Honour Judge Clarke spent some time analysing the credibility of the witnesses and the factual evidence that had been put before her during the trial, and – as with any passing off claim – her findings on the evidence were central to her ultimate conclusion.  Although the Claimant had gathered evidence from a large band of loyal customers-cum-friends (some of whom had manufactured the most unlikely of stories to try and prove their own confusion), at no point could the Claimant advance any simple, straightforward evidence that a customer had said 'I bought a cactus at your new cactus shop'.  Her Honour Judge Clarke was unequivocal in saying that 'mere confusion on the part of consumers, if it does not impel customers to do business, is not enough.'  It seems that, in their enthusiasm to try and say all the right things, the witnesses actually did the Claimant's claim and credibility some damage.

Conclusion

Whilst this is not a particularly surprising decision, it serves as a useful reminder of the essential elements of a passing off action.  It also highlights that where the respective goods and services are not at all closely related it will be particularly difficult to establish any misrepresentation.

The Claimant W3 offered online property-sharing services under the name "EasyRoommate" since 1999. The Defendant, EasyGroup, managed a number of goods and services companies all containing the prefix "easy", including its well-known airline "EasyJet".

EasyGroup first complained about W3's "EasyRoommate" online business in 2003. W3 added a disclaimer to its website that it was not associated with easyGroup and from June 2004, changed its logo to "Flatmateworld – powered by EasyRoommate" but reverted back to "EasyRoommate" from the end of 2006.

In 2007, W3 sought a buyer for its business but found that easyGroup's complaints made it difficult. W3 registered a stylised word mark EASYROOMMATE as a UK trade mark (with no opposition from easyGroup) and used a stylised blue and orange house logo from 2009. EasyGroup continued to complain and in 2015, W3 issued proceedings for groundless threats against easyGroup to end the matter and satisfy investors of W3's rights.

In response, easyGroup counterclaimed for:

• trade mark infringement of several of its trade marks, including EASYJET, EASY and easyHotel, relating to services in classes 35, 36, 39, 42 and 43
• against the EASYROOMMATE word mark and logo; and
• against W3's "equivalent" European marks such as EasyQuarto (Portugal) and EasyKamer (Netherlands); and
• passing off based on goodwill in the "easy" trade marks including EASYJET and EASYEVERYTHING.

W3 then also sought the invalidity of easyGroup's EASY trade mark (in respect of various goods and services, including advertising and temporary accommodation) arguing it was descriptive within the meaning of Article 7(1)(c) of the EU Trade Mark Regulation (the "Regulation").

Decision

In summary, Mr Justice Arnold dismissed the threats claim by W3 as well as easyGroup's counterclaims for passing off and trade mark infringement and declared easyGroup's registered word mark for EASY invalid in respect of the relevant services. He declined to declare W3's UK registered mark EASYROOMMATE invalid, although the scope of services would be reduced as per W3's concessions at trial.

1. Validity of EasyGroup's EASY UK trade mark

   The trade mark EASY denoted a characteristic of the services to which it was connected. To overcome that finding, the mark needed to have acquired sufficient distinctiveness in all EU member states where it was descriptive (English speaking member states, including the Netherlands where English was widely spoken).

   The evidence showed that easyGroup used several of its trade marks (such as EASYJET and EASYHOTEL) but not EASY alone. There was acquired distinctiveness for "easy" as a prefix to another word with an upper case first letter in white font on an orange background but not "easy" alone, Further, evidence did not suggest that customers shortened easyGroup's trade marks to "Easy". The EASY trade mark was therefore invalidly registered in relation to the relevant services.

2. Trade Mark Infringement under Article 9(1)(b)

   The relevant date for assessing infringement of the EASYJET trade mark was 15 August 2000, approximately when "EasyRoommate" was first used on the website.

   The relevant dates for other easyGroup trade marks were their publication dates, eg 18 February 2002 (for easyHotel). However, those marks were found not to have acquired distinctive character through use in relation to advertising or temporary accommodation at those dates.

   There was no infringement under Article 9(1)(b) of the Regulation. The "Roommate" aspect was conceptually, visually and aurally different to each of easyGroup's trade marks. EasyGroup's evidence of actual confusion was weak (such as customers commenting on the similarity of the names) and more evidence should have been available if there was a likelihood of confusion.

3.  Trade Mark Infringement under Article 9(1)(c)

   Nor was easyGroup successful in its infringement claim under Article 9(1)(c) of the Regulation. It had not established reputation in any marks other than EASYJET at the relevant dates, there was no evidence of detriment to EASYJET's distinctive character or its repute, nor reason to consider that W3 gained an unfair advantage.   

   EasyGroup also failed in its infringement claim against W3's "easyroommate" logo. Whilst it demonstrated reputation in EASYHOTEL as at June 2009 (when W3 introduced its logo) and the judge considered that a significant proportion of consumers would connect the parties' brands, the claim was rejected as easyGroup did not enter into property services until 2014 with EASYPROPERTY.

4. Passing Off

   It was found that the claim for passing off was unlikely to add anything to the claims for trade mark infringement and so it was dismissed. The judge noted that the relevant dates for assessment were the same as for the trade mark infringement claims because the principle - that assessment should be made as at the commencement date of the conduct complained of - was essentially the same.

5. Acquiescence

   Since January 2009, easyGroup had repeatedly written to W3 complaining about "EasyRoommate". In April 2011, easyGroup's solicitors sent a letter before action, followed by draft Particulars of Claim in November 2011. A further letter before action was sent in September 2014. The question was whether this was sufficient to overcome acquiescence arguments.

   Despite a gap of four years from the first letter before action until the commencement of proceedings by W3, the judge held that it was. He noted that, if the case turned on the issue, he would have sought an CJEU ruling on this point. However it did not and he decided that easyGroup's actions "amounted to serious, detailed and credible threats of infringement proceedings".

6. Threats

   The relevant threats regime pursuant to section 21 of the Trade Marks Act 1994 was that which applied before 1 October 2017.  W3 argued that, whilst easyGroup's letters referred only to the provision of services (ie outside of the threats regime), the draft undertakings and particulars of claim went further -  also referring to EASYROOMMATE, EASY and any other mark confusingly similar or incorporating the word "easy" for any goods or services.

   The judge found that this did not amount to an actionable threat, as a reasonable person with knowledge of all relevant circumstances would consider the letter only to relate to the supply of services under "EasyRoommate".

Commentary

The conclusion on the threats claim may be regarded as surprising given the previous case law, such as the "No More Tears" case^[1] and the Court of Appeal decision in the Best Buy^[2] case, which extended the scope of what was to be taken into account when assessing threats.

Taking this judgment at face value, it does raise a question as to whether it may have been safer for easyGroup to have defended the threats claim and not counterclaimed for infringement. However, that comes with the benefit of hindsight and, given the previous case law, easyGroup's decision is understandable. Unfortunately for them, the judgment provides another example of the inherent risks of litigation.

[1] L'Oreal (UK) Ltd v Johnson & Johnson [2000] E.T.M.R. 691

The claimants, Sky, claimed that Skykick had infringed four of their EU trade marks and one UK trade mark (a mixture of "SKY" figurative and word marks) (the Trade Marks) and had also committed passing off by using the sign "Skykick" in relation to its provision of cloud management products. In response, Skykick sought a declaration that Sky's Trade Marks were wholly or partly invalid on the basis that the specifications of the goods and services lacked sufficient clarity and precision and that the applications had been made in bad faith.

For the purposes of its infringement claim against Skykick, Sky relied on specific registrations in classes 9 and 38 (including "computer software" and "telecommunications services"), however Arnold J noted that the full Trade Mark specifications were extremely broad covering a number of classes and with some registrations stretching to over 8,000 words.

Skykick pointed to the breadth of Sky's Trade Mark specifications to argue that the applications had been made in bad faith because Sky had no intention to use the Trade Marks in relation to all of the specified goods or services. In particular, Skykick highlighted Sky's registration for "whips" and "bleaching materials" which, on cross-examination, Sky was unable provide any commercial rationale for registering. Skykick also argued that Sky's registrations for goods such as "computer software" lacked sufficient clarity or precision (as required by the IP Translator case). For these reasons, Skykick argued that Sky's Trade Marks were invalid either in whole or in part.

Decision

Trade mark infringement and passing off

Arnold J dismissed Sky's claim for passing off but held that, if the Trade Marks were validly registered for the goods and services relied on by Sky (ie in classes 9 and 38), Skykick had infringed them. This was because the "average consumer" (i.e. customers or end users of Skykick's cloud management products) was capable of perceiving "Skykick" as a sub-brand of SKY. The question therefore turned to the validity of Sky's Trade Mark registrations.

Clarity and precision of the specification

Whilst Arnold J commented that registration of a trade mark for "computer software" is contrary to public interest (because it confers on the owner a monopoly which can't be justified by any legitimate commercial interest), he held that it did not necessarily follow that such a term lacked clarity and precision. Further it was unclear whether insufficient clarity and precision was a legitimate ground for invalidating a trade mark either in whole or in part. For these reasons Arnold J sought guidance from the CJEU (see below).

Bad faith

On the bad faith allegation, Arnold J concluded that at the date of filing the Trade Mark applications, Sky did not intend to use the Trade Marks in relation to all of the goods and services covered by the applications. Further, it was unclear from recent case law whether a trade mark application could be found to have been made partly in good faith and partly in bad faith and, if so, what the legal implication was of this - whether such a finding would invalidate the entire registration or just the part made in bad faith. For these reasons Arnold J proposed a reference to the CJEU (see below).

Reference to the CJEU

Arnold J has indicated that he will refer the following questions to the CJEU:  

1. Can an EU or a national trade mark be declared wholly or partially invalid on the ground that some or all of the terms in the specification are lacking in sufficient clarity or precision?

2. If yes, is a term such as “computer software” lacking in sufficient clarity or precision

3. Can it constitute bad faith to apply to register a trade mark without any intention to use it in relation to the specified goods or services?

4. If yes, it possible to conclude that the applicant made the application partly in good faith and partly in bad faith if the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use the trade mark in relation to other specified goods or services?

Commentary

Arnold J's references to the CJEU leave open the possibility that where part of a trade mark application is found to have been made in bad faith the whole registration could be invalidated. This would clearly have significant implications for trade mark owners holding wide registrations as these could become vulnerable to wholesale strike out as a result of invalidity challenges for bad faith.

A response from the CJEU on this point isn't likely to be returned for some time, and certainly not before the UK leaves the EU on 29 March 2019. Whist referrals to the CJEU may stay in motion after we leave the EU and may not be deemed withdrawn, it is unclear at this stage what weight the English courts could give to any judgment of the CJEU post-Brexit. In the meantime, trade mark owners should review their existing registrations and their current use of their marks to identify any potential areas of vulnerability. They should also consider the potential benefits of filing new (narrower) applications now covering just essential goods and services to ensure that these, at the very least, are protected regardless of the CJEU's decision.

The appellant, the London Taxi Corporation Limited, was the successor in title to the manufacturer of various models of London taxi (the Fairway, TXI, TXII and TX4) and claimed to be the owner of the goodwill in the shapes of all four models. It was also the owner of EU and UK registered 3D trade marks based on the appearance of its taxi models. The appellant brought proceedings against the respondents Frazer-Nash Research Ltd and Ecotive Ltd alleging trade mark infringement and passing off in respect of Frazer-Nash's new "eco-friendly" Metrocab. The respondents argued that the appellant's marks were invalid.

High Court decision

At first instance the judge concluded that the appellant's marks were invalid for 1) lack of inherent distinctive character, 2) lack of acquired distinctive character and 3) consisting exclusively of a shape which gave substantial value to the goods. The judge also found that the appellant's EU trade mark should be revoked for non-use, and that, even if the appellant's marks had been valid, they would not be infringed by the respondent's Metrocab. Finally, the judge concluded that the appellant failed in its claim for passing off.

Court of Appeal decision

The Court of Appeal agreed that the High Court had been right to find that the appellant's marks were invalid for lack of distinctive character. Several other grounds of appeal were considered, but given the finding of invalidity, the Court of Appeal's conclusions on these points were obiter. The following parts of the judgment are of particular interest. 

(i) Average consumer

The issue was whether a member of the public who hires a taxi was to be treated as an "average consumer" of the goods. Such a person was different from an outright purchaser, such as a taxi driver, because he or she did not take complete possession of the goods.  

At first instance the judge concluded that the average consumer did not include members of the public who hired taxis, since they were merely users of the service provided by the consumer of the goods. The Court of Appeal disagreed and found that the term average consumer included any class of consumer to whom a guarantee of origin is directed and who would be likely to rely on it. It did not matter whether a user was someone who took complete possession of the goods or someone who merely hired the goods under the control of a third party. Taxi passengers were not therefore excluded from consideration as a relevant class of consumer.   

(ii) Inherent distinctive character

The Court of Appeal found that, when considering whether a mark in the shape of a product departed significantly from the norm or customs of the sector, it was necessary to determine what that sector was. In the present case, the sector was not limited to London licensed taxi cabs. Even if the marks had been limited to taxis, this would have had to include private hire taxis, which could be any model of saloon car within reason. 

When compared with the basic design features of the car sector, the appellant's marks were no more than a variant on the standard design features of a car. The judge had therefore been right to hold that the marks did not have inherent distinctive character.  

(iii) Acquired distinctive character

With regards to acquired distinctive character, it was not enough for a trade mark owner to show that a significant proportion of the relevant class of persons recognise and associate the mark with the trade mark owner's goods. Instead, it must be shown that those persons perceive goods labelled with the mark as originating from a particular business.

The Court of Appeal noted that members of the public are not used to the shape of a product being used as an indicator of origin. Further, although taxi passengers were not necessarily excluded as a class of average consumer, their focus would be on the provider of the taxi services more than on the manufacturer of the vehicle. Although taxi passengers were aware that taxis in the shape of the appellant's marks could be relied on to be licensed London taxis, it was important to distinguish this from what it was necessary to show in relation to acquired distinctive character. The judge had been right to find that there was insufficient evidence to show that relevant consumers would perceive the shape of the appellant's taxis as denoting vehicles associated with the appellant and no other manufacturer.   

Comment

This case illustrates the difficulties in attempting to obtain and enforce marks in the shape of the goods. The shape in question may not be unique to that particular product, and even in cases such as the iconic London black cab, it will prove difficult for trade mark owners to demonstrate that consumers immediately link the shape of the product with one particular manufacturer. The present case is a good example of the courts attempting to ensure that businesses are not prevented from using shapes which are generic or common to a particular market.        

The relevant law

The law relating to TV formats has been somewhat uncertain since the principle case in this area, Green v Broadcasting Corporation of New Zealand [1989] UKPC 26. In that case a claim that the format of the TV talent show 'Opportunity Knocks' could be protected as a dramatic work failed.  Under copyright law, a 'dramatic work' must be "capable of being performed" – this was a stumbling block which proved too high in the Green case with the majority of judges finding that there wasn't sufficient certainty or unity in the show's format to make it capable of being performed. A number of cases since the Green decision have also failed to clear up the position as to whether, in principle, TV formats can be protected as artistic works.

Background

This case concerned an action brought by Banner Universal Motion Pictures Ltd ('BUMP') for copyright infringement which it claimed subsisted in the TV format for its game show 'Minute Winner'.

BUMP alleged that, after pitching the concept for 'Minute Winner' to one of the Defendants (the Swedish TV production company, Friday TV) in 2005, Friday TV (along with the other Defendants) went on to copy the format of 'Minute Winner' by developing a similar gameshow format 'Minute to Win It'. 'Minute to Win It' first aired in the US in 2010 and was subsequently aired in the UK on ITV2 in 2011. It has since been sold in over 70 countries worldwide.

The concept for the Minute Winner game show involved members of the public being given exactly one minute to try and win a prize. The show format was set out in a short document ('the Minute Winner Document') which described such features of the show as: a brief synopsis; where the program was to be filmed; and the prizes that could be won. BUMP claimed that copyright subsisted in the Minute Winner Document as an artistic work and that the Defendants had infringed this copyright by producing 'Minute to Win It' which, BUMP alleged, involved a very similar format.

Decision

In his judgment, Snowden J found that: "it is at least arguable, as a matter of concept, that the format of a television game show or quiz show can be the subject of copyright protection as a dramatic work". This is despite the fact that, due to their nature, such shows contain elements of spontaneity and events typically change from episode to episode.

Snowden J also went on to consider the minimum requirements that must be met in order for copyright protection to subsist in a TV format as an artistic work, these are:

(i) there must be a number of clearly identified features which, taken together, distinguish the TV show from others of a similar type; and

(ii) those distinguishing features must be connected with each other in a coherent framework which can be repeatedly applied so as to enable the show to be reproduced in  recognisable form.

On the facts of the current case however, Snowden J found that copyright did not subsist in BUMP's Minute Winner Document as it "did not identify or prescribe anything resembling a coherent framework or structure which could be relied upon to reproduce a distinctive game show in a recognisable form". Snowden J highlighted that the performance of a task against the clock to win a prize was a common feature of games shows and that the Minute Winner Document did not specify key information such as: the type of one minute tasks; who the contestants should be; or the length of the program.

What's more, even if BUMP could establish copyright in its Minute Winner Document, Snowden J found that the format described in the Minute Winner Document and that used in Minute to Win It were "different in every material respect" - there was no similarity beyond the fact that they both involve games played against the clock for one minute.

Comment

The decision provides some much needed clarity and guidance around the protection of TV formats under English copyright law. It is now clear that in order to attract copyright protection as an artistic work, TV formats must contain distinctive features and these must be joined together in a coherent framework enabling the show to be reproduced in a recognisable form.

In practice this means that production companies should document as much information as possible about the format of their show in order to demonstrate that it has a coherent framework. We would recommend collating a production bible with comprehensive details of all aspects of the show's concept including any scripts, catch-phrases, set designs, floor plans, costumes, logos, theme tunes and other relevant aspects relating to the look and feel of the show.  The risk of unauthorised disclosure and copying should be mitigated by consistent use of non-disclosure agreements and only disclosing or sharing the contents of any production bible on a strictly confidential basis.

The Claimants (together "Technomed") supplied an internet-based electrocardiogram (ECG) analysis and reporting product system called "ECG Cloud". ECG Cloud enabled ECG readings to be analysed remotely by reporters who were not themselves carrying out the readings.

In developing the ECG Cloud, Technomed built up an underlying database comprising a set of classifications of relevant physical characteristics shown by ECGs, together with a list of options (eg "normal"), and for each option, a risk status or "traffic light", intended to reflect best medical practice for ECG screenings (the "Database"). ECG Cloud produced an XML file with a standardised XML format to generate a report for distribution to the patient or doctor by inserting the information held in the XML format into a template containing a general explanatory text and diagrams about ECG screening. The report included certain diagrams (such as the "Two Hearts" diagram and the "Wave" diagram in which copyright was separately asserted) and various explanatory materials, for distribution to patients using software developed and modified by Technomed.

The Claimants had provided ECG Cloud to the First Defendant ("Bluecrest") under a two-year contract and, during the first few months of the contract, provided Bluecrest with an electronic pdf of the Database and various materials used to prepare the ECG Cloud reports.

Half way through the contract term, Bluecrest switched its heart screening services to the Second Defendant ("Express"), one of the claimants' competitors. At that time, Bluecrest sent emails to Express attaching an XML format file for the report and copies of the electronic pdf, the "Two Hearts" diagram, the "Wave" diagram and explanatory materials to Express (one email with the subject "report goodies"). Express started providing ECG screening services to Bluecrest which essentially replicated the service provided by Technomed.

Technomed brought a claim against the Defendants for infringement of several rights including (i) the sui generis database right in the Database; (ii) copyright in the Database; and (iii) copyright in the diagrams and explanatory materials. Bluecrest counterclaimed, contending that the move away from Technomed was due in part to quality concerns. The contractual aspects of the claim were to be heard separately from the IP issues.

Judgment

Sui generis database right

The court noted that the Database was a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means and, as such, was a database within the meaning of the Database Directive (96/9/EC). It was noted however, that Technomed also needed to establish that a sui generis database right subsisted in the Database.

With reference to Sir Robin Jacob's comments in the Football Dataco[1] case that "the policy of the Directive is that databases which cost a lot of investment and can readily be copied should be protected. The right is created to protect the investment which goes into the creation of a database", the court noted that the Database had been modified by Technomed since its creation in 2009, using a feedback tool which allowed users to request edits to various aspects of the product. Between January 2013 and January 2015, there were 184 modifications to ECG Cloud as a result of feedback. The court considered that Technomed had made substantial investment in the obtaining and verification and presentation of the contents of the Database and that sui generis right therefore subsisted in the Database.

The court held that Bluecrest had a full copy of the Database which was provided to and copied by Express – amounting to infringement of the database right. Further, in accessing the database contents to produce XML files for the purpose of Bluecrest's technical reports, the repeated and systematic extraction and/or reutilisation of insubstantial parts of the database amounted to further infringement under the Database Directive.

Copyright

Technomed claimed copyright in four types of work: (i) Artistic works (the "Two Hearts" diagram and "Wave" diagram); (ii) Literary works including the explanatory materials, patient definitions, XML format and Database); (iii) Literary works in the Database; and (iv) Preparatory design material for a computer program (the XML format and/or Database).

The court noted that the existence of sui generis database right did not determine whether copyright might also subsist in the Database. However, considerable intellectual effort and creativity were expended in choosing, selecting and arranging the Database and it attracted copyright protection. The representations of the "Two Hearts" and "Wave" diagrams, whilst standard concepts, were the result of the creators' intellectual effort and were held to be original artistic works for the purposes of copyright law.

The court also held that data formats written in the XML language were entitled to copyright protection as the examples of the XML format shown to the court contained personal content created by its author, not just structure dictated by the XML standard.

Bluecrest and Express had therefore infringed a number of Technomed's intellectual property rights and, for the purposes of assessing damages, certain infringements were considered flagrant.

Commentary

This judgment demonstrates that information collated in a fixed format – in this case, a pdf of a spreadsheet – is not precluded from attracting database protection. The judge commented that the pdf tied together different items of information which could be accessed through electronic conversion, digital character recognition or re-typing. Of course, it was also necessary to demonstrate that there has been a substantial investment in obtaining, verifying or presenting the contents.

It is also worth highlighting the issues arising from the flawed instruction of Bluecrest's expert witness. During cross-examination it came to light that (i) the expert's company was in commercial discussions with the second defendant, Express and (ii) the manner in which he was instructed was not in accordance with Part 35 or as set out in his written report. He could not be considered an independent expert appointed to the court on matters within his expertise and the court could attach no weight to his evidence. Expert evidence must be and be seen to be the independent product of the expert – failure to do this not only risks expert evidence being rejected but also puts a party's credibility in doubt.

This CMC concerned a claim for infringement of a Community Registered Design by the claimant and a counterclaim by the defendant for unjustified threats of infringement.

The defendant produced a construction toy called "Clingabeez", consisting of individual balls with hook projections, which could be stuck together to build larger structures. The claimant alleged that its product, "Bunchems", which was "Activity Toy of the Year" in 2016, was a substantial departure from the design corpus and, as such, made a significant visual impact on the informed user. The claimant's "Bunchems" product was protected by a Community Registered Design.

The Judge, Mr Justice Carr, noted that the claim and counterclaim raised straightforward disputes, wholly typical of cases of this nature – namely, the claimant contended that the alleged infringement created the same overall impression as the Community Registered Design and pleaded certain similarities. In response, the defendant pleaded that the overall impression of the "Clingabeez" product on an informed user was different and that certain features were dictated by function and in respect of other features, design freedom was restricted. As was generally the case, the Judge noted that the counterclaim would stand or fall depending on whether the Community Registered Design in issue had been infringed.

Observations of the Judge

The Judge expressed surprise that, in light of the above, the costs budget for the defendant was approximately £360,000 and – even more surprisingly – the budget for the claimant was approximately £776,000. Further, the time estimated for trial – six days by the claimant and four days by the defendant – were both considered to be excessive.

The Court of Appeal had given clear guidance in respect of registered designs claims that admissible evidence was limited and hearings should be short (Dyson Ltd v Vax Ltd [2011] EWCA Civ 1206, expanding on Procter & Gamble Co v Reckitt Benckiser (UK) Limited ([2007] EWCA Civ 936). In particular:

1.Registered design cases were concerned with the overall impression of the registered design, the alleged infringement and the design corpus. It was easier to see this than to describe it in words.

2.Admissible evidence in such cases was very limited, and was most likely to comprise technical evidence about design constraints. Such evidence was unlikely to require substantial cross-examination. It should be possible to decide a registered designs case in a few hours.

3.If permission for expert evidence was to be given, then the precise ambit of that evidence should be defined. The expert should be told what question to address and the evidence should be confined to those questions.

 4.It was clear law that whether the defendant has copied was irrelevant to liability. It was equally irrelevant for the defendant to prove or to give disclosure about how his design was arrived at.

To the above principles, he added some further observations:

1. It was clear from previous judgments that there was no reason why registered design cases should last for days, when one understood what really matters.

2. Whilst tempting, claimants should avoid seeking to introduce allegations of copying. In both of the above cases, limitations on design freedom were in issue and the Court of Appeal held that copying was irrelevant. Proof of copying may be considered by claimants to be useful prejudice, but it was nothing more. The appropriate causes of action in civil proceedings for such allegations were infringement of unregistered design and infringement of copyright.

Lessons for the future

The judge, having addressed each of the ten areas of dispute at the CMC, offered some lessons for the future, advising that parties consider the following steps:

1. Use images: The parties should, in appropriate cases, produce images at an early stage to show the differences or similarities upon which they rely, and in the case of the defendant, those features which are wholly functional or in which design freedom is said to be limited. Requests for further information are unlikely to be helpful.

2. Disclosure: The parties should carefully consider why, if at all, disclosure is necessary, rather than agreeing to standard or even issue based disclosure. Claimants should not try to introduce or seek disclosure in relation to copying.

3. Expert Evidence: Expert evidence as to whether the alleged infringement produces on the informed user the same or a different overall impression as the registered design should not be included in cases concerning consumer products. The parties should try to limit the length of any expert evidence to an agreed number of pages.

