Intellectual Property Protection and Enforcement (Hawksmere Report)

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INTELLECTUAL PROPERTY PROTECTION AND ENFORCEMENT

Lorna Brazell

A Hawksmere Report published by Thorogood

IFC

A Hawksmere Report

INTELLECTUAL PROPERTY PROTECTION AND ENFORCEMENT

Lorna Brazell

published by Thorogood Ltd

Published by Thorogood Limited Other Hawksmere Reports published by Thorogood: Software Licence Agreements

12-18 Grosvenor Gardens London SW1W 0DH. Thorogood Limited is part of the Hawksmere Group of Companies.

Robert Bond

Negotiating Hi-Tech Agreements Robert Bond

Evaluating and Monitoring Strategies David Allen

© Lorna Brazell 1998 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior permission of the publisher.

Managing the In-house Legal Function Barry O’Meara

This Report is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out or

The Internet as a Business Tool

otherwise circulated without the publisher’s

Brian Salter and

cover other than in which it is published

Naomi Langford-Wood

and without a similar condition including

prior consent in any form of binding or

this condition being imposed upon Legal & Business Issues in the Music Industry Patrick Isherwood

the subsequent purchaser. No responsibility for loss occasioned to any person acting or refraining from action as

Employment Law Aspects of Mergers & Acquisitions Michael Ryley

a result of any material in this publication can be accepted by the author or publisher. Lorna Brazell has asserted her right to be identified as the author of this publication

Standard Conditions of Commercial Contracts

A CIP catalogue record for this Report

Peter Wilding

is available from the British Library. ISBN 1 85418 054 1 Printed in Great Britain by Printflow Limited.

The author Lorna Brazell graduated in geophysics in 1986 and spent several years in research gaining an in-depth familiarity with computer systems. Having requalified and obtained an LLM from King’s College London, she now practices as a solicitor specialising in intellectual property and technology law. She joined the Intellectual Property Department of Bird & Bird from another London firm in 1994. She speaks regularly on legal and procedural issues relating to intellectual property law, both to commercial conferences and professional organisations. Lorna contributes articles to a variety of IP publications, and her practice includes commercial advice on all aspects of the commercial exploitation of patents, trade marks and copyright in the UK and EU, as well as litigation in the High Court and County Courts. Her recent publications include The use of trade marks in comparative advertising (Brand Strategy, January 1997), Valuing brands (Trademark World, November 1997) and Passing off action succeeds where trade mark registration fears to tread (WIPR, April 1998).

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Contents

1 2

INTRODUCTION

2

PATENTS

6

Introduction ......................................................................................6 Basic requirements ............................................................................7 Validity. ............................................................................................12 Infringement ...................................................................................15 Remedies .........................................................................................18 Other points to note .......................................................................23

3

TRADE MARKS

30

Introduction: trade marks, registered and unregistered .................30 Basic requirements ..........................................................................31 Validity.............................................................................................38 Infringement ...................................................................................38 Civil infringement ...........................................................................39 Criminal infringement .....................................................................47 Other points to note .......................................................................49

4

PASSING OFF – THE PROTECTION OF UNREGISTERED TRADE MARKS

56

Introduction ....................................................................................56 What is the right? ............................................................................57 Infringement ...................................................................................61 Who can sue and be sued ...............................................................67 Remedies .........................................................................................67 Practical pointers ............................................................................68

5

COPYRIGHT

70

Introduction ....................................................................................70 Basic requirements ..........................................................................72 The rights obtained: copyrights and moral rights...........................75 Duration ..........................................................................................76 Ownership and dealings .................................................................76 Collective administration ................................................................78 Infringement ...................................................................................79 Practical anti-piracy measures .........................................................88

6

REGISTERED DESIGNS

90

Introduction ....................................................................................90 Requirements for registration ........................................................91 Exceptions to registrability ............................................................94 How to register ...............................................................................95 The monopoly obtained..................................................................95

Ownership and dealings .................................................................96 Duration .........................................................................................97 Infringement ...................................................................................97 Other points to note .....................................................................101 Summary .......................................................................................101

7

UNREGISTERED DESIGN RIGHT

104

Introduction ..................................................................................104 What designs can be protected? ...................................................105 The monopoly obtained................................................................108 Ownership and dealings ...............................................................109 Term of protection ........................................................................109 Infringement .................................................................................110 Remedies .......................................................................................113 Threats...........................................................................................114

8

TRADE SECRETS

116

Introduction ..................................................................................116 Quality and circumstances – what can be protected? ..................117 Common situations .......................................................................119 Summary .......................................................................................123 Losing confidentiality ....................................................................124 Expiry of confidentiality................................................................125 Transfer of confidential information .............................................126 Infringement .................................................................................126

Appendices Further reading .............................................................................130 Useful addresses............................................................................130

Introduction

chapter

1

Chapter 1 Introduction Until very recently, many businessmen would have been able to go through an entire career without ever coming across the concept of intellectual property. True, brand recognition has long been known as an important aspect of success in business, but for many this would have been seen as an effect, not a cause, of a thriving business. Nowadays, the position is coming close to the reverse of that of 50 or even 25 years ago: businesses are increasingly coming to recognise that intellectual property, in one or more of its many forms, is a valuable asset, if not the asset, which may significantly contribute to their competitive advantage. So what exactly is intellectual property, and how has it come to achieve this leading role? Intellectual property is actually an umbrella term used to describe a variety of different legal rights. The most familiar of these is likely to be copyright: the right of an author (or his or her assignee) to issue copies of a work to the public and to prevent others from doing so without a licence. Ownership of a copy of the work – the latest best-seller, for example – does not give anyone the right to photocopy it and give or sell the photocopy to a friend. What has been bought is only the physical object, the book itself, a means of access to the text: copyright in the text still remains the property of the author. This is a fundamental characteristic of intellectual property: unlike other kinds of property, which consist of physical objects or assets and can by physically walled off from intruders, intellectual property consists of abstracts – expressions, processes, designs – which cannot adequately be safeguarded by purely physical means. The essence of intellectual property is that it is the purely legal rights over the property which are the real boundary–markers, beyond which competitors can be prevented from encroaching. It is therefore necessary to understand, in respect of each separate category of intellectual property, what exactly those rights are, how they come into existence, how they can be enforced and what limitations they have. Although intellectual property rights (‘IPRs’) have the common characteristic of abstraction, they have little else in common. The rights vary widely in nature and scope, covering substantially unrelated materials. The subject matter protected may range from the latest chart–topping single to the shape and colour of a designer lager bottle, or from the detailed chemical formulation of the newest AIDS treatment to the design of a child’s toy. Some, such as a company’s rights over its trade secrets or unregistered trade marks, have developed over many years through the cumulation of decisions of the courts in individual cases. Others,

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INTRODUCTION

such as patent and design rights, are purely creatures of statute created by Parliament. Some require the owner to take formal action – apply for registration – to bring them into existence, while others arise spontaneously. The protection they confer may be absolute, even against an infringer who had no knowledge of the right’s existence, or severely contingent on proving direct copying. Finally, while one right may last for 15 or 20 years, another can persist for 70 years after the author’s death and some, subject to continual use, protection or renewal, can last forever – another striking difference from most physical business assets. The modern importance of intellectual property of all forms is a result of several factors: the growing affluence and sophistication of consumers, the maturation of technology in traditional industries and the increasing domination of so–called ‘high’ technology industries. Previously consumers were concerned primarily with the function and perhaps durability of their purchases, now the image of the product and its associations may be of an equal, or in some cases – clothing, drinks, accessories – greater, importance. For such products, it can be the trade marks and their marketing which sell, as much as the products themselves. In long–standing industries, greater integration of world markets has meant that it is no longer sufficient to produce for, and excel in, a purely local market: the competitive playing field has become both larger and leveller, so that small technical improvements acquire a disproportionate significance in distinguishing one producer from another. And in the high–tech and pharmaceutical industries, success and even survival depend upon continual innovation. Patent rights, establishing a monopoly over the new product or process, are essential to protect the enormous investment which has to be made in research and development. Following on from this increase in importance is an inevitable increase in value. In the early 1990s, debate over the inclusion of brand value on company balance sheets became heated after Rank Hovis McDougall set a price of over £500 million on its portfolio of household names. Although the practice of capitalising intangible assets on the balance sheet did not become widespread, nevertheless it remains indisputable that the majority of strategic mergers and acquisitions are influenced, if not driven by, the intellectual property of one party. Some businesses derive equal or greater profits from the licensing of their patents and trade marks than from direct manufacturing or retail operations. In this situation, it is essential that businesses recognise the value of their intellectual property rights and take the same care in their development, support and protection as they do in the rest of their operations. This Report is intended as an introductory text to enable businesses to decide what kinds of intellectual property are likely to be of value to them, and how best to protect the rights they have or acquire. It therefore does not attempt to look at the economics and strategy of intellectual property ownership and

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management. The Report will review each of the principal forms of intellectual property right available in the United Kingdom in turn, giving a description of the nature of the right itself and explaining: •

How it arises or can be obtained;

•

How it can be exploited;

•

What is necessary to protect the right from erosion or loss;

•

What actions will constitute infringement of the right, under either civil (enforced by the owner) or criminal (enforced by public authorities) law; and

•

What remedies are available to the right owner, once infringement has been proved.

Each chapter can be read on its own, although where the subject matter overlaps – for example, between registered and unregistered designs, or trade marks and passing off – it is recommended that both chapters should be read. The introduction to each chapter makes it clear where an awareness of another section may be useful. Although the Report gives a general overview of the principal aspects of intellectual property for IPR owners and users, more detailed advice should be taken before entering into any substantial transaction. In particular, it is directed towards the law of the United Kingdom. There will be many similarities to UK law in the laws of the major industrialised countries, but in each case, local advice should be taken before attempting to register or enforce IPRs overseas. Further, the Report will not attempt to cover the very industry–specific rights such as the protection of plant varieties, semi-conductor topography rights or the multiplicity of copyright–related rights such as performers’ or broadcasters’ rights. As the law is stated at March 1998, utility models, which will be introduced in a few years time following European Community legislation, and the proposed European designs directive are not discussed either. For detailed discussion of rights in these areas, the reader is referred to specialist texts; a list of possible further reading is given at the end of this publication.

4

Patents INTRODUCTION BASIC REQUIREMENTS VALIDITY INFRINGEMENT REMEDIES OTHER POINTS TO NOTE

chapter

2

Chapter 2 Patents

Introduction Patents, one of the oldest intellectual property rights, are monopoly rights granted over novel technical inventions. Patents may be granted in respect of product inventions or process inventions. Where the invention claimed is a product and an associated process (for example, a process used to make the product concerned) which forms a single inventive concept, they can be covered in one patent. The monopoly obtained through the grant of a patent is a strong one, since no one else can work the patented invention without the proprietor’s consent even if they knew nothing of the patent and had made the same invention independently. It lasts, however, only for 20 years from the date of the application (save where pharmaceuticals are concerned, when an extension of a further five years is possible). There are proposals at European Community level for a shorter term protection to be introduced for minor innovations, to be known as a ‘petty patent’ or ‘utility model’, but these will not take effect in the United Kingdom for at least 5–10 years. This chapter looks at the criteria which need to be satisfied for a patent to be granted and how a patent application is made and assessed. The question of validity of a patent is discussed in some detail. The acts which will infringe a valid patent and the remedies available against infringers, as well as the defences and counterclaims that may be raised are explained. Finally, some specific questions, such as the ownership of inventions made by employees, use of patented inventions by the Government and potential pre–emptive remedies in the face of a threatened patent infringement action are reviewed.

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Basic requirements The conditions necessary for the grant of a patent over an invention are that: i)

The device or process is novel;

ii)

It involves an inventive step (that is, is not obvious);

iii) It is capable of industrial application; and iv) The subject matter is not excluded from patentability. Conditions (i)–(iii) will be looked at in detail in the section on validity, below.

Excluding The subject matter excluded from patentability mainly relates to things which are protected by other intellectual property rights – for example, copyright works – or are not considered to be ‘inventions’, such as: •

Pure scientific theories or discoveries, or mathematical methods; or

•

Methods for performing any mental act, playing games or doing business; or computer programs.

Further exclusions are on moral or social grounds, such as inventions which would be generally expected to encourage offensive, immoral or anti–social behaviour. Varieties of animal or plant or any essentially biological process for the production of any animal or plant (other than micro–biological processes) are also excluded. Any exclusion applies only to the extent that a patent application ‘relates to that thing as such’. This has been important in relation to computer programs. Provided that there is some technical effect outside the programmed computer and the basic requirements are complied with in relation to the apparatus as a whole, then the invention is patentable – even if the inventive step is expressed in a computer program. So, for example, an automatic washing machine controlled by a novel program might be patentable, although the program alone would not be and the machine itself is not novel. The last exclusion – obtaining patents in respect of living matter – is an emotive subject and international policy has not yet been finalised. Meanwhile, however, the European Patent Office have been fairly sympathetic towards applications involving genetic engineering and similar areas of scientific research, perhaps because of the immense investment involved in this area.

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Obtaining protection – application and grant Unlike some other intellectual property rights, a patent does not just come into existence with the invention: it has to be applied for. A detailed specification describing the invention must be submitted, with a fee, to the appropriate Patent Office. Which Patent Office that will be depends on the geographical scope of protection required, and is discussed further below. Patent specification A patent specification consists of two sections: first, a description of the invention, possibly with examples and drawings, followed by one or more claims. The description and any drawings are discursive, explaining for example the problem that the invention overcomes, and how the invention fits into the relevant technological field – the ‘art’. They are used to help with interpretation of the claims, which are both shorter and cover a more limited area since the sole function of the claims is to define exactly what it is that is claimed to be the patentable invention. Hence, the precise wording of the patent application, and in particular the claims, is extremely important. Drafting patents is one of the principal functions of patent attorneys. The overall specification must disclose the invention clearly enough and completely enough to enable the invention to be performed by a person skilled in the art. The claims themselves must: –

Define the matter for which the applicant seeks patent protection,

–

Be clear and concise,

–

Be limited to material disclosed in the description, and

–

Relate only to one invention or to a series of inventions so linked as to form a single inventive concept. Thus, a separate application must be made for each separate invention.

The Patent Office fees from application to grant of patent for a United Kingdom patent are in the region of £285. However, the fees of a patent attorney for drafting the patent and prosecuting the application through the Patent Office can vary widely depending upon how well the applicant has researched the state of the art and defined their invention before asking for the specification to be drawn up. Procedure in the UK Patent Office After the application has been checked for completeness and other formalities, a patent examiner will carry out a search for material which anticipates the claimed invention. It may be necessary to amend the application at this stage to

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exclude any elements of the invention which the search results reveal to have been already known. The application will then be examined to see if it complies with the four conditions for grant of a patent. The examiner notifies any objections to the applicant’s patent attorney, who will either attempt to persuade the examiner to take a different view, or propose further amendments to take account of the objection. The patent application is published as soon as possible after 18 months have elapsed from the filing date (this leaves a period for the applicant to withdraw if for any reason it is decided not to pursue the application). Anyone who sees the publication can then inform the Patent Office of any reason of which they are aware (but which the examiner may have missed) why the patent ought not to be granted. The applicant is notified of all such objections and may once more amend, or attempt to persuade the examiner in writing as to the merits of the application. The complete procedure takes typically two to four years in the UK Patent Office. The procedure at the European Patent Office (EPO) is broadly similar, but in addition permits third parties not merely to tell the examiner he or she has missed something but actually to bring proceedings opposing the patent as soon as it has been granted. These proceedings may involve contested hearings with both parties, and appeals to the Board of Appeal of the EPO. If this happens, a European patent can take considerably longer to reach final approval (although it remains in force during the opposition proceedings).

Who can apply The inventor is the actual deviser of the invention. Where two or more persons were involved, they are considered to be joint inventors. A patent can be granted to the inventor or joint inventors unless another person has a better entitlement to it. For example, in some circumstances (as discussed below) an invention made by an employee belongs by law to his employer. (The inventor has, however a right to be mentioned as being the inventor in any published application and in any patent granted.) The patent will be granted to the legal owner only, although any equitable owner – such as a person or organisation which commissioned the research which led to the invention – may have a claim to the benefit accruing from the patent. There is a presumption (which can, however, be challenged) that the person making the application is entitled to the grant of the patent. The patent can also be granted to a successor in title to the person who would otherwise have been entitled.

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The person to whom the patent is granted and who has the right to work the invention is known as the proprietor.

The monopoly obtained A UK patent gives a commercial monopoly for a limited period of up to 20 years. During this time, the registered proprietor has the exclusive rights to work the patented invention in the United Kingdom – by manufacturing the patented product, using the patented process, or importing, selling or using goods produced by either of these means. Further, the patentee will be able to prevent an unauthorised person from supplying or offering to supply the essential elements of the invention when they know, or a reasonable person would have known, that the elements were suitable for and intended to be used to put the invention into effect in the UK. However, ‘staple’ commercial products are excepted from this – a patentee cannot stop someone selling nails, just because they could be used in assembling an infringing machine. Experimental work in the area covered by the patent will not be prevented, since this would defeat the object of the patent system – encouraging innovation. Private, non–commercial use, will also be possible despite the existence of a patent.

Amendment, assignment, renewal and common sense Substantive amendment of a patent after grant is only possible in limited circumstances (although mere clerical errors can always be corrected). It may happen quite innocently that neither the applicant nor the patent examiner picks up certain prior art during the course of the application, but that it later comes to light. The proprietor of the patent can apply at any point during the lifetime of the patent to amend to avoid such materials. Post–grant amendment must not extend the technological monopoly granted, however, and cannot add new material into the specification. If the patent is infringed before an amendment to the specification is allowed, damages are not available for the period before amendment unless it can be shown that the specification was initially framed in good faith and with reasonable skill and knowledge. Patents may be assigned or voluntarily licensed, either exclusively or otherwise. They may also be mortgaged or vest by operation of law in an executor or trustee in bankruptcy like other personal property. Where there are two or more proprietors of a patent or patent application, the consent of all of them is required for a licence, assignment or mortgage. An assignment or mortgage of a patent or patent application must be in writing and signed (by the parties to the transaction).

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All transactions affecting patents must be registered at the Patent Office: failure to register means a loss of priority over any later assignee or mortgagee who registers first. Further, if the transaction is not registered within six months then no compensation for any infringement of the patent in that period may be available. Assignments of patents also attract stamp duty. Initially, a patent is granted for four years. Thereafter, it is renewable annually, on payment of a renewal fee, up to a maximum of 20 years in total. Renewal fees vary on a sliding scale which increases over time, so that patentees who continue to renew their patents, presumably having made a success of their inventions, subsidise the cost of processing applications, in order to keep the application fees within everyone’s reach. There is six month’s grace for payment of each renewal fee for a patent, but financial remedies in respect of any infringement done during this period are discretionary: it is always prudent to renew before the current period of subsistence expires, rather than rely on the grace period.

International perspectives There are several geographical options open to a person applying for a patent. Depending on the territorial scope of protection required, the options are: •

United Kingdom patent only – apply to the UK Patent Office in Newport.

•

European patent (bundle of national patents, all identical, for any three or more of the 18 member countries of the European Patent Convention (all EC countries plus Liechtenstein, Monaco and Switzerland)) – apply either to the EPO in Munich or through the UK Patent Office (which acts as a post–box for the EPO). The EPO will carry out the search and examination, and adjudicate any oppositions third parties bring against the application. Once it has approved the patent for grant the designated national Patent Offices grant the identical individual patents making up the bundle.

•

‘World–wide’ or ‘international’ patent – over 80 countries are members of the Patent Co–operation Treaty, administered by the World Intellectual Property Organisation in Geneva, and a patent can be applied for in any number of them through the UK Patent Office. However, the patents obtained will not necessarily all be identical. After the initial search for prior art, the application proceeds as a national application

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in each designated country so that the vagaries of the different examiners will produce small, but occasionally critical, variations in wording in the final grants. A European patent can be designated as one application under an international application. European Community proposal For some time there has been a proposal for a single European Community wide patent, instead of the multiple identical patents making up the current ‘European Patent’. When it comes into effect, early next century, the Community Patent will have effect throughout the EC (and wider) and will be administered by the European Patent Office. The principal effect would be to centralise jurisdiction over both infringement and revocation of patents in a European Patents Court, so that the present problem – divergent interpretations of supposedly identical European patents by the different national courts – would be removed.

Validity i)

Novelty – is it new?

An invention is new if, at the priority date of the application, it does not form part of the ‘state of the art’. The priority date is normally the date of filing, although earlier priority can be claimed from a foreign patent application made within the previous 12 months in respect of the same invention. The ‘state of the art’ includes all matter which, at that time, has been made available to the public anywhere in the world by written or oral description, by use or in any other way. If the supposed invention has been completely, clearly and unambiguously described in an earlier publication, it is said to be anticipated and a patent will not be granted, or will be invalid. However, a clear and unambiguous explanation of how to do something, coupled with an instruction not to do it for some reason, will not necessarily anticipate. The prior disclosure does not have to be on a wide scale, nor need it have been acted upon. Given this condition, it is essential that the person applying for a patent does not divulge any details before filing the application, since this will then be part of the state of the art and could itself anticipate the patent. (This is in marked contrast to the position in the United States, where there is a grace period of a year in which the invention may be exploited before the patent application is filed.)

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PATENTS

Obviousness – has it an inventive step?

If the invention passes the test for novelty, it reaches the second test: whether it is inventive – meaning not obvious to a person skilled in the art. Obvious simply means ‘very plain’. Prior unpublished patent applications are ignored from this test even though they form part of the state of the art. The recognised test for inventive step is: 1)

Identify the inventive concept in the alleged invention,

2)

Put yourself in the shoes of the unimaginative skilled person with the common general knowledge in the art at the priority date,

3)

Identify what, if any, differences exist between the prior art identified and the alleged invention, and

4)

Ask whether, viewed without any knowledge of the alleged invention, those differences constitute steps which would have been obvious to the skilled person or whether they required any degree of invention.

This is, of course, impossible: hindsight will always affect the way a technician will look at a problem, making everything more obvious than it might have seemed at the time as a result. But this test does provide a helpful framework for analysing knotty technical problems, and indeed focussing on the most relevant aspects. Who can be ‘skilled in the art’ A patent is addressed not to lawyers or patent attorneys, but to the hypothetical ‘person skilled in the art’. As such, they are taken to have the necessary technical skills to understand and be able to apply the invention. They do not need to have extensive academic credentials – they may be the skilled mechanic or plumber. Equally, in today’s world of highly complex research carried out by large teams of researchers, where each member brings the skills of different disciplines to bear on a single problem, the ‘skilled man’ may in fact be a ‘skilled team’. Either way, the ‘skilled man’ must not have the spark of inventiveness, the ability to jump intuitively over apparent hurdles, which characterises the inventor. Thus, the ‘skilled man’ reads the patent in a dogmatic, technically competent fashion, but unable to surmount any significant flaws without further teaching. What is ‘common general knowledge’? In addition to the material published in learned journals, technical bulletins and the like, there will in any developing industry be a certain amount of information which forms the matrix into which the occasional strikingly new idea falls. This may include: the skilled technician’s ‘know how’ as to how to make a process operate under genuine industrial rather than laboratory conditions; the

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fundamental elements of the art which may come to have new application in light of recent developments; and the background understanding of the how’s and why’s of the subject that every practitioner or researcher in the field carries around with them. Such common general knowledge can render a claimed invention obvious, if in fact it turns out that many industrial operators do as the patent teaches as a matter of course. Commercial success The most likely time when the validity of a patent will be challenged is when the proprietor sues an alleged infringer, who will almost certainly counterclaim that the patent is invalid and should be revoked. If the grounds for the challenge are that the patent lacks any inventive step, one possible answer is that the resulting product has had substantial commercial success – especially if there have been many previous, unsuccessful attempts to find a solution to the same problem. Commercial success is shown by demonstrating high sales volumes and values, compared to previous products in the area. However, evidence of commercial success is not conclusive of inventiveness: commercial success may result from many different factors. The courts will find this sort of evidence helpful if the sales are due to the precise improvement which satisfied a ‘long felt want’, but not if the success results from matters such as the product’s appearance, get–up, price, marketing or advertising. Validity case study: Windsurfing International Inc. v Tabur Marine (Great Britain) Ltd. Windsurfing concerned a patent for ‘a wind–propelled vehicle having an unstayed spar connected through a universal joint and a sail attached along one edge to the spar and held taut between a pair of arcuate booms mounted on the spar at one end and joined together at the other’ (ie a Bermuda rig mounted on a wishbone boom). When sued for infringing the patent, the defendants counterclaimed that the patent was invalid since it lacked novelty over a prior use 10 years earlier by one Peter Chilvers, who, when he was a 12 year old boy on family holidays at Hayling Island, had built himself a rudimentary sailing board. They also claimed that the patent was obvious in view of an article entitled ‘Sailboarding – exciting new water sport’ (which, however, described not a Bermuda rig but a square one). Peter’s rudimentary windsurfer did not use a wishbone boom; he used straight pieces of wood, but these were thin enough to flex when in use and take an arched shape. Windsurfing International attempted to argue that Peter’s use of the sailboard in an isolated spot (albeit open to public view, should anyone with an interest

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have happened to pass), could not be relied upon to show obviousness because it lacked sufficient exposure. They also argued that the booms would have had to be arcuate even at rest to anticipate the patent completely. They said that no one would have taken the article seriously as a commercial proposition; it would have been seen as impractical to develop. The court disagreed with their arguments concerning anticipation by Peter’s board, saying that any adult skilled in the art would have found it obvious to replace his simple boards with a wishbone boom for best effect. Further, Windsurfing’s argument against the article was misplaced. The point was not whether anyone would have thought the idea worthwhile for commercial development, only whether in the light of the publication, the changes necessary to develop the device described into the patented one were obvious to someone skilled in the art. In this case, the court decided that they were. Thus, despite the plaintiff’s undoubted commercial success in the field, the fundamental patent for the windsurfer was found invalid – and the whole field of manufacture thrown open to competition.

iii) Industrial application An invention is capable of industrial application if it can be made or used in any kind of industry, including agriculture. Surgery, therapy and diagnosis in relation to human or animal bodies are excluded from the meaning of industrial application. Thus, new drugs are patentable in themselves, but the way that they are used is not.

Infringement Infringing actions A patent is infringed only by doing one or more of the following acts in a commercial context in the United Kingdom without the authorisation of the proprietor: •

Where the invention is a product: making, disposing or offering to dispose of, importing, using or keeping (whether for disposal or otherwise) a product falling within the claims.

•

Where the invention is a process: doing any of the above in relation to any product obtained directly by means of the process; or

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•

Using the process or offering it for use, either knowing such use to be an infringement or where it would be obvious to a reasonable person that such use would be without the consent of the proprietor and would infringe the patent.

•

All inventions: supplying or offering to supply to an unauthorised person any of the means, relating to an essential element of the invention, for putting the invention into effect. (For this to be an actionable infringement, the alleged infringer must know that the means are suitable for this, or it must be obvious to a reasonable person in the circumstances.)

Determining whether there is infringement To determine if a competing product or process infringes, it is necessary to analyse each claim of the patent element–by–element, comparing each element with the corresponding part of the supposed infringement. If all elements of the claimed invention are present in the competing item, then the latter infringes. If any single element is missing, then it does not. Where the infringing product or process is identical to the patented invention, this comparison is easy to make. When the possible infringement varies to some degree from the patent claims – that is, almost always – it is necessary to interpret the claims to see whether the suspected infringement falls within the patentee’s monopoly.

Claim interpretation: catnic, improver and the protocol The law on determining whether variants infringe is set out in a document called the Protocol to Article 69 of the European Patent Convention (EPC). This states that a strictly literal interpretation of the patent claims is not required, the description and drawings being used to resolve ambiguity. However, neither should the claims be seen as merely being a guide to the general area of the monopoly: a ‘middle of the road’ approach is appropriate, combining fair protection for the patentee with reasonable certainty for third parties as to what they can or cannot do. This test applies in all EPC countries. Despite this, in the notorious case of Improver Corporation v Raymond Industries Ltd concerning European patents for the ‘Epilady’ hair remover for women and an alleged infringement of it, courts in the United Kingdom and Germany came to opposite conclusions as to whether the variant infringed.

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The test to apply in the United Kingdom was set out in Catnic Components Ltd, v Hill & Smith Ltd. Three questions must be asked: 1)

Does the variant, in fact, have a material effect on the way that the invention works? If ‘YES’ the variant does not infringe. If ‘NO’, the second question must be asked:

2)

Would the informed reader (at the date of publication) have thought it obvious that the variant had no material effect? If ‘NO’ there is no infringement. If ‘YES’, the final question must be asked:

3)

Would a reader skilled in the art regard the particular phrase in the patent as including minor variants that would have no effect upon the way the invention works? If ‘YES’ then there is infringement; if not, there is no infringement.

Although using this approach strengthens a patent’s claims by including minor variations, it does make it difficult to predict the exact scope of the claims and, hence, the monopoly granted, until a court has ruled on the correct construction of the claims. This can operate to the patentee’s advantage, since a cautious competitor will want to leave a margin of difference between their product and the patented product, to be on the safe side.

Who can sue and be sued The proprietor of a granted patent can, naturally, sue. An applicant for a patent is able to sue for infringements which occurred between the publication of the application and the grant of the patent, but not until the patent has been granted. Importantly, an exclusive licensee of a patent automatically has the same right as the proprietor to bring proceedings in respect of any infringement after the date of the licence agreement. A non–exclusive licensee cannot, unless their licence gives this right. An infringement action can also be launched by an equitable owner, although the legal title will have to be transferred in the course of the proceedings. As to who can be sued, this includes anyone who does or threatens to do any of the infringing acts – including a licensee who goes beyond the acts permitted under their licence. Ignorance of the patent’s existence is not a complete defence, but will protect an infringer from liability for damages over the period before they became aware of the patent (for example, through receipt of a letter notifying them of it). (The simple marking on the product of ‘patent’ is not enough to destroy this innocence argument: the full patent number needs to be present, to put potential copiers on notice.)

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Remedies The remedies available for infringement of a patent are: 1)

Injunction against continued infringement

2)

Damages – these are alternatives and may not both be awarded or – in respect of the same infringement an account of profits

3)

An order for delivery up or destruction of infringing goods

4)

A declaration that the patent is valid and has been infringed by the defendant.

To obtain any of these remedies, the proprietor or licensee must generally begin legal proceedings in the Patents County Court or the High Court. The question of infringement may, if both parties (the proprietor and any alleged infringer) are willing, be referred to the Comptroller of Patents at the Patent Office, in which case the only remedies available are damages and/or a declaration of validity/ infringement. There are also remedies available to someone being unjustifiably accused of infringement: 5)

To apply for a declaration of non–infringement; and

6)

Where threats of legal proceedings have been made, to bring a threats action against the accuser.

These, and the limited criminal offences which may be charged in relation to patents, are discussed under ‘Other points to note’, below. 1) Injunctions The basis for an award of an injunction is that the infringer threatens to continue to infringe unless restrained. The proprietor can apply for an injunction as part of the final order at trial, but can also ask for a temporary or ‘interim’ injunction at the outset of proceedings, if the effect of the infringer continuing to infringe until trial will seriously damage the proprietor’s business. The court has, however, a discretion to award damages instead of a final injunction, taking into consideration whether the proprietor can be adequately compensated by money and whether it would be oppressive to grant an injunction. For example, if the proprietor routinely licenses the technology, then it is assumed that damages (in the sum of the licence fees the infringer ought to have paid) will be adequate compensation. In these circumstances an interim injunction is also unlikely to be granted.

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An injunction may similarly be refused if the proprietor, despite knowing of the infringing activity, has delayed to the point where the alleged infringer was entitled to believe they were free to continue to act. Finally, where there is an entry on the Register of Patents to the effect that ‘licences of right’ are available in respect of the patent (as discussed below, under ‘Other points to note’) and the defendant undertakes to take a licence, no injunction will be granted against them. 2) Damages/account of profits Once infringement has been proved, the patentee has to choose what form of monetary compensation they want. One option is damages – to compensate for loss or injury by, so far as possible, putting the injured party in the same position as they would have been in if there had been no infringement. Alternatively, where the patentee might not have been in a position to make the same sales as the infringer has done, and therefore has suffered little or no actual damage, the patentee may instead request an ‘account’ (that is, payment to them) of the profits the infringer made by virtue of the infringement. The calculation of damages can give rise to complex considerations. If the proprietor has been exploiting the patent by granting licences, then his loss is the capitalised value of the royalties that the infringer would have paid had he taken a licence. This convenient method becomes less easy to use if – as is often the case – the proprietor has granted various licences of the patent at different royalty rates. The royalty method is not so appropriate if the proprietor does not grant licenses but works the patent himself. In this case it is a question of the profits lost as a result of the infringer’s activities. Here, many factors may be relevant including the effect on the market place of the infringement, such as: •

Whether every sale of an infringing article represents a lost sale for the proprietor (this is assumed, unless the defendant can show otherwise).

•

Whether the proprietor would have sold other articles along with those lost sales (for example, the buyer may have also purchased non–patented accessories in addition to the patented article, damages for which are often referred to as ‘parasitic’ damages).

•

Whether the infringer had generated additional interest in the patented article through his marketing efforts.

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•

What the effect on the market was of changing a monopoly into a duopoly (for example, did the proprietor have to reduce his prices to compete with the infringer).

•

Typical profit margins for the category of article concerned.

•

Whether the infringer had deliberately undercut the proprietor’s sale price.

On sales which the proprietor would not have made, he is entitled to a reasonable royalty. A proper notional royalty rate is that which a potential licensee who had not yet entered the market would pay. On sales which the proprietor would not have made, he is entitled to a reasonable royalty. Exemplary damages – that is, damages above and beyond the loss suffered by the patentee – cannot be awarded. The plaintiff is, however, entitled to simple interest on the damages awarded, calculated at clearing bank base rate plus two per cent.

Limitations on damages As mentioned above, neither damages nor an account of profits is available if the defendant can prove that, at the time of the infringement, that they were not aware and had no reasonable grounds for supposing that the patent existed – the ‘innocent infringement’ defence. Also, if the patent is endorsed ‘licence of right’ and the defendant undertakes to take a licence, the damages recoverable are limited to a maximum of double the amount that they would have paid had the infringing acts all been done under a licence. Damages case study: Gerber v Lectra This case concerned Gerber’s very expensive, patented piece of equipment for automatic cutting of fabrics. The patent in question was in its last years before expiry, and was endorsed ‘licence of right’, but Lectra had neither taken a licence nor undertaken to do so. Gerber also sold peripheral, unpatented equipment along with the principal machine, supplied spare parts and gave service contracts for post–sales maintenance. Having won the case against Lectra as to infringement, in the damages enquiry they claimed not only the lost profits on machines they said they would have sold had Lectra not done so, but also a reasonable royalty on the machines Lectra had sold, but Gerber would not have sold, even if Lectra had not been around. Gerber also claimed their lost profits on the secondary sales of peripherals, spare parts and maintenance contracts. Further, they complained of an instance where Lectra had negotiated

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the terms of a sale during the lifetime of the patent, even though the sale was not to take place until the patent had expired (as, by the date of the enquiry, it had). Finally, they claimed that Lectra’s presence on the market before the patent expired had caused secondary losses by depressing the price they were able to obtain for the machines. The court awarded damages for sales of the machines themselves: lost profits on machines Gerber would have sold, and on a royalty basis for the others, the royalty being calculated, unusually, on the basis of the ‘profits available’ approach (disregarding costs of research and development and fixed costs). The royalty level was not limited because of the endorsement on the Register of Patents of ‘licence of right’, as Lectra had not availed themselves of this option by undertaking to obtain such a licence. The court held that secondary losses could be also be recovered, provided that the associated damage was foreseeably caused by the infringement. Thus, the sales of unpatented peripherals, spares for the machine itself and the associated maintenance could be recovered. Those losses which Gerber could establish had resulted from Lectra’s having established a commercial ‘springboard’ before the patent expired were also recoverable. The sale negotiated before expiry but not taking place until afterwards, however, was not an infringement, and therefore no damages could be recovered in connection with it. 3)

Delivery up/ destruction

This order is self–explanatory: if the infringer has produced infringing products and still has stocks of them, then the proprietor is entitled to have the remaining stock delivered over to them or destroyed, to ensure that they do not filter back onto the market. 4)

Declaration

This is a precautionary remedy. If the patent’s validity is challenged and successfully defended, then the proprietor is entitled to a declaration that it is valid. The proprietor will also be awarded an order for their costs to be assessed by the court (‘taxed’) and a proportion, generally between 65–75 per cent, to be paid back by the loser. Should some third party later challenge the patent’s validity in court and lose, the existence of the declaration will entitle the proprietor to a greater proportion of their legal costs of defending the patent a second time than they would ordinarily get reimbursed.

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Defences While not strictly speaking a defence as such, it is very common for defendants to challenge the validity of the patent, generally citing pre–existing material (prior art) which is alleged either to anticipate the invention or render it obvious. Defences include that: •

The act was – done privately for non–commercial purposes;

•

The act was done for experimental purposes;

•

The extemporaneous making up in a pharmacy of a medicine described in a doctor’s or dentist’s prescription;

•

At the time of the infringement there was a contract in force made by or with the consent of the proprietor which contained restrictive terms requiring or prohibiting the other party to the contract to acquire anything other than the patented product or product directly obtained from the patented process or prohibiting or restricting the use of articles;

•

There is an implied licence to use the patent – for example, to repair goods made using it;

•

The proprietor’s rights are limited because of EC law – for example, where the proprietor’s rights have been exhausted (see below under ‘Other points to note’);

•

The alleged infringing variant is obvious or lacking in novelty – therefore, if it is within the claims of the patent they are invalid or, if not, there is no infringement ( the so–called ‘Gillette’ or ‘squeeze’ defence);

•

The act was done in good faith before the priority date – this includes where the defendant has made, in good faith, effective and serious preparations to do such an act.

In practice, the ‘good faith prior use’ defence is very important. If the defence works, the defendant can ‘continue to do the act’ – that is, continue a single infringing act (completing the construction of something) or repeating a single infringing act (making further articles). Thus, this provision is not just a defence – it gives a right which can be assigned. (It does not, however, allow the prior user to grant licences.)

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Other points to note 5)

Threats actions

It is permissible to threaten a supposed infringer with legal action for making or importing a patented product or for using a patented process. Where a patentee or alleged patentee makes threats that they will bring proceedings for any other form of infringement, selling infringing products, for example, the alleged infringer can bring a ‘threats’ action to stop them. It does not matter whether the alleged threat was addressed to the alleged infringer themselves or to third parties such as their customers or suppliers: they will still be entitled to relief, as an aggrieved party. Mere notification of the existence of a patent does not amount to a threat falling within this provision, but almost anything more than notification does, so ‘cease and desist’ letters and letters before action in patents cases need to be drafted with extreme care, as the case of Ingledew Brown shows. If it is proved that actionable threats have been made then the alleged infringer can obtain an injunction to stop the threats being repeated and damages for any loss caused as a result of their having been made. The patentee’s only defence is to prove that the threats were justified by showing that there was indeed infringement. lt should also be noted that threats are actionable whether or not a patent is granted and whether or not the product complained of is or could be an infringement – so it is no defence to argue that no–one could reasonably have felt threatened. Threats case study: Brain v Ingledew Brown Bennison & Garret and Another Ingledew Brown were the firm of solicitors acting for a Danish research organisation which had developed a process for treating liquid waste by oxidation. The Danes had applied for a patent at the European Patent Office, but the application had not yet been granted. While waiting for the grant, they became aware that a process which they considered infringed the patent they hoped to obtain was being offered in the industry by a company called Intox, of which Mr Brain was the managing director. Accordingly, they instructed Ingledew Brown to write a letter before action calling Mr Brain’s attention to the patent application. Ingledew Brown accordingly wrote, on 9 April 1991, explaining the facts above and saying •

‘The purpose of this letter is to ensure that you are aware that the patent application has been made, that if granted it will have retrospective effect, and to give you notice that our client intends to

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take appropriate action to restrain the infringement of its rights and the use of confidential material as well as seeking damages for all past such infringements.’ On 13 June 1991, they also wrote to the Severn–Trent Water Board, saying •

‘...if you have entered, or intend to enter, into any agreement with Intox... which may involve an infringement of our client’s process, they will take an extremely serious view of that and take the appropriate action to protect it.’

The first letter had clearly threatened proceedings for patent infringement, even though it did not expressly name Mr Brain as a potential defendant. The letter to Severn–Trent was less explicit, but in the context it did amount to a veiled threat against them, at least sufficient to mount an arguable case. Thus Ingledew Brown as the authors of the letters, and their Danish client as the instigators behind them, were potentially both independently liable.

6) Declaration of non–infringement Where there is uncertainty as to whether a proposed course of action will involve infringing a patent or not, and the patentee has declined to confirm that it will not, it is possible to apply to the court for a declaration that the proposed course of action will not infringe. This enables the potential infringer to resolve the question without incurring any damages or risking an injunction being granted against them.

Employee inventions and compensation These provisions are theoretically important, since a very large proportion of patent applications will concern employee inventors. An employee invention belongs to the employer if either: –

The invention was made in the course of the employee’s normal duties as an employee (or in the course of duties specifically assigned to the employee), provided that the invention might reasonably be expected to result from the carrying out of those duties or

–

The employee had a special obligation to further the interests of the employer’s undertaking – for example, where the employee is a director or other senior figure – and the invention was made in the course of the employee’s duties (whether or not it might be expected to result from the carrying out of those duties).

In all other circumstances, the invention belongs to the employee.

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Case study: Harris’ Patent Mr Harris, a manager whose primary duty was to sell valves, was told that he was to be made redundant. Whilst he was serving his period of notice, he invented a new valve. All the company’s research and design work was undertaken by a parent company. It was not part of Mr Harris’ duties to provide solutions to technical problems, nor was the invention made in circumstances such that an invention might reasonably be expected to have resulted from his carrying out of his normal duties. Thus, Mr Harris rather than his former employer was held to be entitled to the patent on the valve. Case study: Greater Glasgow Health Board’s Application A junior registrar, Dr Montgomery, employed as an opthalmologist at Glasgow’s Western Infirmary, despite working an 80 hour week treating patients, was still taking examinations himself and thus involved in studying eye examination. While studying for an exam in his own time some three years after joining the Infirmary, he invented a new way of diagnosing and treating patients. His employer, the health authority, argued that they were entitled to the resulting patent as his job description included an expectation that he would avail himself of the research facilities available to the department and assist with postgraduate teaching of ophthalmology. However, his Head of Department testified that this was intended to function as an informal invitation to become involved with the university side of matters, thus making his career appear more interesting and hopefully opening up opportunities for the future. The court decided that Dr Montgomery’s duties to his employer did not extend to devising new methods outside his working hours. If it had been otherwise, so did the duty of every doctor in the country, which would put many people in a difficult position as to needing authorisation to publish and so forth, which is not presently the case. Therefore, Dr Montgomery, and not his employer, was entitled to the patent. If an employee devises an invention which is of outstanding benefit to his employer the employee may apply for compensation. The employer cannot enforce any term in the employee’s contract to the extent that the term reduces the employee’s right to compensation. However, the UK courts have interpreted ‘outstanding benefit’ extremely strictly: an employee whose invention had generated revenues of £5m was not awarded any compensation since this was not outstanding, in a £5bn industry. As a result, there are only one or two applications for employee compensation each year. This is in contrast to the position in Germany, where employee inventors are often entitled to a significant payment in respect of their inventions.

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Parallel importing – exhaustion of rights Where the patentee owns equivalent patents in several countries, for one reason or another there may be disparities in the prices which can be charged for the products. This is particularly prevalent in the pharmaceutical industry, where national regulations can cause large variations in the price to the end purchaser. If this position arises, there will be an opportunity for parallel importing – that is, buying the goods in a country where they are sold at a lower price and importing them into a country where they sell at a higher, and making a profit whilst possibly still undercutting the ‘local’ price for the goods. The patentee will not be able to stop such imports from another European country merely by asserting their UK patent rights. Under European law, a patent can only be used once in respect of any particular sample. The first sale is such a use, since the patent enables a premium price to be charged. Thereafter, the patent is said to be ‘exhausted’ with respect to that sample. However, the first marketing must be truly voluntary – for example, if the goods were produced by a third party under a compulsory licence in another country, it would still be possible to assert the UK patent against them. Where the parallel imports originate from outside the European Union, it may be possible to prevent their sale in the United Kingdom, but not in every case. To do so, the proprietor must have made sure that both the original purchaser and every intermediate purchaser in the chain, including the parallel importer, was aware that the goods were intended only for restricted circulation when initially put on the market. This will generally require very clear labelling on the goods themselves, and preferably express terms in the contract of sale as well.

Compulsory licences and licences of right – stopping abuse of the monopoly Compulsory licences Once three years have passed after the date of the grant of the patent, then if –

The patent is not being used,

–

Demand for the product (either domestic or potential export) is not being met, or

–

Production either of other patented products or of unpatented materials is being hindered due to the proprietor’s failure to grant licences on reasonable terms.

any person may apply for a licence under the patent and/or for an entry to be made on the Register of Patents to the effect that licences are available as of right.

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Licences of right The proprietor of a patent may have the Register endorsed to indicate that licences as of right are available in respect of the patent. If this is done, subsequent renewal fees are reduced to half. The proprietor may, however, later cancel this concession. The Comptroller of Patents may unilaterally endorse the Register ‘licences of right’ if the patent proprietor is referred to the Monopolies and Mergers Commission and matters specified in the Commission’s report operate, have operated or are likely to operate against the public interest – except where the patent relates to pharmaceutical products, where the exploitation period is reduced because of the time taken to conduct clinical tests and obtain a licence to sell the product. As mentioned above, where the patent is endorsed ‘licence of right’, an injunction will not be granted against infringers and alleged infringers can limit their exposure to damages by undertaking to take a licence. After such an undertaking has been given, any damages awarded against the infringer will be limited to twice the royalty rate they would have had to pay under a licence. Terms of licence of right or compulsory licence If the parties cannot agree the terms, the Comptroller of Patents can impose terms. In doing so, he should aim to ensure that the proprietor receives a reasonable remuneration having regard to the nature of the invention. Consideration should be given to what a willing licensor and a willing licensee would have agreed upon as a reasonable royalty – for example, by looking at any comparable licences which exist.

Crown use – the Government’s powers The Crown has wide powers, for the services of the Crown, for government departments and health authorities to make, use, sell, import or keep patented products or use patented processes without infringing the patent. These powers are extended in periods of emergency. Crown use is subject to a royalty being paid to the proprietor of the patent, unless done as a result of a confidential relevant communication (directly or indirectly by the proprietor or person from whom he derives title). Rights of third parties, such as licensees or even assignees, are not allowed to interfere with Crown use. However, if the proprietor of the patent or an exclusive licensee suffers loss from not being awarded a contract in relation to the invention where the invention is used for the services of the Crown, the government department concerned must pay compensation.

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Criminal offences Unauthorised dealing with patented products or products obtained from patented processes may constitute a criminal offence under trade descriptions, forgery or trade marks legislation. There are also a number of specific offences: i)

Making false representations that anything disposed of for value is a patented product.

ii)

Making representations that a patent has been applied for in respect of any article disposed of for value when this is not true or if the patent application has been withdrawn or refused.

iii) Making, or causing to be made, a false entry on the Register of Patents. This extends to written material purporting to be copies of such entries. It is a defence to the first two of these offences to show that accused person had used due diligence to prevent the false representation being made. These offences are rarely called upon, however, since patent issues tend to be somewhat more complex to determine than the enforcement authorities for criminal matters – the police and local Trading Standards Departments – are generally equipped to do.