4. Relevance of evidence of fact: If evidence of fact is to be introduced, the court must be satisfied of its relevance.

5. Scope of cross-examination: The parties should be prepared at the pre-trial review to identify issues on which cross-examination is necessary, and to explain why.

6. Limited use of samples: Where multiple designs, or multiple infringements, are alleged, the parties should each select a limited number of samples on which the issues can be tested.

7. Issues to be postponed until damages inquiry: The parties should give careful thought to those issues which can be postponed to a damages inquiry, which will only need to be considered if liability is established.

Commentary

Parties are often so invested in proceedings that the complexity of the matter and the issues in dispute risk being overstated. This guidance is intended to ensure that registered design cases remain proportionate and offers a useful tool, both for inter-partes correspondence and at a CMC, to help manage over-active claimants. Whilst case management will vary from case to case, parties should be aware that there is a risk of annoying the court and a potential impact on costs recovery if these lessons are not followed – and if you are in front of Mr Justice Carr, ignore at your peril!

The claimant, Bayerische Motoren Werke Aktiengesellschaft (more commonly known as BMW) is a German luxury vehicle, motorcycle and engine manufacturing company and is one of the best-selling luxury car makers in the world. It is the registered proprietor of numerous trade marks, including the following EU trade marks:

• The text "BMW" in respect of maintenance and repair of cars, motors, engines and parts, cleaning of automobiles; and installation services (the "BMW mark"); and

• A figurative mark incorporating the text "BMW" and registered for the same services.

The first defendant – Technosport London Ltd ("Technosport") – was an independent BMW and MINI specialist garage which provided servicing and maintenance and was, in its own words, "a high quality alternative to BMW franchised dealer garages for over 15 years". It had no formal connection to BMW other than as a purchaser of BMW manufactured spare parts. The second defendant was Technosport's sole director.

The defendants used the Logo and the BMW mark: (i) on their website; (ii) on business cards; (iii) on a facia board on the exterior of its former business premises; and (iv) on the interior of its new business premises.

The defendants also used the BMW mark alongside the defendants' trading name "TECHNOSPORT" in respect of several trading channels, namely: (i) on shirts worn by the mechanics; (ii) on a van owned by the defendants; and (iii) on their Twitter account, which had the user name "@TechnosportBMW".  The van also displayed the Logo underneath the words "Technosport – BMW".

The claimant sued the defendants in the IPEC, alleging trade mark infringement. At first instance, the IPEC found that each of the first four uses infringed the claimant's trade marks. However, in respect of the three uses alongside the "TECHNOSPORT" name, the IPEC held that such use did not amount to trade mark infringement.

The claimant appealed in respect of the three uses of the BMW mark alongside the "TECHNOSPORT" name, arguing that defendants' uses resulted in a likelihood of confusion or, in the alternative, such uses took unfair advantage of the BMW mark.  

The decision

It was common ground that the issues before the Court of Appeal fell to be decided under Article 9(1)(b) of the EU Trade Mark Regulation (207/2009/EC) because the TECHNOSPORT BMW signs were not identical to the BMW mark. It was therefore necessary for BMW to show that, because of the similarity between those signs and the BMW Mark, there existed a likelihood of confusion on the part of the public.

The Court of Appeal agreed with the claimant and found that there was a likelihood of confusion in respect of the defendants' use of the BMW mark. The IPEC was found to have made an error of principle in rejecting the claimant's case on the basis that it should have presented further evidence to establish that the juxtaposition of the BMW mark with the dealer's name would suggest that the defendants were authorised. Nor should the claimant be expected to provide evidence from actual consumers as the judge had suggested.

For ordinary consumer products, the court was not normally assisted by individual consumer evidence (as per Marks & Spencer v Interflora [2012] EWCA Civ 1501). Instead the court should make its own assessment, taking into account all relevant circumstances. The IPEC had erred by focusing on the absence of certain types of evidence.

Instead, with reference to remarks made in an earlier CJEU decision (Case C-63/97 Bayerische Motorenwerke AG and another v Deenik [1999] ETMR 339), the Court of Appeal explained that the question was whether the use of "TECHNOSPORT BMW" by the defendants gave the impression that their business "provides a service which repairs BMWs or uses genuine BMW spare parts" – an informative use – or instead suggested that "my repairing service is commercially connected with BMW" – a misleading use.

The Court of Appeal found that, when considering each of the three uses by the defendants, in the context in which they occurred, each use of the "Technosport BMW" sign exceeded informative use and gave rise to a risk that they would be understood as the misleading use. Further, even in the absence of the Logo from the van (a point on which the parties specifically disagreed), the Court of Appeal held that there was nothing to suggest that the sign "TECHNOSPORT – BMW" was being used informatively.

As a result, there was no need to decide the issue of unfair advantage as the claimant had only advanced a case on Article 9(1)(c) if it was wrong on Article 9(1)(b).

Comment

The original judgment of the IP Enterprise Court demonstrates the difficulty that judges sometimes have – even after the Interflora decision - in deciding whether the court is able to make its own mind up on the likelihood of confusion or whether consumer or expert evidence is required in order to allow it to assess the position.

The distinction between "informative use" and "misleading use" adopted by the Court of Appeal in this case may provide useful guidance for likelihood of confusion cases concerning the provision of services in future.

Jadebay Limited (Jadebay) owns the following trade mark for a stylised device in class 20 for 'flagpoles plastic storage box garden furniture' (the trade mark):

Jadebay has also previously used the words DESIGN ELEMENTS as an unregistered trade mark (the sign).

The issue

Jadebay had a couple of licensees who were authorised to sell Jadebay's flagpoles on Amazon.co.uk (Amazon).  When listing items for sale on Amazon, each new listing is given a unique Amazon Identification Number (ASIN).  However, on Amazon it is possible for multiple sellers to sell the same product without creating a new listing: they simply locate the item they wish to sell within the Amazon website and confirm that the item they intend to sell is the same.  Amazon, in turn, selects a default seller from all those selling the item, and this seller is promoted within the listing so that they receive the majority of sales.  This seller is often the one which sells the product at the lowest price (including postage and packaging).

The Defendant in this case used Jadebay's licensees' Amazon listing – which included the words 'by Design Elements' – in order to sell its own-brand flagpoles.  However, their listing undercut Jadebay's licensees' price, and so the Defendant ended up becoming the default Amazon seller.  It is important to note that the Defendant's products themselves did not use the Jadebay trade mark or sign; only their listing did.

Jadebay's case was that their licensees' listing should only have been used to sell identical products (i.e. the Jadebay branded products), and that the Defendant's products should have been sold with a unique ASIN in a new listing.  Jadebay sued the Defendant for trade mark infringement and passing off, seeking damages as well as an injunction.

The decision

The Judge held that the Defendant's activity amounted to trade mark infringement under section 10(2) Trade Marks Act 1994:

• The Defendant's had used the sign in order to offer its products for sale;
• The sign was aurally and conceptually similar to the trade mark for the device; and
• There was a likelihood of confusion on the part of the average consumer (the average consumer for flagpoles being likely to be 'a considered one, rather than a whimsical or impulsive one') – this was in spite of there being no evidence of actual confusion.

The Judge also held that there had been passing off:

• Goodwill and reputation were easily identified through the significant number of positive customer reviews on Jadebay's licensees' Amazon listing prior to the Defendant's use of the listing; and
• Misrepresentation was established through the fact that the listing included the words 'by Design Elements', as well as because of the use of the photographs in the listing (which showed Jadebay's product rather than the Defendant's).

Damages were easily decided through a reconciliation of the sales which had gone to the Defendant which would otherwise have gone to Jadebay's licensees during the time the Defendant's used the listing.  This was in spite of the fact that, given the Defendant was undercutting Jadebay's licensees in price, it was impossible to tell whether or not all the sales would have proceeded at Jadebay's licensees' higher price.  In addition, Jadebay was awarded an injunction to prevent further infringement and passing off.

Comment

The Defendant in this case is certainly not the only one sailing too close to the wind (or the flagpole) where the issue of digital sales listings are concerned.  eBay also has a feature called 'Sell One Like This' which can be used to copy the information from one listing over to another, and with eBay enjoying over £1.1bn listings in the last quarter of 2016, it is easy to see the commercial driver behind it.

Trade mark infringement is not the only risk either. Stock images and professional website photos are only one Google image search away from being included in an online listing, and can be used to add credibility and interest to anyone's bi-annual wardrobe clear-out, thereby infringing copyright in the process.

We live in an age where the man on the Clapham omnibus is only a tweet away from being a journalist; only a blog post away from being a publisher; and only an online listing away from being a retail outlet.  Digital channels may need to sit up and develop some more sophisticated ways of monitoring their content, or else risk seeing their traffic considerably slow down while listings are taken down following a cease and desist letter from rights owners that references 'the recent decision in Jadebay Ltd and others v Clarke-Coles Ltd (t/a Feel Good UK) [2017] EWHC 1400'. 

FAPL sought the order to combat a growing problem it is facing – more and more consumers are accessing the FAPL's paid for football content through infringing streams on devices such as mobile phones and tablets (as opposed to through websites).

The distinction between accessing infringing content through applications on devices rather than websites is important because whereas the law governing obtaining blocking orders against websites that stream infringing content is "now fairly well established", the law has not, until now, been applied to infringements where devices connect directly to streaming servers via their IP addresses (which is often how a phone or tablet application connect to an infringing stream).

The Order sought

FAPL sought an order that the six ISPs block access to streaming servers identified under section 97A of the Copyright, Designs and Patents Act (CDPA) which permits UK courts to grant "an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright".

FAPL proposed that the streaming servers would be identified via a 2-step process. One of the criteria put forward by FAPL for identifying those streaming servers was held to be confidential (disclosure would facilitate circumvention of a blocking order and was commercially sensitive), but the other, which was disclosed by the court in the public interest, is as follows:

"First, FAPL and its contractor must reasonably believe that the server has the sole or predominant purpose of enabling or facilitating access to infringing streams of Premier League match footage. Secondly, FAPL and its contractor must not know or have reason to believe that the server is being used for any other substantial purpose."

The six ISPs did not oppose the application; in fact a number of them supported the application and even filed evidence in support.

The Decision

Arnold J granted the order sought. In so doing Arnold J found that the target servers would infringe copyright if they were allowed to stream the content to users because: (i) the streaming of the content would be a communication to the public within section 20 of the CDPA; and (ii) the operators would be authorising copying by their UK users of the streamed content, as the users copy the streamed content into the memory of their devices to enable playback (and the operators are liable as joint tortfeasors with the users).

Interestingly, Arnold J relied on the recent CJEU case of GS Media BV v Sanoma Media Netherlands BV in finding that the streaming of the content would be a communication to the public - this appears to be the first time GS Media has been relied on in the English Courts since the decision was handed down.

Importance

Section 97A orders are clearly a useful weapon in rightsholders' arsenal to stop infringement of their digital content, particularly now that the courts are willing to mould these orders to capture the shifting methods by which infringers seek to exploit rightsholders' content.

Alongside the decision in Cartier (which held that a blocking order was available to a rightsholder to prohibit trade mark infringement under s37(1) of the Senior Courts Act 1981), the type of order issued in this case is another welcome development for rightsholders - that said  these orders are reactionary, necessarily limited in scope to the ISPs and the servers identified in the order, and are therefore clearly not a panacea for the large scale infringement of digital content which has been ongoing for many years.

That case concerned confidential information in the food industry, where "information" (ingredients' lists, recipe methods, storage instructions) is relatively easy to identify.  Since then, the Court of Appeal has confirmed a decision that confidential information was not misused by a large telecommunications organisation when it developed a television programme format with multiple similarities to one pitched to (and rejected by) it by a couple of individuals from the music industry a year previously.  Why the difference in approach?

Background

The claimants both worked in the music industry, and pitched their television programme format to British Sky Broadcasting (BSkyB) in June 2009.  The format was for a competitive musical programme where singer-songwriters performed to a panel of judges.  The pitch was delivered using a deck of PowerPoint slides, a copy of which BSkyB retained.  A key feature of the claimants' format was that the contestants' songs would be made available to download the day after the show.  This gave the songs eligibility for the charts immediately. 

BSkyB did not commission the programme, but a little over a year later began broadcasting a very similar programme which ran for a series and enjoyed success in the UK and abroad.  Their programme also featured performance content being made available via download to the public, and the songs featured on the programme were also eligible for the charts.

The claimants brought a claim against BSkyB for misuse of confidential information – the information being the television programme format idea which was presented at the original pitch.

The relevant law

The law protecting confidential information comes from the decision in Coco v AN Clark, which provides that:

1. Information must 'have the necessary quality of confidence' to be protectable – i.e. it must be confidential and not in the public domain;
2. It must be disclosed in circumstances which impose a duty of confidence upon the person receiving the information; and
3. There must be evidence of a breach of that confidence by the person who receives the information – to the detriment of the person who has provided it.

The decision

BSkyB were found not to have misused the claimants' confidential information.

The information was deemed confidential – a point that BSkyB had disputed.  The details of the television format were set out clearly in the PowerPoint presentation, and the circumstances of a pitch meeting at BSkyB's offices strengthened the view that the information was imparted in a confidential context.

However, although there was considerable duplication between the individual elements of BSkyB's programme and the claimants' original format, sufficient differences existed that it did not look like a complete trace of the original idea.  BSkyB was able to rely on evidence that showed how each of the duplicated elements had come to be included in their programme, and they were also able to explain how the programme had come to be developed in such a short time after they had heard the claimants' pitch.  The case ultimately came down to the judge's impression of the factual evidence presented by each party.

The claimants appealed this decision, most significantly on the basis that the judge had approached the issue incorrectly by considering the elements of each  programme format individually before forming a view of 'their effect in combination'.  It was the 'big picture' that made BSkyB's programme appear as a duplication of the claimants' format, and that should have been the primary form of assessment.  However, all bases of the appeal were dismissed.  The judge was entitled to approach his assessment in the way he did, and there was no evidence that his assessment was illogical. 

Comment

This case shows how the protection afforded to confidential information will differ across industries.  The problem for television creators is that their most valuable confidential information is usually an idea, and it is hard to prove that someone else can't possibly have also had your idea.

Under Article 13 of the Enforcement Directive all Member States have to provide measures and remedies to ensure the effective enforcement of IP rights, including by way of damages for the actual prejudice suffered through the infringement.

In the case the Polish collection society for copyright protected works, Stowarzyszenie Filmowców Polskich, sued a local TV broadcaster, Stowarzyszenie “Oławska Telewizja Kablowa”, for copyright infringement due to their broadcasting of protected works managed by SPF after the termination of a licensing agreement over the same between the parties.

Decision

The CJEU had to decide, in essence, whether Article 13 of the Enforcement Directive precluded Member States from allowing rights holders to seek punitive damages from infringers. In this case, the Polish copyright law allowed for compensation for twice or even three times the amount of loss suffered by the rights holder.

According to the court, even though this type of compensation through punitive damages potentially goes beyond the actual loss suffered by the rights holder, this has always been an inherent risk when setting any lump-sum compensation, albeit not expressly stated as being punitive. While such damages are allowed, recital 26 of the Enforcement Directive does clarify that it does not envision imposing such obligations on Member States. The CJEU emphasises this distinction, as the lack of an obligation does not mean that there is a prohibition of the same for Member States.

The CJEU finally highlighted that even if a hypothetical royalty is paid as damages without any additional, possibly punitive damages, it does not necessarily cover all of the loss suffered by the rights holder, particularly in relation to pursuing the action and any activities prior to the same. This often includes extensive research into the infringing act and the entity infringing those rights, interest accrued on the amount of loss, and even possible prejudice to the rights holder's moral rights under the decision in Liffers.

Comment

The decision reinforces the position in the UK, which allows for punitive (i.e. additional) damages for copyright infringement under Copyright, Designs and Patents Act 1988, s. 97(2). Even though the provisions have not been questioned in the UK before the decision, it does give certainty to those seeking punitive damages in the UK courts.

This decision further allows for the UK government to expand the current legislative framework in intellectual property infringement cases, potentially adding punitive damages to other areas such as trade marks and patents, which currently have no such provisions. This would also aid in the UK's intentions to strengthen its measures against IP infringers, as set out in the Intellectual Property Office's 5 year strategy that seek to introduce more drastic punishments for infringers, and the Government'sIP enforcement 2020 report that aims to review and adjust the existing methods of legal recourse in all IP infringement cases.

Regulation No 207/2009 (CTM Regulation) sets out the basic requirements for registering a trade mark in the EU and contesting applications or registrations of marks.

Article 7(1)(b), (c) and (d) of the CTM Regulation contain absolute grounds for refusal for registration of a mark (the Absolute Grounds) - in summary: if the mark is devoid of distinctive character (7(1)(b)), descriptive (7(1)(c)) or has become exclusively customary in the language/trade (7(1)(d)).

Article 7(3) states that the Absolute Grounds are not a bar to registration of a trade mark if that mark has acquired distinctiveness through use in relation to the goods or services for which registration is applied for.

Similarly, Article 52(2) provides (amongst other things) that, where an EU trade mark has been registered in breach of Article 7(1)(b), it may not be declared invalid if, following use after registration, it has acquired distinctive character in relation to the goods or services for which it is registered.

Background

The case considered the validity of a registered EUTM (no. 2632529), owned by Nestle, comprising of a 4-finger Kit Kat chocolate bar without any other markings (the Mark).

The Mark was registered on 7 August 2006. On 23 March 2007 Cadbury (now Mondelez) filed an application for a declaration of invalidity on the basis of (amongst other things) the Absolute Grounds. On 11 January 2011, the Cancellation Division of the EUIPO gave its decision declaring the mark invalid.  Nestle appealed the decision on 9 March 2011 and on 11 December 2012, the Second Board of Appeal of the EUIPO upheld Nestle's appeal, annulling the Cancellation Division's decision. Mondelez subsequently appealed the Board of Appeal's decision to the GC.

The GC's decision clarified two key points in EU trade mark law.

The first was that protection under Article 7(3) and Article 52(2) is only available for those categories of goods in which the rights holder could establish genuine use.  In this case the Mark was registered for "Sweets; bakery products, pastries, biscuits; cakes, waffles" in class 30. The evidence produced by Nestle only showed genuine use with respect of sweets and biscuits, and therefore the GC determined that no protection would be offered under Article 7(3) and 52(2) for the remaining goods.

The second point dealt with evidence of acquired distinctive character. Nestle relied upon evidential data from 10 of the 15 Member States of the EU (at the time), which it extrapolated to indicate what proportion of the total EU population (i.e. across all Member States) would immediately recognise Nestle as the commercial origin of the product having the shape of the Mark. Although the Board of Appeal agreed with this approach, the GC disagreed and determined that "in the case of a mark which, like the contested trade mark, does not have inherent distinctive character throughout the European Union, the distinctive character acquired through use of that mark must be shown throughout the territory of the European Union, that is, in all the Member States concerned" (emphasis added).

Comment

This case demonstrates the need for robust and accurate evidence of acquired distinctiveness and use in relation to all registered goods, for all Member States potentially even at the application stage (if an application seeks to rely upon Article 7(3)).  Brand owners and potential applicants should keep this in mind when compiling and submitting evidence in any EUIPO prosecution or third party opposition proceedings. Currently with 28 Member States to cover, the collection and compilation of this evidence can be hugely costly, and places rights holders in a challenging position.

Nvidia's response was to seek a declaration of invalidity in respect of Hardware Labs' EU marks at the EUIPO, a declaration of non-infringement of Hardware Labs' marks in the UK coupled with an injunction and damages for an "unfounded threat" to sue Nvidia in the UK. Hardware Labs' sought summary judgment and strike out of Nvidia's groundless threats action.

The key question for the UK Court to consider in respect of the groundless threats action was whether the letter from Hardware Labs constituted a threat of infringement proceedings in the UK.

The answer to this question is a matter of construction of the letter in question – it depends on "what a reasonable person, in the position of the recipient of the letter, with its knowledge of all the relevant circumstances as at the date the letter was written, would have understood the writer of the passage to have intended when read in the context of the letter of the whole".²

Nvidia pointed to the fact that the letter from Hardware Labs: (i) was in English; (ii) referred to various German websites "by way of example"; and (iii) required pan-European relief. Nvidia also pointed to the "surrounding circumstances" – in particular the fact that the letter was sent in the context of the wider EUIPO proceedings in which Nvidia's allegation of invalidity was based on an earlier unregistered right in the UK.

Hardware Labs argued that its letter did not amount to a threat to sue in the UK because, having been sent by a German attorney in Germany and with detailed references to German law, it amounted to a threat to sue only within Germany.

The judge sided with Hardware Labs and summarily dismissed Nivida's groundless threats claim.¹

Interestingly, the judge confirmed that "in an appropriate case" threats letters should be treated as though viewed with the benefit of legal advice, and in this case, the Defendant argued that a reasonable lawyer would have advised Nvidia that pan-European relief could only be obtained against the German company in Germany and consequently there was no prospect of infringement proceedings in the UK. 

Even though on the facts Nvidia's groundless threats action failed, slightly different facts (e.g. had Hardware Lab's letter being sent to Nvidia's UK address, or had the letter referenced Nvidia's UK trade marks) could have led to a very different result. This decision therefore serves as a useful reminder to practitioners and their clients alike over the dangers of threatening to sue third parties with proceedings for trade mark infringement in the UK, but also in other EU jurisdictions with no threats regime where pan European rights are being relied on.

The criminal standard is of course higher than in civil cases, the obvious difference being the mental element; whilst stopping short of requiring dishonesty the relevant act must be done "with a view to" gain or causing loss. The Court of Appeal recognised that this may be particularly difficult to establish in the case of 'grey' goods and echoed the words of previous judges that "those who act honestly and reasonably are not visited with criminal sanctions".

Whilst private criminal prosecutions are likely to remain exceptional (in this particular case there was a suggestion of bogus investigations and forged documents), it is worth bearing in mind that such an action might be brought (or threatened) against directors of companies involved in grey market goods to provide additional leverage.

Background

The claimant, Kerry Ingredients (UK) Ltd (Kerry) was a subsidiary of the Irish food company, Kerry Group plc.  There were several defendant companies all falling within the Bakkavor Group of companies (together, Bakkavor).  Bakkavor were providers of freshly prepared food. 

Kerry supplied edible infused oils to Bakkavor over a substantial period of time, until Bakkavor began exploring alternative suppliers in 2010.  While it was supplying Bakkavor, Kerry provided certain information about the recipes of its infused oils to Bakkavor for the purposes of food safety and product checking (as is common practice in the food industry). 

When Bakkavor was ready to launch its own flavoured oils, Kerry suspected that it was doing so having used information about Kerry's products (provided as above for food safety purposes only) to assist in the development of its products.

Kerry launched proceedings against Bakkavor in 2015, for misuse of confidential information.  In December of the same year, the High Court awarded Kerry an interim injunction preventing Bakkavor from launching any infused oil which had been developed using Kerry's alleged confidential information.

Case Law

The core principles of the law protecting confidential information are well-established and are laid out in Coco v A N Clark^[1], which provides that:

(i) in order to be protected, the information in question must "have the necessary quality of confidence", that is it must be confidential (i.e. not in the public domain);

(ii) it must be disclosed in circumstances which impose a duty of confidence upon the person receiving the information; and

(iii) there must be evidence of a breach of that confidence by the person who receives the information, to the detriment of the person who has provided it.

The Judge considered each of these elements to establish whether there had been misuse of Kerry's confidential information, and also considered case law around injunctive relief.

Decision

Bakkavor was found to have misused Kerry's confidential information, relating to the composition of its flavoured/infused oils.  This was despite arguments put forward by Bakkavor that the information provided was obvious because it necessarily complied with certain recognised food safety techniques and that arriving at the recipes would be simply a matter of trial and error, using those techniques.  The Judge gave the following reasoning for his decision:

(1) The relevant specifications were found to be confidential, because they were unique to Kerry and it would have required substantial work or what the Court called "special labours" to reproduce or reverse engineer them.  The fact that the information could be obtained from reverse engineering the products did not of itself prevent the information from being confidential.

(2) Using the objective test of what a reasonable person would have appreciated at the time the information was communicated, the court found that the specifications were provided to Bakkavor for a limited purpose.  In this case the communication was clearly for safety/regulatory reasons, and crucially not for the purpose of product development.

(3) the information was communicated to third parties by Bakkavor to be used to assist in developing a competing product (notably not for the purpose for which the specifications were provided to Bakkavor).  It was immaterial that the resulting product was not identical to Kerry's.  The important point was that Kerry's information had been used as the starting point of development for the new product, which gave Bakkavor an advantage (Terrapin v Hayes^[2]).

As a result, the Court awarded Kerry an injunction to prevent Bakkavor's use of the information until 30 June 2017, based on the estimated head start in product development that Bakkavor gained from using the confidential information (as opposed to starting with development from scratch). 

This is an interesting example of a so-called "spring-board" injunction (which was also applied by the High Court in Vestergaard v Bestnet).  Rather than preventing use of the information indefinitely, the Judge applied a pragmatic approach to the calculation of a reasonable length of time to apply to the final injunction.  He recognised that a similar product could be developed over time independent of Kerry's information and so limited the injunction's effect to the advantage / head-start gained from the misuse of the information.  Under the terms of the injunction Bakkavor was not prevented from on-going development work on its own products.

Kerry will also be entitled to damages (to be assessed in due course) and its legal costs.

In this article for Entertainment Law Review first published in June 2016, Andrew Crystal and Joshua Charalambous discuss Arnold J's decision in the England and Wales Cricket Board Ltd -v- Tixdaq Ltd [2016] EWHC 575 (Ch). 

Introduction

In England and Wales Cricket Board Ltd v Tixdaq Ltd  Arnold J has provided a characteristically long judgment which assists practitioners by exploring a number of areas of copyright law which, to date, have had limited consideration in the UK courts.

It was held that the reproduction and communication to the public of short eight-second clips from the claimants' sport broadcasts and films via the defendants' mobile app was not protected by the defence of fair dealing for the purpose of reporting current events. Arnold J stated that even if the use was for the purpose of reporting current events, it was not fair dealing. In finding that the defendants had therefore infringed the claimants' copyrights, the judge also determined the correct test of substantiality in relation to the reproduction and communication to the public of excerpts from broadcasts and film fixations under the Copyright, Designs and Patents Act 1988 (the CDPA).