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Trade marks INTRODUCTION: TRADE MARKS, REGISTERED AND UNREGISTERED BASIC REQUIREMENTS VALIDITY INFRINGEMENT CIVIL INFRINGEMENT CRIMINAL INFRINGEMENT OTHER POINTS TO NOTE

chapter

3

Chapter 3 Trade marks

Introduction: trade marks, registered and unregistered A trade mark can be any word, symbol or other distinctive sign used to distinguish an organisation’s products or services from those of its competitors. It acts as a ‘badge of origin’ or ‘badge of quality’, which tells the public that the goods or services with which it is associated originate from a certain party and are guaranteed to be of a certain quality. A business may have a variety of marks, which may or may not include its own name: it may have a single word or logo associated with its activities or separate marks for certain types of activities or products. Trade marks can be registered or unregistered. In both cases, they identify goods or services in the minds of the public and therefore can be of great value: in helping to boost recognition, assisting in the introduction of new products and services and also stopping others from using the same or similar marks which, if permitted, could potentially confuse the public, damage reputation and reduce income. However, enforcing unregistered trade marks can be considerably harder, and therefore more expensive, than enforcing registered marks. This chapter deals solely with registered trade marks, and references to ‘trade marks’ below should be taken as referring to registered marks only. Unregistered trade marks in general are protected by an action known as ‘passing off’, which is the subject of Chapter 4. It would be sensible to read this chapter in conjunction with Chapter 4, since the two subjects are closely related. There is some additional protection for internationally well-known marks, whether or not they are registered in this country, but that is beyond the scope of this Report. The chapter begins by looking at the reasons for registering a mark and what marks can be registered. The procedure for registering a mark is outlined, and the rights which attach to a registered mark are described. The issues which affect a registration’s validity are discussed before examining the question of infringement, either as a matter of civil law (enforced by the trade mark owner, possibly with the assistance of HM Customs & Excise) or criminal law (enforced by Trading Standards Officers and the police). The possible defences which may be raised and the remedies available are outlined. Finally, some further issues are

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discussed: threats, actions, trade marks and comparative advertising, Internet domain name conflicts and the perennial problem of parallel imports. The chapter ends with a summary of the practical steps which should be observed in choosing and using a trade mark for greatest protection.

Advantages of registration The owner of a trade mark registration does not have to show that he has a reputation in the mark: that is presumed because of his registration. In contrast, to succeed in an action for passing off, to enforce an unregistered trade mark, the existence of both a reputation in the mark and associated goodwill among consumers must be proved. Thus, an action for infringement of a registered trade mark can be both cheaper and quicker than an action for passing off. Infringement of a registered trade mark can also be a criminal offence, so that criminal as well as civil sanctions, and the assistance of the responsible public agencies, may be brought to bear upon persistent counterfeiters. Further, the assistance of the Customs and Excise can also be invoked to prevent imports of goods counterfeiting a registered trade mark. Registered trade marks have various other advantages over unregistered marks. For example, a registered trade mark can also be sold separately from the business which has been using it, making it an independent asset in its own right. It can also be mortgaged. Finally, once a trade mark has been registered, use of it cannot be held to be an infringement of another person’s registered trade mark.

Basic requirements What can be registered It has always been possible to register words and pictures – for example, logos – as trade marks. When the Trade Marks Act 1994 came into force in late 1994, one of its principal effects was to widen the definition of registrable trade marks to include anything which is capable of being graphically represented. This includes the shapes of containers (eg the COCA-COLA bottle), sounds, smells (if capable of graphical representation), get-ups (for example, characteristic colours and typefaces used on a business’ products) and colours. To be registrable, a mark must be capable of distinguishing the goods or services to which it is applied as those of a particular business. This may be because it is inherently distinctive – for example, an invented word such as KODAK – or

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because, although not distinctive in itself, it has through extensive use in fact become associated by the public with a given business. Thus, some words, such as place names, can be registered as trade marks only if distinctiveness is shown; for example, through evidence that a substantial number of people recognised the name’s association with the applicant. Similarly, words which are wholly descriptive of the character of the product or service, for example ‘Delicious’ for any food product, or ‘Speedy’ for a delivery service, cannot be registered unless it can be shown that the mark has in fact become distinctive. A common laudatory word may never achieve the level of recognition and distinctiveness needed to displace its ordinary meaning and acquire trade mark significance with the public (see British Sugar ‘Treat’ case study, below). A mark which does not describe the product as such, but associates it with a celebrity or character, may also lack distinctiveness despite official endorsement – as the following case study shows. Case study: Elvisly Yours An American company, Elvis Presley Enterprises Inc, carried out merchandising activity on behalf of Elvis Presley whilst he was alive and continued this activity following his death. In 1989 they applied to register as trade marks the words ‘Elvis’ and ‘Elvis Presley’ and the signature ‘Elvis A Presley’ in relation to toiletries. The applications were opposed by Sid Shaw, a small trader who had been trading in Elvis Presley memorabilia in the UK under the name ‘Elvisly Yours’ since the late 1970s, and owned the registered trade mark ‘Elvisly Yours’ in relation to toiletries. He argued that Enterprises applications should not be granted as they were not distinctive and were deceptively similar to his mark. The Court held that in order to be registered, ‘Elvis’ or ‘Elvis Presley’ would have to indicate to the public a trade source. In this instance, customers would buy such goods because they are a reminder of the famous musician, not because they came from a particular source. The words ‘Elvis Presley’ on memorabilia were not used to distinguish the product as emanating from Enterprises but to refer to the performer. Even if Enterprises had been using the mark to distinguish their goods, the marks would be too similar to ‘Elvisly Yours’ and therefore be likely to give rise to deception and confusion. The application was therefore refused. Thus, as this case shows, in order to register a trade mark that is descriptive of the type of goods or services for which it is to be registered, it may not be sufficient to assume that the public will associate the goods concerned with the company authorised to market them. Evidence may have to be brought to show that this is in fact the case.

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In general, however, a trade mark need not be used before registration is applied for – there merely has to be an intention to use. The registration may be applied for at any time: before launch, once the product has been launched or after several years’ use once the product has become established in the market. Signs which are used in the normal course of a particular trade, such as the red–and–white striped pole signifying a barber’s shop, cannot be registered as trade marks as all traders have an equal right to continue using them. Marks can also be refused if they consist exclusively of the shape which results from the nature of the goods themselves, or of a shape necessary to obtain a technical result or gives substantial value to the goods. Shape registrations are therefore likely to be restricted to a few extremely well–known shapes, such as the ‘Coca–Cola’ bottle and equivalents; indeed the shape of the ‘Philishave’ three–headed shaver was recently found not to be registrable even though widely recognised, since it represented an engineering optimum arrangement for three shaver heads. Finally, marks which will deceive the public (for instance as to the nature, quality, intended purpose, value, geographical origin or other characteristics of the goods or services in question) and prohibited emblems (such as the Royal Arms, the Red Cross or national flags) cannot be registered. There are also statutory provisions which provide that certain words – associated with government, royalty or charity, for example – can only be used as part of a company’s name or business name if the approval of the Secretary of State for Trade and Industry is first obtained. Although these rules do not relate specifically to trade marks, it would be unwise to include them in a trade mark without good reason. Summary The best type of words for trade marks are invented words like KODAK and LEGO, as these have no problems with the descriptive/deceptive rules. Also, words which are suggestive of the product in question, but are not actually descriptive, such as WHISKAS in relation to cat food or QUICKSILVER in relation to couriers, can be very effective whilst still being registrable.

Application and grant in the UK The Register of Trade Marks is split into 42 different categories of goods and services called ‘classes’. An application for a trade mark must specify which class or classes of goods the registration is to cover. It is important not to seek too wide a specification of goods, for example ‘computer software’, as this may

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endanger the validity of the registration. It is necessary to balance the need for adequate protection against counterfeiting and the public interest against obtaining a monopoly for a registration which is too broad. The brand owner will generally attempt to obtain a registration which is as broad as possible. However, this approach may no longer provide the greatest protection, and may be open to attack as being in bad faith. The brand owner must consider at the time the application is submitted precisely what products – for example, ‘computer software for stock management and delivery logistics’ – they genuinely intend to commercialise in connection with the trade mark. Before applying to register a mark, it is advisable first to establish whether the mark is available to be used, in the classes of goods required. A search of the Trade Marks Register will show whether the same or a similar mark has already been registered by another party. As the value of a trade mark increases the more distinctive it is, even if the marks which are already registered are not identical but are somewhat similar, then it may be worth choosing a different mark. Unlike patents, there are no penalties for using or disclosing a trade mark prior to applying to register it. Once an application has been lodged with the Trade Marks Registry, the Registry will examine the application to check: 1)

Whether it is suitable for registration ie. if it is capable of distinguishing the goods or services, and

2)

Whether there is any other mark already registered in relation to the same class of goods or similar class of goods which is the same as or confusingly similar to the new application.

If the Registry believes the mark is not suitable for registration it will inform the applicant or prosecuting trade mark agent of this. He or she may be able to argue against this initial ruling, for instance by showing that the mark has acquired distinctiveness through use, but if these arguments are unsuccessful the application will be rejected. (This does not prevent use of the mark, unless someone else has already registered it – it just precludes the benefits of registration so that the mark can only be enforced through an action for passing off.) If the Registry believes the mark is too similar to an existing trade mark it will inform the trade mark agent of any registered mark or marks with which it feels there is a conflict. Again, the trade mark agent may well be able to argue around these objections or slight changes may be needed to the list of goods to which the application applies in order to avoid these other marks. Alternatively, if the two businesses are not in direct competition, the Registry is likely to be satisfied if it is possible to obtain a letter from the owner of the existing trade mark consenting to the new mark being registered. If an agreement cannot be reached,

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it would be prudent to reconsider using the mark, as its use may infringe the registered marks cited against the application. Once the Registry is satisfied, the application is advertised in the Trade Marks Journal. Any third party who considers that the mark should not be registered has three months from advertisement to object (known as opposition). Alternatively, and more cheaply, the third party could put forward an observation to the Registrar concerning whether the mark should be registered, which the Register will forward to the applicant. If no opposition or objection is raised then the mark will proceed to registration, which will take effect as at the date of the application. Otherwise, in an opposition both sides have to put forward evidence to the Registrar, who will decide whether the mark can be registered. Most trade mark agents will carry out a watch on the Trade Marks Journal, to advise clients if an application potentially too close to one of their trade marks is advertised so that an opposition may need to be launched. The total Registry fees and professional charges for a UK trade mark application relating to one class of goods or services will be in the region of £1,000. This estimate is based on the application proceeding through to registration without any major objections being raised, by either the Registry or third parties which will increase the costs. On average, the time from application to registration in the UK should be between about eight months and two years. The costs of registration are staggered somewhat throughout this period.

Who can register? Trade marks are by their very nature marks used in the course of trade. If an organisation solely provides charitable services funded by donations then it is unlikely that it will be able to register a mark. For example, The Gideon’s Society were unable to register the word Gideon in relation to their supply of bibles, as this was not ‘for money or money’s worth’.

The monopoly obtained The registered proprietor of a trade mark has the right to prevent anyone else from using the mark in the course of trade, in respect of the goods or services for which it is registered. As a trade mark can be renewed for repeated in ten year intervals, the monopoly can last for as long as the mark continues to be used with reasonable regularity in any given five year period (see ‘proper use’, below) – in theory, forever.

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Assignment, renewal and common sense measures Transactions Ownership of trade marks and trade mark applications can be transferred by assignment, either in connection with the transfer of the business to which they relate or independently. Assignments must be in writing. The assignment can cover all or part of the goods and services for which the mark is registered, and can be for use of the mark only in a particular location or a particular way. Licensing of trade marks without actual transfer of ownership is possible, and can be lucrative, but detailed consideration should be given to all aspects of the relationship between licensor and licensee, including provision for quality control (to avoid misuse compromising the mark’s standing as a ‘badge of origin’ or ‘badge of quality’). Marks can also be inherited or, as mentioned above, mortgaged (assigned by way of security). A mortgage should be considered very carefully since the average bank will not want to take on responsibility for paying renewal fees or making sure that the mark is properly used. All of the above transactions should be registered at the Trade Marks Registry, to ensure that the assignee, licensee or mortgagee’s rights have priority over any later conflicting transactions which the original trade mark owner may enter into. Renewal In the UK, renewal fees will need to be paid every ten years after the mark is registered. If the mark ceases to be of value to the business, it is possible voluntarily to surrender it back to the Registry at any time, so that renewal fees are avoided and it becomes free for other businesses to use should they so wish. A surrender may be in respect of the whole or some only of the goods and/or services for which the mark was originally registered. ‘Proper use’ There is more to protecting a trade mark than applying for registrations; one of the most important elements is how marks are used in practice – sometimes termed ‘proper use’. A registered trade mark must be ‘properly used’, either by the proprietor or a licensee, since failure to use a trade mark for a period of five years will leave the registration open to an application for revocation, by anyone who wants to use the mark instead. The principal point to be observed is that the right form of the trade mark should be used and used in connection with the actual goods or services for which it is registered. Other common sense measures are set out in the section ‘Practical Pointers’ below.

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International protection – the CTM and the Madrid protocol European Union: the Community Trade Mark National trade mark registrations only give national protection: a UK registration will not assist in stopping someone using the same mark in France. Therefore, businesses operating internationally should consider whether registration is needed outside the UK. Where a mark is intended to be used in more than one country of the European Union (‘EU’), it is possible either to apply for several national trade mark registrations in the relevant countries, or to obtain a Community Trade Mark (CTM) from the Community Trade Mark office in Alicante, Spain. The CTM is a single mark applying in all countries of the European Union, but because of this it can be refused on the basis of any prior conflicting mark in any Member State. However, the costs of carrying out searches in every Member State before applying are very considerable; thus, it is simpler to apply and leave the owner of any prior conflicting mark to notify the CTM office of their mark’s existence. If a mark is refused as a CTM on the basis of such an opposition, it is possible (on payment of a fee) to convert the application into one or more national applications. It should be noted, however, that a CTM cannot be assigned for part of the EU only – as it is a unitary mark, it can only be assigned as a whole. The CTM also becomes vulnerable to revocation if not used over a five year period – but use in any single EU country is sufficient to protect it for the whole of the EU. International: Madrid protocol The Madrid Agreement was an international treaty which aimed to establish an international filing system for trade marks, similar to the international patent system. Unfortunately, several key countries failed to sign up to it and it was only a partial success. In 1989, the World Intellectual Property Organisation (WIPO) in Geneva negotiated a Protocol to the Madrid Agreement which was aimed at removing the objections of the major industrial countries and bringing the Madrid system into wider use. The Protocol, having been ratified by the necessary number of countries including the UK, came into effect in April 1996. Thus, it is now possible once a UK trade mark has been registered to apply for registration in any number of the countries which subscribe to the Madrid system. Once the UK registration has been verified by WIPO, the Trade Marks Registries of the nominated countries have up to 18 months in which to refuse the registration on national grounds. Once registered, the mark remains for ten years and is renewable thereafter indefinitely in sequential ten year terms.

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Validity A registered trade mark will only be valid so long as it complies with the requirements for registration – non–descriptiveness, capability of distinguishing and distinctiveness – and is used. It will also be invalid if it was applied for in bad faith; which may include, for example, making an application without any genuine intent to use the mark – possibly intending to sell it on to a more ‘rightful’ owner should they eventually set up business in the UK. It also includes registering for a specification of goods much broader than the goods on which the mark will actually be used. The registration may be invalid, despite having been registered, if it in fact conflicts with an earlier registration of an identical or similar mark for identical or similar goods, unless the proprietor of that earlier registration had consented to the registration; or if it conflicts with an existing unregistered mark, copyright, registered design or design right. The fact that the Trade Marks Registry have accepted an application does not mean that a competitor cannot challenge the mark’s validity in court – the Registry are not infallible.

Infringement Goods (including packaging, labels, brochures, manuals, guarantee documents, etc) bearing without authority a mark that is identical or similar to that of a validly registered trade mark are described as counterfeit. It has been estimated that 6–10 per cent of world trade involves counterfeit products. The most heavily counterfeited industry sectors (CDs, software, videos, clothing, spare parts and luxury goods) estimate that in 1994 in the UK alone they lost a combined total of £1 billion of revenue. Thus, enforcement of registered trade marks can, particularly in the consumer goods markets, be a major, and on–going, battle. It is likely that both civil and criminal measures may need to be invoked – particularly since the criminal enforcement is carried out at public expense rather than at any cost to the trade mark owner. In addition, the assistance of HM Customs & Excise can be called for.

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Civil infringement In dealing with counterfeiters speed is often the most important factor. What needs to be done is to get the counterfeit product off the market in the run up to Christmas, or before the sports event or concert tour, or in some cases before the official launch of the genuine product. When speed is essential, civil proceedings with the aim of an early application for an interlocutory injunction – a temporary injunction pending the full trial of the case – can be advisable.

Civil infringement defined A registered trade mark is infringed if, in the course of trade, anyone uses a sign which is identical to the registered mark, in relation to the class of goods and/ or services for which the mark is registered. The registration is also infringed by use of a sign, either identical or only similar to the registered mark, in relation to goods and/or services similar to those for which the mark is registered where there is a likelihood of confusion between the registered mark and the sign on the part of the relevant public. Each of the italicised terms is discussed further below. What is use of a sign? A sign is used, in a trade mark sense, if: –

It is affixed to goods or packaging.

–

Goods are offered or exposed for sale under it.

–

Goods are imported, exported or stocked for that purpose.

–

Services are offered or supplied under it; or

–

It is used on business paper or in advertising.

This is generally easy to identify, but may not always be straightforward.

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Case studies: Wet Wet Wet, Trebor Bassett Bravado Merchandising Services Ltd v Mainstream Publishing (Edinburgh) Ltd A Scottish publisher produced an unauthorised book about the pop group Wet Wet Wet, entitled ‘A Sweet Little Mystery – Wet Wet Wet – the Inside Story’. The group’s merchandising agent sued for trade mark infringement as they had registered their name as a trade mark in respect of printed matter, books and book covers. The court held that use of the mark to identify the subject–matter of the book, even without in any way claiming an association between the group and the books publisher, was use of the mark in a trade mark sense and therefore prohibited. (It was, however, allowed in this case since it fell within the defence for use of a mark as an indication concerning the characteristic of the goods (discussed below, under ‘Defences’.)) Trebor Bassett Ltd v The Football Association The well–known sweet manufacturers produced a series of cigarette cards for insertion into their packets of candy cigarettes, bearing pictures of the members of the England football team. The footballers were shown wearing their England kit, which naturally bore the ‘Three Lions crest’. The Football Association had registered the ‘Three Lions’ as a trade mark and threatened to bring an action for trade mark infringement. Trebor Bassett took the initiative and sued for unjustified threats (discussed below); the FA counterclaimed trade mark infringement. The judge held that the fortuitous appearance of the logo on the players’ shirts could not be use of the sign as a trade mark with respect to the cards, any more than a newspaper report of an England match accompanied by a photograph of a player wearing the strip was use of the logo in respect of sales of newspapers. Accordingly, there was no infringement, and the FA’s threat was unjustified.

Similarity The following are the kinds of factors which are relevant in considering whether or not goods or services are similar to those for which the trade mark is registered:

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a)

The respective uses and users of the respective goods or services;

b)

Their physical nature;

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c)

The respective trade channels through which the goods or services reach the market;

d)

The shelves on which the goods were likely to be displayed; and

e)

The extent to which the respective goods or services were competitive.

MARKS

Case study: British Sugar plc v James Robertson and Sons British Sugar plc produce the well–known range of SILVER SPOON products which includes a syrup called ‘Treat’ for pouring over desserts and ice–cream. ‘Treat’ is sold in supermarkets, placed in the section for desserts and ice–cream toppings, in squeezable plastic containers. ‘Treat’ was registered as a trade mark for desserts, sauces and syrups. James Robertson and Sons had long used the mark ‘Robertson’s’ for a range of jams and preserves, and in 1995 launched a new toffee–flavoured sweet spread in an oval glass jar labelled ‘Robertson’s Toffee Treat’. In supermarkets, it was placed on the shelves for jams and preserves. British Sugar alleged infringement against Robertson’s of its ‘Treat’ trade mark; Robertson’s counterclaimed for revocation of the ‘Treat’ trade mark registration. The judge reviewed the marketing and sales channels of both products and, applying the criteria set out above, decided that the two products were not ‘similar’. On Robertson’s counterclaim, however, the judge held that there was no evidence that when British Sugar registered ‘Treat’ as a trade mark it was distinctive or that the majority of the public regarded the word alone as having some trade mark significance for ice cream toppings. As it was only used for ice–cream topping , it did not cover the full range of goods covered by the registration. On that basis, he declared the registration invalid.

Confusion The ordinary meaning of confusion requires no explanation. However, the Trade Marks Act 1994 states that a likelihood of confusion includes a likelihood of association. It was initially thought this would mean that it would still be infringement of a registered trade mark if the public were not in any way confused as to the origin of the goods or services in question, but merely ‘associated’ the two marks, perhaps by one mark distantly reminding them of the other. The damage suffered would be that the exclusivity of the registered mark was ‘diluted’ in the sense of being less distinctive of one particular trader. Brand owners plagued by ‘lookalike’ supermarket own brands had been particularly excited by the prospect of such an extended meaning of infringement because often they

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have difficulty in proving that customers were in fact confused as to source. This interpretation has not been accepted by the courts: association, like confusion, must be as to the source of the goods. Case study: Wagamama v Rajamama A Japanese restaurant in London trading as ‘Wagamama’ successfully sued to prevent another London restaurant trading as an ‘American theme restaurant with Indian decor and food’ under the name ‘Rajamama’. ‘Wagamama’, which means ‘selfishness’ or ‘wilfulness’ in Japanese, is quite meaningless so far as an English speaking public is concerned, much as an invented word would have been. Much of ‘Wagamama’s’ business is likely to come from oral recommendation, however, and the judge considered that this meaninglessness increased the significance of customers imperfectly distinguishing the name from one which is phonetically similar. Thus, it was quite plausible that customers hearing one or other of the two names would be confused. The Judge also considered customers might think that ‘Rajamama’ was a ‘brand extension’ of ‘Wagamama’: they might conclude that, since ‘Raja’ alludes to India,’ ‘Rajamama’ was an Indian restaurant created by or otherwise connected with the restaurant business run by ‘Wagamama’. In other words, they might think ‘Wagamama’ was branching out and ‘Rajamama’ was intended to be the start of a chain of ‘theme’ restaurants. This kind of association is association as to origin since customers would assume either a direct connection from common ownership or perhaps a franchising operation with quality controls from a common source. Thus, ‘Wagamama’ obtained an injunction, forcing ‘Rajamama’ to change their name.

Who can sue and be sued The registered proprietor of a trade mark can, naturally, bring infringement proceedings, as can an exclusive licensee since such a licence gives the same rights and remedies as if the licence had been an assignment. Non–exclusive licensees will also be able to sue if the proprietor, having been called upon to enforce the mark, fails to do so within two months. Thus, an ordinary licensee is potentially subject to a two month delay before they will be able to take direct action against an infringer of their own accord.