The parties

The first claimant (the ECB) is the governing body of cricket in England and Wales. The ECB reinvests any profits that it generates for the benefit of all levels of cricket in England and Wales. The ECB organises the commercial exploitation of cricket matches played by the England men's and women's teams in matches and events not staged by the International Cricket Council.

The second claimant (Sky) is the well-known pay-television operator that operates the Sky Sports satellite broadcast television channels.

The claimants entered into an agreement with each other in January 2012. Sky exploits its rights under the agreement primarily by broadcasting matches on its television and digital services. The ECB retained the copyright in the broadcast footage and granted the right to show highlights on terrestrial television to Channel 5 in exchange for a substantial fee. Other rights were granted to show short highlights of the broadcasts on various digital platforms.

The defendants operate a website at www.fanatix.com (the Website) and various mobile applications including the fanatix app (the App). They also operate a number of football-related websites including www.tixdaq.com.

The dispute

Mr Muirhead, shareholder of the defendants, thought up the idea of the App when first using the short video-sharing application Vine. Arnold J's judgment describes the development of the App over the course of 2013 and 2014 and Mr Muirhead's assertions that he had been careful to take steps to ensure that the defendants stayed within the law. However, from the defendants' internal documents it was clear that they were (as Mr Muirhead put it) "pushing legal boundaries". Essentially, the defendants' employees and contractors, and members of the public who have downloaded the App, use screen capture technology to copy clips of broadcast footage of sporting events. They then upload the clips to the App, each clip lasting up to eight seconds.

The App developed over time with later versions:

• obliging users to attribute clips to a specific source broadcaster or confirm that the clips contained no third-party broadcasts;

• requiring users to add at least 70 characters of commentary before uploading a clip; and

• using an algorithm to restrict the amount of footage that could be viewed from each sports event in 24-hours.

The ECB first became aware of the defendants' activities in June 2015 when it noticed that a clips reel of key moments in three England cricket matches were uploaded onto the Website and related social media accounts. The ECB realised that the clips were copied from live Sky broadcasts and uploaded on a near-live basis.

The claimants claimed copyright infringement in relation to two categories of copyright work: (i) television broadcasts of cricket matches staged under the control of the ECB; and (ii) films made during the course of the production of the broadcasts (i.e. the recorded footage which is used for action replays). The defendants denied infringement, relying primarily upon the defence of fair dealing for the purposes of reporting current events and secondarily upon immunities for acting as a mere conduit and hosting.

The legal backdrop

CDPA s.1 provides that copyright subsists in films and broadcasts. Section 16 lists those acts that an owner of copyright has the exclusive right to perform, and includes copying the work and communicating it to the public. To perform one of those exclusive acts using copyright belonging to another person, without that other person's consent, is infringement.

CDPA 1988 s.30(2) provides that there will be no infringement of copyright in instances of a work that has the purpose of reporting current events (fair dealing):

"(2)        Fair dealing with a work (other than a photograph) for the purpose of reporting current events does not infringe any copyright in the work provided that (subject to subsection (3)) it is accompanied by a sufficient acknowledgement.

(3)        No acknowledgement is required in connection with the reporting of current events by means of a sound recording, film or broadcast where this would be impossible for reasons of practicality or otherwise."

Copyright Directive (2001/29/EC) art.5[1] also provides exceptions and limitations to when a work may infringe copyright. Article 5(3) provides that works should be allowed, "to the extent justified by the informatory purpose".

Copyright Directive art.5(5) provides the three-stage test that must be overcome for the exceptions and limitations to apply. It must be (1) a special case that (2) does not conflict with a normal exploitation of a work but which (3) does not unreasonably prejudice the legitimate interests of the rights holder. It was common ground in this case that art.5(5) required the three-step test to be applied by national courts when deciding individual cases even though the United Kingdom has not transposed art.5(5) into national law.

E-Commerce Directive (2000/31/EC) arts 12 and 14[2] provide that information society service providers (ISSs) will not be liable for information that is transmitted in circumstances when they are acting as mere conduits or hosts of information.

The decision

Arnold J concluded that the defence of fair dealing for the purpose of reporting current events did not apply to the defendants' use of the copyright work. The use was not for the purpose of reporting current events (rather it was primarily for sharing the clips with users). Even if the purpose was to report current events, it fell short of amounting to fair dealing. The judge's reasoning is discussed below.

Signal rights and the substantiality test

Broadcasts and films under the CDPA are signal rights rather than content rights. Arnold J considered that this interpretation corresponded with the Copyright Directive and that there was no need for the works to be original for copyright to subsist in them. Article 2 gives the copyright owners the right to prohibit reproduction of works "in whole or in part". For a work to infringe the copyright it must copy a substantial part of those works.

Although the CJEU ruling in Infopaq International A/S v Danske Dagblades Forening (Infopaq I)[3] concerned literary and artistic works, Arnold J accepted that the same test applied to both broadcasts and films. As such, Arnold J held that parts of the broadcasts or films that were copied were protected by the Copyright Directive art.2 provided they contained elements that reflected the rationale for protecting them. As entrepreneurial rights, the rationale for protecting the broadcasts and films in this case was the level of investment made by the broadcaster.

Thus the correct test to apply was a qualitative and quantitative assessment of whether a substantial part of the claimants' works had been copied in each of the eight-second clips, having regard to the extent to which such reproduction exploited the investment made by the broadcaster or producer. The conclusion was that although quantitatively, eight seconds was not a large proportion of the broadcast or film, qualitatively most of the clips contained key moments of the matches (wickets, runs, umpire's decisions). Most of the clips contained something of interest that exploited the claimants' investment in producing the broadcast/film. As regards communication to the public, Arnold J considered that the same approach to determining what amounts to a substantial part should be applied in that context as in the context of reproduction.

Fair dealing for the purposes of reporting current events

The court decided that CDPA s.30(2) should be interpreted in accordance with the Copyright Directive art.5(3). Article 5(3)(c) allowed use of a copyright work "to the extent justified by the informatory purpose". Section 30(2) allowed use that was "fair dealing". Arnold J therefore considered that in assessing whether use was fair dealing, one should ask whether the extent of that use was justified.

Arnold J confirmed that the question of whether the use was "for the purpose" of reporting current events must be judged objectively. He commented that "current events" were not only events that were very recent but could be interpreted more widely. It was also noted that "news reporting" as referred to in the recitals of the Copyright Directive did not limit "reporting current events" only to "news reporting".

The parties agreed that a contemporaneous sporting event, such as a cricket match in this case, was a current event for the purpose of CDPA s.30(2). However, the judge commented that due to a lack of judicial authorities, it was difficult to decide on whether the purpose of the communications via the App was to report that current event.

Nonetheless Arnold J considered that the Copyright Directive art.5 together with CDPA s.30(2) were designed to limit copyright protection in the public interest and the exception should be given a "living" interpretation to take into account recent developments in technology and digital media. As a result, Arnold J decided that the interpretation should be wider than in the past and should not be limited to "traditional media". The concept of "citizen journalism" could qualify as reporting a current event if, for instance, a passer-by recorded a newsworthy event using their smart phone and uploading it to social media sites like Facebook or Twitter.

Despite this broader approach, however, it was held that the use of the App was not for the purpose of reporting current events but, rather, was for sharing clips with other users. It was the value of the clips that drew the audience in rather than the reporting on it.

In relation to fair dealing, Arnold J held that the most important factor to consider in this case was the amount and importance of the work that had been taken.[4] After considering this factor one should ask: was the extent of the use justified by the informatory purpose? This was considered obiter by Arnold J who proceeded on the assumption for this analysis that the use was for reporting current events. Applying key factors in Ashdown and the three-stage test in art.5(5) (see below), the judge held that the use of the App commercially damaged the claimants and conflicted with the normal exploitation of the work. The amount and quality of the work taken could not be justified by the informatory purpose even if it existed.

Other defences

Helpfully, and characteristically, Arnold J considered some legal points obiter that clarified the law surrounding sufficient acknowledgement, conduit and hosting and the three-stage test in art.5(5).

CDPA s.30(2) allows fair dealing so long as it is accompanied by a sufficient acknowledgement. Following Pro Sieben Media AG v Carlton UK Television Ltd,[5] the court accepted that the use of the broadcasters' logo could be a sufficient acknowledgement. The defendants argued that although in some instances that logo was missing, a moderately attentive viewer would appreciate that the footage would come from the same source. In accepting this as a possible argument, Arnold J expands the understanding of sufficient acknowledgement.

Arnold J also briefly explored whether the defendants could rely on the mere conduit and hosting defences under the E-Commerce Directive arts 12 and 14. Article 12 gives a full defence to ISSs if the service only involves the transmission of information. As the App also stored the information this argument failed. When interpreting art.14 Arnold J held that, following L'Oreal SA v eBay International AG[6], there may have been a defence in respect of any user post that was not editorially reviewed. However, as the point was not fully argued, Arnold J stated that this was his provisional view.

There has been little judicial comment (if any) on the three-stage test in the Copyright Directive art.5(5). Arnold J agreed with counsel in this instance that the approach was effectively the same as the considerations in fair dealing but made the following comments that are useful for practitioners in the future:

Step 1: the art.5(5) exception is confined to "certain special cases" and reporting current events was such a certain special case.

Step 2: when applying the art.5(5) exception one must not conflict with a normal exploitation of the work. It is important to consider the potential future ways in which a copyright owner might extract value from the work (licensing plans etc). Step 3: the art.5(5) exception must be applied so that it did not unreasonably prejudice the legitimate rights of the rightsholder. Arnold J notes that although it is a separate step, there have been strong arguments that it qualifies Step 2. Step 3 requires a consideration of proportionality, and a balance to be struck between the copyright owners' legitimate interests and the countervailing interests served by the exception.

Comment

The decision is a much-needed up to date analysis of the relevant tests to apply when considering fair dealing and substantiality in relation to broadcasts and film fixations. As regards fair dealing, the judge noted the difficulty in relying on UK authorities that could be seen to be out of date given that most were decided before the Copyright Directive was implemented.

The key point in this case is that the users uploaded the clips predominantly for others to view and not to illustrate points made in a wider report of the event. Even though viewers commented on the clips this still held true. The clips used had intrinsic value in themselves and the defendants intended them to have a commercial value.

Arnold J's key decision on fair dealing was summarised by him at [151]:

"the use … did not amount to fair dealing. The conflict with the Claimants' exploitation of their copyrights was not warranted by the nature and extent of the use, and thus the use was not proportionate."

It was also interesting to note that some of the clips would have failed the fair dealing test in any event because they lacked the sufficient acknowledgement of who owned the copyright.

Interestingly, Arnold J noted that the claimants did not rely on "literary and artistic works" within the meaning of the Berne Convention art.2(1), and did not contend that any of the broadcasts and films relied upon were intellectual creations. He considered that, "in theory" it would have been possible to advance a case that, "by virtue of the selection of camera angles, close ups, slow motion and the like", Sky's personnel produce intellectual creations, which in English law would have to be classified as "dramatic works". There will also be some conjecture over whether the defendants considered relying on a defence of fair dealing for the purposes of quotation under CDPA s.30(1ZA). This would have given Arnold J the opportunity to lay down some ground rules on the new exception which one assumes would have failed for the same reason, namely that the clips on the defendants' App conflicted with the claimants' normal exploitation of their copyrights.

In the end this was a significant victory for rights holders, with the High Court clarifying that the fair dealing exceptions do not allow digital operators to snaffle the key moments of sporting events (here wickets, runs etc. and by analogy goals, tries, the final furlong and so on), where such highlights constitute a substantial part of the broadcast, which applying the purposive substantiality test expressed by the judge will often be the case.

This material was first published by Sweet & Maxwell in Entertainment Law Review (Volume 27; Issue 6; issn 0959-3799), and is reproduced by agreement with the Publishers.

[1] Directive 2001/29 on the harmonisation of certain aspects of copyright and related rights in the information society [2001] OJ L167/10.

[2] Directive 2000/31 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L178/1.

[3] Infopaq International A/S v Danske Dagblades Forening (C-5/08) [2012] Bus LR 102; [2009] ECR I-6569.

[4] Ashdown v Telegraph Group Ltd [2001] EWCA Civ 1142.

[5] Pro Sieben Media AG v Carlton UK Television Ltd [1999] 1 WLR 605.

[6] L'Oreal SA v eBay International AG (C-324/09) [2012] Bus LR 1369. 

In its decision the CJEU focussed on the knowledge of the person hyperlinking to the infringing content. It decided that if that person knew or ought to have known that the hyperlinked to content infringed copyright, hyperlinking to that content is itself a 'communication to the public' and therefore an infringement of copyright.

The knowledge of the person hyperlinking to the infringing content was assessed both objectively and subjectively by the CJEU, i.e. it will be an infringement if that person "knew or ought reasonably to have known" that the hyperlinked to work infringed copyright. Primary copyright infringement was previously considered a strict liability offence; therefore importing subjective intent into the test is potentially a very significant development.

The following factual scenarios were also considered by the CJEU:

• where a person hyperlinks to infringing content for financial gain, it is presumed that person knows the linked to content is infringing as that person is expected to have carried out the necessary checks to ensure the work hyperlinked to is not infringing (it should be possible to rebut this presumption);

• where a person is notified of the fact that the hyperlinked to content is infringing, hyperlinking to that content will constitute an infringement (this will be welcome news for content creators – notifying a person that has hyperlinked to their content could convert the hyperlink from non-infringing to infringing); and

• where a person hyperlinks to copyright content in a way that circumvents the public access restrictions put in place by the site where the protected work is hosted, that will also constitute an infringement.

In a judgment handed down today, the Court of Appeal, led by Lord Justice Kitchin, has overwhelmingly rejected the appeal by the five largest ISPs and upheld the High Court decision to grant Richemont a blocking order requiring those ISPs in the UK to prevent access to various third party websites from advertising and selling goods which infringe Richemont's trade mark rights. 

It is now clear that ISP blocking orders provide trade mark owners with another option in the fight against counterfeiting, but other effective measures still need to be developed and deployed to try and stem the tide of counterfeits and related websites.

Background

The Claimants (collectively, "Richemont") own (and have registered trade marks for) a large number of luxury brands, including CARTIER, MONTBLANC and IWC. 

Richemont became aware of certain third party websites, including www.cartierloveonline.com, www.iwcwatchtop.com and www.montblancopensonlineuk.com ("Target Websites") advertising and selling counterfeit goods. 

High Court action

Richemont made an application to the High Court seeking an order requiring the five main retail internet service providers ("ISPs") in the UK, namely Sky, BT, EE, Talk Talk and Virgin, who between them have a market share of 95% of UK broadband users, to block, or at least impede, access by their respective subscribers to the Target Websites, all of which had infringed Richemont's trade mark rights.  

(i) Legal basis for the blocking order

Blocking orders, such as the one sought by Richemont, have been made by the Court over the last three years pursuant to section 97A of the Copyright, Designs and Patents Act 1988 ("CDPA"), which implements Article 8(3) of the Information Society Directive.  Section 97A expressly states that the High Court shall have power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright.

As there is no analogous provision under UK trade mark law, Richemont asked the Court to rely on its inherent jurisdiction to grant an injunction where it is "just and convenient to do so", as recognised by section 37(1) of the Senior Courts Act 1981.

This was because the UK had not in fact implemented Article 11 of the IP Enforcement Directive and in particular the provision that "Members States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right…".

(ii) Threshold conditions

The Judge noted that there are certain "threshold conditions" that must first be satisfied in order for a blocking order to be granted in a trade mark case:

• The ISPs must be 'intermediaries' within the meaning of the third sentence of Article 11 of the Enforcement Directive - this was not in dispute in this case.
• Either the users and/or the operators of the website must be infringing the claimant's trade marks - again, this was not in dispute in this case.
• The users and/or the operators of the website must use the ISP's services to do that.  The Judge said that the operators of the Target Websites had been infringing Richemont's trade marks by placing on the internet advertisements and offers for sale which were targeted at UK consumers.  In this respect, the Judge contended that the ISPs had an essential role, since it is via the ISP's services that the advertisements and offers for sale were communicated to 95% of broadband users in the UK.  The Judge also made it clear that it was immaterial that there was no contractual link between the ISPs and the operators of the Target Websites.
• The ISPs must have actual knowledge of this.  Richemont had sent the ISPs emails attaching two schedules, one containing information about its trade marks and the other information about the test purchases from each of the Target Websites.  So knowledge of the infringement was not in dispute; in any case, the ISPs had the requisite knowledge as a result of having been served with the evidence in support of the blocking order injunction application itself.

(iii) Additional satisfying criteria

After deciding that the threshold conditions had been satisfied, the Judge went on to consider that the relief must:

• be necessary, but this did not mean that a brand owner has to show that a blocking order is indispensable for enforcing its trade mark rights;
• be effective, but this did not mean that a brand owner has to establish that the relief it seeks is likely to reduce the overall level of infringement of its rights;
• be dissuasive (ie the remedies granted against the defendant should dissuade third parties from infringing in the future);
• not be unnecessarily complicated or costly;
• avoid barriers to legitimate trade: the measures targeted by the ISP must be strictly targeted so that they do not affect users who are using the ISP's services in order lawfully to access information;
• be fair and equitable and strike a "fair balance" between the applicable fundamental rights;
• be proportionate: the Judge considered that proportionality was a key issue, in particular whether the likely costs burden on the ISPs is justified by the likely efficacy of the blocking measures and the benefit to the trade mark owner, compared against the other options available.

  The Judge concluded that not only did he have jurisdiction to make the order sought by Richemont but that it was appropriate to do so. He also held that the ISPs should bear the costs of its implementation.

  Court of Appeal decision

  In their appeal against the order granted by the Judge, the ISPs contended, in broad outline, that:

• they were wholly innocent parties and were not alleged to be wrongdoers;
• the court had no jurisdiction to make any such order;
• if the court did have jurisdiction, the jurisdictional threshold requirements were not satisfied in the circumstances of these cases;
• the judge failed properly to identify the correct principles that should be applied in deciding whether or not to make an order;
• the orders made were disproportionate having regard to the evidence before the court; and
• the judge fell into error in making the orders that he did in relation to costs.

The Court of Appeal agreed with the High Court Judge and rejected the ISPs appeal in its entirety.  In particular, the Court of Appeal held that the court had jurisdiction to grant the blocking order it did and that ISPs have a duty to take steps to assist with blocking measures when requested to do so in circumstances where rights holders' rights have been infringed.

The Court of Appeal also held by a majority of 2 to 1 that the ISPs should bear the cost of implementation of the blocking order as it considered those costs to be relatively modest and part of the price ISPs must pay for providing their services. Lord Justice Briggs dissented on this issue on the basis that the rights holder ought to pay such costs as the price of obtaining valuable injunctive relief for the better exploitation of its intellectual property.

Conclusion

This decision is a great outcome for brand owners, which provides them with certainty regarding a significant new weapon in their fight against websites that advertise and sell counterfeits. Whilst the sheer volume of online counterfeit activity means that requiring ISPs to block specific websites cannot eradicate the problem, brand owners can use blocking orders to target the worst offending sites.

The task of unpicking the implications for those different rights in the event of a Brexit would not be simple, but presumably the current legislation would remain exactly as it is for a considerable period. One immediate problem would be to assess whether pan European rights (Community Trade Marks and Registered Designs) would continue to offer protection in the UK post-Brexit. Presumably they would not, but to avoid huge disruptions to business it can only be assumed the UK's Intellectual Property Office would have to offer a system of "grandfathering" over the "UK element" of those European rights into separate analogous UK rights. Brexit would also almost certainly mean the end of the UK's eligibility to take part in the proposed new unitary EU patent and its planned role as a host of one of the central divisions of the proposed Unified Patent Court. 

The limits of IP rights in the UK have also for many years been defined by the interplay with EU competition law. So, for example, trade mark licences to distributors could not prohibit those distributors from engaging in passive sales outside of their territory but within the EU and the act of placing IP-protected products on the market in one member state is deemed to "exhaust" the proprietor's right to object the subsequent free circulation of those goods within the EU. If UK IP law and EU competition law is to converge, then UK right holders may be able to control more tightly the circulation of their products on the wider market. 

Background

The claimant, Comic Enterprises Ltd (Comic), has operated live entertainment venues (for stand-up comedy and live music) across the UK since 1994 under the names "Glee" and "The Glee Club".  Comic has owned a UK trade mark for a series of two figurative marks since 2001 which feature "Glee" (the Mark).  The Goliath in the case, media company Twentieth Century Fox (Fox), produced the well-known American television series "Glee" which was first broadcast in the UK in late 2009. 

The history of the case, including the High Court decision and the earlier Court of Appeal decision are recapped below, but the key point at issue in this most recent Court of Appeal hearing related to the validity of Comic's marks, which were registered as series marks under s.41 of TMA 1994.  The marks in question are shown below, and are identical except that the first mark in the series claims the colours red, black and white as an element of the mark.

S.41 TMA 1994 is part of the "Registration" provisions of that Act, and a series of trade marks is defined as "…a number of trade marks which resemble each other as to their material particulars and differ only as to matters of a non-distinctive character not substantially affecting the identity of the mark" (s.41(2)).

Fox contended, in a point which is of more general importance, that series marks themselves are in fact incompatible with the requirement under EU law that a trade mark must be a single sign which is capable of being graphically represented in a clear, precise, unequivocal and/or objective way (Articles 2 and 3 Directive 2008/95).

The High Court Decision

Comic issued proceedings against Fox in September 2011, claiming trade mark infringement under sections 10(2) and 10(3) of the Trade Mark Act 1994 (the Act), and passing off.  At the 2014 High Court trial, the Judge ruled that the "Glee" television series did infringe Comic's Mark but dismissed the claim for passing off.  Both parties appealed the decision: Fox against the findings of trade mark infringement and Comic cross-appealed the passing off decision.

The February 2016 Court of Appeal Decision

In February of this year the Court of Appeal rejected both appeals, and upheld the High Court's decision.  It confirmed that (i) "wrong way round confusion" aided the Court in deciding whether there was a likelihood of confusion in light of Fox's actual and threatened activities; (ii) that there was a degree of similarity between Comic's Mark and Fox's use of the word "Glee" sufficient to amount to trade mark infringement; and (iii) that the similarity gave rise to a "link" in the minds of consumers which caused those who did not like the TV series "Glee" to change their behaviour to the detriment of Comic.  The Court recognised that Fox had adopted "Glee" in good faith, but there had nonetheless been damage to the reputation and distinctive character of Comic's Mark.

Comic also failed in its cross-appeal for passing off with the Court of Appeal emphasising the distinction between confusion and misrepresentation – the latter being a prerequisite for a finding of passing off.  The Court of Appeal agreed that Comic had established goodwill in "Glee" in respect of its venues at the time of the TV series launch but the subsequent confusion was not sufficient to make out misrepresentation by Fox.

An interesting aspect of February's appeal hearing was that, late in the day, Fox also raised the additional point relating to s.41 of the TMA 1994, which governs the registration of series marks.  The challenge had the potential to have a significant impact on proprietors of series trade marks since it threatened the very legality of those marks.  The Court reserved its decision on this point, until this most recent Judgment, in order to allow evidence from the Comptroller-General of Patents, Designs and Trade Marks (the Comptroller-General).

Court of Appeal decision on compatibility with EU law

The Comptroller-General provided evidence that a series of trade marks registered under s.41 TMA 1994 are in fact a series of individual marks which must each comply with the requirements of Directive 2008/95 in order to be valid.  He argued that the registration of marks as a series of marks is simply an administrative process which does not result in additional rights.

Lord Justice Kitchin (followed by Lord Justice Lloyd Jones and Lady Justice Arden) accepted this analysis, and held that even though there is no provision in EU law that allows a series of trade marks to be registered, this does not mean that the registration of series marks under the TMA 1994 goes further than EU law (i.e. tries to create a new or additional trade mark right).  The invitation to refer the question to the Court of Justice of the European Union was declined.

The Court of Appeal's confirmation of the legality of s.41 TMA 1994 will come as a relief to proprietors of series marks. 

Currently each European country legislates on the protection of trade secrets in its own way, creating discrepancies in protection between jurisdictions, which the EU considers may create confusion and increase costs for companies trying to protect their trade secrets across Europe.

Now that the Directive has been accepted by the EP, it must also pass through a first reading by the Council of the E.U.

A report on the recent European Parliament session can be found here.

Background

Bristol-based firm Magmatic Limited (Magmatic), founded by Dragon's Den reject Robert Law, owns the Community registered design for Trunki children's ride-on suitcases (CRD).  Magmatic brought a claim in respect of the Kiddee case created by PMS International Limited (PMS) - admittedly 'inspired' by the Trunki design – arguing it infringed the CRD.

High Court decision 

At first instance Arnold J focused only on the shape of the two products, confirming that the CRD protected the shape of the Trunki case only; the proper comparison is between the CRD and the shape of the Kiddee case.  The reason being that the CRD is a monochrome Computer aided drawing (CAD)and Arnold J confirmed that where a design was not registered in colour, only the shape should be considered.  This left other features of the Kiddee case design – most notably surface decoration – ignored and consequently Arnold J held that the Kiddee case infringed the CRD as it created the same overall impression on the informed user.  PMS appealed this decision, and so the story continued.

Court of Appeal decision 

In a lead judgment from Lord Justice Kitchin, the Court of Appeal overturned the first instance decision, finding that Arnold J had erred in principle in two significant aspects:

1   Surface decoration

Kitchin LJ held that the CRD, when considered as a whole, gives the impression of a horned animal.  Further, the decoration of the Kiddee case "significantly affects how the shape itself strikes the eye" and is "…plainly not a horned animal". 

2   Colour contrast on the CRD

Although Arnold LJ was right to find that the monochrome CRD was not limited to particular colours, the distinct contrasts in colour between the wheels and strap and the rest of the suitcase were distinctive design features.  The Kiddeecase has no colour contrast on the body of the case, and so the judge was wrong to ignore this aspect of the CAD representation.

Magmatic was subsequently given permission to appeal to the Supreme Court.