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Defences Own name It is a defence for someone accused of infringing a registered trade mark to be able to show that in fact they were simply using their own correct company or personal name, and their own address, as long as that use is in accordance with honest practices in industrial or commercial affairs. Case study: Mercury Mercury Communications Limited (‘MCL’), the well known telecommunications company, had registered the trade mark Mercury for ‘computer programs’. Mercury Interactive (UK) Limited (‘Mercury Interactive’) was the UK subsidiary and distributor of a US software house. Mercury Interactive sold programs in the UK under the names ‘Mercury’ or ‘Mercury Interactive’; under the parent company’s name Mercury Interactive Corporation; and under the UK company’s name Mercury Interactive (UK) Limited. In each case the word Mercury generally appeared in significantly larger type than the other words. When MCL sued Mercury Interactive for infringement of its registered trade mark, Mercury Interactive gave evidence that it often referred to itself, and was known by others, as ‘Mercury’ rather than its full company name. The Court decided that, provided that Mercury Interactive or its parent company could establish that it was generally known as ‘Mercury’, it was likely to have a complete defence to a trade mark infringement action. Description/intended purpose Similarly, use of a term describing the goods or services offered, or indicating the intended purpose of the goods (‘spare parts for FORD cars’, for example) cannot infringe a registered trade mark, as long as it is an honest practice. Prior use If the mark can be shown to have been in use in a particular locality, or in a particular trade, before the proprietor either started using it or registered it, then the person so using it will not infringe the subsequent registration – although this does not entitle them then to begin using it over a wider area. Identifying proprietor Finally, use of a trade mark in order to identify goods or services of those of the proprietor does not infringe, although it may be controversial to assert this right in the context of comparative advertising, discussed further below.

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Remedies Injunctions Either interlocutory or final injunctions may be available to restrain a counterfeiter from continuing with their activities, if it can be shown that the counterfeiter will continue to infringe unless restrained. To obtain an interlocutory injunction, the proprietor must be able to show a good case that they will succeed in showing the trade mark is being infringed, and that the balance of convenience favours stopping the defendant before trial. As an injunction is an equitable remedy, however, it is important that the proprietor should have behaved appropriately – for example, neither delayed bringing proceedings nor acquiesced in the defendant’s activities. Damages/account of profits Damages for infringement of an intellectual property right are calculated to put the proprietor in the position they would have been in had the infringement not occurred. If in reality the proprietor would not have been in a position to make the sales that the counterfeiter made, then an alternative remedy is to ask for an ‘account’ (payment over to them) of the profits which the counterfeiter in fact made from their activities. As an account is an equitable remedy it is necessary for the proprietor to be able to show that they have ‘clean hands’, that is, have not themselves been guilty of any unfair or improper conduct in the matter or the amount awarded may be reduced. Anton Piller orders The Anton Piller order can be a relatively cheap and very effective means of recovering counterfeit goods and other evidence. This order acts in effect as a civil search warrant, requiring the counterfeiter to allow representatives of the trade mark owner to enter and search their premises for specified goods or information. It is obtained by the rights owner without notice to the suspected counterfeiter. It has, however, been subject to criticism because of somewhat heavy–handed use, for example where the searchers turned up at 6am at a house where a woman was living on her own. Due to such abuses, the Order can now be executable only during working hours, and a requirement for supervision of the searchers by an independent solicitor has been introduced, which adds to the cost. To obtain such an order it is necessary to have a very strong case and to be able to show a likelihood that the Defendants will destroy evidence if proceedings on the usual (slower) timetable are followed. It is especially useful against the fly–by–night operators. The ‘Doorstep Piller’ (so named because no–one actually

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enters the counterfeiter’s premises, but instead the counterfeiter is ordered to produce and hand over the required items) can be used where there is less evidence available, and can be similarly effective. Civil judges will take strong and enforceable action against anyone who ignores an Anton Piller Order. Case study: Taylor Made Taylor Made Golf Co. Inc. v Rata & Rata The Defendants, who made counterfeit golf clubs, failed to comply with an Anton Piller Order: they delayed entry into their premises and failed to supply relevant information and documents. They avoided jail, but the judge fined the company £75,000 and ordered them to pay legal costs of £57,434. Delivery up and destruction Not only may the counterfeit goods themselves be ordered to be delivered up to the trade mark owner or destroyed, but also any articles adapted for making counterfeits as well.

Customs & Excise HM Customs & Excise (C&E) are able to seize counterfeit or pirate products at the point of entry, if they are entering the UK from outside the European Union for any reason (including transhipment) and to destroy the goods if proved to be not authorised. This power can be extremely useful. There are two separate regimes under which the Customs and Excise can seize counterfeit goods which are not yet in free circulation within the European Union. The first relates to goods, labels or packaging, as well as infringing moulds or matrices designed or adapted to produce counterfeit trade marks, which without authorisation bear a mark identical to, or indistinguishable in its essential aspects from, a registered trade mark. Customs are empowered of their own initiative to seize goods which appear to them to be counterfeit. If they do so, they are entitled to detain the goods for up to three working days – to enable them to contact the rights owner and for the latter to make an application for the goods to be suspended. Three days is a very short time in which to act; it is advisable to have a specific application for detention ready prepared, and someone specifically designated as Customs’ contact, who will be ready to take action as soon as they are notified. However, the effectiveness of Customs’ acting on their own initiative is likely to be limited – they are unlikely to be aware of all registered marks, and besides they

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have responsibility for many other matters apart from counterfeits. Thus, it may be advantageous for a trade mark owner to apply to request Customs to keep a specific watch for counterfeits of their goods. In order for Customs to keep a watch for counterfeit goods in respect of any registered mark, the owner must apply on form C1340, giving a detailed description of the goods, proof of ownership (for example, certificate of registration) and existence of the right, the applicant’s identity and (if applicable) proof of authority to act for the right owner. All accepted applications are put on the Customs and Excise’s database, which is available to all C&E officers at the UK’s numerous ports of entry. If any information is available concerning port of entry and shipping information, this will clearly improve the chances of the Customs making a seizure; but it is not essential to the application being accepted. A fee of £185 is payable for each application for the first month; thereafter the fee is £165 per month. The right owner must notify Customs if the right expires or otherwise ceases to be validly registered. If such an application is in effect, Customs will notify the trade mark owner if any suspected counterfeit goods are seized and the trade mark owner then has ten working days in which to inspect the goods and confirm their counterfeit or genuine status (although this time period can be extended in some cases). If the goods are confirmed as counterfeit, then they will be seized and destroyed unless the importer within one month contests their counterfeit status, in which case the Customs must institute legal proceedings for a final determination. Seizures under this regulation have been small as yet; the largest seizures to date being of 1,000 PENTIUM processors valued at £180,000 and over 13,000 counterfeit LEVI jeans valued at £64,000. Nevertheless, although these results have not been very dramatic to date, it is clearly preferable to stop the goods before they enter the market, rather than attempt to track them down and retrieve them once they are in circulation. The second possibility relates only to goods not covered by the above procedure. In practice, this is restricted to well–known trade marks being used on goods for which they are not registered, and parallel imports coming in from outside the European Union. The procedure in these circumstances is cheaper than the ‘watch’ above, at only £30 per application, but can only be invoked in respect of a known batch of goods: for customs to make a seizure full details as to place and time of arrival and so on need to be given. The application is made on a ‘section 89’ notice, but is likely to be less useful in general than the broader procedure above since accurate advance information as to the arrival of counterfeit goods is often hard to obtain. It can be very effective if, for example, a foreign distributor informs the trade mark owner that there are counterfeit goods heading into the UK.

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Criminal infringement Infringement defined It is a criminal offence for a person without the consent of the proprietor, for profit or to cause loss to another, to use a sign identical or likely to be mistaken for a registered trade mark on goods for which that mark is registered, or to sell or distribute the goods in the course of business. This is narrower than civil infringement since it only applies to goods which are the same as the registration, and does not cover marks registered in respect of services at all. Nevertheless, many counterfeits are precise copies of goods and so caught under both. It is also an offence to use such a sign on packaging, labels, business papers or advertising, be in possession of goods bearing the sign, or have goods adapted for making copies of the sign. To be an offence, the unauthorised use must be in relation to the classes of goods for which the mark is registered, or must take unfair advantage of the distinctive character or repute of the mark. The protection given is broad as any sign which is likely to be mistaken for a registered trade mark can lead to conviction. Disclaimers such as ‘These goods are fakes’ or ‘Brand copies’ will not assist a counterfeiter in escaping conviction (as they did before the Trade Marks Act 1994 came into force).

Enforcement Trading Standards Departments It is the duty of Trading Standards Departments (TSDs ) (part of every local authority) to enforce these provisions. TSDs have the power to make test purchases and more importantly to enter premises and seize documents – effectively Anton Piller powers without the costs. But the duty to enforce is relative, not absolute – and enforcement sometimes becomes a question of local politics. The existence of the duty has lead in some cases to the Police and Crown Prosecution Service avoiding their own responsibility, thereby leading to a greater problem overall. Nevertheless, involving Trading Standards can be a highly effective anti– counterfeiting strategy.

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Case study: the Football Association and Euro ’96 In the year before Euro ’96 there had been about 30 cases of counterfeit FA products being produced. These were usually quite poor imitations of the England replica strip and usually in quite small quantities. The FA anticipated that because of the extensive TV coverage and sponsorship which would coincide with Euro ’96 there would be a greatly increased level of counterfeiting activity before, during and for some time after the Championships. Geographically, there was obviously going to be heightened attention by the counterfeiters around the actual match cities but as the problem had been a national one there was no reason why this should change. The FA wanted to have an proactive cost effective approach and in addition wanted to use the Euro ‘96 anti–counterfeiting action as a springboard to raise the profile of the FA and its trade marks with the enforcement authorities. To this end, the FA produced its own anti–counterfeiting brochure, giving: 1)

General background on the FA.

2)

Details of all the FA marks and relevant graphical representations.

3)

Details of the FA’s licensees and the products they make.

4)

Information on how to spot counterfeits and actual examples; and,

5)

Contact details for inspection and the provision of witness statements.

This brochure was sent to over 150 TSDs in England and Wales and also to the relevant Customs & Excise offices. With this information, TSDs knew what was counterfeit on a first visit to a factory or trader, thereby avoiding delays and further sales of counterfeit articles. Further, the brochure showed TSDs that the FA considered this problem seriously and that it was prepared to assist TSDs quickly and effectively with the information and other assistance that they needed to get convictions. By this cheap and simple approach, the FA recruited over 200 experienced (and, very importantly, honest) part time investigators, who actively search for counterfeit products and who will bring their own criminal prosecutions without any further assistance or cost. As a result, during Euro ‘96 and thereafter TSDs seized counterfeit items on 40 occasions including 800 England replica strips from one warehouse and numerous small quantities from a national chain of shops.

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Counterfeiters’ defence It is a defence for someone accused of counterfeiting to be able to show that they believed on reasonable grounds that the use was not an infringement. The best evidence for this would be that they had received professional advice that the sign used did not infringe – hence, their belief could be reasonably held. But the onus will be on the defendant to prove in court that they truly had the belief and reasonable grounds for it. Such a defence would not succeed in a civil action.

Remedies The criminal penalties for counterfeiting are similar to those for theft, which may be up to ten years imprisonment. In addition, and of considerably more value to the trade mark owner, it may be possible to obtain a confiscation order in respect of the proceeds of the infringing acts. This can only be requested in respect of a given counterfeiter once they have been found guilty of two or more offences. In reality, because of the costs of such proceedings it is unlikely that the Crown Prosecution Service will bring applications for such orders before the Court unless it is understood that the defendant has at least £10,000 in realisable assets. It will be for the defendant to prove that the assets have been obtained from legal means.

Other points to note Threats If a trade mark owner threatens supposed infringers with proceedings for trade mark infringement, it is possible for the recipient to bring an action to prevent the threatener repeating the threats and asking for damages for any loss suffered as a result, unless the threats relate to: 1)

Applying the mark to the goods or

2)

Importing the goods into the UK.

Even if the accused company is doing these things and so is a primary infringer, the trade mark owner should not ask for any undertakings other than not to apply the mark to goods or to import goods bearing the mark. Where the suspected infringer is not doing either of the above, then the most that any letter should do is notify them of the existence and ownership of the trade mark, preferably

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enclosing a sample. Thereafter, if the counterfeiter does not stop their activities the next step is to issue proceedings. If in the wake of a letter of notification a threats action is brought, the trade mark owner can always counterclaim that the plaintiff is infringing a registered trade mark, but it is generally preferable to appear before the Court as plaintiff rather than defendant.

Comparative advertising and malicious falsehood Comparative advertising covers a variety of forms. It is most recognisable in its direct form where one product is compared with another, usually its main rival, and said to be equal to and better than it in various respects – as in the ‘Barclaycard’ case study, below. Alternatively, it can take the form of general exhortation of a product against all its competitors. As mentioned above, it is not an infringement to use someone else’s registered trade mark if it is for the purpose of identifying goods or services as theirs. This has legitimised the practice of comparative advertising, formerly seen as entirely unacceptable in the UK. Use of the trade mark must be in accordance with honest industrial or commercial practices, and must not be such as to confuse the public – who are, however, seen as considerably more sophisticated at ‘decoding’ advertisements than they used to be, and therefore much harder to confuse. The test for what are honest commercial practices is objective, but this does not necessarily mean requiring compliance with statutory or industry–agreed codes of conduct. Where a comparison reflects very poorly on the competitor, it is essential to ensure that it is absolutely accurate to avoid a claim of malicious falsehood. Case study: Barclays v RBS Advanta RBS Advanta Ltd intended to offer a credit card under the name ‘RBS Advanta VISA Card’. To test the market, it sent out advertising literature comparing the new card to the credit card services offered by Barclays and other major participants in the market. Express reference was made to Barclaycard Visa. Barclays, which owns the trade marks BARCLAYCARD in respect of credit card and charge card services and BARCLAYS and BARCLAY in respect of financial services, complained that such use amounted to infringement of its registered trade marks. The judge reviewed the comparison made in the leaflets between the different cards, interest rates, annual fees and so on. Although the comparisons chosen did not include those which would show the strengths of the Barclaycard, they

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were all accurate. Accordingly, it could not be said that RBS Advanta had been dishonest, and the action failed.

False claims of registered trade marks It is a criminal offence to claim that a trade mark is registered when it is not; this can lead to a fine of up to £1,000. Thus, before bringing any kind of infringement proceedings, it is essential to check the Trade Marks Register to be absolutely sure that the trade mark in question is registered and that renewal fees are up to date.

Domain names With the recent increase in commercial use of the Internet, conflicts have begun to arise between ‘real world’ businesses using particular marks on their goods or packaging, and the entities which have registered those same marks as their ‘domain name’ or address on the Internet. The name registration authorities for the Internet, such as NSI in the United States and Nominet in the UK, have now recognised this as a problem, and procedures are in place whereby disputes between trade mark holders and applicants for domain names can be resolved – often in effect by freezing the domain name application until the two organisations concerned have resolved their disagreement in a ‘real world’ court. The area is a relatively new one, so hard–and–fast rules have not yet emerged, but there does seem to be a tendency to rely upon registered trade marks as justification of a claim to ‘ownership’ of a particular domain name, even where some other business has already registered it.

Parallel imports – European Union and non–EU imports EU imports Free movement of goods is one of the cornerstones of the common market, and parallel imports – the importing of goods sold at one (low) price in one country, into another for resale at the local (higher) price – clearly assist in the harmonising of the whole market, and benefit consumers. Trade marks, as potential barriers to the movement of goods between countries, are therefore viewed with suspicion in some quarters and the extent to which they can be used to stop parallel imports has been limited to minimise the conflict with this principle. In essence, once the trade mark rights have been exercised in the first marketing of a particular batch of goods by the proprietor or with its consent, they are exhausted – they cannot be used again against those particular samples. So if a company owns the same trade mark in several countries of Europe, and has perhaps

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licensed a local dealer to sell them under the local trade mark in France or Italy, it will not be possible to stop the goods ‘leaking’ back into this country by suing an importer from France or Italy for infringement of the UK trade mark. A special set of exhaustion of rights arguments concern the problem of the parallel importer who repackages goods legitimately bought under a particular trade mark and resells them elsewhere, under either the same trade mark or a different trade mark also used for the same goods by the company which first placed it onto the market. Particularly where potentially dangerous goods such as pharmaceuticals are concerned, the trade mark owner may have legitimate reasons for opposing the resale of repackaged goods. Case study: Paranova Paranova, a Danish parallel importer, repackaged drugs. The repackaging, although not directly affecting the internal packaging of the pharmaceuticals involved, did include addition of extra items such as syringes and the re–application of the manufacturer’s trade mark. Another company involved in the same case, Eurim–pharm, went only a step from complete repackaging by cutting up blister packs of tablets (although without actually touching the tablets themselves) and repackaging them. The European Court of Justice eventually heard the case on appeal. Balancing the need to ensure the free movement of goods with the essential function of a trade mark as a guarantee of a product’s origin, the judges concluded that a trade mark owner is precluded from preventing parallel imports, even where the product was repackaged and remarked without the owner’s authorisation. However, the Court went on to state that there are limits to the parallel importers’ rights. A trade mark owner may oppose the marketing of repackaged products to which the trade mark has been reaffixed where any of the following apply:

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Reliance on the trade mark to oppose the parallel imports would not lead to artificial partitioning of the single European market;

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The repackaging directly, or indirectly, affects the original condition of the product;

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The new packaging does not clearly indicate the name of the original owner and the repackager;

•

The new packaging is liable to damage the reputation of the trade mark or its owner; or

•

The repackager does not declare his activity to the original owner and, if requested, present a sample to them.

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The Court also remarked in passing that repackaging of the wholesale nature being undertaken by Paranova and their kind should only be undertaken if it is necessary – a very difficult test to apply. Non–EU parallel imports Where parallel imports originate from outside the European Union, EU law has a less clear impact on the trade mark holder’s right to prevent their resale in the UK unless they enter the UK after a sale has already taken place within another EU country (in which case the EU principle of free movement of goods applies exactly as for parallel imports originating within the EU). Where there has not yet been a sale within the EU, then it may be possible to prevent resale in the UK, but only if sufficient has been done to draw to the attention of the original and all subsequent purchasers that the goods are not for circulation within the UK. For example, a term to this effect must have been included in the contract of sale to the first purchaser, and, preferably, the goods should be labelled to the same effect so that even resellers are aware of this limitation.

Practical pointers – protecting your registration The following are guidelines which should be borne in mind when marks, particularly if they are word marks, are used in any form of advertising or packaging: When referring to the mark in text, distinguish it from the other words by putting it in capitals, italics or underlining it. On any label or advertisement the trade mark should appear in a prominent position. Never hyphenate the trade mark to another word or split a single word mark by punctuation, spaces or hyphenation. Avoid using the mark as a generic term. If a trade mark becomes widely used as the ordinary name for a particular product or service (eg ‘Hoover’ for vacuum cleaners) the courts will not stop competitors from using the same word for such products or services and the trade mark automatically loses virtually all value. Third parties should accordingly be discouraged from making such use – but this starts with the trade mark owner avoiding such use in the first place. If the trade mark is mentioned several times on a label or in advertising copy, combine it at least once with the product or service designation. Ensure that the same typeface is used for all the letters of a word mark. Where the trade mark is a logo, ensure that the correct colours are used,

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and have a standard black and white version to be used when colour printing is not available. The fact that a mark is a trade mark should be asserted at least once on any label and in any advertising. Where a trade mark is used in relation to goods for which it is registered, it may be accompanied by the sign ® (usually placed at the top or bottom right hand corner of the word or symbol). Where a trade mark is unregistered or is still at the application stage of registration or its status is unclear it should be accompanied by the sign ™ . Particular care should be taken only to use the ® symbol against marks which are actually registered. Where space permits there should be a footnote to the advertisement/feature explaining the significance of the ®, ™, and identifying the owner of the mark, along the following lines: ‘® WIDGET is a registered trade mark of Wotsit Industries plc’ These designations are not universally applied throughout the world, so it is important to check their use on a country by country basis before using the same advertising copy or labelling in other countries.

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Passing off – the protection of unregistered trade marks INTRODUCTION W H AT I S T H E R I G H T ? INFRINGEMENT WHO CAN SUE AND BE SUED REMEDIES PRACTICAL POINTERS

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Chapter 4 Passing off – the protection of unregistered trade marks

Introduction ‘Passing off’ is a confusing term in that it does not describe any particular intellectual property right. Instead, it is the short name given to the civil legal action, developed over the centuries through case law, which can be brought to protect unregistered trade marks: it is an action to prevent one trader passing off their goods or services as those of another trader. In fact, the action extends to protecting the business as a whole – no trade mark need be involved at all. However, proof that goods were being passed off as those of another trader often depends upon showing that distinguishing marks which identify the goods as one party’s or the other’s have either been copied or imitated. Passing off as a means of protecting rights circumvents the necessity for trade mark applications and the subsequent renewal fees. To counterbalance this advantage, however, it does have serious limitations. In bringing a passing off action to protect a business’ reputation and exclusivity both the existence of that reputation and the status of the unregistered mark which is claimed to be infringed, need to be proved. Doing so can prove both difficult and expensive, compared to the position where a trade mark has been registered. A further limitation is that there are no criminal penalties (such as imprisonment or fines); thus, the worst an infringer has to fear is being prevented from continuing the wrong and having to pay damages. Finally, the aid of the public enforcement agencies such as Trading Standards and Customs and Excise cannot be invoked. This chapter will look first at the nature of the right protected by passing off, both in general and in the special case of products made by a variety of producers but sharing a reputation as a class (such as champagne or Scotch). It will then examine the acts which may constitute grounds for bringing a successful complaint. Finally, the remedies available will briefly be reviewed. Since this right arises solely from the case law, this chapter includes many of the principal cases. It would be sensible to read this chapter in conjunction with Chapter 3 on registered trade marks, since the two subjects are closely related.

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What is the right? The fundamental right protected by the action for passing off is the right to undisturbed integrity of the goodwill of a business as a whole. Thus, a right of action arises where one trader makes a false representation to the public which damages the goodwill in which the public hold another trader’s goods or services.

Proving the right To succeed in an action for passing off, the aggrieved party must first prove that they have the benefit of existing goodwill with the relevant public in the copied mark or product appearance or ‘get–up’, such as a ‘house’ colour or standardised, distinctive packaging used across the business’ range of products.

Goodwill Goodwill is the benefit and advantage of a good name or reputation – the attractive force which brings in custom to a business. Almost all businesses will have some goodwill unless they survive purely on passing trade, and even businesses not trading in the UK may still have some reputation among consumers in this country sufficient to enable them to stop others using their names in this country – for example, famous restaurants or hotels. The goodwill which can be damaged by passing off is that attaching to those aspects of the business which the public recognise and with which they have positive associations of whatever kind. Thus, the first stage of establishing a case in passing off is to show that the public do actually recognise the business or its products, and that they have positive associations with it. This can both be difficult and lead to unexpected findings. A typical approach is to demonstrate the extent of advertising of the business or product over a period of time, and, if necessary, to conduct market research to establish the level of public recognition of the name or product. Although passing off relates to the business as a whole, the elements which are most likely to have some kind of recognition, and so potentially suffer damage, will be the brands and get–up of goods and the business’ good name. Hence, passing off is principally associated with protecting unregistered marks. (Where a mark is used by another trader for a class of goods or services for which it is registered, it will be more easily and cheaply protected by an action for trade mark infringement. Note that the unregistered marks protectable by a passing off action include marks which are registered by their owner for some classes of goods or services but are then used by another trader on a different class of goods or services.)

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Case study: Harrods Limited vs The Harrodian School Limited Harrods Limited sold a site in Barnes in south west London, for use as a preparatory school. The site had previously been used by Harrods as a recreation facility for its staff known as the Harrodian Club, but interest in the club had waned and it had fallen into disrepair. The purchaser decided that, as the site had always been known as ‘Harrodian’, the new school would be known as the ‘Harrodian School’. Harrods objected to this and commenced an action against the school for passing off. Harrods’ case was that members of the relevant purchasing public would think that there was some connection between the school and them. They claimed that ‘Harrodian’ meant ‘pertaining to Harrods’, so that the public would think that Harrods had in some way endorsed or were associated with the school. They were able to show that the staff of Harrods had formerly referred to themselves as ‘Harrodians’, and that in the distant past Harrods had sold a number of products with the word ‘Harrodian’ on them. However, this usage had lapsed many years before the set up of the school. They were also able to show that they provided a wide range of goods and services, and had trade marks registered in many classes – but they did not own or run a school. Crucially, Harrods were not able to produce any evidence that members of the public believed there to be any connection between them and the Harrodian School. Therefore, although accepting that Harrods is a famous department store and has goodwill associated with its name, the judge rejected Harrods’ case. Harrods appealed, arguing that the ‘Harrods’ name was so very distinctive that its reputation was universal and that hence even the school’s unrelated activities would inevitably lead to a dilution of Harrods’ reputation. The Court of Appeal rejected this argument: although willing in principle to protect the goodwill of a brand against debasement, this will only be called into play if there was in fact confusion amongst the public threatening the brand. Since the passing off action is protecting unregistered marks, in order to succeed it will be necessary to show that the marks in question are distinctive and not descriptive or generic, exactly as in a trade mark application (see Chapter 3 above). Further, it will need to be shown that the public associate the marks with a single trade source (although the public need not know the name or location of the trader, merely understand that it is a particular trader and not suppliers in general). The importance of these two hurdles are illustrated in the following case studies.

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Case study: Hodgkinsons & Corby Ltd v Wards Mobility Services Limited Hodgkinsons & Corby (H&C) were the UK distributor of a special cushion, known as ‘Roho’, designed for use with wheelchairs, which the patient’s care–worker would order and adjust for the particular user. The ultimate consumers – the patients themselves – had minimal involvement in the purchase of the cushions. When Wards began selling in the UK a copy of the ‘Roho’ cushion under a new name (‘FloTair’), H&C brought a passing off action based on the distinctive shape of the cushion. The judge was not convinced. There was insufficient evidence that the shape of the cushion had become distinctive of the ‘Roho’ cushion to the point of indicating a trade source. Given the completely different name of the copy, there was no evidence that anyone buying the cushion (and these were health care professionals) was being deceived by the similar shape into buying the ‘FloTair’ when they wanted the ‘Roho’. Case study: United Biscuits (UK) Limited v Asda Stores Limited PENGUIN biscuits have been sold since the 1950s; since the mid–1970s their standard packaging for the milk chocolate version has been predominantly red with a horizontal yellow band, PENGUIN in black (or very dark blue) capital letters on the yellow band and at least one representation of a penguin. Various pictorial marks of penguins have been registered, ranging from naturalistic versions to more cartoon character types. In December 1995 Asda prepared a design brief for a new brand beater chocolate biscuit, instructing that it should clearly match against the brand PENGUIN using cues such as colour and typography. In September 1996, they launched a red packaged product the same size and shape as PENGUIN with the name PUFFIN in black capitals, edged in white as PENGUIN is, and with a cartoon of a seabird with a white front and blue–black back and wings. There was no yellow band or equivalent. Asda’s marketing department witnesses were consistent in calling the product the ‘Asda Puffin’, but the Judge found that it was generally referred to as ‘Puffin’. The public witnesses generally expressed some sort of view that PUFFIN was made by the same manufacturer as PENGUIN, though few could name United Biscuits. From their evidence the Judge drew three conclusions. First, it was likely that a significant proportion of supermarket shoppers would fail to distinguish between PUFFINs and PENGUINs if both were on sale next to each other. Second, a substantial number of shoppers would suppose that there was an association (in the form of a common manufacturer) between PUFFIN

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and PENGUIN. Third, that the great majority of shoppers would not know who manufactures PENGUINs. The Judge held that Asda had taken a conscious decision to live dangerously, and had gone too far since the public evidently inferred from the similarity of packaging of the two brands that they must be closely related. The association which the public was making as to common manufacturer was sufficient to establish passing off.

Protection of geographical indications of origin In appropriate instances, there may be goodwill attaching to the nature of the goods themselves, where that nature has a specific geographical connotation. This extended form of passing off was first used to protect the designation ‘champagne’; it has since been used to protect, for example, ‘Scotch’ for whisky and ‘Swiss’ for chocolate. Case study: Tattinger et al v Allbev Limited et al Thorncroft Vineyard produced a traditional English non–alcoholic sparkling cordial known as ‘Elderflower Champagne’. Despite the very considerable differences between this drink and real champagne, including its price tag of only £2.99, Taittinger and the other French champagne producers sued for passing off. The High Court judge found that using the champagne name and get–up (for example, dark green bottles with the typical wired cork used for champagne) for the Elderflower drink did constitute a misrepresentation – it was designed to resemble real champagne. However, in his view the average member of the public was not likely to be confused into thinking that the drink was French champagne. Most people who might at first think this would read the label, which explained that it was a natural non–alcoholic sparkling refreshment, and would therefore appreciate that the drink was not real champagne. Those people who would actually be confused were so few that the damage in sales that champagne would suffer would be insignificant. He ignored the argument that Thorncroft’s use would erode the uniqueness of the champagne mark. The champagne manufacturers appealed. The Court of Appeal considered that even those who read the label might be led to believe that this was a non–alcoholic version of champagne, following the trend seen in recent years of non–alcoholic wines and beers. Thus, the distinctiveness of the name champagne in this country would be eroded by Thorncroft’s use of the mark, and hence the goodwill of the business of the

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champagne houses would be damaged, even though there was no significant reduction in the Plaintiffs’ sales. An injunction was granted to prevent a proliferation of Champagne named non–alcoholic drinks, which might eventually have led to the term ‘Champagne’ meaning nothing more than ‘fizzy’ or ‘premium’.

Dealings in goodwill Goodwill is classed as personal property and therefore can be assigned, but this assignment must be along with the particular business to which it pertains since goodwill has no independent existence. Thus, a purchaser of a business can take over the goodwill, and hence the right to sue for passing off, along with the other assets. There is no need for an assignment of goodwill to adhere to any particular formalities, but it may be wise where small businesses are concerned to include a covenant that the former proprietor will not immediately set up in competition in the near vicinity, whether using a different name or not, since goodwill can often attach to individuals. Goodwill can also in effect be licensed, in that the owner can permit others to do things which would normally be actionable in passing off; this will normally be in the form of a licence to use particular marks or get–up.

Infringement Two elements need to be established: 1)

That there has been a misrepresentation which deceived the public as to the goods sold and

2)

That this has caused or will (if not prevented by an injunction) cause damage to the legitimate business.

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Misrepresentation Passing off does not protect a mark or style absolutely; rather, it protects a trader using that mark from deceptive use of that mark by someone else. In theory, anyone can use another’s unregistered mark as long as no one is brought to imagine that the goods sold by the first trader under the mark are those of or associated with the second trader. Thus, for an action to succeed, the plaintiff must show both that: 1)

A false representation has been made, and

2)

The effect of that representation has been to deceive or confuse the public as to the goods or services they are buying.

False representations A representation is false if it is calculated to deceive, even if it is in fact true in some sense. Thus, a retailer selling seconds as ‘Smith’s finest quality china’ will be deceiving the public even if the china really is from Smith’s finest quality line, for it is not accurate to represent that the goods reach Smith’s quality standard for that line. The representation may relate to any material matter. Common examples are representations as to: –

The trade source or nature of the particular goods or services,

–

The quality of the goods or services,

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The identity of a business or its connection with a known business, or

–

Connection with or endorsement by a known personality or creation. For example, the official merchandisers of Teenage Mutant Ninja Turtles brought a successful passing off action against a dealer in goods depicting other humanoid turtles.

Case study: The Law Society v Society of Lawyers The Law Society is the statutory body which, since the eighteenth century has been responsible for the qualification and professional conduct of solicitors. In 1995, an organisation was set up to represent professionals such as licensed conveyancers, legal executives and others carrying out legal work but not necessarily having a full qualification as a solicitor or barrister. The new organisation called itself ‘The Society of Lawyers’. The Law Society sued, and successfully argued that the general public would understand lawyer to mean solicitor or barrister only. Thus, the name ‘The Society of Lawyers’ constituted a material misrepresentation as to the qualifications of the group’s members.

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Statements relating to a trader’s personal standing will not be actionable in passing off unless the goodwill of the business itself is affected. Otherwise, such statements may be actionable as libel or slander (and thus outside the scope of this Report). To be actionable, the representation needs to be made to suppliers, customers or the ultimate consumers of the relevant goods or services – after all, entirely uninterested third parties are unlikely to harbour any goodwill towards the complainant which might be damaged. Confusion It is almost always important to obtain real evidence of confusion among the public in passing off cases. Unless the issue is so clear cut that the Judge will be able to reach a decision without hearing any evidence, it is imperative to convince him by bringing witnesses to testify as to confusion. Unfortunately, particularly in cases concerning low cost items in competitive markets, even if there is in fact widespread confusion it is unlikely that either party will ever come to hear of it. It is therefore necessary to go out and find the evidence. Surveys – good, bad and costly A favourite form of evidence gathering is the commissioning of market surveys, to be carried out by independent survey organisations and, hopefully, demonstrate that because of the misrepresentation, members of the public believe that the goods of one trader are associated with another. However, the Courts have become increasingly sceptical of survey evidence, and high standards of fairness are therefore imposed. Meeting these standards is essential for the results to have any weight in court, but can add significantly to the cost of an action. The requirements fall into two categories. •

Methodology: the survey must be done fairly and by a method such that a representative cross–section of the public is interviewed; the sample must be sufficiently large to produce a statistically significant result; exact answers must be recorded in full, rather than pre–coded boxes used for recording categories of answer; and no leading questions should be asked and the interviewee should not be directed into a field of speculation upon which s/he would never otherwise have embarked. The questions should be as unambiguous as possible and factually realistic: for example, the question ‘who do you think made this?’ has been specifically criticised for not being a question the consumer would normally ask him– or herself.

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Disclosure: the other side must be shown: the number of surveys carried out. This requirement aims to forestall the progressive refinement of survey questions to the point where answers which favour the party using the survey can be elicited more frequently than they would have been had the questions been simple and direct; the methodology and sample sizes of all surveys carried out. For example, responses to questions asked under unnatural, laboratory–type conditions are considered less reliable than those asked under realistic, point–of–purchase–type conditions; all instructions given to the interviewers as to how to conduct the interviews, and, if the answers are subsequently computer coded, any instructions to those carrying out the coding; and all of each interviewee’s answers.

The weight given to a survey can be increased very substantially by backing it with evidence from the interviewers, independent witnesses of the interview technique and, in particular, any interviewees who are willing. Members of the public can be unpredictable as witnesses, but their very independence tends to lend additional conviction to their evidence. Completely unsolicited evidence carries even greater weight. Case studies: Neutragena v Laboratoires Garnier The ‘Neutragena’ and ‘Neutralia’ brands are both used for personal care products: shampoos, conditioners, shower gels etc. The ‘Neutragena’ range of hypo–allergenic products have been sold in the UK since the 1950s. ‘Neutralia’ had been used by Laboratoires Garnier to market their range of products across Europe from about 1984, although it was not until 1994 that the product was fully launched in the UK. To prove confusion, Neutragena carried out a market survey, to find potential witnesses who would be able to testify to having been confused. The survey was carried out in various shops up and down the country, with a market researcher and a lawyer present in each shop. As sales of these products are not that frequent, shoppers were encouraged to buy them by a placard in the shop stating that purchasers of any ‘Neutragena’ product would get another free. If anyone in the shop picked up either a ‘Neutragena’ or ‘Neutralia’ product they were interviewed. Out of 131 interviews, 11 gave evidence for Neutragena. Although this form of evidence was no doubt persuasive, the nail in Laboratoires Garnier’s coffin was actually a somewhat risque television advertisement for

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‘Neutralia’ shower gel, featuring a woman taking a shower, which included a shot of the woman’s nipple. 158 letters of complaint were received by the Independent Television Commission. Of these complainants, nine were obviously confused as they referred to the subject of the commercial as ‘Neutragena’. Thus, people were confusing the two products even when they were going to the trouble of writing letters of complaint. This evidence undoubtedly had a strong effect on the Judge, as it was untainted by any artificiality. Case study: Andrex/Nouvelle (Kimberley–Clark v Fort Sterling) Fort Sterling Ltd launched a new line of their ‘Nouvelle’ toilet paper, ‘Nouvelle Quilted’, promoting it with an offer to supply any dissatisfied customer with an equivalent packet of ‘Andrex’. The offer was promoted on special packs which stated ‘Softness guaranteed (or we’ll exchange it for Andrex)’ in large, 36 point type. The words ‘softness’ and ‘for Andrex’ appeared to be highlighted. Immediately underneath the words ‘for Andrex’, it stated ‘Andrex is a registered trade mark of Kimberley–Clark Ltd’, but in small, eight point type. A paragraph in eight point or smaller type even lower down explained clearly ‘Andrex is a competitor’s brand which does not belong to the manufacturer of Nouvelle’. Kimberley–Clark immediately brought an action for trade mark infringement and passing off, and within two weeks of the offer first going out on to the shelves the parties came to a hearing. The judge did not think that most shoppers would notice the disclaimer in small type at the foot of the promotional section of the package – indeed, one consumer actually wrote to Kimberley–Clark saying that before seeing an item in the Daily Mirror, she had believed the ‘Nouvelle Quilted’ was being made by another branch of ‘Andrex’. Kimberley–Clark had also, with impressive speed, managed to conduct two separate surveys of shoppers. The first was relatively informal, carried out in London in the two days following purchase of the first sample. Many of the safeguards above were missing, and the results were of limited value. The second survey was carried out over a broader geographical spread and did attempt to follow the guidelines more closely. In this, even when shown the standard ‘Nouvelle’ packaging and asked who manufactured it, 14per cent of respondents said ‘Andrex’. Only 24 per cent said ‘Nouvelle ‘although that name was printed prominently across the package. (The judge commented that the likelihood was that those respondents who said ‘Andrex’ were simply guessing, taking the answer ‘Nouvelle’ to be too obvious and treating the question as a trick. If so, the value of the survey was undoubtedly limited.)

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He was, however, impressed that the percentage saying ‘Andrex’ in response to this question increased to 42 per cent when the packaging incorporating the offer was shown. Hence, the survey results were consistent with some consumers being deceived into thinking they were buying a Kimberley–Clark product when faced with the special offer packaging, and this was sufficient to establish passing off. In summary, a misrepresentation can be any aspect of the goods or services in question, their presentation or packaging, which can be shown to mislead the consumer into thinking they are getting something different from what they are actually getting.

Damage No actual damage to the business need already have occurred, in order to succeed in a passing off action; but it must be possible to show that damage is likely to be suffered. Note that it is not necessary for there to be any intention to cause damage – indeed, it is scarcely ever the case that a defendant in a passing off action has intended harm. Rather, the damage is typically caused by someone attempting to trade off the superior quality or reputation of particular goods. The form of possible damage may be anything from direct loss of sales, through a degradation of the reputation of goods or services (by association with the defendant’s inferior products), to loss of exclusivity or distinctiveness (as in the Champagne case, above) or loss of a licensing opportunity. Where the misrepresentation involved is sufficiently serious to establish fraud, then the courts will tend to assume that damage has been or will be caused, but in ordinary passing off cases some evidence of damage is needed. The amount of evidence needed will be less, the closer the fields of activity of the two parties – if a trader uses a direct competitor’s mark or get–up, then the courts will see damage to the latter’s business as intrinsically probable. On the other hand, if the parties are in completely unrelated fields then it will be necessary to show a real probability of damage. Case study: Stringfellow v McCain McCain, the manufacturers of oven–ready chips, adopted the name ‘Stringfellow’ for one type of their frozen chips. They also advertised this new brand through television advertisements which included a shot of a kitchen turning into a discotheque. Peter Stringfellow, the proprietor of a large London nightclub, sued them for passing off their chips as being associated with his club. The court agreed that it was possible that some consumers might make the leap of imagination required to associate the chips with the night club. However,

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as there was no damage proved to the club’s reputation through the advertisements, nor was any inherently likely, Stringfellow lost the action.

Who can sue and be sued To bring an action in passing off, a party must normally be in business and have a favourable reputation in England and Wales, either as a business as a whole or in respect of particular goods or services. Professional or trading associations, however, may be able to bring actions in passing off: for example, against parties misrepresenting themselves as members, or using a title sufficiently similar to that of the association as to cause damage (as in the Law Society case study, above). A start–up business will rarely be in a position to bring an action of this kind, since it is necessary to have goodwill. However, advance advertising on a sufficient scale may create a reputation before actual trading has started. Alternatively, the trading arm of an organisation which already has a reputation, or the merchandising outlet for a celebrity, may be able to sue from day one. To be liable in passing off, the defendant must be in trade as well. There is no need for the parties to be competing in the same field of business; but the closer the two are to each other, the easier the case will be to prove. Finally, directors or other officers of a company may be found liable for passing off by their company in addition to any liability of the company itself, if they had sufficient personal involvement in the matter.

Remedies The remedies available in a passing off action are the same as those for a civil registered trade mark infringement action – an injunction against further infringement, monetary damages or an account of profits, and delivery up or destruction of offending goods. As always, injunctions and accounts of profits will not be available to a plaintiff who has not conducted themself fairly, or has delayed unduly or acquiesced. Anton Piller orders are less obtainable in respect of unregistered trade marks than registered ones, since there is a less clear–cut right being infringed at the outset.

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Practical pointers The single most effective way to avoid being sued for passing off is to choose a name and appearance for your product which is as unique as possible, and to ensure that through advertising or otherwise it is quickly established in the public mind as a product associated with your business and none other. Easier to say than to do! Nevertheless, the further a product is distinguished from its competitors, the less prospect there is of any successful action being brought against it – and the easier it is likely to be to show that any later imitation is associated by the public with your business rather than the imitator’s. Conversely, if launching a deliberate ‘lookalike’ product, it would be prudent to conduct some market research before the launch aimed at establishing whether any significant confusion is likely, to avoid wasting production and advertising costs if the product has to be withdrawn in the wake of a passing off action by the brand owner. It might also be advisable, though rarely critical, not to trumpet too loudly the intention to match a particular brand.

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Copyright INTRODUCTION BASIC REQUIREMENTS T H E R I G H T S O B TA I N E D : C O P Y R I G H T S A N D M O R A L R I G H T S D U R AT I O N OWNERSHIP AND DEALINGS C O L L E C T I V E A D M I N I S T R AT I O N INFRINGEMENT PRACTICAL ANTI-PIRACY MEASURES

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Chapter 5 Copyright

Introduction Copyright is the most international of intellectual property rights. Works by British nationals or residents, or which are first published in the UK, are automatically protected by copyright in almost all industrialised and most developing countries, thanks to the Berne Convention on Copyright of 1885. This Convention sets a minimum standard of protection for copyright works, and requires all signatories to grant the same protection to works of foreign authorship (as long as the foreign author comes from another Berne member country) as to works of its own nationals. The Berne Convention has recently been signed by the United States and by China; further, even countries which have not actually joined Berne are generally required under the World Trade Organisation rules to give foreign works at least as good protection as Berne would require. The first statutory copyright in the UK was introduced in the early eighteenth century to improve the protection of printers from the commercial depredations caused by ‘pirate’ copying of the works they produced. Initially, the right was obtained through a registration of a work at the Stationers’ Company, and until very recently the Stationers’ Company of the City of London continued to run a register. However, the requirement of registration in order for a work to be protected by copyright was abolished many years ago, and the register therefore fell into disuse. Further, the range of kinds of work which are protected has been substantially broadened over the years, so that for example artistic and musical works, as well as literary, are now protected. Although copyright in the UK originated as a protection for commercial interests, there has always been another approach taken in continental legal systems: that the right aims to protect not the printer but the author. Thus, whereas the UK initially gave a copyright with a term of only 28 years in total – sufficient for the printer to recoup his investment in producing the book – the continental systems based the term of protection on the lifetimes of the author and his or her heirs. Today, all EU countries give copyright lasting for the 70 years after the author’s death – potentially, for a work written today by a person in their twenties, a total in the region of 150 years. It is debatable whether this is in any way proportionate to the value of the right itself in the majority of cases.

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Copyright may be a long–lasting right, but it is not a strict monopoly as patents and registered trade marks are: the proprietor can only prevent actual copying of the work; independent creation of the same work does not infringe. This is often explained by saying that copyright does not protect the idea underlying a work; rather, it protects the form in which it has been expressed. The distinction between idea and form or expression, while in some ways an oversimplification, has been significant in respect of computer programs in particular, where copyright infringement may be avoided by using the mathematical solution or algorithm embodied in a particular program, but writing different computer code to implement it. As technology has developed, a variety of different forms of work and their propagation have evolved which were not foreseen by the original copyright – for example, sound, film and video recording, cable and satellite broadcasting. The evolution of film and video led for the first time to the permanent recording, and subsequent repetition and exploitation, of formerly impermanent performances, which accordingly became capable of protection as ‘works’. Since all of these new types of works have individual characteristics unlike those of the ‘traditional’ copyright works they have been granted protection under rights specifically crafted to reflect the genuine needs of the respective industries: performers’ rights, broadcasting, rental and lending rights, for example. These are often referred to as ‘neighbouring rights’, since in terms of subject matter at least, they are close neighbours of copyright. This chapter does not attempt to cover the neighbouring rights: space does not permit, and they are in any case very industry–specific. The chapter does look at the kinds of works which will be protected by ‘traditional’ copyright, and the nature of the different rights which the proprietor obtains. It will then outline the way that copyright is commonly administered in the music and similar copyright–based industries. Acts which may infringe copyright in a work, which the proprietor may enforce through legal proceedings, will be explained. The problems which may arise in trying to enforce the right will be discussed as well as defences which the alleged infringer may raise. Finally, criminal copyright infringement (‘piracy’) will be discussed and the options available for enforcement against criminal infringers.

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Basic requirements Literary, dramatic, musical and artistic works Copyright subsists only in this specified list of types of work – although each type is broadly defined. Thus, an ‘artistic’ work includes: –

A graphic work, photograph, sculpture or collage,

–

A work of architecture, or

–

A work of artistic craftsmanship (such as clothing, ceramic tableware or craftworks generally);

and a ‘graphic work’ means a)

Any painting, drawing, diagram, map, chart or plan, and

b)

Any engraving, etching, lithograph, woodcut or similar work.

Dramatic works include dance and mime. Literary works include tables and compilations, and computer programs and preparatory works therefore (for example, flow diagrams), but not single words no matter how original nor at what cost invented. For example, the name ‘Exxon’ was selected after extensive research to confirm that it had no meaning in any major human language – but even so was not protectable as a ‘work’ – that is, something intended to give either information or pleasure. Under UK law, copyright is independent of any kind of aesthetic or artistic ‘minimum standard’ – a child’s scribble and a watercolour by a Royal Academician, equally qualify for protection; similarly, an electrical circuit diagram is as capable of being copyright as a Pinter play. What qualifies a work for protection in the UK is the mental effort which went into its production, not any value judgment as to what that effort produced. This is not the position in some other countries, notably France, where protection is only given to works of some aesthetic quality. The effect is that in the UK many mundane works – letters, reports, industrial design drawings and so on – are protected by copyright to the same extent as recognised artistic works.

Special cases: Computer programs Computer programs have always been protected as literary works, but several special provisions have had to be made. If a software house could effectively tie any customer to using their software only, by preventing other programmers from

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having any access to the source code, it would clearly be a major hindrance to the development of the software industry. Thus, an exception to copyright protection has been made to allow any program to be ‘decompiled’ (from object code (readable only by computers) to source code (readable by humans)) where and to the extent necessary in order to enable a competitor to write interoperable programs. It is allowed, for example, to decompile a software package in order to identify the correct parameters and addresses within the existing program, to which an interoperable program would need to refer. The copyright owner can get around this exception only by making the necessary program interface information freely available, so that there can be no genuine need to decompile. Further, it is permissible to run any program for the purpose of working out how it operates – despite the fact that this will infringe any copyright in the program (by creating transient copies in the computer’s memory). It is also expressly permitted to make backup copies of a program legitimately obtained, to alter the source code to remove small errors or ‘bugs’, and to make minor changes to keep the software up–to–date – for example, if an industrial design program incorporated safety standards and these were changed, it would be necessary to alter the values incorporated in the program. However, the copyright owner can by contract exclude this right – thus requiring all users to come back to them for any maintenance or development work. Databases Special rules have recently been introduced across Europe to protect the commercial value represented by European databases of many kinds. Although it is likely that databases had copyright protection under UK law in any event, the same was not true of many other European countries. Accordingly, a special database right has been introduced to enable European database owners to prevent the unauthorised extraction or re–utilisation of entries from a database (defined as a collection of items of data arranged in a systematic or methodical way and capable of being individually accessed by electronic or other means). In order to qualify in addition for ordinary copyright protection, the selection and arrangement of the database must be its author’s ‘own intellectual creation’ – thus barring computer–generated databases, and those which, relying on electronic search methods, are not structured or arranged but simply free–form. Database right lasts for 15 years from creation of the database, but if the database is substantially updated (including updating by the addition of individually small incremental changes over a period), the 15 year period commences again – giving a potentially permanent monopoly over a regularly updated database. Lawful users of a database are given a limited right to extract or re–utilise small parts of the database, but not to such an extent that it conflicts with the database

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maker’s ability to exploit it. The right is also limited by exceptions which allow the public to use substantial parts of a non–electronic database, as long as the use is for private purposes, and permission for teachers or scientific researchers also to use the contents as necessary as long as acknowledgement of the source is given.