Supreme Court's decision 

After recognising that the Kiddee case is "very similar indeed" to the CRD, the Supreme Court unanimously dismissed Magmatic's appeal and stated that there would be no reference to the Court of Justice of the European.  This means that the Court of Appeal judgment stands, namely that PMS's Kiddee Case did not infringe the registered design rights. 

Lord Neuberger, delivering the judgment, agreed that Arnold J overlooked the importance of the horns on the CRD and that the Court of Appeal was right in finding that the overall impression of the CRD was that of a horned animal and this was not given sufficient weight at first instance.  The ruling further held that the Kiddee case's surface decoration is enough to prevent the case from creating the same "overall impression" as the Trunki. Magmatic's indication that a CJEU reference was necessary to determine the surface decoration point was refused, with Lord Neuberger stating that a reference would be futile as the CJEU would likely answer that the matter is one for a national court to decide. 

Comment

A key point for designers to take on board following the Supreme Court Judgment is that they should be careful about the nature of the designs they register.  Magmatic's registered design for the Trunki case includes details such as high colour contrast exposed wheels and a body shown to be contrasting in colour from its attachments, which means that their design encapsulates much more than the overall shape of the product. These factors helped to make it possible for PMS to create a product sufficiently different from the Trunki to avoid the allegations of registered design infringement.

Whilst the Court had sympathy with Rob Law and Magmatic because Trunki was a"clever idea", it was swift to reinforce the positon that "Design Right is here to protect designs, not ideas".  Businesses will need to consider carefully the overall impression created by their registered designs.  Some practical points are set out below:

• Those seeking to rely on registered designs need to ensure that such designs capture exactly what they are seeking to protect. 
• It may prove prudent to file a series of designs, ranging from a simple shape design to more detailed designs incorporating any unique features and surface ornamentation to maximise protection.
• Whilst CAD images are increasingly popular in design registrations, traditional line drawings are more likely to be interpreted as not excluding ornamentation.

It is clear from this decision that ensuring adequate design protection is as vital, yet more challenging, than ever.

Background: the UK position

Since the landmark decision Twentieth Century Fox v Newzbin in 2010, the film and music industry has taken advantage of section 97A of the Copyright, Designs and Patents Act 1988 (CDPA) in order to obtain injunctions against ISPs to block access to file sharing websites that infringe their copyright works. 

Over the past five years, the English Courts have demonstrated a willingness to break new ground in order to remain effective and responsive to the continuously-evolving internet forum.   

This was evident in a decision handed down in April last year, in which six Hollywood film studios brought proceedings to block access to US-based piracy application 'Popcorn Time'. This catalogue application was downloadable from a source website and enabled users to browse and locate programmes that they wished to view.  This was the first time that a blocking injunction had been sought against an application as opposed to a website.  It was held that the suppliers of the application were joint tortfeasors with the operators of the host website and so the English Court considered that it had jurisdiction to order an injunction. 

In another landmark decision, in Richemont v BskyB, the English Courts granted a site-blocking injunction based on trade mark rights (as opposed to copyright).  This was the first decision of its kind. The ISPs were ordered to block access to certain websites targeting UK customers which offered and advertised counterfeit goods bearing the well-known trade marks owned by Richemont, namely CARTIER, MONTBLANC, IWC. 

Whilst the basis for the injunction was section 37(1) Senior Courts Act 1981 which provides that the Court can grant an injunction in all cases where it appears just and convenient to do so, it was noted that this provision did comply with the third sentence of Article 11 of the IP Enforcement Directive, namely that EU member states must ensure that IP rights-holders can apply for an injunction against intermediaries whose services are used by a third party to infringe an IP right. Further site-blocking injunctions based on trade mark rights may follow elsewhere in the EU.

Guidance from the Court of Justice of the EU (CJEU)

Although the CJEU had previously considered ISPs' obligations to deal with infringing content, it was not until March 2014 that it was called on to rule upon issues relating to site blocking injunctions, in the form of a reference from the Austrian Supreme Court. The proceedings, Telekabel v Constantin Film, centred on the unauthorised online availability of films and the CJEU was asked to provide guidance on the construction of Article 8(3) of the InfoSoc Directive, the form of an order against an ISP and its compatibility with EU law.

In an endorsement of the English Court's approach to site blocking cases, the CJEU confirmed that an ISP could be considered an "intermediary" within the meaning of Article 8(3), on the basis that its services were used by customers to access infringing material made available to the public on the internet by a third party.  The CJEU further observed that the criteria to be fulfilled and procedures to be followed for the granting of site blocking injunctions are a matter of national law, but subject to the acknowledgment that the EU-level fundamental rights of consumers and ISPs need to be respected.

It is worth noting that the Austrian injunction regime considered by the CJEU was results based, i.e. focused on the end outcome of prohibiting access to certain sites, in contrast to the English Court's approach where injunctions commonly specify the technical method(s) the ISP must employ to comply.  ISPs faced with a results based injunction will be concerned as to how they are to ensure compliance with the internet users' right to freedom of information; it will clearly be a balancing act to determine the necessary restrictions whilst ensuring lawful access to services is maintained. Some comfort may be taken from the compliance threshold which requires ISPs to show they have taken all reasonable measures and the CJEU's remark that ISPs will not be required to make "unbearable sacrifices".

Notwithstanding these concerns, rights holders will welcome the CJEU's confirmation that the use of site blocking injunctions is appropriate and also its comments on the legitimacy of the preventative role of injunctions - rights holders do not need to prove that customers are actually accessing the infringing material for an order to be granted. 

The position elsewhere in the EU: the fight against Pirate Bay

The Pirate Bay site provides links to files stored on other users’ computers.  The site has been blocked at ISP level in, for example, Belgium since 2011 and the UK since 2012, but users continue to access it through proxy sites.

In December 2014, Swedish Police raided Pirate Bay and seized hardware in connection with suspected copyright infringement, taking the site temporarily offline (only for it to be back up less than 3 months later).  A year later, a Swedish district court reached the surprising decision that it did not have jurisdiction to order an ISP block on the site.  This naturally leads to the question - if Pirate Bay, one of the world’s largest BitTorrent indexes and a spiritual home to online copyright infringement does not deserve an ISP block, what site does?

The Dutch Supreme Court provided another recent instalment in the Pirate Bay saga in November 2015, requesting a CJEU reference on whether the site can be considered to bedistributing copyrighted content (and therefore warrant a site-blocking order) when it technically only facilitates access to the files. 

The Netherlands’ tumultuous relationship with Pirate Bay over the past few years is well documented with overturned decisions and reinvigorated attempts to block domestic access.  The CJEU’s decision on this point could have ramifications for those member states already blocking piracy sites, and the recent Popcorn Time decision could also be called into question if the CJEU answers in the negative.

Conclusion

Whilst recent UK decisions have paved the way for site blocking injunctions, the ongoing fight against Pirate Bay epitomises the fragmented approach to site blocking injunctions across the EU.  The upcoming CJEU decision should provide guidance but the sooner member states move towards a common interpretation and enforcement of the InfoSoc Directive, the simpler it will be to ensure a cohesive approach within the EU.

Rights holders will continue to welcome any expansion of the jurisdiction of site blocking injunctions; however, whilst these measures do provide some remedy, they are relatively costly and may be only a temporary solution.  The internet and streaming services are becoming more sophisticated all the time, resulting in a heavy burden on ISPs to enforce site blocking injunctions.  Faced with the abundance of proxy sites and the general impossibility of permanently removing anything from the internet, it remains to be seen whether ISPs can deliver on results based injunctions or if, as Pirate Bay has shown, sites will appear transformed and resurrected in some other corner of the internet.

Background

The claimant, Comic Enterprises Ltd (Comic), has operated live entertainment venues across the UK since 1994 under the names "Glee" and "The Glee Club" where stand-up comedy and live music are performed.  Comic has owned a UK trade mark for a series of two figurative marks since 2001 which feature "Glee" (the Mark).  The veritable Goliath in the case, media company Twentieth Century Fox (Fox), produced the well-known American television series "Glee" which was first broadcast to the UK in late 2009.  The series has resulted in DVD releases, concert tours, albums and merchandising.

Comic issued proceedings against Fox in September 2011, claiming trade mark infringement under sections 10(2) and 10(3) of the Trade Mark Act 1994 (the Act), and passing off.  At the 2014 High Court trial, the Judge ruled that the "Glee" television series did infringe Comic's Mark but dismissed the claim for passing off.  Additionally, although the Judge found that Comic's Mark was validly registered, it was partially revoked for non-use in class 25 (clothing) and the scope of cover for entertainment services in class 41 was reduced.

Both parties appealed the decision: Fox against the findings of trade mark infringement and Comic cross-appealed the passing off decision.

Court of Appeal decision

In a lead judgment delivered by Kitchin LJ, the Court of Appeal rejected all appeals.

Trade mark infringement

Crucial to the trial Judge's finding of a likelihood of confusion was 'post-dated evidence'; ie evidence from consumers who made a connection between Fox's sign and Comic's Mark when later confronted with Comic's Mark because of their prior exposure to the "Glee" TV series.  Fox argued that this "wrong way round confusion" was irrelevant to s10(2) infringement as a matter of law and was therefore inadmissible.

The Court of Appeal rejected these arguments holding that the order in which a consumer came across Fox's sign and Comic's Mark was irrelevant: the question of infringement simply came down to whether there was a risk that the average consumer might think that the two entities were connected.  Notably, the Court of Appeal confirmed that "wrong way round confusion" was admissible as it aided the Court in answering the question of whether there was a likelihood of confusion in light of Fox's actual and threatened activities. 

Fox's appeal on s10(3) was also unsuccessful.  The Court of Appeal upheld the finding that the similarity between the Mark and sign gave rise to a 'link' in the minds of consumers which caused those who did not like the TV series "Glee" to change their behaviour to the detriment of Comic.  Though the Court recognised that Fox had adopted "Glee" in good faith, there had nonetheless been damage to reputation and distinctive character of Comic's Mark.

A particularly interesting aspect of the appeal was that Fox also applied for permission to introduce a new claim that s41 of the Act, which governs the registration of series marks (which included Comic's Mark), is incompatible with the requirement at EU Directive level that a trade mark must be a single sign which is capable of being graphically represented. Despite a UK IPO submission in support of series trade marks as a bundle of separate trade marks each entitled to protection under EU law, this issue remains to be fully determined by the Court of Appeal.  If Fox pursues this avenue, it could potentially have a significant impact on proprietors of series trade marks, threatening as it does the very legality of such marks.  

Cross-appeal on passing off

Comic failed in its cross-appeal with the Court of Appeal emphasising a distinction between confusion and misrepresentation – a prerequisite for a finding of passing off.  The Court of Appeal agreed that Comic had established goodwill in "Glee" in respect of its venues at the time of the TV series launch but the subsequent confusion was not sufficient to make out misrepresentation by Fox.

Comment

The Court of Appeal's confirmation that "wrong way round confusion" is not only admissible but sufficient to establish infringement under s10(2) of the Act in the absence of "traditional" confusion is notable. Not only would it appear that the order in which the relevant marks and signs are encountered is irrelevant, but it follows that later signs can become infringing as a victim of their own success – it was the sufficient reputation of Fox's TV series that gave rise to "wrong way round confusion" in this case.  

In the course of proceedings the parties both made interesting concessions.  Comic stated that they would not pursue an injunction against Fox, but would be content to settle for an account of profits only.  After all, it could be argued that the damage to Comic's business would not be repaired by an injunction, since the "Glee" TV programme was so well known already.  Fox, perhaps recognising the disparity in size between the parties, conceded that if successful they would not seek to recover their costs from Comic.

The Guide brings together contributions from copyright experts in our Terralex network firms in key territories to provide an invaluable primer to copyright law in each of those jurisdictions. We hope you find it a helpful resource – and do be in touch with any national or international copyright issues that you think we may be able to assist with. 

NOTE - to see the 2017 version of the guide please click here.  

Sound a bit familiar? It's fair to say that with each new Commission term of office comes an equally ambitious plan of making copyright "fit for the digital age", unfortunately with little, if any, real progress made before it’s time for the next team of Commissioners to step up to the task.  Perhaps, however, these next five years will be different.

In conjunction with the Communication, the Commission published a focused legislative proposal on ensuring the cross-border portability of online content services in the form of a draft regulation (the Proposed Regulation).  In this article, we consider the provisions of the Proposed Regulation and focus on the implications for service providers, right holders and consumers.  We also briefly take a look at some of the Commission's legislative plans in the pipeline as set out in the Communication.   

Cross-border portability of online content

The Proposed Regulation

Currently, consumers who have paid for or otherwise legally acquired online content in their home Member State are unlikely to be able to access this same content elsewhere in the EU due to territorial restrictions imposed by content service providers. The Proposed Regulation requires online audio-visual content service providers to allow consumer subscribers in one Member State access and use of their online content when temporarily present in another Member State. Article 3 (1) of the Proposed Regulation provides:

"The provider of an online content service shall enable a subscriber who is temporarily present in a Member State to access and use the online content service."

To address the immediate issue of the divergent copyright systems across Member States, the Proposed Regulation offers a workaround solution whereby the cross-border service is deemed to occur where the subscriber is usually resident. This not only covers copyright law issues, but also sidesteps differences in consumer law, data protection and content standards. The Commission has not however given any guidance on the meaning of ‘temporarily present’ which leaves open the question of how long an individual may be resident in another Member State before they have exceeded the ‘temporary’ time measure. 

Retrospective effect

The Proposed Regulation will have retrospective effect in that any contractual provision which is incompatible with the portability obligation will be rendered unenforceable.  This will therefore include terms between rights holders and content service providers, and service providers and users.  Both rights holders and service providers will therefore have to be alert to the Proposed Regulation’s effect on any terms which run contrary to the portability obligation.  There may well be long term agreements in place which have not catered for these developments and will therefore need to be reassessed in light of this proposal.

What are the implications?

Providing for the portability of subscribed content will no doubt be heralded by some as modernising EU copyright to reflect the trend towards mobile device access to audio visual services and appeasing the ever-frustrated travelling content subscriber. However, mandating cross-border portability is not free from negative implications for stakeholders. In particular, the obligation to locate the habitual residence and temporary presence of online content users and the cost implications of removing borders to online content undoubtedly need highlighting to all stakeholders.

Service Providers

If the Proposed Regulation comes into force as currently drafted, service providers will need to ensure they are able to confirm where their subscribers are habitually resident so that an accurate determination of subscribers’ temporary presence in other Member States can be made.

If users are not ‘temporarily present’ and yet service providers do provide content to them, the providers risk infringing copyright if they do not have a pan-EU licence.  It is likely that many smaller service providers will not have the technological capability to geo-locate consumers at the time of using the service.

Rights holders

It is not only content service providers at risk if residence and location cannot be established, but there is also an impact on rights holders.  As drafted, the Proposed Regulation only allows right holders to require content service providers to use ‘reasonable’ specified means to verify the habitual residence of a user.

Unreliable geo-location will result in users having unfettered access to copyright content wherever they are in the EU and regardless of how long they have been present there. Right holders will be concerned with the potentially diminished protection offered as those service providers unable to police the cross-border portability and/or who are vulnerable to piracy ‘open the back door’ to unlicensed access to audio visual material. 

What is the potential cost impact?

Notwithstanding the Commission's proposal that the Proposed Regulation would not require service providers to take any measure to ensure the quality of services outside the user’s habitual Member State, it is inevitable there will be a cost impact of removing borders to online content. Service providers will incur new costs connected both with the provision of the online content throughout the EU and compliance with the geo-location requirement of the regulation.  Most likely, those who do not currently offer portability of their services will find themselves hit with costs arising from the use of foreign network infrastructure and those lacking geo-location technology must upgrade to comply with the Proposed Regulation requirements.

This extra cost to the content service providers is compounded by the fact that cross-border portability will only be profitable in certain regions, in relation to particular content and only for some business models.  Indeed, public service providers such as the BBC and its iPlayer service are caught by the Proposed Regulation and how they will be impacted from a cost perspective is not clear.

By obliging service providers to offer cross-border portability in situations where there is no demand and still considerable cost implications, the Commission is arguably not balancing the needs of the consumer with the business needs of the service providers.  Considering these implications for service providers, it is arguable that cross-border portability should have been posed as a business decision and not EU mandated, and that it almost certainly is not offering “better protection” or “fair remuneration” for stakeholders as professed in the Communication.

Further proposals in the Communication  

The Commission discusses a number of other proposals on copyright which it aims to legislate in early 2016.

Exceptions

The exceptions to copyright are an area where the fragmentation of copyright rules across the EU is seen as especially acute. Divergence in the availability and scope of exceptions is highlighted as a particular problem for those which are related to education, research and access to knowledge.

It is within this context that text and data mining (TDM) is discussed. Reflective of the absence of concrete proposals throughout the document, the Communication states that the Commission is "assessing options and will consider legislative proposals" in order to allow public interest research organisations to carry out text and data mining of content they have lawful access to for scientific research purposes.

Whilst the belated recognition of the legitimacy of TDM technologies will be welcome news to stakeholders, concerns persist around the wording used in the Communication. Specifically, the limiting reference to "public interest research organisations" as the sole beneficiaries takes a narrow view of the participants in this sector and ignores the practical reality that much scientific research occurs in public private partnerships.

One of the few firm commitments in the Communication is the Commission's pledge to propose the legislation required to implement the Marrakesh Treaty, which was originally signed on behalf of the EU on 30 April 2014. Such implementation will result in the introduction of a harmonised EU exception to allow for the making and dissemination of special formats of printed material to the benefit of those with visual impairments. Whilst this is a welcome restatement of the Commission's intention, ultimately implementation is simply the fulfilment of its pre-existing commitment.

Value gap in online content provision

The Commission acknowledges the growing concern amongst right holders about the ‘value gap’ created by online content-sharing platforms which capture an ‘unfair’ proportion of the value generated by online content distribution.  It is acknowledged that there is a clear disparity between the revenue generated by these platforms and the royalties paid to the owners of shared content.

As part of its proposals, the Commission is also considering issues such as the safe harbour exemption, its scope, and the types of platforms that should / should not be entitled to benefit from it.  Whether we will see any legislative solution to these issues is uncertain.    

The Commission acknowledges that legislative clarity may be required on the definitions of the "right of communication to the public" and the "making available right" in the Copyright Directive 2001/29/EC.  These rights govern the digital use of copyright protected content and uncertainty about the scope of these rights has led to numerous CJEU referrals over recent years.  Consequently, we have seen piecemeal law making at the judicial level in an area that obviously calls out for legislative intervention.      

Enforcement system

The Communication also acknowledges that the current enforcement regime is not fully fit for the challenges of the digital single market.  The Commission proposes to continue to formulate and pursue a 'follow the money' approach aimed at deterring infringers by depriving them of the revenue streams flowing from their activities. It plans to immediately engage with all interested parties including intermediary service providers to set up and apply Codes of Conduct implementing follow the money mechanisms. Such a self-regulatory approach could (and arguably should) be backed by legislation for full effectiveness.

At the same time the Commission will consider the need to amend the existing legal framework focusing on commercial scale infringements. This review will seek to clarify, amongst other things, the rules for identifying infringers and for injunctions and their cross-border effect and is scheduled to conclude by autumn 2016.

Single Copyright Code

Looking ahead, the Commission has not relinquished its vision of full harmonisation of copyright in the EU with a single copyright code. Whilst the Commission can be commended for its unwavering commitment to this goal and for its recognition that this would require "substantial changes" to the current legal regime, a single copyright code seems a far stretch to achieve during the current term. 

The Communication points to the Community Trade Mark and Unitary Patent as evidence of successfully implemented pan-European rights.  However, we saw the creation of the Unitary Patent span decades from first discussions 40 years ago - predating the launch of iPhones, Netflix and Spotify. If the Commission takes as long to push through a single copyright code, who knows how technology might have advanced and moved on by the time it is implemented!

Conclusion

When announcing the proposal on portability, Günther H. Oettinger (EU Commissioner for Digital Economy and Society) described it as the ‘appetiser’ to 2016’s ‘main course’, which seems apt.  The approach taken by the Commission is clearly incremental and is one aimed at fostering convergence of national laws in the long term. Despite the Communication's perhaps overly ambitious narrative, the Commission’s plans will be welcomed largely by consumers as a step forward in its vision to remove barriers. 

That said, the Communication largely consists of promises of consultations and legislative proposals with little concrete action actually committed to thus far.  Moreover, the one draft regulation proposed is fairly limited in scope in that it only applies to portability of content to those "temporarily present" in another member State and not wider geo-blocking practices.  However, to give credit where due, this term of Commissioners have at least got the ball rolling and seem to be undeterred by the significant obstacles that lie ahead.

There can be considerable overlap between the laws of copyright, registered designs and design rights, in that all three may be relevant to the same article. An unintended consequence of this was that a rights holder might seek to claim an extended period of protection by way of copyright, when it would otherwise be limited under design right to a protection period of up to 25 years.

Section 52 of the Copyright Designs and Patent Act 1988 (CDPA) was therefore introduced to limit the duration of copyright in artistic works that have been industrially exploited with the copyright owner’s consent to 25 years (i.e. the same maximum protection available for designs).

Over the years, several designers have lobbied to have this exception removed to ensure that any artistic work they produce can enjoy the full term of copyright protection (author's life plus 70 years). In 2012, they were successful in their efforts and section 52 was to be repealed under the Enterprise and Regulatory Reform Act 2013.

Recognising the potential impact on businesses (for example, those who produce and sell reproductions of classis furniture), the government also provided for a transitional period of five years until April 2020 in order to prepare for the changes. The Commencement (Enterprise and Regulatory Reform Act 2013 (Commencement No.8 and Saving Provisions)) Order 2015 (the Commencement Order) was passed to give effect to the repeal and transitional period.

However recent developments have resulted in confusion. A claim for judicial review was brought challenging the transitional period on the grounds it is incompatible with EU law which resulted in the government's decision to reconsider the issues raised. At the end of July 2015, the Intellectual Property Office (IPO) announced it was revoking the Commencement Order and putting the repeal on hold.  However, this is not the end of the story.

The Government remains keen to revoke section 52 but with different transitional arrangements. Therefore an entirely new set of proposals for implementation has been drafted and a further consultation held in respect of these proposals.

The Consultation

The consultation on potential new transitional provisions ran from 28 October 2015 until 23 December 2015 and sought to consider four issues:

1. The transitional period before the repeal of section 52 takes effect;
2. The depletion period required for existing stock;
3. Provision of copyright protection for works made before 1 June 1957; and
4. Compulsory licensing of works where copyright is revived.

Transitional Period

The government originally decided that five years was an appropriate transitional period but is now of the view that a different approach is needed and that a greater balance needs to be struck between the needs of the rights holders - who are keen to obtain protection as soon as possible - and the businesses who need time to adjust.

The consultation paper (produced by the IPO) makes reference to the Court of Justice of the European case of Flos, which held that it may be lawful to have a transitional period when introducing copyright for artistic design for the full term of protection, provided that the principle of proportionality is taken into account.

The original five year period would not meet the requirement of avoiding delay in establishing full copyright protection. Conversely a very short period of transition (such as a month) would be unfair to businesses. The Government has therefore reviewed the position to try and seek a middle ground.

Its proposed solution is to provide for a transition period of six months from the publication of the consultation (which began on 28 October 2015). Therefore, from 28 April 2016, the repeal will come into effect and businesses and individuals will no longer be able to rely on section 52.

Depletion period for existing stock

Initially the Government, under the original Commencement Order, intended that any relevant stock imported or produced up to the date of repeal would remain lawful if dealt with after that date. However that approach was criticised as it meant rights holders would be unable to control copies made of their works by way of granting licences.   

The Government has now proposed to allow for an additional six month depletion period (in effect, a "sell off") following the date of the repeal – ie up until 28 October 2016 - in order to provide for certainty in licensing works after the repeal of section 52. It should be noted however, that the depletion period will be allowed only for goods produced or acquired under a contract entered into before the publication date and time of the consultation (ie before 28 October 2015). The reasoning behind this is that it will protect those businesses who produced or acquired affected goods before the Government's announcement of its proposal for a six-month transitional period, whilst preventing a flurry in the purchase of affected products by businesses with a view to selling them off quickly.

If adopted, the repeal of section 52 will mean that all relevant stock will either need to have an appropriate licence from the rights holder or have been depleted by 28 October 2016.

Provision of copyright protection for works made before 1 June 1957

The CDPA contains provisions in Paragraph 6 of Schedule 1 which deny copyright for artistic works made before 1 June 1957 where the work could also have been a registered design and was used as a model or pattern to be multiplied by an industrial process.

In order to provide clarity for rights holders, and to ensure equality of copyright protection for artistic works capable of qualifying as designs and other artistic works, the Government proposes to amend this provision to exclude articles protected by copyright in the EU as at 1 July 1995.  

Compulsory licensing of works where copyright is revived

This is an area in which the Government has not previously considered action necessary.  However the proposals now include protection for rights holders of revived copyright by allowing them to control the making of copies of their work.  It is suggested that this would be achieved by repealing Regulation 24 of the Duration of Copyright and Rights in Performance Regulations 1995, which imposes an obligation on the rights holder of a revived copyright work to grant a licence.

Comments

Whilst there is a need to ensure rights holders are able to benefit from the new regulations as soon as possible, it is also important that there is a balance struck with the potential effects on business.  When initially deciding the transitional period, the Government believed five years was necessary to allow businesses to adapt and find new revenue streams. The newly-proposed 6 month period has also attracted criticism that it does not give businesses enough time to prepare.

The new proposals are likely to have far reaching effects; affecting not only for manufacturers producing 3D goods but also businesses such as publishers and institutions such as museums. For example, a book filled with images which did not previously require consent to reproduce may instead require a licence for each individual image used of a design (on the basis that a 3D to 2D copy would be considered a replica).

With the final proposals for the repeal expected to be confirmed by the Government in spring this year, it is clear that the proposed timeframe is tight and that the outcomes of the consultation might necessarily include further tweaks in respect of implementation.  Even so, it is clear that businesses will have to react quickly to either clear their stock or negotiate relevant licences within the depletion period, in order to avoid being liable for infringement claims. Given the limited timescale, keeping up to date with developments is essential.

The court confirmed, in the light of the widespread misinterpretation of Lord Hoffman's judgment in Attorney General of Belize and others v Belize Telecom Ltd, that that judgment did not dilute the traditional tests. 