Originality To be protected by copyright, a work must be original – meaning no more than that it is not a copy of a previous work. It is generally enough that the work is the production of something in a new form as a result of the skill, labour and judgement of the author, even if another had already achieved the same result by a different method. There is a bottom line: a work will not be protected if its creation was a matter of routine such as arranging names in alphabetical order, or filling in colours according to existing instructions. But beyond this, any degree of originality is sufficient. It does not even matter if the end result is identical to an existing work – for example, a table of trigonometric functions or logarithms, if individually calculated afresh, could be a copyright work notwithstanding that the contents have been known for over a century. Similarly, a compilation of data, a translation of a work from another language (including a computer code in one language into a computer code in another), an anthology or a collage may each have copyright if enough work was put into their production. Where the ‘new’ work is an abridgement, consisting of selections from an existing work there may or may not be any copyright depending upon the degree of skill and judgement needed to perform the selection. Case study: Walter v Lane Lord Rosebery, a Victorian politician, gave an extempore public speech which was recorded in shorthand notes by a journalist from The Times. The journalist then wrote up his notes into an accurate, detailed account of Lord Rosebery’s speech, and it was duly published in The Times. A rival newspaper then printed an account of the speech derived from The Times’ report, and when sued for copyright infringement argued that there was no original copyright in The Times’ account, as all their reporter had done was record verbatim what the speaker said. The court disagreed. The transcription of a speech into shorthand is an original work which requires skill and labour, and can therefore be protected by copyright, notwithstanding that any other shorthand writer who might have been present could equally have produced a substantially identical report. The

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fact was that The Times had sent a reporter who had expended that effort; rivals were not entitled simply to borrow the results of that work. It should be noted, however, that the lower the degree of originality a work has, the more slavish or direct a copy will have to be to infringe the copyright. Thus, all that the logarithm table copyright in the above example is likely to protect against is exact reproduction of virtually the whole table. The copyright in a striking and original modern painting will protect not only against complete reproduction but also potentially against copying in isolation of significant details, or borrowing of the underlying structure or of the colour scheme.

Need for permanent form A work is not protected until it has been recorded in writing or otherwise – since otherwise there would be no means of knowing what it was that was protected. It can be recorded in any material form: on paper, in computer memory, on film and so on.

The rights obtained: copyrights and moral rights Copyright The copyright owner is exclusively entitled to a number of rights, of which the most salient for present purposes are: •

The right to copy the work;

•

The right to issue copies of the work to the public; and

•

The right to make an adaptation of it, or make or publish copies of an adaptation of it.

It is an infringement to perform any of the acts to which the copyright owner has the exclusive right, without their permission.

Moral rights In addition to the commercial copyrights, the author may have certain additional rights, known as ‘moral’ rights over the work. The principal moral rights are: –

The right to be identified as the author (‘right of paternity’)

–

The right not to have the work subjected to derogatory treatment (‘right of integrity’).

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The right of paternity is more–or–less self–evident (though, notably, it only applies if the author ‘asserts’ it – see, for example, my assertion at the front of this Report). The right of integrity is a little harder to interpret, since it is open to interpretation what treatment might be derogatory of a work. ‘Derogatory’ is defined as including anything which distorts or mutilates the work or is otherwise prejudicial to the honour or reputation of the author – but authors are famously touchy people, and may feel themselves dishonoured more easily than less creative spirits. The test for whether treatment was derogatory is therefore likely to be an objective one, taking third parties’ views rather than the participants. It is not likely to include critical reviews even if scathing, as these do not directly alter the work itself – though they may affect the author’s honour or reputation, it will not be as a result of the appearance of the work. In addition, there is a moral right, pertaining to anyone who may need to make use of it, not to have works falsely attributed to them as author. There is also a limited ‘right of privacy’ whereby the commissioner of personal photographs (weddings, funerals and the like) may object to publication, broadcast or shown in public even though in the absence of an express assignment, the photographer will own the copyright.

Duration The basic period of protection for copyright works where the author is within the Berne Convention expires at the end of the period of 70 years from the end of the calendar year in which the author dies. The moral rights, other than right to object to false attribution, also last until this point. The right to object to false attribution lasts only 20 years after the death of the falsely attributed ‘author’.

Ownership and dealings The ‘author’ of a work is the person who creates it, or, in the case of computer–generated works, the person who makes the arrangements for the work to be produced. The first owner of copyright is the author unless the author is an employee who creates the work in the course of his employment (in which case the employer is the first owner of copyright in the work, subject to any agreement to the contrary). If the work has been produced by collaboration such that separate contributions cannot be identified, then it is a work of joint

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authorship and the copyright is owned jointly between all the contributors. This does not apply to the position where different authors’ contributions can be identified – for example, contributors of separate chapters to a book. In that case, each contributor has a separate copyright in their own text. There is no automatic vesting of copyright in a commissioned work in the commissioner: contracts commissioning works which may be copyright need to provide expressly for the right to be owned by the commissioner. Copyright can be assigned; any assignment must be in writing, signed by or on behalf of the owner. If there are joint owners then all owners must be parties for the assignment to be effective. The assignment should specify which of the several rights in any work – for example, the right to copy, to perform, to make recordings and so on – are being assigned and in what territories of the world, as there is a separate copyright in every country. It is advisable, when taking an assignment of copyright, to include in the rights assigned the right to sue for past infringements, in case the value of the copyright turns out to be under siege from existing pirate copiers. Since copyright can be assigned, it can in theory be assigned by way of security – that is mortgaged. It can also be inherited, or passed to a trustee in bankruptcy. Copyright can also be licensed; similar considerations apply to licences as to assignments, with the addition of terms as to how long the licence is to last. Although ordinary (non–exclusive) licences can be granted orally, it makes for greater certainty, and thus enforceability, if the terms are written down. An exclusive licence must be in writing. In some circumstances, a licence may be implied. For example, if an architect is commissioned to produce plans for a building, the contract may only require the architect to pass over the drawings themselves, but a licence will be implied to permit the commissioner to build a building to those plans (as this could otherwise infringe the copyright in the drawings). Similarly, an author who sends a manuscript to a journal will be implied to have licensed the publisher to include it in the journal. Moral rights, on the other hand, cannot be assigned but can be inherited. They can also be waived, either generally in respect of specified acts or occasions. This has substantially weakened their effectiveness, since in most cases an author has minimal bargaining power vis–à–vis the publisher, record or film producer, and it is standard in copyright assignments for many purposes to include a waiver of all moral rights so that the assignee is free to deal with the copyright in any way they wish.

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Collective administration Once gramophones had been invented and the widespread reproduction of recorded music became possible, it soon became apparent that music performers and broadcasters would not be able to function if it were necessary in each instance to trace the copyright owner for each work and obtain a licence. Rather, it would be simpler and more convenient if a single organisation could hold all copyrights on behalf of the composers and grant block licences to radio stations, concert halls, record producers and so on. Thus, between 1910 and 1915 the Mechanical Copyright Licences Company (now MCPS, and covering TV, film and video as well as records) and the Performing Rights Society was established, and has since been joined by Phonographic Performance Limited (broadcasting of sound recordings). These organisations are known as ‘collecting societies’, and form part of an international network of similar societies, so that by agreement they are also responsible for administering in the UK copyright in works by overseas composers and performers. The composer of a piece of music assigns the relevant aspects of copyright to the relevant collecting society, which thereafter: –

Negotiates licences with anyone interested in using the work,

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Monitors broadcasters and anyone else using the work (for example, anywhere where music is played over a public address system, such as cafés, shopping centres or airports, needs a licence) to ensure that they obtain and abide by their licence – and sues them if they do not,

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Collects licence fees and royalties and distributes them to the appropriate composers, and

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Lobbies for any changes in the law which appear necessary to preserve or enhance their members’ rights.

Similar problems began to arise in respect of written or printed works once ‘reprographic copying’ methods such as photocopying became commonplace. As a result the Design and Artists Copyright Society (in respect of artistic works) and very recently the Copyright Licensing Agency (in respect of literary works, in particular newspapers and magazines of all kinds) have been established. Once the collecting societies had come into existence, however, they began to wield very substantial market power in their related industries. An inability to obtain a licence from the necessary collective administrator puts a business at risk of having to close down if it cannot operate without using the copyright works. There is therefore a dedicated Copyright Tribunal, a court whose principal function is to regulate the licensing schemes administered by the collecting societies to ensure that they do not abuse their power by charging extortionate

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fees or applying discriminatory terms in licences without due cause. Any party dissatisfied with the performance of a collecting society can bring proceedings at the Copyright Tribunal to have its activities and licence terms reviewed.

Infringement Copyright infringement may be tackled by using either civil or criminal law, or both. The civil approach is at the option of the copyright owner, which has advantages in terms of control and speed, but also leaves the entire costs to be borne by the owner. Criminal enforcement is carried out by local Trading Standards Officers and HM Customs & Excise, usually at the request and with the cooperation of the copyright owner (since there is no other means by which they might know what goods are pirate copies and which are not). There are several advantages to using criminal measures: the costs savings of having any investigation and prosecution funded publicly, the increase in manpower available through bringing in these authorities, and the potential application of criminal remedies including prison sentences. However, this approach is most suited to stopping relatively large scale pirate copying of consumer items such as music CDs, clothing and so on: it is not suitable for preventing other unauthorised uses of copyright works, such as advertising. Further, there will often be a need for action to be taken very fast, in which case a private (civil) action may be the only realistic option.

Civil infringement Primary infringement The following acts will infringe copyright, if done without the consent of the copyright owner: 1)

Reproducing the work in any material form (‘copying’);

2)

Putting copies into public circulation;

3)

Performing the work in public;

4)

Broadcasting the work or including it in a cable programme;

5)

Making an adaptation of it, or doing any of the above in relation to an adaptation of it;

6)

Authorising anyone to do any of the above.

These acts are known as primary infringement, and are actionable whether or not the perpetrator knew or had any reason to believe that the work concerned

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was a copyright work. They will infringe even if carried out on a purely private, non–commercial basis. 1) Copying Copying means reproducing the original work in any material form: it may be in hundreds of copies by mechanical means, but a transient electronic copy in a computer memory or a single handwritten copy equally infringe. Alternatively, a recording of someone reading a book aloud is a copy of the book, as would be a silent film of it without benefit of any words at all. The person who made the recording or the film would have copyright in that as work in itself, but would not have had the right to create the work in the first place without the express permission of the owner of copyright in the underlying work. Similarly, copying includes making a copy in three dimensions of a two dimensional work and the making of a copy in two dimensions of a three dimensional work – thus, manufacturers used to be able to claim that companies which copied their product were actually infringing copyright in the engineering drawings of that product by reproducing it in three dimensions. However, for designs created on or after 1 August 1989 it is no longer an infringement in the copyright in a design drawing for an article to make an article to that design or copy an article made to that design or issue copies to the public. Instead, a special limited protection for designs of three dimensional articles was introduced (see Chapter 7, on unregistered design right). To infringe, the copy has to be a copy of the whole or a substantial part of the work, and must be a sufficiently close copy that it can clearly be described as a reproduction or adaptation of the original. What is a substantial part? The test of substantiality is one of quality as much as quantity: even if only a few lines are taken from a text, or only a detail from a drawing, if those are the memorable and acclaimed aspects of the particular work in question, then copyright may be infringed. On the other hand, a more lengthy extract which comprises only mundane material may not infringe. There is necessarily a degree of subjectivity involved in deciding exactly how much of a work amounts to a substantial part. For example, small amounts taken regularly from a serial publication are likely to infringe if the result is to reduce the market for the original in a particular field or area. A substantial part of a work may consist equally in the underlying form of the work as in the actual words or lines used to express it. Where the skill and judgement which went into the original lay in the selection or arrangement of information, then copyright may be infringed by taking the selection or

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arrangement, even if the result is recast in different form. Alternatively, a few bars of a song taken and reused as an instrumental passage, or as the chorus rather than the verse, will still infringe the copyright in the original. Parodies, which deliberately attempt to recall the original but with intent to ridicule, are generally granted a degree of latitude but may still infringe copyright if they come close enough to the original to be said to have taken a substantial part. Connection with the original It is also necessary to show that the alleged infringement has in fact been copied – that the infringer had had access to the original at some point and in some form before they produced the alleged copy, even if they have now forgotten that they had ever seen it. There must be a causative link between the two works. This can be fulfilled if, for example, a manufacturer sees the original and later gives instructions to their designer to create a design, describing to them the object which they intend to produce. Even though the designer himself never sees the original, nevertheless there is a clear link between original and copy, in the form of the instructions given by the manufacturer. Thus, to avoid any possibility of copyright infringement, the best way to proceed is to give only a general instruction and leave the designer free to develop as much as possible of the eventual product on their own – the ‘clean room’ approach. 2) Putting copies into public circulation This refers to any copy not yet in public circulation, so that once an infringing copy (or a copy produced under a licence which has since expired) has been released, this does not render the release of subsequent infringing copies any less an infringing act. On the other hand, it is not a primary infringement to resell an infringing copy which is already in circulation – although in some circumstances (discussed below) it may be a secondary infringement. Note also that where the work is a film, sound recording or computer program, any subsequent rental or lending of the work even after it has been put into circulation is still an infringement of the copyright owner’s rental or lending right. Public circulation is interpreted very broadly – for example, where six copies of the sheet music for a work were put on sale in a shop, this was held to be public circulation even though none of them were actually bought – it was open to the public to look at them.

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3) Performing the work in public Performance includes showing a film or broadcast, playing a recording, reading a work (or an unreasonable extract from it) aloud. The number of the audience needed for the performance to be ‘in public’ is small: playing music in a factory has been decided to be ‘in public’, as has showing an instructional video to only 11 of a bank’s employees. 4) Broadcasting the work or including it in a cable programme Broadcast is anything transmitted by electromagnetic signals without a physical link; a cable programme is a transmission by means of optical fibres or other physical means.This category may be important in connection with protecting works presented on internet web sites, since they are retrieved by viewers over telephone networks. 5) Making an adaptation of a work Infringement by copying is a difficult area where someone has produced a work derived from another – for example, a translation, a dramatisation such as a screen–play, or an arrangement of a piano work for orchestra and so on. The situation is that an original work – one into which enough skill and labour has been put to enable it to qualify for copyright protection in its own right – based on an earlier work of a different character, may still infringe the copyright in the underlying work. It is therefore necessary to obtain a licence to publish derivative works, unless it is clear that too little has been taken to qualify as a substantial part. 6) Authorising anyone to do any of the above It is equally as much an infringement to purport to authorise someone else to carry out an infringing act – for instance, directing a colleague to make a copy of a journal article – as it is to perform the act oneself. The question arising is, what amounts to authorisation? It does not need to be an express direction to do something which involves copying: in a noted Australian case, the University of New South Wales was held to be authorising its students to infringe copyright in books held in its libraries by providing photocopiers for their use in the library. However, supplying a juke box to a café (on which infringing records are later played) is not authorising infringement unless the supplier has some active involvement in how the juke box is used. Case study: CBS v Amstrad Amstrad manufactured a tape cassette recorder capable of recording from one tape to another at high speed. Their advertising for this machine included

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statements that it would ‘enable you to make duplicate recordings from one cassette to another, record direct from any source and then make a copy and you can even make a copy of your favourite cassette’. The advertisement also advised that some copying might be in breach of the Copyright Act, but not prominently. The record company CBS, the owners of copyright in a substantial number of sound recordings, sued Amstrad for authorising purchasers of the tape recorder to make infringing copies of their recordings. However, the courts held that this advertisement did not amount to an authorisation as such. It highlighted the ability to copy, but did not grant any right to do so in respect of copyright works. Secondary infringement Secondary infringement covers a range of commercial dealings in an infringing copy of a copyright work, listed below – that is, acts other than actually making copies or dealing with the work in the ways set out above. Infringement is secondary in these cases because whether or not the act infringes depends upon whether or not the person doing it knew or had reason to believe that the article in which they were dealing was an infringing copy of the work. If they were ignorant as to this, then the act does not infringe. Thus, secondary infringement is considerably harder for the copyright owner to prove, as it will need to be shown that the infringer had some reason to believe the copies infringed. In practice, when coming across an importer or dealer for the first time, the essential thing is to notify them of the existence of copyright so that they can thereafter no longer rely upon this let–out. This can be done in relatively forceful terms since, unlike most other intellectual property rights, someone threatened with legal proceedings for copyright infringement cannot turn around and bring an action for threats. It is secondary infringement, without the licence of the copyright owner, to do any of the following in respect of an infringing copy: –

Import it into the UK, otherwise than for private and domestic use.

–

Possess or distribute it in the course of business.

–

Sell it, or let it for hire or offer it for sale.

–

Exhibit it in public.

An infringing copy is one the making of which did infringe, or would (had it been made in the UK) have infringed, copyright or been in breach of an exclusive licence. It is also secondary infringement to make, import, possess, sell, let or offer/expose for sale an article designed or adapted for making copies of the work. Further,

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even non–commercial distribution of infringing copies infringes, if they are distributed so widely as to affect prejudicially the copyright owner’s market. There are further possible acts of secondary infringement relating to infringing public performances of copyright works. Infringement does not depend upon the alleged infringer having intended any harm to the copyright owner, nor even having obtained any commercial advantage from their acts. Who can sue and be sued The legal owner of any aspect of copyright in a work can sue for infringement of that aspect of the right. A licensee, other than an exclusive licensee, does not obtain any right to enforce in their own name as of right, so if such powers are required, the licensee must expressly be given the right to bring proceedings in the copyright owner’s name. An exclusive licensee can bring proceedings as of right. Interestingly, where an exclusive licence has been granted, if the copyright owner wishes to bring proceedings over an infringement which includes infringement of all or part of the rights covered by the exclusive licence, then they must also include the licensee as a party to the proceedings. If the copyright is jointly owned, any one or more of the co–owners can bring proceedings in their own right. In respect of moral rights, only the original creator of the work is entitled to sue for infringement. This reflects the moral rights’ origins in continental law, where the rights are seen very much as personal to the creative genius whose work it is. Anyone who infringes copyright may be sued, whether the infringement is primary or secondary. However, there is one unusual party who may be sued: where copyright is jointly owned, if one co–owner alone purports to grant a licence to a third party, then the licence will be invalid and the co–owner themselves may be sued for authorising an infringement. Civil remedies for infringement There are several possible remedies available to a copyright owner or an exclusive licensee. Damages are available to compensate the copyright owner by putting them in the position they would have been in had the infringement not taken place. This may be, for example, the profits the copyright owner would have made from selling the same number of original articles as the pirate has sold copies; though if the copyright owner cannot show that absent the piracy they would have sold

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those copies, they may only get a reasonable royalty on them instead. Damages may also compensate for the suppression of the price the copyright owner can command for originals, due to the presence of pirate copies on the market. The damages available are limited to compensating for the six years prior to the proceedings being started however, so where a long–standing pirate is only identified after some years it is essential to bring proceedings immediately or compensation for earlier infringement may be foregone. Additional damages may be available in some cases where, for example, the infringement has done more than merely cause the copyright owner to lose a measurable amount of money, but has also damaged the market, or the infringer has made additional profits which the copyright owner might not have been in a position to make. The flagrancy – deliberate or deceptive conduct, for example – of the infringement may be a contributory factor to persuading the court to make an award of this sort. The pirate is also likely to be injuncted from either committing, or continuing to commit, the infringing acts. An application for an injunction pending trial can be made simultaneously with the issue of a Writ or at any later stage; a permanent injunction will only be granted after trial. This may not be granted if the copyright owner has acquiesced in the pirates’ activities, or has delayed bringing proceedings to the extent that the defendant was seriously prejudiced – for example, where a former authorised dealer is led to believe that they have been permitted to continue dealing in copies. Delivery up to the copyright owner of the infringing articles may be ordered. However, the copyright owner is allowed to pre–empt the need for court proceedings by seizing infringing articles without any court order having been made (if the infringing copy was exposed for sale or hire), on condition that proceedings for copyright infringement are then started. The power can only be exercised in public or on premises to which the public have access, so it is most useful for dealing with, for example, traders selling counterfeit memorabilia outside stadia or concert halls. It is necessary to give notice of the time and place of the proposed seizure to the local police station, in case the attempt to exercise the power leads to any breach of the peace. It is not permissible to use any force, and a notice (stating who has seized the goods and other details) must be left with the trader. However, it is prudent only to exercise this right when it is absolutely obvious that the goods are counterfeit. If goods are seized which prove not to be infringing copies, then the copyright owner my be ordered to return them and, if unable, may have to pay damages for them instead. The copyright owner is entitled to have an order for all infringing copies to be destroyed, so that they cannot find their way back onto the market.

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The civil remedies for infringement of the moral rights are an injunction and damages, probably in the form of compensation for the creator’s loss of goodwill and reputation (as economic rights) and for injury to feelings (in line with the damages awarded in libel cases). Defences and permitted acts Copyright is not only not a strict monopoly, it is also subject to a number of exceptions. For example, a limited amount of copying is permitted for educational purposes, or by libraries and archives, since this is considered to be in the public interest. It does not extend to teachers being permitted to copy whole books and distribute them to pupils. Copying within public administration – parliamentary or legal proceedings, or of material on a public register – is also permitted. Further, limited copying may be permitted as ‘fair dealing’ for the purposes of research (including commercial research) or private study – again, this is the use of abstracts and small excerpts from a complete work, not wholesale copying of texts. It may equally be fair to copy for the purpose of criticism or review, or in the course of reporting current events (as long as a sufficient acknowledgement is made as to the source of the material copied). The test for what is ‘fair’ is a matter of degree and depends on the impression the court forms of the defendant’s conduct – but any dealing which may have an impact on the copyright owner’s ability to exploit the work is very unlikely to be considered ‘fair’. Similarly, if the material has been published in breach of confidence, then it is unlikely to be considered fair – though leaking information which it is in the public interest to reveal may survive this hurdle. Thus, the copier’s motive may be relevant to what is or is not ‘fair’. Copying of a complete work, with the addition only of marginal notes, is unlikely to qualify as fair dealing for the purpose of criticism; but a long passage with detailed commentary may. Including a copyright work incidentally in a photograph, film or broadcast does not amount to infringement: this exception is clearly necessary, since it would be impossible to record interviews or make documentaries without including some copyright work or other – many buildings are still covered by architectural copyright, for example. However, it is applied less liberally in respect of musical works, since ‘incidental’ addition of music can add substantial value to a film or report. If music is included, it needs to be genuinely incidental for the defence to apply, such as a report of a public ceremony including footage of a military band playing the copyright piece. Finally, as mentioned above, it is no longer (although it once was) an infringement of copyright in a drawing of an industrial design to manufacture an article to that design. This exception is a matter of public policy, to avoid an overlap with the

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other possible rights which the designer may have – either registered or unregistered design right (discussed at Chapters 6 and 7 below).

Criminal infringement It is a criminal offence to do any of the following in respect of an article which the dealer knows or has reason to believe is an infringing copy: –

Make it, for sale or hire;

–

Import it other than for private, domestic use;

–

Possess it in the course of business with a view to doing any infringing act;

–

Sell, let, offer, exhibit or distribute it in the course of a business; or

–

Distribute it, even if not in the course of a business, if it is to such a great extent that it prejudices the owner’s rights.

It is also an offence to possess anything specifically designed or adapted for making infringing copies, if the holder knows or has reason to believe it is to be used for that purpose. Note, however, that the prosecution will have to prove that the dealer knew or had reason to believe that the article was an infringing copy. Thus, these provisions can only be successfully invoked after the dealer has been notified that the copyright owner considers the articles to be infringing copies – up until then, the dealer is free to argue that they had no idea what they were selling. It may also be possible to give notice to the world in general, for example by advertising in the trade press, with enough information to enable traders to distinguish the originals from the counterfeits. Of course, in any given case there may be other circumstances which would lead to a dealer being shown to have had the necessary knowledge even in the absence of specific notice having been given. Anyone convicted of any of these offences – which can include directors of companies which are found to be infringing – can be sentenced to up to six months imprisonment by a Magistrates Court or up to two years by a Crown Court. They may also be fined. The assistance of Trading Standards Departments of local authorities can be requested for help in keeping an eye out for pirate copies leaking onto the market, and can be a very useful means of enforcement at low cost. Similarly, the Customs and Excise can be requested to keep a watch for imports of pirate copies – the procedures in each case are very similar to that in respect of trade mark couterfeits, which is described in full in Chapter 3 above.

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Practical anti–piracy measures If the following conditions are met, then in any civil action, and in a criminal action for delivery up, ownership of copyright will be presumed to be correct as stated unless the defendant can show otherwise: –

All works – mark the publisher’s name on all copies – literary, dramatic, artistic or musical works – mark the author’s name on all copies;

–

Sound recordings and computer programs – mark the copyright owner’s name and date and country of first publications on all copies;

–

Films and videos – as for sound recordings, but mark in addition the author’s and director’s names.

The main difficulty for public authorities attempting to stop sales of pirate copyright works is the problem of identifying them. Thus, it has become common to identify original copies by devices such as security tags, holograms and so on, which are harder for the counterfeiter to reproduce than the work itself may be. In respect of digital media for copyright works (music, software and so on), various mechanisms have been developed which will scramble any unauthorised copies made from originals although the pirates are generally close behind in coming up with ways around these techniques. Particularly in respect of goods being manufactured in the Far East, the best means of controlling pirate copies may be to maintain rigorous control over production and export at that end so that additional identical copies do not start to reach the Western markets, making detection of unauthorised copies extremely difficult.

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Registered designs INTRODUCTION R E Q U I R E M E N T S F O R R E G I S T R AT I O N EXCEPTIONS TO REGISTRABILITY HOW TO REGISTER T H E M O N O P O LY O B T A I N E D OWNERSHIP AND DEALINGS D U R AT I O N INFRINGEMENT OTHER POINTS TO NOTE SUMMARY

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Chapter 6 Registered designs

Introduction The protection available for designs is something of a patchwork, with a less than logical structure. Designs may be registrable, in which case no enforceable rights whatsoever accrue in the design until it has been registered. Other designs (or other aspects of a design, some aspects of which are registrable) which do not meet the criteria for registration, were formerly protected as copyright works but are now accorded only a short-term, tailor-made right known, memorably, as unregistered design right (but often shortened to ‘design right’). The principal difference between the two forms of protection is that a registered design is an absolute monopoly right. This means that nobody may produce an article to a design which matches the registration for the duration of the right, without permission from the registered design proprietor, whether or not they knew of the existence of the registration. In contrast, copyright and unregistered design right are not infringed if the apparent copy is in fact a genuinely independent design, even if it results in an identical article. Registered designs can also be protected for an effective 25 years, as opposed to only ten for unregistered design right. However, there is nothing to be gained by drawing comparisons since there is no choice to be made between them – as mentioned above, they apply to different categories or aspects of design (both of which may subsist in any given article). Registered designs are an under–utilised form of intellectual property in the UK: comparatively few are registered and even fewer actively and successfully enforced. This is in marked contrast to the position in continental Europe, where registered designs are taken far more seriously as assets and enforced rigorously. There is, however, no operative international design registration regime equivalent to that for patents or trademarks; instead, every national registration must be applied for individually. This chapter deals with rights in UK registered designs: what designs may be registered, how this is done, who owns a design, what acts will infringe a registered design and the remedies which will be available. Unregistered design right is the subject of the next chapter.

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Requirements for registration The substantive requirements for registrability are that the design must have ‘eye–appeal’ and must be new. Even designs which meet these requirements, however, will only be registrable if they relate to features of shape, configuration, pattern or ornament to be applied to an article by an industrial process, and do not fall into any of the exceptions.

Eye appeal The most important criterion for a design to be registrable is that features constituting the design must appeal to and be judged by the eye of the customer (not the designer). Provided that aesthetic considerations are taken into account by prospective purchasers to some degree, however small, then the design will be registrable. This does not, however, restrict registrability to those cases where the eye appeal is immediately apparent to the customer purchasing the article. For example, a design of a toy included inside a hollow chocolate egg might be registrable even though the customer did not see it at all before purchasing. It is simply that the design will not be registered if the appearance of the article is completely immaterial in the eyes of the those acquiring or using articles of that description – such as, for example, the electric terminals used in a washing machine. Case study: Interlego v Tyco This case concerned the design of LEGO bricks for children: essentially a small rectangular plastic brick with round knobs on the upper surface and a hollow underside containing tubes into which the knobs of the brick below will connect. Interlego AG, the makers of LEGO bricks, whose registered designs had expired, wanted to invoke copyright protection (which lasts longer, but cannot subsist in a registrable design) to extend the total period of protection. They therefore argued that the registrations had been improper and that all of these features were purely functional, with no aesthetic qualities whatsoever. However, the evidence showed that although the features did have a predominantly functional purpose, their particular dimensions and shape had been chosen so as to produce a brick which, taken as a whole, was an attractive object. Indeed, one of the judges pointed out that a child’s toy has by definition to appeal to the eye of the intended player – that is the very purpose of the article.

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Novelty A design can only be registered if it is ‘novel’. Novelty in this context means new in a similar sense to the equivalent concept under patent law – that is, that the design must not previously have been published – but with an important difference: only prior publications in the UK, rather than anywhere in the world, are relevant. Thus, a registration can be obtained for a design which has already been commercialised abroad, as long as it has not been either registered or published in the UK in respect of the same or any other article, at the date for registration of the application. Publication for these purposes can include drawings, written descriptions (if they clearly and unambiguously direct the reader how to produce the design) or use, as long as such use has been visible to the public – even if only by an article being on display to visitors to a private house. It is not yet clear what effect the inclusion of the design on a web site on the Internet accessible from the UK, but not otherwise available in the UK, will have as there have been no cases. On the other hand, confidential disclosure by the proprietor, or by a recipient in breach of confidence, will not destroy the novelty of the application. Where there is a prior publication in respect of a very similar design, the design may still be novel if it differs from that design in more than immaterial details or variants commonly used in the trade. A detail is immaterial only if it is of no importance to the prospective purchaser. For example, for a door or window–frame spacer the use of a polygonal arch with regular apertures was considered to be materially different from the use of a U–shaped arch with irregular apertures, so that the former could be registered even though the latter had been published. Variants commonly used in the trade might be, for example, the presence or absence on a running shoe of spikes to improve grip – so a design consisting solely of adding spikes to an old design of running shoe will not be sufficiently novel to be registrable. It will also be unusual for a mere change of colour to be enough to make a design novel. On the other hand, if there is only one prior instance of a particular variant being used, or only one manufacturer or supplier supplying that variant in the UK, then adding such a variant to a pre–existing design may be enough to confer novelty. Statement of novelty Where only part of the overall design is novel, it must be specified in the design application which aspect this is. This claim of novelty needs to be worded very carefully, since the scope of protection obtained will be limited by any limitations in that statement. Conversely, a statement in too broad terms may bring the design within the scope of the prior art.

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Other requirements Features of shape, configuration, pattern or ornament To be registrable, a design must relate to a feature of shape, configuration, pattern or ornament, although it is possible to claim a design comprising all four features. Generally, ‘shape and configuration’ relate to three dimensional aspects of a design – for example, the shape of a television set. ‘Pattern or ornament’ relate to two dimensional features, such as surface decoration or a textile design. Article An ‘article’ means something made and sold separately on the market. This can range from a sheet of wallpaper to a pre–fabricated building; it is generally not an issue, but becomes problematic when spare parts are concerned. The question is considered from an economic point of view: does a market exist for the article separate from that for which it is primarily manufactured? This is of particular significance to spare parts, since parts which have no reality as articles of commerce apart from their forming part of a complete item cannot be said to be made and sold separately, and so cannot be considered as ‘articles’. For example, an application for a design registration in respect of an icon on a computer screen was rejected for several reasons, one being that it was not capable of being sold in isolation Case study: Ford’s application The Ford case concerned, amongst other car spare parts, door panels which are sold either as a part of the car for which it was designed to fit, or as a spare part to that particular car. Although they are indeed made and sold separately from the car to which they relate, the application was rejected on the grounds that they are in reality a mere adjunct to that car as a whole. Thus, they were not ‘articles’ and the design for them could not be registered. By way of contrast, many steering wheels or wing mirrors can be fitted to a variety of different cars and, therefore, can be said to be made and sold separately, and so be considered ‘articles’. Designs for certain types of articles are expressly excluded from registration: –

Works of sculpture,

–

Wall plaques, medals and medallions,

–

Printed matter primarily of a literary or artistic character.

(These may have intellectual property protection under other rights, such as copyright or unregistered design right.)

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By an industrial process This requirement normally goes without saying, particularly since ‘industrial process’ includes hand–application, as long as this is carried out as part of an industrial arrangement – for example, a design used on mass–produced hand–painted china would qualify even though the design was applied to the article by hand in every instance. A complete building operation, which must necessarily be tailored in each case to the circumstances of the site, does not constitute an industrial process – thus, a design for a petrol station was considered unregistrable.

Exceptions to registrability Method or principle of construction A design will not be registrable if it constitutes a method or principle of construction. This requirement is rarely of any effect; it is designed to prevent monopolies arising from these rights in industrial techniques which would more appropriately be patented. For example, a design for a basket woven in a certain way has been held not to be registrable as, in a very early case, was an application which attempted to cover the way a bicycle’s spokes relate to the rim and hub – unless the applicant agreed to restrict the effect of the registration solely to the particular arrangement of spokes shown in the drawing and not to include all possible arrangements.

Function Where the design relates to features of shape or configuration, those features must not be dictated solely by the function which the article has to perform. Thus, a shape is excluded if it possesses no features beyond those which are necessary to enable the article to fulfil its function. It is normally possible to avoid this exclusion by showing that, as in the LEGO case cited above, however functional the features may be, their particular proportions and/or dimensions were selected with eye appeal in mind.

Must match This exception relates again to the debate over the degree of protection which ought to be provided for motor vehicle spare parts (although of course it also

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applies to parts intended for inclusion in any other larger whole). Features of shape or configuration of an article are excluded if they are dependant upon (‘must match’) the appearance of another article of which the article is intended by the author of the design to perform an integral part. The effect is that some vehicle parts, such as body panels, will be excluded from registered design protection, even if held to be ‘articles’, since they can only be sold to match the overall shape of the vehicle for which they are intended and are not interchangeable, either upon the same vehicle or for use with other models.

How to register To register a design, the proprietor must send to the UK Designs Registry: i)

A set of drawings showing the design from all relevant angles. Specimens may in some cases be requested by the Registry, if the filed drawings are not sufficiently clear;

ii)

A statement as to the article to which the design is to be applied (and thus in respect of which protection is required) and

iii) A statement of novelty. The new application will be examined against all existing registrations and a selection of trade catalogues, to establish novelty. It will also be checked for compliance with the conditions for registration generally. If everything is in order, then the design may be registered. If the Registry is not satisfied with the application for any reason, they will send the applicant a statement of their objections, giving two months in which the applicant may either write back commenting on the objections, or ask for a hearing (at which the applicant may try to persuade them to grant the application). If the application is still refused after a hearing, it is possible to appeal to the Appeal Tribunal.

The monopoly obtained Once a design has been registered, the registered proprietor has the exclusive rights to: –

Make or import an article to the design for sale or hire or for use or for the purposes of a trade or business, or

–

Sell, hire or offer or expose for sale or hire such an article.

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Mere possession of an article using the design, even for commercial purposes, is not an infringement (in contrast to the position under patent law). It should be noted that the rights apply only in respect of the design applied to the article in respect of which the design is registered. The proprietor has no rights to stop anyone using the same design but applying it to an article different to that in the certificate of registration. Further, there is no exclusive right to make an article to which the registered design is applied; the exclusivity applies only to making it for one of the specified purposes, that is, essentially for commercial purposes. Finally, the monopoly does not extend to being a defence to an allegation of infringement of someone else’s registered design. A registered design can still infringe another registration.

Ownership and dealings The author or creator of a design will be the proprietor and entitled to register, unless he or she produced the design under a commission arrangement or in the course of his or her employment. If this was the case, then the commissioner or employer owns the rights in the design. A registrable design can be assigned, either before or after registration, in whole or in part – thus, the assignment should spell out exactly what elements of the design are being assigned. After registration, the registration can also be licensed or mortgaged. Any transaction in a registered design must be notified to the Registry so that the Register correctly shows who has an interest in the design at all times. A transaction which has not been registered cannot be relied upon in court, should it prove necessary to enforce the design. If the proprietor of a registered design does not sufficiently exploit it in the UK, then any person interested in exploiting it in their stead (other than solely by import from outside the European Union) can apply to the Registry for a compulsory licence under the design. Further, if the proprietor is the subject of an unfavourable Monopolies and Mergers Commission report, the Registry may endorse the Register to show that licences under the design are available as of right. In both cases, the terms of such licences are settled by the Registrar if the parties cannot agree; the royalty rate set will be, as far as the Registrar can determine, that which would apply between a willing licensor and willing licensee in an ‘arm’s length’ negotiation.

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Once the design has been endorsed ‘licence of right’, then anyone who is sued for infringement of the design can set an upper limit to the possible damages which may be awarded against them, by undertaking to take such a licence if they are indeed found to infringe. The damages awarded will then be no more than double the royalty which would have been payable under a licence.

Duration Since 1 August 1989, the period of protection for all new registered designs is 25 years. (Up to that date, duration was 15 years from date of registration.) The period of protection is given in five year chunks – so it is vital that the registration is renewed after the initial five year period has expired. There is, however, a six month grace period for payment of the renewal fee after each five year period expires. If the renewal fee is not paid either before a five year period expires or within six months thereafter, then the registration lapses. It is possible for the formerly–registered proprietor to make an application for the registration to be restored at any time up to 12 months after the latest five year period has expired, if they can show that they took reasonable care to have the protection period extended – that is, to pay the necessary renewal fee. For example, delegating the payment of the fee to a specialist renewal agency and then (when sent a reminder notice by the Registry) taking steps to ascertain what is happening, will be enough to show that reasonable care has been taken. If the registration was assigned in the period after it had lapsed but before it was restored, this will take effect as if the registration had been in effect all along.

Infringement Infringing acts A registered design is infringed when a design identical to or not substantially different from the novel aspects of that registered is used commercially on an article in respect of which the design is registered. These rights apply only once the registration has been effected. No proceedings can be brought for the period between application and registration, even retrospectively once the registration is in place.

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Determining if there is infringement To decide whether a design which is not absolutely identical to the registration infringes the registration, it is necessary first to work out exactly what the registration covers, bearing in mind what is claimed in the statement of novelty. This is a process of subtraction. That is, identify from the drawings what exactly is claimed to be new (and so protected) and so disregard everything else. From the resulting design, any features which are solely functional, immaterial, common trade variants or ‘must match’ should also be disregarded. The remaining allegedly novel features must then be compared against the potentially infringing article, to see whether the features of the infringement are identical to or at least not substantially different from the protected features of the design. Test of substantial difference In almost all cases there is at least a slight difference between the alleged infringing article and the registered design. In trying to decide whether this difference is substantial or not, the courts look first at how close the registered design is to the prior art. If it is only slightly different from previously existing designs in that field, then the scope of the registration will be narrow: another design would have to be similarly close to the registration to infringe it. If, on the other hand, the registration was quite unlike anything that existed before it, then it will have a broader scope: more of the possible variations on it will be within the scope of the registration and accordingly infringe. The test also takes into account human fallibility – consumers do not have perfect recollection of goods they have previously seen. Thus, it is not sufficient merely to consider the two designs side by side. The question should be approached from the viewpoint of someone who, having at some point seen the article bearing the registered design but no longer having it in front of them, is presented with the allegedly infringing design and asked to determine whether the two are the same. The viewer is assumed to be interested in matters of design, but not to have any special skill in identifying or distinguishing them. Evidence that consumers have actually confused the two products will, in many cases, materially assist in establishing that the design has been infringed. Finally, if the registered design has some particularly striking feature and the alleged infringement does not have this feature, it is unlikely to be held to infringe even if it shares many of the lesser details which make up the registered design as a whole.

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Case study: Sommer Allibert (UK) Ltd v Flair Plastics Ltd Sommer Allibert made a range of plastic chairs, one of which, called the ‘Madrigal’, had grooves moulded into the back. They owned a registered design for a chair, which showed the grooves in the back. Flair Plastics began manufacturing similar plastic chairs without the grooves, which they called ‘Sonata’, and Sommer Allibert sued for infringement. They argued that the grooves shown in the registration were only features of pattern or ornament, and therefore not necessary to the design, which claimed novelty only in the shape and configuration of the chairs. Unfortunately, the courts were not convinced. As the grooves were three–dimensional, and formed as part of the moulding of the chair itself, they were considered to be part of its configuration. Further, since the purely functional elements of the chair – four legs, seat and back – had to be disregarded, the grooves were one of the principal and most striking features actually covered by the design. The court decided that under normal conditions of use of the two chairs the eye would not confuse the two designs. Hence, there was no infringement.

Who can sue Notably, only the registered proprietor has a statutory right to bring proceedings for infringement – a licensee, even an exclusive licensee, has no such rights. Thus, when taking a licence the licensee should always ensure that it includes an express right to bring proceedings in the registered proprietor’s name, to avoid being left without any remedy should the proprietor for whatever reason not wish to cooperate in suing any infringer.

Remedies The remedies available include injunctions, damages or (alternatively) and account of the profits made by the infringement, and delivery up or destruction of infringing articles. The basis for an award of an injunction is that the infringer threatens to continue to infringe unless restrained. The proprietor can apply for an injunction as part of the final order at trial, but can also ask for a temporary or ‘interim’ injunction at the outset of proceedings, if the effect of the infringer continuing to infringe until trial will seriously damage the proprietor’s business. However, injunctions are rarely granted at the interim stage in registered design cases.

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The court also has a discretion to award damages instead of a final injunction, taking into consideration whether the proprietor can be adequately compensated by money and whether it would be oppressive to grant an injunction. For example, if the proprietor routinely licenses the technology, then it is assumed that damages in the sum of the licence fees the infringer ought to have paid will be adequate compensation. In these circumstances an interim injunction is also unlikely to be granted. An injunction may similarly be refused if the proprietor, despite knowing of the infringing activity, has delayed to the point where the alleged infringer was entitled to believe they were free to continue to act. Damages for loss of the proprietor’s profits are obtainable in theory, but it may be very hard to establish that any sales were lost due in particular to the application of the design to the defendant’s goods and not to some other reason such as price difference. Damages will therefore be calculated only on the basis of a reasonable royalty. Further, no damages are available for any period when the defendant did not know and had no reason to suppose that the design was registered. Thus, opting for an account of the defendant’s profits may be a more certain route to take for financial compensation. Delivery up to the design proprietor or (if the proprietor prefers) destruction verified on oath of any infringing articles can also be ordered, to ensure that they do not filter back onto the market. If successful, the proprietor will also be awarded the usual proportion (two–thirds to three–quarters) of their legal costs of the action. Having successfully defended the validity of the registration, the proprietor may ask the court for a certificate of contested validity which, if the design is ever again challenged and successfully defended in court, can lead to a more generous award of costs in the proprietor’s favour in those later proceedings.

Defences It is usual to argue as a defence that the defendant’s design is substantially different from the registration and so does not infringe, or that the aspects of the defendant’s design which are palpably the same as the registration are either functional, common trade variants or immaterial differences from the prior art. In addition, the design registration will be put at risk as the defendant will almost inevitably counterclaim for the registration to be revoked on the grounds that it is invalid. Although this is not a defence as such, it is an equally effective way for the defendant to avoid any liability, if it is successful.

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Other points to note Threats If threatened with legal proceedings over an alleged infringement of a UK registered design, the recipient of the threats or anyone else aggrieved by them can bring an action against the threatener. To be actionable the threats must relate to alleged infringement by any infringing act other than manufacture or import of the allegedly infringing articles. Almost any intimation of possible legal proceedings constitutes a threat, as opposed to a very neutral notification that the design exists, which is allowed. The remedies available will be an injunction against repetition of the threats and damages for any loss which can be shown to have been suffered as a result of the threats. This may be slight, and in any event is not easy to quantify in most cases; thus, the threats action is most used for obtaining an injunction stopping threats being made by a competitor against customers. The usual defence the threatener will bring is to attempt to show that the threats were justified – that is, that the design was indeed infringed. This will lead to a counterclaim for invalidity as in normal infringement proceedings, the threatener/ proprietor thus ending up exactly where they would have been had they sued for infringement, but without the initiative in the court proceedings.

Crown use Crown use of a registered design is possible without the proprietor’s consent, as in the case of Crown use of a patent, although compensation is payable.

Summary Designs are relatively easy to register, as long as the principal requirements of ‘eye–appeal’ and novelty can be complied with. The down side is that it can often also be relatively easy for a genuine trade competitor to avoid infringement by making very slight modifications. Nonetheless, a design registration can still be a useful tool against out–and–out counterfeiters, who often sell slavishly exact copies and may have a significant impact on the market by the extent to which they undercut prices

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Unregistered design right INTRODUCTION W H AT D E S I G N S C A N B E P R O T E C T E D ? T H E M O N O P O LY O B T A I N E D OWNERSHIP AND DEALINGS TERM OF PROTECTION INFRINGEMENT REMEDIES T H R E AT S

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Chapter 7 Unregistered design right

Introduction Design right is a relatively new right, created in 1988 by the Copyright, Designs and Patents Act. It applies only to original designs created on or after 1st August 1989. Designs created before then, but not eligible for registration (as discussed in Chapter 6, above), may have some protection under copyright, although this is now being phased out. Design right was introduced to rationalise the system of protection for what are essentially industrial drawings. Up until the 1988 Act, any drawing, of no matter how utilitarian a function, qualified for copyright protection and the accompanying potential 100+ years’ protection. This protection had been conceived for works of artistic intent and value, and it was felt disproportionate for everyday design drawings. Registration, on the other hand, is available only for designs which have an aesthetic quality. Thus, abolishing copyright for industrial drawings would have left no protection at all for more functional works, which may nevertheless involve considerable creativity and effort. Design right is intended to fill that gap, protecting the investment in designs for purely utilitarian items – the internal components of a machine, for example. This right is also novel in that it is a right peculiar to UK law. All of the other statutory rights discussed in this Report have counterparts, although these may differ in some respects, in the laws of most other countries. Unregistered designs, however, are not protected by a special right in most countries, New Zealand being an isolated exception. Elsewhere, unregistered designs either continue to be protected by copyright or are unprotected. Thus, there are no international reciprocating provisions to rely upon where a design originates in another country: to qualify for protection under UK law, the design must have some connection with the UK. The right, which arises automatically, is similar to copyright in that it does not confer a monopoly against the world in general, only protection from direct copying. The unregistered design right lasts in practice for only about ten years. Further, as with the registered rights but unlike copyright, caution is necessary in asserting the right since it is possible for the recipient to bring an action against the sender of unfounded threats.