Although the facts relate to a property transaction, the case has wider implications across all commercial contracts. 

Blog by Chris Ross and Parham Kouchikali

Background

The appeal arose following the exercise of a break clause in a lease between Marks and Spencer (the tenant) and BNP Paribas (the landlord).  The lease had been granted for a term expiring in February 2018 and the rent was payable in advance on the usual quarter days.  The tenant exercised its right under the break clause to determine the lease in January 2012, after it had already paid the full quarter's rent in advance in December 2011.

The issue was whether the tenant could recover the apportioned rent in respect of the period from January to March 2012.  This turned on the interpretation of the lease and required the court to consider the principles relating to when a term is to be implied into a contract.

At first instance, the court held that the tenant was entitled to a rebate of the future rent. The Court of Appeal reversed that decision. The question went up to the Supreme Court, which unanimously dismissed the appeal.

The judgment: discussion of relevant tests

There was no provision in the lease that expressly obliged the landlord to pay the apportioned sum to the tenant. The question was therefore whether such an obligation should be implied.

Lord Neuberger, giving the lead judgment, noted that two tests are commonly used when determining whether a term should be implied into a contract:

• Under the "business efficacy" test the proposed term will be implied if it is necessary to give business efficacy to the contract (The Moorcock (1889) 14 PD 64).
• Under the "officious bystander" test the proposed term will be implied if it is so obvious that, if an officious bystander suggested to the parties that they include it in the contract, 'they would testily suppress him with a common 'oh of course' " (Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206).  In other words, the proposed term must be so obvious that it goes without saying.

The modern authority is Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988. In that case Lord Hoffman suggested that the process of implying terms into a contact was simply part of the exercise of construing the contract, saying "There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?"

The Supreme Court held that this formulation in Belize has been misinterpreted as suggesting that reasonableness is itself a sufficient ground for implying a term and suggested that the right course is for Lord Hoffmann's speech in Belize to be treated as a "characteristically inspired discussion rather than authoritative guidance on the law of implied terms."  The court confirmed that Belize did not dilute the traditional business efficacy and officious bystander tests and to the extent subsequent judgments suggested that it had, that approach was mistaken.

Lord Neuberger confirmed that the pre-Belize authorities "represented a clear, consistent and principled approach". He referred in particular to BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20 and Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472.

In BP Refinery the court said that for a term to be implied, the following conditions (which may overlap) must be satisfied:

1. it must be reasonable and equitable;
2. it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
3. it must be so obvious that 'it goes without saying';
4. it must be capable of clear expression;
5. it must not contradict any express term of the contract.

In Philips, the conditions in BP Refinery were described as a summary whose simplicity could be misleading.  The court stated it is difficult to infer with confidence what the parties to a lengthy and carefully drafted contract must have intended.  An omission may be the result of the parties' oversight or their deliberate decision.  It is tempting, but wrong, for a court, with the benefit of hindsight, to imply a term which reflects the merits of the situation as they then appear.  The term to be implied must be either the only contractual solution or the one which would, without doubt, have been preferred.

In the present case, Lord Neuberger made the following comments in addition to the conditions set out above:

• If reference is made to the question of what the parties would have agreed, the question is not concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time they were contracting.
• A term should not be implied into a detailed commercial contract merely because it appears fair or one considers that the parties would have agreed it if it had been suggested to them: those are necessary but not sufficient grounds for implying a term.
• The "business necessity" and "obviousness" tests can be alternatives, but in practice it would be a rare case where one was made out but not the other.
• "Business necessity" involves a value judgment: it does not require absolute necessity. In Lord Sumption's words, a term should only be implied if, without the term, the contract would lack "commercial or practical coherence".

On the facts, the court found that the conditions for implying a term into the lease were not satisfied, in particular because the implied term would have sat uneasily with the fact that the parties had agreed a very comprehensive (70 page) lease and the fact that there was clear caselaw establishing that rent payable and paid in advance can be retained by the landlord. As such, very clear express words would have been needed in order to find in the tenant's favour.

The court also went on to consider whether it was correct the that the processes of contractual interpretation and implication of terms are part of the same exercise.  Lord Neuberger stated that they are separate and that therefore in most, and possibly all, disputes about whether a term should be implied, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered.

Comment

The case brings clarity to this area of the law after the uncertainty following the decision in Belize and confirms that the traditional "business efficacy" and "officious bystander" tests are alive and well.

The decision reinforces that the courts will be slow to imply terms into a professionally drafted commercial agreement even where, as in this case, the court acknowledged the "real force" in the tenant's argument that allowing the landlord to retain the entire rent payment would be unfairly prejudicial to the tenant and a windfall for the landlord.

The issue as to whether the implications of terms was part of or something separate from the proper interpretation of a contract was referred to by Lord Carnwath as "an interesting debating point", but of little practical significance.  That may be the case, although following Lord Neuberger's approach the process of interpretation would take place before the question of implied terms is considered, which would suggest a clearer distinction does exist.

It is interesting to note that:

• The types of detained articles continuing to top the list are cigarettes, toys and medicines, but foodstuffs has made its way into the top 6.

• China has remained the primary source of infringing goods with 80% of articles seized originating there.

• In over 92% of cases, the detained articles were either destroyed or a court case was initiated by the right-holder to establish the IPR infringement.

The report also states that small consignments now account for 81% of all detentions. This perhaps goes some way to explain why the domestic retail value of the detained articles has decreased to €617m notwithstanding the number of detention cases having increased. It also suggests the customs interceptions are having an impact and so infringers are reducing consignment sizes in an attempt to avoid detection.

Please click here to access the full report.

For more information about the report or any other anti-counterfeiting or anti-piracy related issue, please contact Ben Mark (ben.mark@rpclegal.com) or David Cran (david.cran@rpclegal.com).

Unjustified Threats" (the 2015 Report) which explained and published the draft Intellectual Property (Unjustified Threats) Bill (the Bill). This final report is the culmination of a project spanning the last two years within which the Law Commission has sought to reform the complicated legislative framework governing groundless threats in order to clarify and harmonise the provisions across IP rights.

The Law Commission initially published a Consultation Paper in 2013 (considered here and followed up with a Report issued in April 2014 which made 18 recommendations for legislative reform – endorsing an evolutionary, rather than revolutionary, approach. 15 of those recommendations were accepted by the Government and the remaining three were accepted in principle, but with comments. 

The 2015 Report addresses those three recommendations and provides further explanation of the Bill which proposes to implement the 18 recommendations. Furthermore, the 2015 Report proposes two new recommendations which have arisen from developments with the new Unitary Patent procedure.

Reform to groundless threats legislation

The reforms have four broad objectives: (i) to produce consistency between the threats provisions for patents, trade marks and designs; (ii) to strike an appropriate balance which allows rights holders to protect their valuable IP but not to misuse threats; (iii) to distinguish clearly between those threats made legitimately and those used to damage a commercial rival; and (iv) to support parties in dispute to try to reach a negotiated settlement and avoid litigation.

Of the Law Commission's 18 recommendations, three reform proposals are key:

There will be no liability for threats made to primary actors

The 2015 Report noted that the most significant inconsistency in the current law is that only threats that are strictly limited to "primary acts" (eg manufacture, importation) escape liability in respect of trade mark and design rights; whilst the exceptions are wider for patents as a result of the amendments introduced by the Patents Act 2004. The Law Commission recommended that the law for trade marks and designs should be reformed to bring them into line with patents – ie that a threat made to a person who had carried out a primary act will not be actionable, even if the threat also refers to other, secondary, acts.

For trade marks, the Bill also implements the recommendation that a threat should not be actionable if it is made to the person who applied the mark to goods or their packaging, or to the person who commissioned that to be done.

"Safe harbour" for communications with secondary infringers

The Bill creates a new "safe harbour" for communications with secondary infringers (eg retailers), where (i) the communication is made solely for a permitted purpose (such as to discover if the right is being infringed and by whom), (ii) all of the information provided is necessary for that purpose; and (iii) the person making the communication reasonably believes it to be true, even where the recipient might interpret the communication as an implied threat.

However, it is recognised that the measures must be consistent across the relevant IP rights and seek to minimise the risks of such communications being used as an opportunity to make disguised threats. As guidance, the Bill therefore also sets out what may not be treated as a "permitted purpose".

Further, under the current Patents law, where a secondary infringer is threatened, the threatener has a defence if it can show that the primary infringer could not be found despite using best endeavours to do so. The Law Commission recommended that this should be applied equally to all IP rights and the Bill has implemented this change, albeit with an amendment that the threatener should have used "reasonable endeavours".

Professional adviser liability

The Bill will include the Law Commission's recommendation that professional advisers acting in a professional capacity should be protected from liability against unjustified threats provided that certain conditions are satisfied, namely: (i) the communication must clearly identify the client; and (ii) the adviser must show that they were acting on instructions.

Further, the Bill makes clear that the liability of the client will be unaffected if the exemption applies to their professional advisers.

Comment

To its detractors, the Bill will represent a lost opportunity to overhaul the system fully. The amendments suggested by the Bill do not address the status of "missing" IP rights such as copyright, passing off, trade secrets, geographical indications and database rights. There is also no extensive consideration of the potential benefits of (or how to) harmonising the position throughout the EU in respect of groundless threats. Instead, the position in Europe remains inconsistent and advisers must consider whether to seek local advice before issuing letters in individual territories.

The Bill is nevertheless an attempt to provide clarified and harmonised legislation in a minefield of uncertain and inconsistent provisions. To the extent that threats provisions can be simplified and more applicable to commercial practice, it is to be applauded. It may prove not to be sufficient but it will provide a useful "litmus test" and, given that the Government has not ruled out wider reform in the long term, detractors need not be overly pessimistic just yet.

Acquired distinctiveness

Although the specific outcome for Nestle and Cadbury is pending the High Court decision (which is anticipated to be heard in early 2016), this ruling from the CJEU has clear implications for the future of filing and enforcing shape marks more generally. Of foremost significance is the formulation of the test for acquired distinctiveness through use (Article 3(3) of Directive 2008/95 (the 'Trade Mark Directive')). The High Court asked the CJEU whether distinctive character can only be established through (i) reliance on the shape mark alone to identify the goods, or (ii) whether recognition of the mark and association with the goods is sufficient. The CJEU held that the former was the proper construction of the test, immediately raising the threshold for any aspiring shape mark owners out there.

For Nestle, this is good news. Back in 2013 they relied on survey evidence in the High Court which showed that over 90% of respondents mentioned 'Kit Kat' when shown the shape mark on its own. However, even if they are ultimately successful, their Kit Kat will likely be part of a distinguished few confectionary – or other – goods that will be capable of having their shape filed as a mark on this basis. In the class 30 category, others might be Kraft Food's Toblerone or Haribo's Gummy Bears. But for others, the shape alone is unlikely to be distinctive enough for a consumer to identify the goods. Most chocolate bars are just that: rectangular bars!

'Nature of goods' and 'technical result'

The two other key points arising from the CJEU's ruling concern the interpretation of Articles 3(1)(e)(i) and (ii) of the Trade Mark Directive, which state that (i) where a shape derives from the nature of the goods in question, or (ii) that shape is necessary to obtain a technical result, it cannot be validly registered as a trade mark.

The first question sought clarification on the independent operation of these provisions, and the CJEU confirmed that independence. This is helpful for Cadbury since, of the three key features of the Kit Kat shape, one derives from the nature of the products (its rectangular shape) and the two others are necessary to obtain a technical result (the grooves between the fingers, which enable the fingers to be consumed separately; and the number of grooves, which determine the size of the four-fingered bar). The fact that none of those features fulfils both criteria does nothing to lessen the likelihood of invalidity. More broadly, this interpretation dampens the chances of a shape mark ever clearing that hurdle: a key factor in the design of a product is either its nature or its technical result.

The second question probed the issue of functionality further, asking whether the necessity of achieving that 'technical result' which may risk an invalidity challenge applies to the function of the product alone, or also to the manufacturing process. Once again the CJEU interpreted the provisions literally and confirmed that only the function of a product is relevant to this provision. As well as showing strict adherence to the wording of the Trade Mark Directive, this part of the decision emphasises the value placed on the consumer in the debate over shape marks. Arguably, the process by which goods are manufactured is capable of showing greater ingenuity or distinction on the part of their creator than the overall function of the product itself, but it is not something that concerns the consumer when they go to buy their chocolate bar.

Comment

For the time being, both Nestle and Cadbury have reason to hope and fear in equal measure. The test for acquired distinctiveness works strongly in Nestle's favour because of the comparative distinctiveness of the Kit Kat's shape, but the interpretation on functionality hands over a lot of the cards to Cadbury. Whilst we await the High Court decision with interest, that crystal ball can only confirm that the future for shape marks puts consumers firmly in the driving seat, and sets the threshold high for shape mark applicants.

The report noted that a key emerging trend is the threat from social media. E-commerce is significantly increasing the availability of counterfeit merchandise as sellers enjoy greater and easier access to new customers through closed social media groups. This threat is being responded to by the Anti-Counterfeiting Group and their partners with initiatives such as:

• Operation Jasper, which has brought together officers from 63 industry bodies and agencies and has taken down 4,300 Facebook listings, 20 Facebook profiles, issued over 200 warning letters and delivered 24 cease and desist letters;

• The ACG's Facebook initiative "Operation Watch", which has identified the availability of over 30,000 individual images of counterfeit goods across the social media site.

Please click here to access the full report.

For more information about the report or any other anti-counterfeiting or anti-piracy related issue, please contact Ben Mark (ben.mark@rpclegal.com) or David Cran (david.cran@rpc.cp.uk).

The Supreme Court has refused permission to appeal the Court of Appeal decision

The reason given by the Supreme Court for refusing permission to appeal was that "the application does not raise an arguable point of law of general public importance. The relevant principles are not in issue, only their application to the facts of the case".

This means that the majority decision of the Court of Appeal - that Asos could rely on the 'own name defence'  to permit it to continue to use ASOS without infringing Assos' Community Trade Mark ASSOS - is not susceptible to further challenge in the English Courts.

The 'own name defence' – proposals to change in the law

The own name defence provides that a proprietor of a trade mark shall not be entitled to prohibit a third party from using his own name in the course of trade in accordance with honest commercial practices.

On 19 June the European Commission published a draft text of a regulation to amend the Community Trade Mark Regulation (CTMR) entitled "Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 207/2009 on the Community Trade Mark ". Paragraph 14 of the draft text amends Article 12 of the CTMR so that, once implemented, the own name defence will only apply to natural persons (and so won't be available to companies, such as Asos, in the future).

Many thought the exceptions, which transposed certain provisions of the Copyright Directive (2001/29/EC) into English law, were long overdue to bring the law up-to-date with modern reality.

One amendment was the introduction of a private copying exception allowing individuals to make a personal copy of a copyright protected work for their own private use - an action many individuals had thought was a legitimate practice already.

In addition to the private copying exception, many other member states had introduced a levy or surcharge on equipment which can be used for private copying to compensate rights holders for the loss of any revenue as a result of the exception.

However, in the UK the Secretary of State deemed that a compensation scheme was not necessary as there was only de minimis harm to rights holders by the introduction of the private copying exception. As such the private copying exception was introduced without a corresponding compensation scheme.

Unhappy with the Secretary of State's decision, a number of rights holders brought a judicial review action claiming (amongst other things) that the decision not to introduce a compensation scheme was flawed as the evidence relied upon was inadequate and unsatisfactory.

Decision

The High Court agreed with the rights holders and found that the introduction of the exception for private copying without a compensation scheme was unlawful as the inferences drawn from the evidence relied upon were not warranted or justified.

Green J held that whilst it was acceptable for the Secretary of State to have common sense intuitions on whether a compensation scheme should be introduced, these intuitions should have been a starting point in the analysis and were not capable of answering the specific legal question of whether more than de minimis harm to rights holders would occur as a result of the introduction of a private copying exception.

However, even though Green J found that that the private copying exception was unlawful he did not strike it out. The judge was careful to grant the Secretary of State three options to rectify the error, including the introduction of a compensation scheme, removing the private copying exception, or undertaking the necessary qualitative and quantitative surveys to determine whether a compensation scheme should be introduced.

The judge granted the parties leave to make submissions to determine whether any issue of law needed to be referred to the CJEU and whether any appropriate relief was required given his conclusion that the Secretary of State's decision to introduce the private copying exception was unlawful.

Comment

It's unclear whether the government has any plans to undertake a quantitative and qualitative survey to demonstrate a lack of harm. Whatever happens next, it is absolutely clear that change is required. Consumers consider private copying is a legitimate activity which is reinforced by the way copying and storage devices are currently sold. The law has failed to keep up with consumers' expectations and it will be interesting to see what action the government takes in light of this decision.

R (British Academy of Songwriters, Composers and Authors and others) v Secretary of State for Business, Innovation and Skills [2015] EWHC 1723 (Admin), 19 June 2015

Two Hong Kong-based media companies, Starbucks and PCCW Media Ltd (collectively "PCCM"), claimed Sky’s Now TV traded off the goodwill of its own identical service operating under an identical name.

PCCM’s service was the largest pay TV operator in Hong Kong in 2012. PCCM’s service was only available to subscribers based in Hong Kong as only they could receive its closed circuit service. People based in the UK were, however, able to access some Chinese content on their website. Some broadcasts from PCCM’s service could also be accessed via their YouTube channel and were also made available on certain airlines that flew to the UK. Many Chinese speaking residents of the UK were aware of PCCM's NOW TV.

In June 2012 PCCM launched a mobile app for its NOW TV service, in anticipation of launching the service in the UK.  Within four months of the launch approximately 2,000 people in the UK had downloaded the app. On 21 March 2012 Sky announced that they intended to launch an internet TV service under the name NOW TV, and subsequently they launched the service in mid-July 2012.

PCCM alleged that use of the name amounted to passing off. PCCM's claim was dismissed by the High Court and Court of Appeal on the basis that it had no protectable goodwill in the UK. Although PCCM’s service had acquired a reputation amongst the Chinese-speaking community in the UK, their actual customers were based in Hong King and therefore their goodwill was limited to Hong Kong.

Supreme Court decision

This issue was appealed to the Supreme Court. The question for the Court was whether a claimant required customers within the jurisdiction, or whether a reputation within the jurisdiction would be sufficient to succeed in a claim for passing off.

PCCM argued that due to the nature of the internet and relatively quick and cheap travel, it was inconsistent with commercial reality for goodwill to be restricted. They argued that it was unrealistic to suggest that goodwill is incapable of extending to territories were the mark is known.

The UK Supreme Court rejected the passing off claim. All five judges agreed that PCCM did not have any customers in the UK and therefore it lacked goodwill. They held that goodwill in the context of passing off is territorial in nature.  The Court accepted that a significant number of people within the Chinese community in the UK would associate NOW TV with PCCM's service, but they were not considered customers. Only in Hong Kong could they enjoy the service in question, those who got access in other ways were not PCCM customers as there was no payment involved in any way.

Comments

This decision reiterates the established position that in order to succeed in a passing off action, a claimant will need to establish goodwill in the UK, namely having a customer base in the UK – mere reputation or knowledge of a brand is not enough.  It is notable that in certain other common law countries, such as Australia, the Courts take a different approach. 

The Lisbon Agreement

The Lisbon Agreement is an international treaty offering AOs protection against 'usurpation' or 'imitation'. The Agreement established the Lisbon System for the International Registration of Appellations of Origin (the Lisbon System) which provides contracting parties with access to an international registration system for AOs through a single registration with an international bureau.

The Geneva Act

On 21 May 2015 the Lisbon System was revised by the adoption of the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications (the Geneva Act).  The Lisbon System now applies to GIs as well as AOs.

According to a WIPO press release dated 20 May 2015 the Geneva Act 'allows the international registration of geographical indications, in addition to appellations of origin, and permits the accession to the Lisbon Agreement by certain intergovernmental organizations'.

In addition the Geneva Act will alter the scope of protection offered under the Lisbon Agreement, offer protection against GIs and AOs becoming generic, provide safeguards in respect of prior trademark rights and make changes to fee provisions.

The new act will enter into force three months after five eligible parties have deposited their instruments of ratification or accession. On Thursday 21 May 2015 there were 11 countries signed up (the UK has not yet done so).

Commentary

The right to use a GI is an extremely valuable asset for the producers of products that have garnered fame as a result of their connection to a specific location.

Take for example the GI 'Irish Whiskey' which is protected under articles 15 and 16 of the EU Spirits Regulation.  Irish Whiskey has a heritage and taste quite distinct from whiskey produced elsewhere in the world and consumers of Irish Whiskey naturally attach importance to the characteristics of whiskey originating from Ireland.  As a result the GI 'Irish Whiskey' has the power both to inform consumers and attract them to a product in much the same way as a trade mark does in relation to branded goods.  If Irish Whiskey is to maintain its reputation (and continue to generate the financial benefits flowing from that reputation) it is crucial that whiskey originating from elsewhere in the world cannot be labelled as 'Irish'.  The same applies to products such as Roquefort cheese, Grana Padano and Cornish Pasties, which are all listed as GIs protected in some capacity in the EU.

Due to the inherent value of a GI, the enhanced protection offered by the Geneva Act will be welcomed by those whose products are covered by a GI. 

By their nature, products that qualify to be labelled with a GI are likely to be marketed globally and therefore require protection against wrongful use of GIs across multiple jurisdictions.  The new international registration system for GIs should provide security for businesses requiring protection in multiple jurisdictions by creating a more cohesive, coordinated and effective system of international protection.

The aim is to achieve a Digital Single Market where the free movement of goods, persons, services and capital is ensured under fair competition conditions with a high level of consumer (and personal data) protection.

According to the Commission, "the DSMS will be built on three pillars:

1. Better access for consumers and businesses to online goods and services across Europe

2. Creating the right conditions for digital networks and services to flourish

3. Maximising the growth potential of our European Digital Economy"

Expanding the three pillars

These three pillars are the bases of the Commission's plans to:

• harmonise contract and copyright law between member states to allow better online activity;
• introduce trusted cross border e-commerce rules;
• end "unjustified" geo-blocking;
• further harmonise EU copyright law including portability of content, cross border access to content, harmonised exceptions, modernising the enforcement regime;
• promote a more joined up approach to cyber-security;
• review the ePrivacy Directive with a focus on ensuring a high level of protection for data subjects and a level playing field for all market players; and
• ensure that "Big Data" can flow across borders in the EU.  The Commission will propose a "free flow of data" initiative that tackles restrictions on the free movement of data other than for data protection purposes.

What can we expect to actually happen?

According to the paper, the team tasked with implementing the DSMS will deliver its actions before the end of 2016. In reality however, this paper should be seen a statement of political intent rather that a blueprint for wholesale changes of legislation.  It gives a clear indication of the areas in which the Commission will be active – but what the results of that activity will be is difficult to predict.

The full communication from the Commission can be found here

Assos had registered a Community Trade Mark ('CTM') in 2005 for ASSOS in respect of, among others, clothing, footwear and headgear. Asos, which had previously been known as 'As Seen on Screen', had been using the acronym ASOS since the early to mid-2000s.

Assos brought trade mark infringement proceedings against Asos in respect of its use of ASOS on its website www.asos.com and on its own label clothing. Asos denied infringement, relying in particular on the 'own name' defence, and counterclaimed for both revocation of the CTM on the basis of non-use, and invalidity of the CTM on the basis of its own prior rights.

High Court decision

In the High Court, Mrs Justice Rose held that:

• The average consumer was not likely to be confused and therefore Assos' infringement case failed, despite finding that the marks were very similar.

• Although Assos had a reputation in the EU amongst cyclists, this did not extend to the general public, and the distinctive character or repute of ASSOS was in no way diminished or damaged by use of the sign ASOS.

• It was unnecessary to decide the question of whether the 'own name' defence (which provides that a proprietor of a trade mark shall not be entitled to prohibit a third party from using his own name in the course of trade in accordance with honest commercial practices) applied as there was no infringement.

• The CTM relied upon by Assos was partially revoked and limited to: "Specialist clothing for racing cyclists, jackets, t-shirts, polo shirts, track-suit tops, track-suit bottoms, casual shorts, caps".

Court of Appeal decision

The Court of Appeal, led by Lord Justice Kitchin, unanimously overturned two elements of Mrs Justice Rose's decision by finding that:

• Mrs Justice Rose had wrongly focused on the specialist clothing covered by the specification. According to the Court of Appeal, the Judge should have considered the 'notional and fair use' of the, albeit, cut down CTM specification, which still included non-specialist clothing. On the Court of Appeal's own assessment there was a likelihood of confusion on the part of the public, at least in relation to the sale by Asos of casual wear and the provision of its retail services in relation to such casual wear. 

• There was or would be damage to the distinctive character of the CTM in that "the ability of the mark ASSOS to identify at least some of the goods for which it is registered as being the goods of Assos has, in some circumstances amounting to a normal and fair use of that mark, been weakened".

The Court of Appeal was however split over the application of the own name defence and the extent to which the CTM specification should be revoked.

Own name defence

In reaching the decision that Asos could rely on the 'own name' defence, the following facts were of particular relevance:

• the parties had adopted their names independently;

• Asos did not conduct a trade mark search which would have identified Assos' trade mark application;

• the parties did not anticipate confusion in 2006 and no actual confusion had arisen in practice, nor was actual confusion likely in the future given the parties' use of their respective brands (as opposed to the likelihood of confusion arising from the notional and fair use of the CTM); and

• Asos had purchased ASSOS as a keyword only to cover misspellings of its name and although it had sold cycling clothing on its website, these activities had stopped prior to trial.

The majority decided on balance that Asos had "fulfilled their duty to act fairly in relation to Asos' legitimate interests and had not conducted their business so as unfairly to compete with Assos". As a result the 'own name' defence applied.

Lord Justice Sales (dissenting) preferred to place more emphasis on the rights of the CTM proprietor and the public in not being confused as set out in the recitals to the Community Trade Mark Regulation and considered that the own name defence was not available to Asos.

Revocation

Whilst the Court of Appeal upheld Mrs Justice Rose's revised specification for the CTM with the proviso that the word 'racing' be removed, Lord Justice Sales (dissenting) held that the category 'casual clothing' was appropriate (as opposed to listing out every item) as it was the smallest category which encompassed the selection of items on which use had been proved.

Comment

The Court of Appeal decision is particularly interesting because of the application of the own name defence and the dissenting judgment of Lord Justice Sales.

It's also worth noting that the Court of Appeal majority placed significant emphasis on the fact that there had been no actual confusion. Trade mark proprietors should bear in mind that whilst actual confusion is not a prerequisite for infringement, its absence may be crucial, particularly when both parties have coexisted for a significant period of time.

In contrast, Lord Justice Sales preferred a balancing of interests between the trade mark owner and the potential infringer, finding that the trade mark rights should be given primacy, resulting in a much narrower own name defence.

A further appeal to the Supreme Court may well be pursued by Assos, so we may find that the scope of the own name defence is tested again and has another twist in it yet.

Background

In 1990, Supreme Petfoods (SP) launched a muesli rabbit food which it marketed using a cartoon character called "Russel Rabbit".  On its packaging was the word "supreme" in a banner.  The success of that product led to the introduction of a larger range of muesli pet food products, including "Gerty Guinea Pig", each sold in similar packaging to that of "Russel Rabbit" but used different colouring and cartoon characters on each.  Between 2003 and 2007, SP registered five Community and UK trade marks consisting of, or including, the word SUPREME.

The defendant Henry Bell (HB) and its predecessors had marketed a product called "Mr Johnson's Supreme Rabbit Mix" since 1994. SP originally contacted HB's predecessors in October 1994 to ask it to delete the word "supreme" from a banner on the packaging or to delete the banner, but did not ask them to stop using the word itself.  HB subsequently dropped the banner but continued to use the word" supreme" on various products.

In 2012, Henry Bell extended its range of "supreme" pet foods and re-designed the packaging.  SP complained about the use of the word "supreme" in the name "Mr Johnson's Supreme Rabbit Mix" and sued for trade mark infringement and passing off.

Decision

Arnold J dismissed the trade mark infringement and passing off claims, finding that HB's use of "supreme" would be understood by pet owners to be descriptive or laudatory, given its OED definition meaning "of the highest quality".  Three of SP's "supreme" marks were therefore found to be invalidly registered, save in relation to small animal food, where the marks had acquired a "slender degree" of distinctive character.  However, SP's UK and CTM stylised ribbon marks were validly registered.

Further HB's use of the sign amounted to honest concurrent use, as it had used it on products for over two decades without causing confusion.

Arnold J took the opportunity to consider where the burden of proof in demonstrating prejudice to trade mark functions lies.  Notably, he disagreed with the Court of Appeal's decision in Interflora Inc v Marks & Spencer plc (which itself overturned Arnold J's decision at first instance) that, in "double identity" cases, the burden falls on the trade mark owner. Instead he considered that, once the trade mark owner had satisfied the first five conditions under Article 5(1)(a) of the Trade Marks Directive (2008/95/EC), the burden of proof shifted to the defendant to show that his use did not result in prejudice.

Conclusion

The decision shows how trade mark co-existence can become problematic when one party decides to overhaul or extend its product range.  It also illustrates the pitfalls of seeking to enforce descriptive trade marks, running the risk of an invalidity counterclaim (which SP was able to successfully defend only in relation to small animal food by evidencing a "slender degree" of distinctive character). 

As practical guidance, brand owners should be aware of competitors' use of trade marks and any changes introduced and, if appropriate, try to agree commercial solutions.  As can be seen from this decision, initiating litigation – particularly when relying on relatively generic trade marks – can be costly, not only financially but also to the validity of the trade marks themselves.

At the European level, copyright is rooted in the principle of territoriality i.e. copyright law is national and the way in which it is implemented may therefore vary from one Member State to another.  Consequently, online content which is lawful in one Member State (e.g. it is entitled to avail of a copyright exception such as parody), might constitute an infringement of copyright in another Member State (i.e. where there is no such exception).  Unfortunately, the differences between Member States laws on basic copyright issues, such as the definition of rights, the exceptions to rights and the differing approach to the implementation of copyright levies, creates an obstacle to the free flow of online content across Europe’s internal borders.

Cyber travel is however a reality and protected digital content is unlawfully moving across Europe's borders.  Ideally content should only be accessed and distributed in a way that ensures that the rights of authors and content owners are protected and copyright laws are respected, while at the same time meeting consumer demand.  The need for real reform at the European level is therefore undoubtedly long overdue. Is it time for a single EU Copyright Title? At a minimum, a further harmonised copyright system is essential to allow Europe to fully realise the internal market objective, to compete globally and to attract foreign investment to the EU.

The Commission’s agenda

Jean-Claude Juncker has set himself five core priorities for his tenure as President of the European Commission.  His first priority is to put policies that create growth and jobs at the centre of the Commission’s policy agenda. To achieve this, he states:

“We must create a digital single market for consumers and businesses – making use of the great opportunities of digital technologies which know no borders.”

President Juncker also refers to the need “to have courage to break down national silos” in regulation and legislation including in respect of copyright.  In particular, his vision for Europe is one where “consumers can access music, movies and sports events on their electronic devices wherever they are in Europe and regardless of borders.”

Juncker’s team of Digital Single Market (“DSM”) Commissioners aim to have a fully developed DSM strategy by May 2015.  No mean feat considering quite wide-ranging issues such as consumer rights, data protection, cyber-security, competition law issues and copyright will need to be considered.  As regards the latter, it is already quite clear where policy making on copyright is likely to go.  In a blog post following the first meeting of all the DSM Commissioners on 12 November 2014, Andrus Ansip, Vice President of the European Commission, poses the question “is there anyone who would not want to get rid of geo-blocking, which goes against the core principles of Europe’s single market?”.

The DSM and copyright harmonisation

The DSM Commissioners have set themselves an ambitious task – the creation of a Digital Single Market.  But is Europe’s copyright system ready for a virtual world without borders?

Stakeholders require predictability and legal certainty in respect of copyright issues when moving content across borders.  A borderless utopia cannot therefore be achieved without first making serious advancements on the harmonisation of copyright in Europe.  It is fair to say that this is an issue which has been on the Commission’s agenda for several years not least demonstrated by the following list of some of the Commission’s previous initiatives:-

2006: the Commission holds a wide ranging consultation on online content with a view to making Europe’s online content market more competitive;

2008: the Commission publishes a Green Paper entitled “Copyright in the Knowledge Economy”;

2009: a further consultation is held by the Commission on the challenges to creating a single market for creative content online, and the way those challenges could be addressed;

2011: the Commission issues a blueprint for IP rights entitled “A single market for intellectual property rights boosting creativity and innovation to provide economic growth, high quality jobs and first class products and services in Europe” – in it the Commission suggests considering the adoption of a European Copyright Code;

2012: the Commission issues a communication entitled “The Digital Agenda for Europe – Driving European growth digitally”; and 

2013/2014: the Commission holds a public consultation on the review of EU copyright rules and an “Internal Draft” White Paper entitled “A copyright policy for creativity and innovation in the European” is subsequently leaked.

Clearly the will is there at the European Commission level to bring about copyright harmonisation and reform but progress to date has been painfully slow, no doubt due in large part to the various conflicting stakeholder interests at play.

In the meantime, however, the Court of Justice of the European (CJEU) has been proactively tackling harmonisation by means of judicial interpretation.  Over the last number of years there has been an influx of references for preliminary rulings to the CJEU with Members States seeking guidance on how to interpret various aspects of the InfoSoc Directive.  Consequently, we have seen judicial interpretation of key principles of European copyright such as the originality requirement (Infopaq); what constitutes a "communication to the public" (TVCatchup, OSA), and issues such as whether linking and framing constitute copyright infringement (Svennson, BestWater).  Whilst these judicial developments are to be welcomed, this type of piecemeal harmonisation does not bring with it the level of legal certainty required to make Europe digitally fit for purpose.

There are various potential options available for tackling further copyright harmonisation at the EU level. Firstly, after the entry into force of the Treaty of Lisbon, full harmonisation of the copyright laws of Member States through the introduction of a copyright regulation with effect throughout the EU may be possible under Article 118(1) TFEU.  This would allow for a single EU Copyright Title to replace national laws, which would have the merit of overcoming problems relating to the issue of territoriality.  However, if the pace at which Europe's plans for a unitary patent system has moved is to be provide a benchmark, the quest for a fully harmonised copyright system in the form of an EU Copyright Title might not be an attractive option. Other potential options would be to try to achieve further harmonisation through the enactment of ad-hoc directives or to rely on guidance through non-binding recommendations.

Alternatively, Europe could continue as it has done to date and wait for further copyright harmonisation to be achieved by the activity of the CJEU judiciary or by way of national courts following each other’s decisions.  This “laissez faire” approach is however probably the least satisfactory from a legal certainty and costs perspective i.e. all those affected will need to await the outcome of litigation (which is typically time consuming and costly), to understand how the law should be interpreted.

The real world

The comments from the European Commission come as no surprise when considered against the backdrop of what is happening online.

While cultural preferences and language differences can play a role in demand for cross border services, generally consumers want access to protected online content to be universally available, constant and flexible.  Much to their disdain, the vast majority of internet users will however have encountered geo-blocking tools at some point – essentially these tools allow content providers to pinpoint a user’s location (via Internet Protocol address identification) and limit the user’s access to content based on the location from which the user is connecting to the internet.  Geo-blocking therefore establishes virtual borders and enables content providers to partition markets.  For example, geo-blocking allows our national TV stations to ensure that content that is provided “for free” in the United Kingdom under the TV licensing regime, cannot be accessed from other countries where access to that content requires a subscription / charge.  Similarly, geo-blocking allows licensees of content to effectively ensure compliance with the terms of their licence by restricting user access to licensed content to the licensed territory – hence the block you will encounter when trying to access the full suite of content on your BBC iPlayer when overseas!

From the perspective of rights holders and content providers, geo-blocking technology serves various useful commercial and legal purposes, including ensuring that local copyright laws are complied with, by restricting access to content from only those territories where it is legally permissible (or indeed desirable) to do so.  Amongst other things, geo-blocking tools therefore provide a technical solution to a problem that the law has to date not sufficiently addressed.  These tools allow content providers to neutralise the effects of the impact of differences in copyright laws between Member States and as such play a pivotal role in the territorial functioning of copyright.  Until such time as copyright has been further harmonised at the EU level, content providers will need to continue to rely on geo-blocking and any call for its abolition may be premature.

Some potential implications of a borderless online Europe

Ideally Europe would like to achieve a reality that satisfies the needs and wishes of its citizens whilst also protecting the commercial interests of entities operating within its borders.

An abolition of digital borders would undoubtedly have implications for the status quo as it currently exists.  From a web-user's standpoint, a borderless online Europe would theoretically provide access to all available content across all Member States thereby providing much greater choice.  It would also instil confidence within the system and eliminate the consumer temptation (or indeed need) to avail of software that may be illegal or from dubious sources (e.g. geo-blocking evasion tools) to access the content that they wish to access. From a consumer standpoint, the potential for exposure to a greater volume and variety of online content across the entirety of the EU is always going to be an attractive proposition.

Likewise, for the rights-holders / content providers of digital content, the introduction of a digital single market with no borders would facilitate the cross border flow of their content with the potential to introduce it to a significantly wider audience/ consumer-base.  It would also potentially reduce enforcement costs.

However, such a position might not be as attractive to rights-holders / content providers as it sounds.  Typically they will impose royalty rates for specific territories which ensure optimum consumption and revenue within a territory.  In setting these rates, rights-holders will take into account factors such as maturity of the online content market, value placed on online content and acceptable royalty rates in that territory. Consequently they implement and manage licensing structures at a country level which ensures maximum return on their investment.  Under a borderless system, rights-holders may not be able to fully realise profits on their content as consumers would potentially be able to "forum shop" for the best deals available on the European market.  This could lead to rights-holders deciding to standardize / increase royalty rates across all territories to ensure their revenue position is protected.  The abolition of virtual borders may not ultimately be as beneficial to consumers as first envisaged.

Conclusion

The European Commission has ambitious plans for a Digital Single Market and aims to have its DSM strategy finalised by this coming May.  The vision involves a virtual Europe where consumers can access online content anytime anywhere within its borders without fear of contravening laws.  The Commission's strategy will therefore need to involve consideration of quite wide-ranging issues such as consumer rights, data protection, cyber-security, competition law and copyright law issues.

This article looks at how Europe's copyright laws fit within this wider plan.  At present, Europe's copyright system is rooted in the principle of territoriality where copyright laws may vary between the various Member States.  It is clear that Europe will need to further, arguably fully, harmonise its copyright laws in order to facilitate the objective of a borderless virtual market.  Whether, and if so, how Europe will do so – well, only time will tell.

Without intending to sound unduly pessimistic, we suspect that it is likely to be quite some time before Juncker's utopia becomes a virtual reality.  In the meantime, geo-blocking technology (and geo-blocking evasion tools) will remain a feature of the online world.

By way of brief background, the dispute concerned the use by a car rental company, Europcar, of a stylised "e" logo which Enterprise (another heavyweight in the car rental market) claimed infringed its figurative UK and CTM marks for its "e" solus registered in various classes including vehicle rental services.  Enterprise also claimed passing off. The High Court agreed on both counts.

Before the liability trial, the parties had a two day hearing to argue over the admissibility of Enterprise's survey evidence assessing the distinctiveness of its marks and/or reputation/goodwill attaching to them – Mr Justice Morgan's conclusion in that hearing was that it was likely the surveys would be of real value at trial, and the likely value of the surveys would justify the costs.  On that basis Enterprise was permitted to adduce the results of the survey evidence.

At the trial, Europcar criticised Enterprise's surveys on a number of grounds, each of which were considered in turn by Mr Justice Arnold.  From his commentary, it is possible to extract some useful pointers to bear in mind when conducting a survey:-

1. it is acceptable to simply stop people on the street provided the survey contains a sufficient cross section of people. Interestingly, in this case the High Court found that it was acceptable to include US nationals in the survey as both companies had a presence in both the UK and the US;
2. it is common, and almost inevitable, that surveys will occur after the relevant date of the alleged infringement. This does not (of itself) mean that the survey has not been validly conducted and cannot cast light on the position at the relevant date, provided there has not been a material change in circumstances in the intervening period (e.g. an influx in TV advertising featuring the brand just before the survey);
3. a fine balance should be struck between the class of people surveyed and the scope of the issues surveyed – in this case, the Court found that Enterprise has correctly included within the scope of the survey consumers who had not in fact rented cars in the past, but intended to do so in the future;
4. Mr Justice Arnold commented on the need to avoid leading and speculative questions (i.e. the questions must not be framed in a way that invites the respondent to guess the right answer!);
5. beware of over contextualising survey questions – in this case, the Judge noted that contextualising the survey question to vehicle rental services could result in increased favourable answers for Enterprise (a presumption that was however rebutted on the evidence).

Mr Justice Arnold concluded that the surveys confirmed the conclusion he was in any event minded to reach having assessed all the other evidence in the case including in respect of the average consumer, likelihood of confusion, and inherent and acquired distinctiveness of the mark. Given that the survey evidence was not of itself definitive of the issues, the question still remains "when will the court consider a survey to be of real value?"

Where a party is seeking permission to adduce survey evidence, or is conducting a survey after permission is granted, Mr Justice Arnold's commentary should be of assistance in framing any survey. What real (or additional) value that survey will ultimately bring is uncertain.  It is difficult to see what monetary value was obtained from the survey evidence in this particular case – the results of the procedure prescribed in Interflora has been to put these two parties to the significant cost of a two day hearing in advance of trial (amounting to some £215,000 costs), which did not ultimately save any costs at trial and required the court to consider Europcar's criticisms of the surveys not once but twice!

Nevertheless, there are still cases where surveys are required (e.g. where other evidence is weak or unavailable) and in those cases a party must try and persuade the court that such a survey would indeed be of real value and justify the cost.

In 2012 Topshop sold a sleeveless t-shirt in the UK bearing the celebrity Rihanna's image, which it had licensed from a third party photographer. As Rihanna did not own copyright in the image or any associated trade mark rights, she turned to the tort of passing off for protection.

The High Court upheld the well-established position under English law that there is no such thing as an individual's right to protect his or her image from being used to endorse a product or from being used on a product's packaging. Although such an 'image or personality right' may be recognised elsewhere in the world, including in the USA, it is not currently recognised in the UK.

However, the Court went on to find that Rihanna had successfully proved the key elements of passing off (namely, goodwill, misrepresentation and damage) so that she was entitled to compensation from Topshop for this particular instance of unauthorised use of her image.

Decision

The Court of Appeal (led by Lord Justice Kitchin) held that the Judge was right to reach the conclusion that he did based on the evidence before him.

The Court of Appeal reiterated that there is in English Law no "image right" or "character right" which allows a celebrity to control the use of his or her name or image; simply because the name or image of a celebrity appears upon a consumable commercial item, it by no means follows that the public will assume that it has been endorsed by that celebrity.

In reaching its decision, the Court of Appeal dismissed Topshop's contention that the Judge ought to have assessed the passing off claim having regard to the perceptions of those persons for whom the presence of Rihanna's image was "origin neutral". The Court of Appeal stated that it was plainly relevant for the Judge to consider (as he did) potential customers who were both fans of Rihanna and prepared to shop in a Topshop store – this reflected "real life". Topshop's marketing activities (ie publicising and promoting its connection with Rihanna over a period of time) was also a relevant factor in the Court of Appeal's decision.

Comment

The decision confirms that each case will be decided on its own facts and mere use of an image will not be sufficient on its own. Interestingly, Lord Justice Underhill, whilst agreeing with Lord Justice Kitchin, did say that he considered this to be a "close to borderline" case and that both Rihanna's past public association with Topshop and the particular distinctive features of the image itself were essential to Rihanna's claim; in his view, either of these factors alone would not suffice.

Whilst the decision reaffirms the position that there are no image rights per se under English law, it would appear that protection under the law of passing off will most likely be afforded to those individuals who already have their own merchandising lines, such as David Beckham, and, in particular, those individuals that have a previous association or connection to the defendant.

[1] Robyn Rihanna Fenty & ors v Arcadia Group & ors [2015] EWCA Civ 3

The decision also recognises that counterfeiting is a very serious problem, and in effect, prefers the rights of trade mark owners to combat the issue over the rights of the ISPs (and, to an extent, internet users).

Counterfeiting is extremely prevalent and so effective measures to restrict the supply of counterfeits are to be welcomed. In 2014, the European Commission published its Report on EU Customs Enforcement of Intellectual Property Rights: Results at the EU Border which recorded that in 2012 customs authorities at the external borders of the EU seized a total of over 39.9 million articles, representing a market value of almost €900 million. The corresponding figures for 2013 were 35.9 million articles and €768 million.

ISP blocking orders now provide trade mark owners with another option, but other effective measures still need to be developed and deployed to try and stem the tide of counterfeits and related websites.

Factual background

The Claimants (collectively, "Richemont") own (and have registered trademarks for) a large number of luxury brands, including CARTIER, MONTBLANC and IWC.

Richemont became aware of certain third party websites, including www.cartierloveonline.com, www.iwcwatchtop.comand, and www.montblancopensonlineuk.com ("Target Websites") advertising and selling counterfeit goods.

Richemont made an application to the High Court seeking an order requiring the five main retail internet service providers ("ISPs") in the UK, namely Sky, BT, EE, Talk and Virgin, who between them have a market share of 95% of UK broadband users, to block, or at least impede, access by their respective subscribers to the Target Websites, all of which had infringed Richemont's trade mark rights.

Legal basis for the blocking order

Blocking orders, such as the one sought by Richemont, have been made by the Court over the last three years pursuant to section 97A of the Copyright, Designs and Patents Act 1988 ("CDPA"), which implements Article 8(3) of the Information Society Directive.  Section 97A expressly states that the High Court shall have power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright.

Blocking orders of this type have been successfully obtained by film studios, record companies and the FA Premier League.

As there is no analogous provision under UK trade mark law, Richemont asked the Court to rely on its inherent jurisdiction to grant an injunction where it is "just and convenient to do so", as recognised by section 37(1) of the Senior Courts Act 1981.

This was because the UK had not in fact implemented Article 11 of the IP Enforcement Directive and in particular the provision that "Members States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right…".

Threshold conditions

he Judge noted that there are certain "threshold conditions" that must first be satisfied in order for a blocking order to be granted in a trade mark case:

• The ISPs must be 'intermediaries' within the meaning of the third sentence of Article 11 of the Enforcement Directive - this was not in dispute in this case.
• Either the users and/or the operators of the website must be infringing the claimant's trademarks - again, this was not in dispute in this case.
• The users and/or the operators of the website must use the ISP's services to do that.  The Judge said that the operators of the Target Websites had been infringing Richemont's trade marks by placing on the internet advertisements and offers for sale which were targeted at UK consumers.  In this respect, the Judge contended that the ISPs had an essential role, since it is via the ISP's services that the advertisements and offers for sale were communicated to 95% of broadband users in the UK.  The Judge also made it clear that it was immaterial that there was no contractual link between the ISPs and the operators of the Target Websites. 
• The ISPs must have actual knowledge of this.  Richemont had sent the ISPs emails attaching two schedules, one containing information about its trademarks and the other information about the test purchases from each of the Target Websites.  So knowledge of the infringement was not in dispute; in any case, the ISPs had the requisite knowledge as a result of having been served with the evidence in support of the blocking order injunction application itself.

Additional satisfying criteria

After deciding that the threshold conditions had been satisfied, the Judge went on to consider that the relief must:

• be necessary, but this did not mean that a brand owner has to show that a blocking order is indispensable for enforcing its trade mark rights;
• be effective, but this did not mean that a brand owner has to establish that the relief it seeks is likely to reduce the overall level of infringement of its rights;
• be dissuasive (ie the remedies granted against the defendant should dissuade third parties from infringing in the future);
• not be unnecessarily complicated or costly;
• avoid barriers to legitimate trade: the measures targeted by the ISP must be strictly targeted so that they do not affect users who are using the ISP's services in order lawfully to access information;
• be fair and equitable and strike a "fair balance" between the applicable fundamental rights;
• be proportionate: the Judge specifically noted the following factors when considering proportionality:
• The comparative importance of the rights that are engaged and the justifications for interfering with those rights.  As the Target Websites were exclusively engaged in infringing activity, the operators had no right which required protection. So the key consideration was the impact on the lawful internet users.  On this point the Judge said that if the Order was properly targeted, and had sufficient safeguards built in, then that should mean that such users would be unaffected;
• The availability of alternative measures which are less onerous: other options (some of which Richemont had exhausted) include notice and takedown by hosts, payment freezing, domain name seizure, de-indexing and customs seizure.  However, the Judge was not persuaded that any of these measures would be equally effective as a blocking injunction, but less burdensome with the effect that Richemont's application should be rejected on that ground alone, albeit it was one of the factors to be considered for proportionality;
• The efficacy of the measures which the Orders require to be adopted by the ISPs, and in particular whether they will seriously discourage the ISPs' subscribers from accessing the infringing websites;
• The costs associated with those measures, and in particular the costs of implementing the measures;
• The dissuasiveness of those measures (ie the threat of a blocking order injunction);
• The impact of those measures on lawful users of the internet: the Judge considered that it should be possible to target the blocking so that lawful users are not adversely affected; and
• The substitutability of other websites for the infringing websites (ie there is nothing to stop the operators of the Target Websites from setting up new infringing sites).

Proportionality

The Judge considered that proportionality was a key issue, in particular whether the likely costs burden on the ISPs is justified by the likely efficacy of the blocking measures and the benefit to the trade mark owner, compared against the other options available.

In reaching his decision that a blocking order injunction should be granted, the Judge noted that:

"the Orders are proportionate and strike a fair balance between the respective rights that are engaged, including the rights of individuals who may be affected by the orders but who are not before the Court".

The Judge also built in a number of safeguards (largely following submissions made by the Open Rights Group which had acted as an intervener in the case on behalf of potential third parties affected by the order) such as (i) users can apply to vary or discharge the blocking orders; and (ii) more information should be provided as to the blocking orders on the relevant holding webpage.

We can expect to see such safeguards in future blocking orders, whether for trade mark or copyright infringement reasons.

Likely impact on future blocking orders

There is no doubt that more brand owners will now apply for these types of blocking orders, both before the English courts and other EU courts.  The blocking orders will most likely be sought in relation to high profile or high volume counterfeit websites, or where websites are hosted outside of the EU, the US and other countries where notice and take down requests are usually complied with.  The costs to brand owners of obtaining such blocking orders will likely provide a potential control on the number of such applications and resulting blocking orders.

Trade mark owners will still continue to use other methods of combatting counterfeits and associated websites, including notice and take down requests, domain name recovery, contacting registrants, de-indexing requests, custom seizures, etc, but blocking orders provide a useful, additional option.

Likely impact on ISPs

here will be additional administrative and costs burdens on ISPs resulting from the decision. As well as copyright infringement, ISPs can now be put on notice of websites infringing a party's trade marks (or other IP) and ultimately be required to block access to them.

ISPs can therefore expect that a large number of notices will be sent by trade mark owners putting them on notice of infringing websites.   The costs of making the Court applications to block the websites will be borne by the trade mark owners but the costs of implementing the blocking orders will be borne by the ISPs.

As the decision recognises, the ISPs have already invested in sophisticated technology that allows them to block access to websites and so the incremental cost per website is unlikely to be significant.

The aggregate cost burden across a large number of websites, with which the ISPs were particularly concerned, could however be substantial over time - Richemont alone had identified a very large number of potentially infringing websites, though not all will be addressed through blocking orders (the legal costs alone would be prohibitive).  Whilst this concern was acknowledged, the Court took comfort from the fact that large numbers of copyright blocking orders had not been sought over the preceding 3 years.

Conclusion

This decision is a great outcome for brand owners, which provides them with a significant new weapon in their fight against websites that advertise and sell counterfeits. Whilst the sheer volume of online counterfeit activity means that requiring ISPs to block specific websites cannot eradicate the problem, brand owners can use blocking orders to target the worst offending sites.

For ISPs, this decision requires them to further restrict what can be accessed by users of their services.  Whilst it was recognised that this does place additional burdens on ISPs, the decision sets the standard that (at least currently) such burdens are proportionate and strike a fair balance between the rights of the brand owners, the ISPs and internet users.

1. Cartier & Ors -v- BskyB & Ors [2014] EWHC 3354 (Ch)

This article was first published in the December 2014 issue of E-Commerce Law & Policy

In particular, Rose J considered the damages applicable to the sales of a certain type of mosquito net, which was developed indirectly from confidential information belonging to Vestgergaard.  While there was no direct authority on this point, the general principles applicable to calculation of damages in General Tire v Firestone were still followed, putting the "injured party in the same position as he would have been if he had not sustained the wrong"².

Background

To recap on the facts which are relevant to the damages decision, the dispute involved certain secret information used in the manufacture of mosquito nets.  The Claimant, Vestergaard, had a business which involved the development, manufacture and marketing of mosquito nets, and as part of that business had developed special techniques which ensured that their nets retained their insecticidal properties after washing.  These techniques involved the "recipes" for the insecticide used, and the choice of material used to make the nets.

Each technique or recipe would be tested both in a lab, and then later in field trials in an area where malaria is endemic.  Approval for successful mosquito nets would also be required from the World Health Organisation (WHO).

The case revolved around two ex-employees (Mr Larsen and Mrs Sig), and an ex-consultant of Vestergaard (Dr Skovmand).  Both Mr Larsen and Dr Skovmand were involved in developing the confidential techniques while working at Vestergaard.

In 2004, Mr Larsen and Mrs Sig decided to set up a business in competition with Vestergaard.  Dr Skovmand agreed to work with them, and began developing a product, which was in due course manufactured and put on the market under the name "Netprotect".

Arnold J held, back in 2009, that the Defendants had misused the Claimants' confidential information, and that therefore an inquiry should be held as to damages.  The parties were poles apart in terms of the quantum to which they considered Vestgaard should be entitled (Vestergaard claiming many millions of pounds, while Bestnet claimed that it was worth only a few thousand).

Quantum Decision

A total amount of US$485,419 was awarded to Vestergaard in damages.

In coming to this figure, Rose J looked at two different types of infringing nets sold, and calculated damages figures for each one.  The types of infringing nets and calculation of damages were divided up as follows:

1. Nets made using a recipe which was based directly on the work Dr Skovmand had done for Vestergaard
   
   Damages in relation to this first category of nets were split into:

(i) Firstly, a sum awarded on the basis of loss of profit on diverted sales from Vestergaard to Bestnet (ie the sales that would have been made by Vestergaard if the Bestnet product had not been on the market).

This was calculated by apportioning an amount of Bestnet sales to Vestergaard, on the basis of the proportions of business won in other areas of the market.  This was then reduced by an amount that represented the proportion of Vestergaard owned by interests outside the Vestergaard group.

(ii) Secondly, a royalty amount for remaining sales reflecting a payment for permission to use the confidential information that had been used to develop the infringing recipe.

     2.   Nets made using a recipe developed by Dr Skovmand while working             for Bestnet (developed using Vestergaard confidential information in             combination with a substantial amount of further research and             development)

In respect of this second category of nets, Rose J awarded a damages amount based on a consultancy fee for use of Vestergaard's confidential information.

Rose J considered that although a lot more development had been done by Dr Skovmand while at Bestnet, the information on which the original recipe was based was still used quite substantially (both in the development of the second recipe and also in promotional material and applications for WHO approval).  This was combined with a consideration of typical consultancy rates in the area, and Dr Skovmand's own consultancy rate while at Vestergaard was directly considered, which led to the damages award.

Vestergaard had also sought so-called "springboard" damages, ie compensation for a "short cut" or "fast track" entry into the market, and potentially an additional sum of damages could have been awarded in this respect.  However, Rose J found on the facts that, while Dr Skovmand's development time had been reduced by approximately 6 months by using the Vestergaard confidential information, this had not speeded up entry on to the market because the time taken to achieve WHO approval to sell the new nets was also held up by 6 months (the requisite testing could take place only in mosquito season, so there was a 6-month delay).  As a result, no additional springboard damages were awarded.

Comment

This decision provides useful guidance as to the Court's approach on assessing damages for breach of confidence on loss of sales, notional licence fee and springboard bases.  It also confirms that damages will still be payable even where the later development arises indirectly from the confidential information in question, with such damages being assessed by reference to a notional consultancy rate.

The decision further illustrates that a different view between the parties as to the principles that should be applied to the assessment of damages should be approached can lead to a very significant difference in each party's view of the sums at stake and, even once the principles are established, the outcome is still heavily fact dependent, both as to what happened between the parties in dispute and what the market position is generally.

1. Vestergaard Frandsen A/S (now called MVF 3 ApS) and others v Bestnet Europe Limited and others [2014] EWHC 3159 (Ch)

2. General Tire & Rubber Company v Firestone Tyre & Rubber Company [1975] 1 WLR 819, page 824

As a result of the VeRO complaint, the Claimant suffered an inevitable loss of trade. The Claimant was also concerned that it could prejudice their ability to sell goods on eBay long-term.  The Claimant therefore brought a claim against the Defendants, alleging that the VeRO complaint amounted to an unjustified threat under section 26 of the Registered Designs Act 1949 ("RDA") and section 253 of the Copyright, Designs and Patents Act 1988 ("CDPA").

The parties made several applications to the Court. The Defendants brought a strike out application on the basis that the Claimant had no reasonable grounds for bringing the claim. In the alternative, the Defendants sought summary judgment, arguing that the Claimant had no real prospect of succeeding on the claim and there was no other compelling reason for a trial. The Claimant also made an application for summary judgment in respect of several aspects of its claim. The applications were heard by deputy judge Mr Richard Spearman QC in July 2014.

This is not the first time that VeRO has come under legal scrutiny.  In the 2006 case of Quads 4 Kids v Campbell [2006] EWHC 2482, Pumfrey J granted an interim injunction restraining Quads 4 Kids from threatening Campbell with proceedings after they submitted a notice via the VeRO system against Campbell, claiming that Campbell's bikes infringed their Community Registered Design rights. In the course of making his decision about the injunction, Pumfrey J noted that there was a "serious triable issue" as to whether or not the VeRO system constituted a threat.

The Decision

The deputy judge considered five central issues when assessing the merits of the applications:

1. Whether the Defendants had made threats against the Claimant in accordance with the relevant threats legislation;
2. Whether, if there were threats, those threats were groundless;
3. Whether the first Defendant, Mr Blackmore – a director of the company – was jointly liable with the second Defendant company, Mirrorkool Limited;
4. Whether section 26(2A) of the RDA (as amended) and section 253(3) of CDPA provided the Defendants with protection against the threats claim; and
5. Whether the proceedings should be stayed or struck out on the grounds that they were disproportionate and an abuse of process.

1. Did the Defendants make threats against the Claimants?

The Claimant submitted that the notice sent to eBay under the VeRO scheme "plainly" constituted a legal threat as the notice asserted the Defendants' ownership of their registered design rights and the belief that those rights had been infringed. By comparison, the Defendants argued that the notice under the VeRO scheme only gave notice of an assertion of intellectual property rights which eBay then investigated to reach an appropriate result. 

The deputy judge considered the previous case concerning the VeRO system and threats - Quad 4 Kids v Campbell.  In that case, Pumfrey J noted that eBay's VeRO scheme was designed to avoid eBay becoming involved in disputes, which led them to "take the line of least resistance". In reality, this meant that notified listings were always removed, which made any notice seem more like a threat. 

Whilst the deputy judge indicated that he found that argument, and the Claimant's arguments, persuasive, he also noted that Pumfrey J had only said that it was arguable that the notice was a threat when granting an interim injunction. The deputy judge considered that he was not precluded from reaching a different conclusion.

The Defendants argued that a commercial assessment of eBay's VeRO scheme in 2006 could not necessarily be carbon copied to 2014 and this case was not wholly comparable to Quad 4 Kids in any event. In the earlier case, the issues considered – and the significance of the decision – were narrower as they dealt only with the grant of an interim injunction, not a strike out application.  Moreover, the Defendants said there were real reasons to believe that the VeRO process had changed at eBay, as they now investigated notifications and did not thoughtlessly proceed with removing listings. 

The deputy judge considered that more material was required to assess those submissions, particularly with respect to the VeRO system. The deputy judge was interested in how notices were handled – and by whom – at eBay as the evidence did not demonstrate that a designated member of a Legal Department responded to or dealt with the notices, a fact which did not sit well with the principle that "there is a legal test as to what is a threat".

The deputy judge considered that neither party had delivered a "knock-out blow" and therefore neither party was successful in their application. The question of whether the VeRO notice constituted a threat needed to be decided at trial.

2. If the Defendants did make threats, were these threats groundless?

This question was wholly dependent on the answer to the first question and so was not considered in any detail. However, the deputy judge indicated that the Claimant was in a stronger position because a visual comparison of the relevant products suggested that it was "very, very unlikely" that infringement had taken place. As such, if the Defendants were found to have made a threat, it was likely that the threats would be considered groundless.

3. If a valid threat had been made, was Mr Blackmore jointly liable with Mirrorkool for it?

The third issue was considered in greater detail as it did not require consideration of the technical issues concerning groundless threats but was a simple assessment of liability.

The deputy judge considered two communications: the VeRO notice itself and a letter sent on 7 May 2013 from the Defendants' solicitors to the Claimant's patent attorney. 

With regard to the VeRO notice, the deputy judge considered it clear that Mr Blackmore, a director of the second Defendant, was jointly liable for the VeRO notice. Mr Blackmore owned and asserted the Defendants' rights; he signed the VeRO notice on behalf of the second Defendant and provided his contact details. 

Liability in respect of the letter was more complicated and depended upon whether Mr Blackmore was involved personally, given that the letter was sent by solicitors. However, it was considered that he would have been personally involved as the letter reflected the context of the VeRO notice. Further, the small family nature of the company and Mr Blackmore's position as shareholder suggested that it was not unreasonable to infer that Mr Blackmore authorized and approved the sending of the letter.

4. Does the relevant legislation provide the Defendants with protection against the threats claim?

Section 26(2A) of the RDA and section 253(3) of the CDPA prevent claims being brought for threats made in relation to the making or importing of goods only.   The Defendants sought to argue that, as the ongoing Law Commission consultation had considered extending these exemptions to also cover threats made in respect of selling, it was open to the deputy judge to read an extension into the current legislation.

The deputy judge considered the argument "hopeless". The legislation means what it says and it has not changed. The Defendants' potential threats covered selling as well as making and importing and could not therefore claim protection under the current legislation.

5. Are the proceedings disproportionate or an abuse of process?

The final issue was whether the proceedings were worth pursuing. The parties had radically different ideas about the damage sustained but the deputy judge did not conduct any substantial assessment because the central question as to whether the VeRO notice amounted to a "threat" contributed to that assessment in any case.  For the same reason, there was no reason to consider that there had been an abuse of process by either party here.  As Pumfrey J had decided in 2006, there was a "serious triable issue". It could not be regarded as an abuse of process when the issues are clearly as complex – and legally significant – as they are here.

Conclusion

In essence this judgment changes little, as it deals with preliminary strike out and summary judgment applications - all of which were rejected by the deputy judge on the basis that there was an arguable claim to be heard. What is of note is that it endorses Pumfrey J's view in the Quads 4 Kids case that there is a serious point of law to be decided as to whether a notice made under eBay's VeRO system can amount to an actionable threat.

It may be doubtful as to whether the parties involved will want to proceed to trial in order to obtain judgment on this point, although it would undoubtedly be of benefit to others to clarify the position. In the meantime, intellectual property rights holders should exercise judgment when deciding whether to submit a notice under the VeRO system, as there is a risk that it may ultimately be considered to be an actionable threat.

First published in the E-commerce Law Reports

The new regulations (which can be found here) introduce a points-based test to determine the classification of a video game as British for the purposes of the corporation tax relief. They are largely the same as the draft regulations published in April 2013.

Under the regulations, a video game will be certified as British if it passes a 'cultural test'. This is achieved if a game scores at least 16 out of a possible 31 points under the regulation (and scores the minimum required score where applicable). Points are awarded for the:

1. extent to which the game is set in UK or the EEA;
2. number of the video game characters that are from the UK;
3. extent to which the game depicts a British or EEA story;
4. percentage of the original dialogue that is recorded in the English language or a recognised regional or minority language (which includes British sign language);
5. contribution of the video game to the promotion, development and enhancement of British culture;
6. location of certain aspects of production;
7. and residence of the personnel involved in making the video.

Due to both the wide variety of permutations by which a developer can score the required 16 points, and the introduction of EEA elements into the cultural test, the regulations offer developers flexibility to secure the corporation tax relief, which will no doubt be welcomed. The introduction of the £1 million cap for however, will inevitably lessen the potential upside for larger developers.

Developers seeking to benefit from the regulation will need to apply to the Secretary of State for certification, and the application must be supported by evidence.

It is interesting to note that: 

• 66% of the products originated from China, comprising mobile phones, memory cards, ink cartridges and electrical household appliances.
• The most prevalent product category remains clothing (accounting for 12% of all detained articles) with medicines (10%), cigarettes (9%), and toys (8%) all high on the list.
• Only 2.9% of the products were released because they were in fact original goods.

The report also says that an increase in e-commerce has resulted in a greater number of small consignments entering the market through postal and courier traffic (concerning sport shoes, personal accessories like bags and wallets, clothing, sunglasses and watches); such cases now account for 72% of all detentions, up from 40% in 2009.

Please click here to access the full report.

For more information about the report or any other anti-counterfeiting or anti-piracy related issue, please contact David Cran (david.cran@rpclegal.com)or Ben Mark (ben.mark@rpclegal.com)

The decision is consistent with previous European case law and is good news for rights holders. However, sceptics might say that the decision could lead to some unsatisfactory results where simple products are involved or similarly, where the design right in question is simply a modification of several pre-existing designs.   We've explored some of these issues below.

Background

In many unregistered design right cases and especially cases, such as these, where the defendant admits to copying the design in question, a defendant will seek to invalidate the unregistered design by asserting that it lacks "individual character". This line of attack comes from Articles 4 and 6 of the Community Designs Regulation (6/2002/EC):

"4. A design shall be protected by a Community Design to the extent that it is new and has individual character; […]

6. A design shall be considered to have individual character if the overall impression it produces on the informed user differs from the overall impression produced on such a user by any design which has been made available to the public […]"

The above provision certainly indicates that a single pre-existing design with the same overall impression (commonly referred to as prior art) is what is required in order for an unregistered Community design to lack individual character. However, there is some potentially contradictory language in Recital 14 to the Community Designs Regulation– which states that a defendant can rely on the "existing design corpus". You could argue (as Dunnes did in this case), that the reference to the design corpus as a whole, is a reference to all pre-existing design features rather than pre-existing products taken individually.

In this case, Dunnes Stores (Limerick) Ltd, an Irish based retailer, had already admitted to copying two of Karen Millen's (fashion retailer) designs – namely for a black knitted top and a striped shirt (the Karen Millen Designs). However, Dunnes identified several pre-existing designs which contained some of the same design features as the Karen Millen Designs. Dunnes relied on Article 6 of the Regulations, read in conjunction with Recital 14, and sought to invalidate the Karen Millen Designs.

The primary question (although there were others) referred to the CJEU by the Irish Supreme Court was whether a defendant could rely on "a combination of features taken in isolation and drawn from a number of earlier designs" to establish invalidity.

Decision

This issue had been discussed in PepsiCo v Grupo Promer Mon Graphic SA (Case C-281/10 P), where the CJEU held that a defendant couldn't rely on an "amalgam" of two pieces of prior art, where each piece of prior art, taken independently, created an overall different impression. In that case, the defendant argued that consumers had imperfect recollection and therefore, the amalgam of both pre-existing designs was sufficient for a consumer to believe the design in question was not of individual character.

The CJEU in this case followed the PepsiCo decision. As to Recital 14, the CJEU noted the accepted position that the recitals of Regulations have no direct legal effect, but notwithstanding that, the CJEU were of the view that the language "existing design corpus" was not inconsistent with Article 6. In other words, in the context of Article 6, "existing design corpus" meant any pre-existing designs, taken individually.

Dunnes raised further arguments, citing optional provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (or TRIPS), but the CJEU was not persuaded by these.

Comment

This decision is not a surprising one and, in any event, it remains to be seen whether any individual items of prior art in this case, taken independently, will be enough to invalidate Karen Millen's designs.

However, taken to an extreme, sceptics might say that the results of this decision could lead to an imbalance in favour of rights holders.

It is commonplace, in the fashion industry, for designers to be inspired by pre-existing designs. Indeed you could argue that design inspiration is the life-blood of any creative industry. However, if instead, a first designer of a garment uses or is inspired by the design features from two or more other items then, depending on the product, then that might not result in a high degree of artistic creation.

If a defendant copies an article believing it to be comprised of a series of commonplace and non-extraordinary design features, then, depending on the extent to which the defendant designs away from the article in question, that defendant would be liable for unregistered design right infringement. In those hypothetical scenarios, there may not actually be a great deal of difference between the levels of artistic creation by each designed. In those circumstances it's reasonable to suggest that there's an imbalance between the rights of the first designer and the liability of the second.

The above scenario is particularly relevant in mainstream or high street fashion, where many designs are likely to be influenced by what went before. It is difficult to draw the line between what constitutes acceptable design inspiration and what constitutes unacceptable IP infringement.

There is an additional consideration here, which this case touched upon. It is incumbent on a defendant to establish invalidity (despite Dunne's attempts to shift this burden to Karen Millen in this case). Due to the transient nature of the fashion industry, it can be very difficult for defendants to identify prior art – especially where it is insufficient to merely prove that either: (a) each design feature existed before the claimant's design (in different designs); or (b) the product is basic or "obvious". With no patent style "inventiveness" threshold, this could lead to the protection of unremarkable and simplistic products or, as explained above, those which are arguably no less of a copy than the supposedly infringing product.

Ultimately, defendants will continue to have trouble once they have admitted to copying an article. Whilst courts have yet to say as much, it's perhaps difficult to avoid the assumption that if the article was worth copying, then it must be worth protecting. In most cases, infringement will likely follow if a defendant copies just one article; whereas using design features from a number of articles is likely to fall on the right side of the line.

Written by Jeremy Drew and Chris Sanderson

The defendants' application for a stay of the claimants' remaining copyright infringement claim and the defendants' remaining trade mark invalidity counterclaim was based on the fact that, when the claim form was issued on 4 April 2012, three sets of proceedings already existed in Italy concerning BETTY BOOP branded merchandise. In brief, these Italian proceedings consisted of:

• A claim by Hearst Holdings Inc. (the first claimant in the English proceedings), against a number of Italian companies who were purportedly licensed by AVELA Inc. (the first defendant in the English proceedings) to sell BETTY BOOP branded merchandise.
• Third party indemnity claims brought by the Italian companies against AVELA.
• A claim by AVELA to invalidate Hearst's Italian and Community registered trademarks alleged to have been infringed by the Italian companies.
• A claim by Hearst against AVELA for joint liability in relation to the acts of the Italian companies.

Importantly, the Italian Courts were seised of all these claims before the claim form was issued in the English Courts.

Birss J refused the defendants' application for a stay of the English proceedings, ruling that the policy behind Article 104 of the Community Trade Mark Regulation (CTMR) is to avoid irreconcilable judgments or at least the risk of irreconcilable judgments, and this policy is wholly defeated if an application for a stay under Article 104 is only brought after a judgment in the court second seised has been given – in the circumstances, the risk of irreconcilable judgments would not be mitigated by granting the stay. The defendants' extreme delay therefore constituted 'special circumstances' not to grant a stay under Article 104. In coming to this decision, Birss J provided a useful exposition of Article 104 and 109 CTMR, and Articles 27 and 28 of Council Regulation 44/2001 (Brussels Regulation).

Relevant legislation

Article 109 CTMR

Article 109 CTMR deals with simultaneous and successive civil actions on the basis of Community trademarks and national trade marks in the courts of different Member States. It provides that:

"Where actions for infringement involving the same cause of action and between the same parties are brought in the courts of different Member States, one seised on the basis of a Community trade mark and the other seised on the basis of a national trade mark:

(a) the court other than the court first seised shall of its own motion decline jurisdiction in favour of that court where the trademarks concerned are identical and valid for identical goods or services. The court which would be required to decline jurisdiction may stay its proceedings if the jurisdiction of the other court is contested;

(b) the court other than the court first seised may stay its proceedings where the trademarks concerned are identical and valid for similar goods or services and where the trademarks concerned are similar and valid for identical or similar goods or services."

Article 104 CTMR

Article 104 CTMR provides that a Community trade mark court hearing an action for infringement, revocation or invalidity (but not a declaration of non-infringement); "shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the Community trade mark is already in issue before another Community trade mark court on account of a counterclaim or where an application for revocation or for a declaration of invalidity has already been filed at the Office".

Decision

Article 109 CTMR

Birss J found as follows:

• For the purposes of Article 109 CTMR, the parties were the same before the English and Italian Courts (to satisfy this test it was clear that not all parties needed to be the same, just some).
• The expression 'same cause of action' had the same meaning as under Article 27 of the Brussels Regulation.
• Referring to the principles laid down in The Alexandros T [2013] UKSC 70, Gubisch v Palumbo (Case C-144/86), the Tatry (Case C-406/92) and Sarrio v Kuwaiti Investment Authority [119] 1 AC 32, 'same cause of action' must be read as referring to "proceedings which have the same cause and the same objet" (a test derived from the French text of the Brussels Regulation).
• 'Cause' means 'the same facts' and 'the same rule of law as the basis for the action' whilst 'objet' means 'the same end in view'. All of these requirements need to be present for the 'same cause of action' test to be satisfied.

Were the facts and was the rule of law the same?

Both the English and Italian proceedings concerned the sale to European consumers of Betty Boop merchandise which was licensed by AVELA. In a sense the proceedings were about similar issues in general terms but they were not concerned with the same facts. The persons carrying out the infringing acts in Italy and the transactions themselves were different in the UK and Italian proceedings and the images of Betty Boop used in Italy were different to the images used in the English proceedings.

Did the proceedings have the same end in view?

Birss J found this to be a more difficult question, but preferred the claimants' argument that the ends in view were not the same: just because relief arising out of one case in one country may overlap with the issues in another country does not necessarily mean that the ends in view are identical. The objective of the English court was to grant proper relief to compensate the claimants for the acts proved in the English case. The objective of the Italian court would be correspondingly focused on the proper relief arising from the acts proved before the Italian court. On this reasoning, it is difficult to envisage a scenario where two sets of proceedings will have the same ends in view, unless identical facts are proved and relied on, and identical relief is sought, in each court.

Accordingly, article 109 CTMR did not apply.

Article 104 CTMR

There was no doubt Article 104 applied because AVELA brought an invalidity claim in Italy before the proceedings in England were started. However the question of whether there were special grounds for continuing the hearing in England still had to be considered. Birss J relied on Starbucks v BSkyB [2012] EWCA Civ 1201 as the leading authority on this question, noting that the clear presumption in favour of a stay under Article 104 was strong and it would be a rare and exceptional case where there are special grounds within Article 104.

Counsel for the defendants submitted that mere lateness cannot create a special ground for refusing a stay under Article 104, however Birss J rejected 'mere lateness' as a characterisation of the timing of the defendants' application for a stay. Rather, for the application to be raised after the main judgment on infringement and passing off was "wholly unprecedented" and "certainly 'rare and exceptional'". Both parties were severely criticised for not bringing the existing Italian proceedings to the court's attention previously, and if they had been raised at the appropriate time Birss J suspected that significant parts of the English proceedings might have been stayed pending the Italian proceedings.

The risk of irreconcilable judgments between the English and Italian Courts could not be avoided or reduced by staying the English proceedings and the application for a stay under Article 104 CTMR was refused.

As Birss J had already refused to stay the proceedings under Article 104 (the wording of which is more favourable than Article 28 Brussels Regulation), no real question arose as to whether a stay should be granted under Article 28 Brussels Regulation.

Summary judgment

Although beyond the scope of this article, in addition to successfully defending the stay application, it is worth noting that the claimants also made a successful application for summary judgment in relation to the defendants' trade mark invalidity counterclaim: The Court found that the defendants' evidence did not support their allegation that the claimants had no rights in the mark in question when they applied to register it.

Commentary

Birss J's judgment reinforces the decision in The Alexandros T, cementing the position that for proceedings to have the 'same cause of action' they must have: (i) the same facts; (ii) the same rule of law as the basis for the action; and (iii) the same end in view.

The judgment is also a salutary warning to those seeking to rely on Article 104 to stay proceedings. Serious delay in making an application can constitute special circumstances not to grant a stay, even though the presumption in favour of a stay is a strong one and should only be rebutted in a rare and exceptional case. Such a rare and exceptional case is where the court second seised has already given judgment on the claim and the risk of irreconcilable judgments would not be mitigated by granting the stay.

Birss J was scathing in his assessment of both parties' behaviour in failing to bring the Italian proceedings to the English Court's attention earlier, a failure which had put the English Court at the unavoidable risk of making an irreconcilable judgment with the Italian Courts. In short, when seeking to rely on Article 104 to secure a stay, don't delay.

Finally, it is worth remembering that the English Court's interpretation of the CTMR will not necessarily be mirrored in other European jurisdictions. In France, for example, the Court's interpretation of 'special circumstances' under Article 104 CTMR is markedly different (see, for instance, the approach in Soothys International v. Européenne de Produits de Beauté (No. RG 05/17476, OCt. 17, 2006).  Advice from local lawyers should be sought in such circumstances.

Commercial analysis: There's no smoke without fire. Jeremy Drew, partner and head of IP & technology and Ben Mark, senior associate in the IP & technology group at Reynolds Porter Chamberlain, say the majority in the tobacco industry seem to recognise that the introduction of plain cigarette packaging will likely lead to an increase in illicit trade, particularly counterfeits.

What are the key issues that the government is seeking to address?

Ben Mark (BM): According to the most recent consultation launched by the Department of Health on 26 June 2014, the policy objectives for standardised packaging include: 

• discouraging people (particularly children/young adults) from starting to use tobacco products
• encouraging people to give up using tobacco products
• reducing the appeal or attractiveness of tobacco products

Why has it taken so long for the government to publish plans on how standardised packaging would be implemented in the UK?

Jeremy Drew (JD): The government no doubt wants to make sure that it has considered all relevant opinions, options and evidence before introducing standardised packaging legislation. This can be seen by the sheer number of consultations and reports the government has commissioned on the subject. This is likely to be due in part to the ongoing legal action against the Australian Government following the introduction of its standardised packaging legislation, namely the Tobacco Plain Packaging Act 2011.

To date, there does not appear to have been any conclusive evidence that standardised packaging will materially address the government's concerns on public health. However, the Chantler Review (an independent review carried out by Sir Cyril Chantler) concluded that if standardised packaging were introduced it would be 'very likely' to have a positive impact on public health. 

So, what is the anticipated time scale? Well, the current consultation closes on 4 August 2014. The government then needs to make a final decision. It is at least clear from the draft regulations published in the consultation that any change to the law, if introduced at all, is unlikely to happen until early 2017 at the earliest.

To what extent do you think the new regulation will deal with the public health concerns?

BM: While it's not really for us to comment on the public health aspects of the regulation, the government may want to wait until more conclusive evidence is available, for example studies conducted in Australia over a period of time, before introducing the new regulations.

What are the ramifications of this within the industry?

JD: As tobacco companies would no longer be able to distinguish their cigarette products from a competitor product, it is likely that consumers would simply stick to the product they know and trust.  This would inevitably reduce competition as new entrants would be put off entering an already difficult market given the ban on advertising. This is in stark contrast to the rapidly expanding e-cigarette market.

Could the move give rise to legal challenges from tobacco firms?

BM: In Australia, the introduction of the Tobacco Plain Packaging Act 2011 has come under attack on the basis that it is incompatible with the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

TRIPS signatories (including the EU) may adopt measures to protect public health and nutrition provided that 'the use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as...use in a manner detrimental to its capability to distinguish the goods or services from one undertaking from those of another'.

The key issue will be whether standardised packaging can be justified. This is the issue before the WTO in pending cases against the Australian Government. The outcome of those decisions will no doubt have a significant bearing on whether any similar challenges could be raised against the UK government. Much will depend on whether the government is able to identify compelling evidence that the public is likely to be better protected with standardised packaging, this is the subject of much debate.

Do you envisage any practical or technical difficulties or unintended consequences arising from standardised packaging?

JD: It seems to be recognised by the majority in the tobacco industry that the introduction of plain packaging will likely lead to an increase in illicit trade, particularly counterfeits. The reason for that is twofold: 

• counterfeit products will likely be cheaper and easier to produce given the lack of design/logos on the legitimate products, and
• tobacco companies will inevitably find it more difficult to use their IP rights to prevent counterfeit products from entering the market

What are the implications for IP practitioners?

JD: Given that any change in the law will not come into effect until 2017 at the earliest, tobacco companies have time to consider their options. Interestingly from a trade mark perspective, the draft regulations specifically state that the regulations themselves will constitute 'proper reasons for non-use' so that it will not be possible to revoke tobacco companies' trade mark registrations in respect of device marks/logos solely on the basis that they can no longer be used.

As the UK Intellectual Property Office and the Office for Harmonisation in the Internal Market operate a 'use it or lose it' policy in respect of a trade mark registration that is over five years old, this would appear to alleviate at least one of the tobacco companies' concerns. Given the substantial sums that tobacco companies have invested in their brands and the potential for harm to those brands caused by the new regulations, this will provide scant consolation.

For now, while there remains a substantial degree of uncertainty, IP practitioners will no doubt continue to advise clients to protect their brands (including sub-brands/logos etc.) with trade mark registrations in the usual way.

Interview conducted by Kate Beaumont

The Common Practice applies to priority claims, relative grounds for refusal (in oppositions) and determining genuine use as follows:

Priority claims: a trade mark registered in black and white / greyscale is not considered identical to the same colour version, for the purposes of claiming priority. However, if the differences in the colours / contrast in the shades are insignificant such that they would go unnoticed by the average consumer, the signs will be considered identical.

Relative grounds for refusal: Again, an earlier trade mark registered in black and white / greyscale is not identical to the later filed colour version of the mark, unless the differences in colour / contrast of shades are insignificant.

Genuine use: In response to the question of whether the use of a colour version of a trade mark registered in black and white / greyscale (or vice-versa) is acceptable for the purposes of establishing genuine use, the Common Practice states that that may be the case where the change only in colour does not alter the distinctive character of a mark, and provided the following requirements are met:

• The word/figurative elements coincide and are the main distinctive elements;
• The contrast of shades is respected;
• Colour or combination of colours does not possess distinctive character in itself; and
• Colour is not one of the main contributors to the overall distinctiveness of the mark.

OHIM has applied the new practice retrospectively to all pending applications and proceedings.

It is worth noting that the Common Practice is only intended to be implemented at the registry level. The courts will continue to determine infringement cases with reference to relevant case law and the guidance provided by the decision of the Court of Justice of the European (CJEU) in Specsavers International Healthcare Limited and Ors v Asda Stores Limited (C-252/12), which in particular, recognised that, in certain circumstances, use in colour of a mark registered in black and white was a relevant consideration in assessing likelihood of confusion.

In April 2013, the Supreme Court took the view that mere browsing by an internet user (as opposed to copying or downloading) benefits from the exemption to copyright infringement for temporary reproduction under Article 5(1) of the Copyright Directive. The Supreme Court nevertheless decided to refer the question of the "browsing defence" to copyright infringement to the CJEU given the impact of this case on millions of internet users across Europe. For further background, see our previous IP Hub update – Copyright: Supreme Court Considers "Browsing Defence".

CJEU decision

he CJEU has confirmed the approach of the Supreme Court in finding that browsing satisfies the first three conditions under Article 5(1) of the Copyright Directive (i) the act is temporary; (ii) it is transient or incidental; and (iii) it is an integral and essential part of the technological process. The fourth and fifth criteria had already been established by the Supreme Court.

The CJEU also noted that browsing must also satisfy the conditions laid down in Article 5(5) of the Copyright Directive. This provides that the carrying out of a temporary act of reproduction is exempt from the reproduction right only in certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the rights holders.

Whilst the Supreme Court had held that if the conditions in Article 5(1) are established, it follows that the conditions in Article 5(5) are also satisfied, the CJEU considered the Article 5(5) conditions separately. In doing so, the CJEU links the fact that the legitimate interests of the rights holders are not prejudiced on the basis that "there is no justification for requiring internet users to obtain another authorisation allowing them to avail themselves of the same communication as that already authorised by the copyright holder in question".

Comment

This decision raises an interesting question as to whether the browsing defence will be available where the internet user is browsing infringing content.

This mirrors the recent decision of the CJEU in Svensson^[2], which, at first glance, appears to say that mere "linking" to content available elsewhere on the internet would not constitute infringement, but nevertheless appears to leave open the possibility of infringement where a website provides links to infringing content.

The Supreme Court's position on this point had been clear, by confirming that it has never been an infringement, in either English or EU law, for a person merely to view or read an infringing article in physical form, so why should viewing content on the internet be any different.

We now wait to see how the Supreme Court interprets this decision and whether this point is specifically addressed.

[1] Public Relations Consultants Association Ltd v Newspaper Licensing Agency Ltd and Others (Case C – 360/13)

[2] Svensson and others v Retriever Sverige AB (Case C‑466/12)

The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) criminalise unfair commercial practices, including conduct that amounts to a "misleading action". Under the existing CPRs, local authority trading standards are designated to act as "specified enforcers" to whom businesses can report unlawful copying of package designs. The specified enforcers are then responsible for prosecuting the infringing parties.

Currently, the CPRs do not provide businesses with a private right to enforce its provisions in the civil courts; the right to pursue a wrongdoer under the CPRs is exclusively reserved for specified enforcers.

BIS consultation

The BIS consultation had requested industry opinion on whether aggrieved businesses should be afforded the power to privately enforce the "misleading packaging" provisions contained within the CPRs through the civil courts. This would supplement the private rights of action for trade mark infringement and/or passing off, to the extent available.

The response from TSI

In an open letter to BIS, TSI stated that the reforms contained within the consultation could prejudice smaller companies, who may not be able to afford the costs of a private civil action. The existing legislation provides a level playing field for businesses, as once an infringement has been reported the costs of pursuing a wrong-doer are borne by the "specified enforcer".

The consultation period ended on 19 May 2014. BIS will publish a final report in September 2014. 

PEGI will have three pricing tiers from 1 July 2014:

• Lowest tier: for online or downloadable games only which must be under 250mb. Charges: €260 per certification.

• Middle tier: for games larger than 250mb with a production budget of less than €200,000. Charges: €1,155 for certification and €1,050 for each additional platform.

• Highest tier: for games with a budget larger than €200,000. Charges: €2,100 for certification and €1,050 for each additional platform.

Under this system, smaller developers that are launching games larger than 250mb are subject to the same re-certification fee (€1,050) as a multi-national developer which is launching a blockbuster title.

To larger games development companies, these charges have less impact on costs and cash flow. But to the smaller or 'indie' developers, these repetitive charges could have a serious impact upon their cash flow. TIGA believes this charging system therefore has the ability to stifle innovation at grass roots level.

In the US, by contrast, games developers do not have to pay charges for rating identical content on multiple platforms.

TIGA has suggested that a legally binding document could be introduced whereby developers warrant that game content is identical across the different platforms on which it wishes to release the game. This would negate the need for PEGI to undertake multiple content rating exercises.

TIGA has recently received a response from PEGI to its open letter. PEGI stated that the 'fee per platform' policy was not new and that there had only been one price rise in the last five years – but TIGA has stated that PEGI failed to address the key points.

TIGA has now written to PEGI again, asking PEGI "to explain explicitly" why it cannot adopt the approach of developers signing a legally binding document which states that game content is the same across all platforms (rather than simply stating the same policy will continue to apply). We look forward to PEGI's response.

Background

On 10 February 2014, Cosmetic Warrior and its exclusive licensee, Lush Limited (together referred to as Lush), the manufacturer and supplier of the LUSH cosmetic products, famous for its colourful soaps and 'bath bombs', issued proceedings in the High Court for trade mark infringement in respect of Amazon's use of the sign Lush in its sponsored adverts within the Google search engine results and in the search facility on the amazon.co.uk website.  In his Judgment dated 10 February 2012, Mr John Baldwin QC, sitting as a Deputy Judge, referred to the leading cases in this area, Google France (Case C-236/08) [2010] RPC 19, and more recently, Interflora Inc v Marks and Spencer plc [2013] FSR 33 to make the following findings:

1. the use by Amazon of the LUSH trade mark as a keyword within the Google Adwords service to trigger  sponsored advertisements for the Amazon.co.uk website, which included references to "Lush" and "Lush soap" products despite the fact that such products were not available (and instead offered similar or equivalent products), infringed Lush's CTM pursuant to Article 5(1)(a) of the Trade Marks Directive; the Deputy Judge held that the average consumer would not expect Amazon to be advertising Lush soap for purchase if it were not in fact available for purchase.
2. there was no finding of infringement in respect of those Amazon sponsored adverts which did not include any reference to "Lush" or "Lush Soap" but only references to similar or equivalent products as, according to the Deputy Judge, consumers are familiar with sponsored adverts and are used to seeing such adverts from competing suppliers.
3. the use by Amazon of the Lush trade mark within its internal search results, so that when consumers searched for "lush" they were then directed towards a 'drop down' menu which ultimately led the consumer to competitor products, infringed Lush's CTM pursuant to Article 5(1)(a) of the Trade Marks Directive; the Deputy Judge held that the average consumer would not be able to ascertain without difficulty that the goods available on the Amazon site were not Lush products.
   Form of Order hearing

As the parties were unable to agree the form of Order it was left to the Deputy Judge to finalise the terms of the Order, following submissions from the parties.  The most pertinent aspects of the Order are set out below:

Form of injunction: Lush, not unsurprisingly, argued that the Court should impose a general form of injunction against infringement.  Amazon, on the other hand, argued that the injunction should be in a specific form, relating only to certain uses of the Lush mark, as set out in the Judgment.  Amazon's concern was that because of the way it designed its software, it was technically difficult to avoid infringement. For example Amazon contended that it did not quite know how to prevent its web page reproducing the word Lush above the offering of a range of products competitive to Lush products.  The Judge was not convinced by this argument and was satisfied that Amazon did have the expertise to do what was required if it wished but only commercial reasons which prevented it from doing so.  Amazon provided no adequate justification as to why they could not use more conventional methods to inform customers that the goods that were being offered were not Lush's products.  On this basis, the Deputy Judge granted a general form of injunction.

Territorial extent: The Deputy Judge rejected Amazon's argument that the injunction should only apply to the UK (since the trial had only concerned Amazon's UK site) and held that there were no special circumstances to warrant a departure from the usual order that as the infringement related to a CTM, the injunction should be effective throughout the EU.

Publicity: As to the question of whether the Court should grant a publicity order, the Deputy Judge sought guidance from the case of Samsung Electronics (UK) Ltd v Apple Inc [2013] FSR 9. He concluded that Amazon should publish a notice on its website, by way of a link to the judgment, for one month. This was in relation to all pages which returned in response to the term "lush." The Deputy Judge did, however, take into account the fact that the decision had already attracted significant publicity and for this reason no further advertisement in national press was warranted and the Deputy Judge agreed to grant a stay regarding the publicity order, pending any appeal to the Court of Appeal.

Permission to appeal: The Deputy Judge refused to grant permission to appeal on the basis that he had simply applied established legal principles to a set of facts. Amazon now has the opportunity to apply to the Court of Appeal in order to obtain permission to appeal.

Registration of licence: The Deputy Judge rejected Amazon's argument that Lush should only be entitled to 50% of its costs owing to the fact that the exclusive licence between Cosmetic Warrior and Lush had not been recorded at the UK Intellectual Property Office within the prescribed time period pursuant to Section 25(4) of the Trade Marks Act 1994.  In sum, Section 25(4) states that where a person becomes the licensee of a registered trade mark and the mark is infringed before the licence has been recorded, in proceedings for infringement, the Court shall not award him costs unless the licence has been recorded within 6 months (unless it was not practicable for the licence to be recorded).  The Deputy Judge contended that this was a case about injunctive relief which depended almost entirely upon what had happened subsequent to registration of the licence and that it was incidental that Amazon's infringements date back to a period prior to registration.  The Deputy Judge conceded that the position may well be different when it comes to costs of any damages inquiry or account of profits of pre-registration activity.

Conclusion

Increasingly, form of Order hearings are becoming fiercely contested, as parties seek to gain any possible advantage over each other.  This decision acts as helpful guidance as to the type of issues that are considered following judgment in intellectual property cases. In particular, it demonstrates that commercial considerations of the defendant are not relevant when deciding the form of any injunction.  This decision also acts as a useful reminder to rights holders that any exclusive licence should be recorded at the UK Intellectual Property Office as soon as possible, and in any event, within 6 months as it could have an effect on cost recovery, at least in respect of a damages inquiry.

What is the background to this case?

This case involves a long-running saga between fashion retailer Karen Millen and Irish retail chain Dunnes Stores. Karen Millen brought proceedings against Dunnes Stores in the Irish High Court back in 2007 claiming that Dunnes Stores had infringed the unregistered Community design rights in a knitted jumper and striped shirt marketed by Karen Millen.

Dunnes Stores admitted that it copied the designs but denied infringement of Karen Millen’s unregistered Community design right. Dunnes Stores asserted that the garments did not have a sufficiently ‘individual character’ to be afforded protection under Council Regulation (EC) 6/2002 (the Regulation), and that in any event the evidential burden as to whether the garments possessed an individual character was on Karen Millen.

In particular, Dunnes Stores contended that the copied garments comprised a combination of existing design features that could be identified from various designs within the fashion industry prior to Karen Millen’s designs. Karen Millen contended that ‘individual character’ was not to be assessed through a comparison with an amalgamation of existing designs, but that a Community design should be compared against individual existing designs in their entirety.

Karen Millen was successful in its infringement claim before the Irish High Court. Dunnes Stores appealed the decision to the Irish Supreme Court and the case was then referred to the Court of Justice of the European (CJEU) for a decision on the interpretation of the Regulation. Advocate General Wathelet has just handed down his Opinion that in order for a design to have individual character, the overall impression which that design produces on the informed user must be different from that produced on such a user by one or more earlier designs taken separately viewed as a whole, not by a composite of various features from earlier designs.

What is your view of how the Advocate General characterised the prior art as needing to be whole designs rather than an amalgamation of design features?

I agree with the approach adopted by the Advocate General. This builds on, and is line with, existing CJEU case law regarding the interpretation and parameters of ‘individual character’.

Probably the most convincing justification provided by the Advocate General in support of his approach is contained in the following extract from his Opinion:

‘[None of the translated versions of the Regulation]…permit the abstraction of certain specific features from one or more earlier designs in order to create a theoretical object of comparison.’

The Advocate General seems to suggest that if art 6 was intended to be interpreted as allowing for the creation of a ‘theoretical object of comparison’, the Regulation would expressly allow for the amalgamation of previously disclosed design features. The Regulation does not however allow for it and such a construction should not be implied.

How does the Advocate General’s view on this point fit with previous CJEU cases?

I do not believe the Advocate General’s Opinion is particularly controversial and in fact it closely mirrors the findings of the General Court of the CJEU in Shenzhen Taiden v OHIM: T-153/08, a decision from 2010. In that case the court found:

‘A comparison should be made between, on the one hand, the overall impression produced by the contested Community design and, on the other, the overall impression produced by each of the earlier designs legitimately relied on by the party seeking a declaration of invalidity.’

Advocate General Wathelet quoted this passage with approval in finding that comparisons should be made with ‘each’ individual garment presented, not a hypothetical amalgamation of features from different designs.

What is your view of how the Advocate General characterised a design owner having to give an indication of individual character rather than having to prove it?

Article 85(2) creates a presumption of validity in respect of an unregistered Community design right in an infringement action, provided that the provisions contained within art 11 are met and the holder of the design right can ‘indicate what constitutes the individual character of the design’. Article 11 states that a design right will be valid where the requirements of section 1 (arts 3–9) are met, and the design has been made available to the public within the last three years.

Article 6 provides that a design must be shown to produce a different overall impression on informed users. So there appears to be an inherent conflict in art 85(2), as the requirement only to ‘indicate’ the individual character of the design does not fit with the more onerous art 6.

The Advocate General dealt with this apparent conflict by opining that if one was to read art 85(2) and art 11 as Dunnes Stores had (ie that in order to be afforded protection a designer would need to prove compliance with arts 3–9), then in order for a design to be protected, the right-holder would also need to prove that they had met the requirements of ‘visible features’, ‘normal use’, ‘novelty’ and ‘disclosure’. To require evidence of the aforementioned would undermine the whole purpose of the presumption of validity afforded under art 85.

If this Opinion is followed in the CJEU decision, who will be the wider industry winners and losers?

Due to the transient nature of fashion which militates against the cost of registered designs, the unregistered Community design which lasts for three years is an integral part of a fashion designer/retailer’s IP tool kit. In the event that the CJEU affirm the Advocate General’s Opinion, the undoubted winners will therefore be mid to high end fashion designers and retailers. This approach gives them comfort that provided a new design possesses an individual character when contrasted with existing whole designs, they will be able to enforce a right in that design against those who copy it.

By contrast, designers and retailers at the lower end of the spectrum who make their margins by selling lower quality versions of high-end products will need to be wary of such a decision. The Advocate General has effectively endorsed a relatively low threshold in respect of the ‘individual character’ test.

This article was first published on Lexis®PSL IP & IT on 10 April 2014 and is in a Q&A format with Kate Beaumont.

The "Pheasant Mark"                                                 The "Pigeon Sign"

This case is a useful reminder of how the conceptual similarities between marks, in spite of obvious visual differences, can lead to a finding of infringement.  Arnold J's positive findings on likelihood of confusion and unfair advantage were particularly interesting given the lack of evidence adduced by either party.  It demonstrates that the courts are very willing to reach independent findings of fact on these issues based on judge lead deduction.

Background

The facts of the case were straightforward and broadly not contested by the parties.  Jack Wills' Pheasant Mark was registered in class 25 (amongst others) and House of Fraser's use of the Pigeon Sign post-dated the relevant registration(s).  Jack Wills sought a finding of infringement under both Art. 5(1)(b) and Art. 5(2) of Council Directive 2008/95/EC (respectively, use of a confusingly similar mark, and taking unfair advantage of a mark).

Decision

Art. 5(1)(b) (confusingly similar mark)

Applying the standard tests, Arnold J had no difficulty in finding that the Pigeon Sign was used by House of Fraser in the course of trade without the consent of Jack Wills.  It was also not contested that the Pigeon Sign and the Pheasant Mark were used on similar (indeed identical) goods.  The two questions that arose therefore were the similarity of the marks and the likelihood of confusion.

Similarity of the marks.  House of Fraser's primary arguments were simply that the birds in question were different species and that there were some obvious visual differences between the marks – namely the bow tie, cane and the logo's orientation.  To the extent that Jack Wills cited visual similarities, namely the fact that both signs were of birds, with a similar posture and profile, House of Fraser applied a classic squeeze argument stating that those similarities were borne out of a lack of distinctiveness.

House of Fraser pointed to several other "bird brands" such as Hollister and Penguin as well as the lesser known bird used by Modern Amusement.

Arnold J was in the end, persuaded by the conceptual similarities.  Left unconvinced by House of Fraser's position that the Pigeon Sign was a symbol of working class London, Arnold J noted that both the Pigeon Sign and the Pheasant Mark bore "accoutrements of an English Gentlemen".  Not only was that observation determinative of conceptual similarity, but it took care of all of House of Fraser's arguments that the Pheasant Trade Mark was not distinctive – ie none of the birds cited by House of Fraser wore any accoutrements at all.

Likelihood of confusion.  Jack Wills, having established that the Pheasant Mark was inherently distinctive also sought to establish enhanced distinctiveness (therefore increasingly the likelihood of confusion).  House of Fraser observed that little or no evidence was adduced by Jack Wills in support of its submission, but Arnold J was persuaded that through sheer use (3 million units sold over 4 years), the Pheasant Mark must have enhanced distinctiveness and that such distinctiveness increased the likelihood of confusion.

No evidence of actual confusion was provided by Jack Wills, but  Arnold J reiterated that no actual evidence of confusion is necessary and held that in fact there was a strong likelihood in this instance that any confusion could go undetected.  Consumers might purchase House of Fraser products thinking it was Jack Wills, but not complain – both products would have been well manufactured and from well-regarded high street stores.  In the end, Arnold J held that there must be a likelihood of confusion because of, in particular, the conceptual similarity of the mark and the sign and the acquired distinctiveness of the Pheasant Mark. 

Art. 5 (2) (unfair advantage)

Once again, several limbs of the unfair advantage (5(2)) test were unchallenged.  However, in brief, Arnold J was satisfied that Jack Wills had a significant repute in the UK (and such a repute within one member state would suffice for Community purposes).  Arnold J had already held that the Pheasant Mark and Pigeon Sign were sufficiently similar and was also satisfied, in light of his finding of conceptual similarity, that the Pigeon Sign would "call the trade mark to mind for the average consumer, who is reasonably well informed and reasonably observant and circumspect".

Of the three "limbs" of damage possible under 5(2): (i) detriment to distinctive character of the mark; (ii) detriment to reputation of the mark; or (iii) the taking of unfair advantage of the mark, Jack Wills pursued the unfair advantage limb only.

House of Fraser argued that, in order to establish unfair advantage, it was necessary for Jack Wills to show evidence that the economic behaviour of House of Fraser's consumers was actually altered by House of Fraser's use of the Pigeon Sign.  Arnold J rejected that submission, following the decision in Case C-383/12 Environmental Manufacturing LLP v OHIM that logical deductions about the unfair advantage gained by a Defendant were permissible, provided that those deductions were in fact logical and not "mere supposition".

Arnold J concluded that "the effect of House of Fraser's use of the Pigeon Logo will have been to cause a subtle but insidious transfer of image from the Trade Marks to the Pigeon Logo (and hence from Jack Wills goods to House of Fraser's goods) in the minds of some consumers, whether that was House of Fraser's intention or not."  That conclusion was based on deductions made by Arnold J in relation to the retail clothing market and the attraction of consumers towards prestigious brands.  Consequently, Jack Wills was also successful in proving infringement under Art. 5(2).

Decision

It may be that Arnold J was unconvinced that the Pigeon Sign was conceived independently from the Pheasant Mark and so, the benefit of the doubt was always more likely to be exercised in Jack Wills' favour. 

Ultimately the conceptual similarity between the Pheasant Mark and the Pigeon Sign was fatal for House of Fraser showing that conceptual similarity can be sufficient to override obvious visual differences between a trade mark and allegedly infringing signs. That approach may be considered particularly relevant in the retail world (especially towards the higher-end).  Visual similarities in these types of cases may be less important considering that current trends lean towards branding on higher end products tending to be small and unobtrusive (e.g. a small piece of embroidery on the left breast - as in this case).

What the case also demonstrates is that Judges are more than happy to draw their own deductions on outcomes from their own experience when it comes to findings of likelihood of confusion or whether a party has obtained an unfair advantage - even where neither party adduces any evidence on that point at trial.

Judges plainly see high street retail as an area on which they are well qualified to comment.   Whether in this specific context or, for example, as a consequence of laying down much stricter guidelines on parties' use of survey evidence and experts, it's becoming increasingly common to see Judges relying on their own findings and placing less weight on evidence.

Written by Jeremy Drew and Chris Sanderson

The claimants (FAGE UK Limited and FAGE Dairy Industry S.A., together "FAGE") have, since the mid-1980's, imported from Greece and sold throughout the UK, yoghurt described as 'Greek yoghurt' under the brand 'Total'. By 2012, FAGE had a 95% market share for all yoghurt sold in the UK labelled as 'Greek yoghurt'. The defendants (Chobani UK Limited and Chobani, Inc. together, "Chobani") manufactured yoghurt in the US which was sold in the US as 'Chobani Greek yoghurt'. In mid-2012 Chobani decided to introduce their product into the UK market and label it as 'Greek yoghurt'.