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This chapter reviews the conditions which need to be met for a design to be protectable through unregistered design right. It then looks at ownership and the protection this right confers. The acts which will infringe an unregistered design right are discussed, and the remedies which are available are reviewed. Since this design right is so new, however, there has been very little guidance as yet from the courts on how it should be interpreted. This chapter therefore lays out the basic framework for protection, but necessarily leaves some questions unanswered.

What designs can be protected? Design right subsists in a design, created on or after 1st August 1989 and recorded in some manner. The design must be original, must qualify by connection with the UK and must not fall within the scope of any exception. Each of these requirements is considered in turn, in the following sections.

What is a design? A design is something that concerns any aspect of the shape or configuration (whether internal or external) of the whole or any substantial part of an article. Thus, it is principally concerned with the three–dimensional character of objects or aspects of objects. As discussed in Chapter 6 above, in registered design law an article is defined as something that is ‘made and sold separately’. This restriction does not appear in the statute concerning unregistered designs, so it is probable (but has not yet been tested) that unregistered designs can be protected even if they relate only to a part of an article which is never sold separately from the whole. No distinction is made between aesthetic and functional design – there is no requirement for eye appeal, as there would be for a design to be registrable.

Recorded This is a very simple requirement: design right only comes into existence when either the design is recorded in a design document, or an article has been made to that design, even if the design is not made public at that time. Clearly, it would be impossible for normal trade to take place if rights could be asserted in a design which as yet existed only in the designer’s head.

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Originality In order to be protected, the design must be the creator’s own work – that is, not copied from an existing work. Further, it must not be ‘commonplace in the design field in question at the time of its creation’. Thus, complete trivia of the trade will not gain protection just by being newly incorporated into a design. ‘Not being commonplace’ is not the same as being entirely novel, but it has not yet been defined exactly how unusual a design will have to be to meet this requirement. It may be that the presence on the market of no more than a few prior examples will result in a design being regarded as commonplace. Nor is it yet certain whether designs published in other countries should be taken into consideration, although it would seem unlikely, if the design is applied to an article widely traded internationally, that it could still be claimed not to be commonplace in this country. It is not yet well–defined exactly what constitutes the ‘design field in question’ – how far protection can be gained by transposing a design from a field where it is indeed commonplace into an unusual application. This will remain to be worked out on a case–by–case basis.

Qualification by connection with the UK As mentioned above, due to the relative international uniqueness of the UK’s design right law, protection is only available to certain classes of design. These are decided either by reference to the nationality of the designer, his or her commissioner or employer, or by reference to the country in which the design was first marketed. For this purpose, some countries are designated as ‘qualifying’; the rest of the world does not. The Qualifying Countries include the UK and the rest of the EC plus New Zealand and the Channel Islands. The design will qualify by the first route if the designer, or their commissioner or employer (if applicable), is an individual who is a citizen of, or habitually resident in, a Qualifying Country. If the commissioner or employer is a corporate body, then it must either be formed under the law of a Qualifying Country, or have substantial business activities within a Qualifying Country. The designer is the creator of the design or, in the case of computer generated works (eg the output of CAD equipment), the designer is the person by whom the arrangements necessary for the creation of the design (for example, setting up the parameters

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for the program to apply) are undertaken. Note that the designer need not necessarily be the person who actually records the design; that could be recorded by the machine itself, for example, or by a draughtsman working under the designer’s instructions. If the design does not qualify for protection by any of the above criteria, it may still qualify for protection if the first marketing of articles made to the design took place in a Qualifying Country. For this to qualify the design for protection in the UK, the first marketing would have to be done by a person/organisation who is exclusively authorised to put the articles on the market in the EU; and that person/organisation would have to qualify under the nationality requirements set out above in respect of designers, commissioners or employers.

Exceptions The exceptions are the following: 1)

A method or principle of construction –

2)

Surface decoration –

3)

This is included principally to prevent overlap with cases where patent protection would be available.

This exception is possibly largely redundant as the right can only apply to features of shape and configuration anyway.

Must fit –

This exception relates to features of shape or configuration which enable the article to be connected to, or placed in, around or against, another article so that either article may perform its function. For example, no protection could be obtained for the shape of either a plug or the socket into which it had to fit; or for a video or audio cassette, which must fit into the recorder. The shape cannot be protected if it ‘must fit’ even if it also performs some other function such as appearing attractive.

Case study: Electronic Techniques (Anglia) Ltd v Critchley Components Ltd Electronic Techniques manufactured line isolating transformers for telephone lines, and claimed that Critchley had infringed their design. Critchley argued in their defence that there could be no design right since the elements of the design enabled the transformer to fit together. Electronic Techniques countered that the ‘must fit’ exception only applied to the transformer as a whole and the way it interfaced with some other article.

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The judge disagreed. The ‘must fit’ exception applies equally where the two parts are connected to each other to form the whole, or part of another larger article. 4)

Must match –

This is similar to the previous exception – it covers features of shape or configuration which are dependant upon the appearance of another article of which the article is intended by the designer to form an integral part. For example, a car door panel must match the outline of and any decorative features present on the rest of the vehicle in a seamless fashion. Other components, such as steering wheel or exhaust pipe, will not be excluded since there is clearly much scope for variation without necessarily duplicating the features of the original part, yet still matching the car. It is open to question how far elements of a set might be caught by this, though it seems unlikely that, for example, one chair out of a three–piece suite will be denied protection on a ‘must match’ basis – no one is forced to have matching living–room furniture.

The monopoly obtained The owner of an unregistered design right is exclusively entitled to reproduce the design for commercial purposes by: –

Making articles to the design; or

–

Making a design document recording the design for the purpose of enabling such articles to be made.

In this context, ‘reproduction’ means copying the design so as to produce articles exactly, or substantially to that design. What is ‘substantially’ to a design is discussed in more detail under ‘Infringement’ below.

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Ownership and dealings The first owner of design right in a design is determined according to a strict order of priority as follows: i)

If the design qualifies for protection by reference to first marketing – the first marketer owns the design right; otherwise,

ii)

If it qualifies by reference to nationality, then if the design was commissioned – the commissioner owns the right; but if not, then if it was created in the course of employment – the employer; or if neither of the above – the designer.

Design right can be assigned in whole or in part; the assignment must be in writing signed by or on behalf of the assignor. This can also cover design rights which have not yet come into existence – for instance, if a design has been commissioned, the commissioner could assign their rights in the design before it is produced, and once the designer has produced it, the design right would belong to the commissioner’s assignee. It may also be licensed, exclusively or otherwise.

Term of protection Design right comes into existence as soon as the design is recorded (or first marketed, if this is how the design ‘qualifies’). The right is, however, the shortest–lived of all the statutory rights. It has a maximum possible period of protection of 15 years from the end of the calendar year in which the design is recorded. However, once articles made to the design are marketed, then the right expires ten years from the end of the calender year when those articles were first marketed unless the 15 year long–stop term runs out first. Thus, if a designer produced and recorded a design in 1995, the design right would expire no later than 2010. If she then markets an article bearing the design in 1998, the design right will run for only a further ten years and will expire in 2008. If, however, she leaves the marketing of the article until 2001, then the design right will still expire in 2010 but she will have had only nine years of protection while exploiting the design. In addition, any person is entitled to obtain a licence of the design right, as of right, during the final five years of the design right’s term – if necessary, the prospective licensee can bring proceedings to settle the terms, including royalty to be paid, of such a licence. The licence of right provisions are similar to those

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applying to patents (discussed at Chapter 2 above). As a result of these provisions, the total period of exclusivity for exploiting a design is a maximum of five years. In the example above, if the design was never marketed, or only marketed from 2001 onwards, then a licence of right would be available from 2005 – five years before expiry of the right in 2010. If the design was marketed in 1998, then a licence of right would become available from 2003 on.

Infringement Primary infringement An unregistered design right is primarily infringed by anyone who, without the permission of the design right owner copies the design for commercial purposes to produce articles wholly or substantially to the design. The copying need not be deliberate – a copy infringes, whether or not the copyist knows that the design right exists. It is also primary infringement to authorise anyone else to make such copies. Genuinely independent creation of a similar design does not infringe, and nor does substantially reproducing a design for private purposes. The test of ‘how similar is substantially to the design’ applies to both primary and secondary infringement, and so is discussed below.

Secondary infringement Certain other commercial activities are also prohibited with respect to articles protected by design right: these are generally referred to as secondary infringement. A degree of knowledge – that the article in question is an infringing article – is required before a party can be liable for secondary infringement, since they often could not reasonably be expected to know or have cause to investigate the circumstances of design and manufacture. As a result, the protection available against these activities is slightly weaker than it is against straightforward primary infringement by manufacture of copies: it is always difficult, and sometimes impossible, to prove what someone else did or did not know. It is secondary infringement of an unregistered design right, if without the permission of the design right owner someone imports into the UK, or possesses for commercial purposes, or sells, hires (or offers so to do) in the course of a business an article which is, and which the infringer knows or has reason to believe is, an infringing article.

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The definition of an infringing article for these purposes is thoroughly circular: an article is an infringing article in the UK in one of two circumstances. First, if its making to that design was an infringement of design right, or would have been if it had been made in the UK. This covers the case where the articles were made by completely unauthorised manufacturers or by licensees whose licences do not cover the UK. Second, if its making in the UK would have been a breach of an exclusive licence agreement relating to the design. Thus, if the design right owner grants someone else an exclusive licence to manufacture articles to the design in the UK, but then goes ahead and manufactures them themselves, the resulting products will still be infringing articles.

What amounts to a substantial copy? Both primary and secondary infringement require that there be a substantial reproduction of the work. What amounts to a substantial copy is to be decided through the eyes of the person to whom the design is directed – ie the consumer. If the design of the product looks substantially the same to the likely purchaser, then it is a substantial copy. Features which are commonplace in the design field in question at the time of creation of the design (and therefore are not protected by design right) are to be disregarded. This suggests that great care must be taken in deciding precisely what the design is that is alleged to be infringed, as the following case study shows. Case study: C & H Engineering v Kluznik (F) and Son Ltd Both parties in this case were designers and manufacturers of pig fenders. A pig fender is a movable structure that is placed around the entrance to a pig arc in which a sow and her litter of piglets are being kept. The fender is designed to allow the sow to enter and leave the fender/arc combination relatively freely, yet, because of the height of the sides, retain the piglets within it. When sued, Kluznik counterclaimed infringement by C&H Engineering of their design right in a design for a pig fender which featured a roll bar on top of the edges, to try to avoid any edges catching the sow’s teats while she stepped over the fender. In C&H Engineering’s design, the roll bar feature was copied but an additional striking feature was used – that of sloping the sides to enable stacking. The scope of the design claimed being for ‘a pig fender’, the Judge compared the whole of the pig fender made to the design against the whole of the alleged infringement. On doing so, the Judge held that the two designs were not substantially similar: the interested man would consider the two designs to

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be different, but with a similar design feature – namely, the roll bar around the top. Accordingly, there was no substantial copying of the whole article in which design right was claimed and therefore there was no infringement. It may be that if the scope of the design claimed had been limited to the roll bar, the result of the case would have been different. But if so, by limiting the scope of the design alleged to be infringed to only a small part of an article, the owner may also limit the extent of damages available to a royalty calculated on the value of that part only.

Who can sue Either the design right owner or their exclusive licensee can sue over any infringement of the right.

Overlap with copyright Unregistered design right and copyright may both exist in the same article. However, to avoid double recovery of damages for any infringement, the law is set up so that insofar as an act would be an infringement of copyright in that work, it will not also amount to an infringement of the unregistered design right, and vice versa. Thus, it is not an infringement of the copyright in the design for anything other than an artistic work to make an article to the design: in such circumstances design right will be the right infringed, if either. For example, consider the design drawings for an artistic sculpture (not industrially exploited). Reproduction of the sculpture (itself being an artistic work) will amount to copyright infringement. Whilst design right may well also subsist in the sculpture it is not infringed by reproduction – the term of protection is thus determined according to the more favourable copyright rules. On the other hand, if the article in question was a telephone handset (not itself an artistic work), the copyright exclusion bites such that reproduction of the handset would amount to design right infringement but not to copyright infringement.

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Remedies Injunctions Both interlocutory or final injunctions may be available to restrain a counterfeiter from continuing with their activities, if it can be shown that the counterfeiter will continue to infringe. To obtain an interlocutory injunction, the proprietor must be able to show a good case that they will succeed in showing the design right is being infringed, and that the balance of convenience favours stopping the defendant before trial. As an injunction is an equitable remedy, however, it is important that the proprietor should have behaved appropriately – for example, neither unduly delayed bringing proceedings nor acquiesced in the defendant’s activities.

Damages/account of profits Damages for infringement of an intellectual property right are calculated to put the proprietor in the position they would have been in had the infringement not occurred. Damages cannot be awarded for any period of time when the infringer did not know and had no reason to believe any design right subsisted – that is, until they were notified of the right, by the right owner; but an account of profits will still be available. Conversely, the design right owner may have a right to additional damages if the infringement was particularly flagrant or resulted in great enrichment to the infringer. If in reality the proprietor would not have been in a position to make the sales that the counterfeiter made, then an alternative remedy is to ask for an ‘account’ (payment over to them) of the profits which the counterfeiter in fact made from their activities. As an account is an equitable remedy it is necessary for the proprietor to be able to show that they have ‘clean hands’, that is, have not themselves been guilty of any unfair or improper conduct in the matter or the amount awarded may be reduced.

Delivery up and destruction Not only may the infringing articles themselves be ordered to be delivered up or destroyed, but also any articles adapted for making them as well, if the possessor knew or had reason to believe that they had been or would be used to make infringing articles.

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Threats A person to whom an unjustified threat of legal proceedings for design right infringement is made, or others aggrieved as a result of the threat, can bring pre–emptive legal proceedings to stop the threats being repeated. This applies unless the threat is to bring proceedings for making or importing the allegedly infringing articles. Thus, where the infringer has been doing anything other than making or importing the articles, any letter or other notification to them of the existence of the design right should be limited to precisely that, and not make any suggestion of further action being taken. The remedies in such a pre–emptive action would be an injunction to prevent further threats (and, possibly, a declaration to the effect that the threats are unjustifiable) as well as damages for any losses arising as a result of the threat. The damage which might be incurred by a victim of threats to bring infringement proceedings could include, for example, lost sales since the threats would give potential distributors reason to believe that the goods in question may be infringing articles. As a result,they could themselves become liable for secondary infringement. It is unlikely in these circumstances that anyone would want to deal in the goods. It is a defence to such threats actions to show that the threat was justifiable in that the act complained of was an infringement of the design right, or in the case of an act which appeared likely to happen (but was forestalled by the threat), would have constituted an infringement had the act been done. The defence thus takes the form of proceedings for infringement of design right – but starting from a defensive position, rather than having the initiative.

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Trade secrets INTRODUCTION Q U A L I T Y A N D C I R C U M S TA N C E S – W H AT C A N B E PROTECTED ? C O M M O N S I T U AT I O N S SUMMARY LOSING CONFIDENTIALITY EXPIRY OF CONFIDENTIALITY T R A N S F E R O F C O N F I D E N T I A L I N F O R M AT I O N INFRINGEMENT

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Chapter 8 Trade secrets

Introduction Trade secrets are a particular case of the broader category of confidential information. This is an important category, encompassing many things which fall outside the areas protectable by the intellectual property rights discussed above. Classic examples of information which may be protected by confidentiality include minor (that is, unpatentable) innovations to a product or process, commercial details such as customer lists, the ‘know how’ which may be necessary to maximise the efficiency of any kind of industrial or commercial operation. Which of these will qualify as trade secrets proper, is a question of fact and degree. Any kind of confidential information may have value to a business, however; thus, it may be worth taking steps to ensure that the information is not disclosed or made available to competitors to use. Although the category is broad, it is not all–inclusive. Describing something as confidential does not mean that it actually is, or that a court will recognise it as such. Most of us have had the experience of being sworn to secrecy by a friend or colleague, only to find that the ‘secret’ then revealed was something we already knew or had heard from another source. It is precisely this problem which arises repeatedly where trade secrets are being discussed – one man’s trade secret is another man’s general background knowledge, or seems to the recipient too trivial to warrant secrecy. Thus, this chapter begins by discussing the different kinds of information that may be confidential, the circumstances in which it may need to be protected and how confidentiality may be lost. It then looks at the remedies which may be available if the secrecy is put in jeopardy or, in the worst case scenario, breached.

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Quality and circumstances – what can be protected? In order to be protectable, information must: –

First, be of a truly confidential nature – in legal jargon, have ‘the necessary quality of confidence’; and

–

Second, be disclosed in circumstances such that the recipient is placed under an obligation to keep it confidential.

The ‘necessary quality of confidence’ What is meant by requiring the information to be of a truly confidential nature? In many cases – the formula for ‘Coca–Cola’, for example – the value of the information, and its confidentiality, are easy to recognise. Characteristically, however, disputes arise about allegedly confidential information which is only one step away from the public domain. It is these marginal cases which are difficult to categorise. Describing a document as confidential, even where care is taken to maintain the secrecy of the contents, will not turn a piece of information which is not inherently capable of being confidential into confidential information. Similarly, requiring employees to enter into an undertaking as to the confidentiality of their employers’ business information will not render the day–to–day trivia of the business protectable if it is not in fact truly confidential to start with. There does not have to be anything secret about the starting materials, for information derived from them to be confidential. Where the starting elements are commonplace, however, the resulting information will normally need some degree of distinctiveness to enable its confidentiality to be recognised. For example, an initial idea for an all–night night club with separate areas for socialising and dancing was not sufficiently distinctive to be protectable, even when the result was the well–known and distinctive London nightclub, Ministry of Sound. Someone must have added some thought, some effort, to the existing public materials, to arrive at a product which deserves protection. Consider a list of names. The growing trade in mailing lists demonstrates that a list of names and addresses has a financial value – yet each of those names and addresses is probably available from the telephone directory, should anyone wish to take the time to look them all up. The value lies in the association of those particular names and addresses with a particular interest group. They may have been identified as potential subscribers to a new sailing magazine, for example. Is the list confidential, as such? Perhaps surprisingly, it may be – but it is not necessarily. It may simply be the list of members of the local Yacht Club, available

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to anyone who calls the Membership Secretary and asks. If so, then there is little about it which would justify a claim of confidentiality. But if the list has been compiled from the results of a painstaking survey of other subscription lists, or the responses to a questionnaire circulated to yacht clubs around the country, then it could well be that the combination of items does have a confidential aspect. Information need not be either complex or voluminous to be confidential – a simple formula or description can be as confidential as a new discovery. Conversely, an extensive compilation of non–confidential items of information will not necessarily acquire the character of confidentiality. The circumstances, or the criteria used for selection and compilation, must be sufficient to confer that additional level of value. Genuine preparations to publish the information commercially, or sell or license it, will support a claim that it is truly confidential, since otherwise how could it have commercial value.

Circumstances of disclosure In what circumstances need the disclosure of information take place, for an obligation of confidentiality to arise? A good guideline is whether the circumstances were such that a reasonable man standing in the shoes of the recipient of the information would have realised, upon reasonable grounds, that the information was being given in confidence. This adds a helpful element of objectivity – most people can if necessary put themselves in the shoes of the ‘reasonable man’ – but is not definitive. It is necessary to maintain a flexible approach, because of the range of different circumstances in which breach of confidence may be alleged. If it is expressly written into a contract of employment, or mutual disclosure agreement, or stated at the point of hand–over of the material, that particular material is to be treated as confidential, then no reasonable recipient could be left in any doubt as to its intended confidentiality. Even putting up a sign stating that what can be seen in a given area is private can sometimes, be enough to impose a requirement of confidentiality. But in many situations the information will not be handed over in such a formalised context – it may simply be picked up in the course of conversation, or observed on a visit. It is in such intermediate situations that the difficult issues arise. Where no express requirement of confidentiality has been imposed, then uncertainty may arise as to whether or not the recipient was placed under any obligation of confidence. For example, if the information is common knowledge in the trade, or is treated by the discloser as though it were common knowledge, then it is reasonable for the recipient to assume that they are not being put under any obligation to keep it confidential. Alternatively, the context may be such as to disarm the recipients from any feeling of confidentiality – the details allegedly

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later used for the Ministry of Sound were discussed at a dinner party, such that no–one present had any inkling they were being told in secret. The holder of confidential information must maintain a high standard of caution, however. Discussion in a public place, for example raises a risk of being overheard which could damage the confidentiality of the information – and even information picked up from a police telephone tap is not confidential, on the grounds that ‘anyone who utters confidential information must accept the risk of any unknown overhearing that is inherent in the circumstances of the communication.’ A private telephone tap, on the other hand, does not have the same confidentiality–destroying effect. Protection of confidential documents An important role in establishing and maintaining confidentiality can be played by restricting access to the information (through, for example, limiting the number of copies made and the persons who may have access to them, stamping each page ‘Confidential’ and so on). Similarly, details of a process which might appear common sense to any skilled technician in the area may still be capable of being protected as a trade secret if in fact none of the owner’s competitors are using them, they have not been publicly documented and visitors to the plant would not be allowed to see them.

Common situations Employer–employee Information available to employees in the course of their employment will fall into one of three legal categories as regards its confidentiality. The first is the mundane trivia of the business, which is not confidential and cannot be made so. Secondly, there is information which does have a confidential aspect and may be capable of limited protection. Finally, there are truly confidential trade secrets: information which is protectable both while the employees remain in employment and indefinitely afterwards. i)

The mundane aspects of a business cannot be regarded as confidential in the true sense, and accordingly employees cannot be required to keep them secret even while they remain employed. This will include all information about the business or industry which is available to the public, either generally or on demand. It will also cover custom and practice in the trade.

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Information which has some confidential element can be required to be kept secret from third parties while the employee remains employed. However, its confidentiality may either not be kept enforced afterwards, or only for a limited period.

This is particularly relevant in the context of information carried away in the heads of departing employees. It is impossible for an employee not to learn a certain amount about their employer’s business in the course of their employment. Skilled workers’ increasing experience, wherever gained, is likely to augment their existing level of skill in their particular occupation. Information which becomes part of the employee’s own skill and knowledge set cannot be required to be kept confidential once the employee has left that employer – although while still working for them they can be required not to disclose it to third parties (and especially competing businesses). Clearly, it is impossible to lay down any hard and fast rule as to what this covers. The more complex the information, the less likely it is to be credible that it had been absorbed in the course of ordinary duties by the employee; but this also will depend upon the particular employees, their existing professional skills and qualifications and the nature of the job they held. If it can be shown that the employee had consciously memorised the information, rather than simply picking it up over time, this will indicate that the information has not simply become part of the employee’s general background knowledge. In most cases, this will not be easy to prove unless the employee has actually told someone what he or she is doing. Information confidential during employment but unlikely to be afterwards can also include information concerning customers, prices, technology and know–how, and even the names and addresses of other employees to whom the departing colleague may wish to offer future employment. Business policy is unlikely to be protectable, and business methods will need to be broken down into categories of information in order to separate out those which are peculiar to the business in question from those which apply in a variety of different trades or industries. It is also difficult to stop a business method becoming part of the employees’ own skill and knowledge. Protection after employment ends: The extent of the employee’s duty of good faith and fidelity in respect of this second category of information after the employment has ended varies according to the kind of employment – a company has less right to expect continuing confidentiality from an employee whose duties did not include handling that kind of information, as the employee will not be expected to have the same kind of sensitivity to the material as one whose job regularly involved access to secrets. Any evidence of dishonesty or surreptitious behaviour by the ex–employee,

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however, will be persuasive that the information really was confidential, and that the employee realised this. It may be that information in this category can be protected after the end of an employment contract by the inclusion of an express term – but in such cases, the employer will need to bear in mind the possibility of being in restraint of trade, by attempting to restrain the employee’s possible options regarding exercise of their trade in a new employment. The usual outcome is that restrictive covenants of this type will be held valid only for a period of a year, or two at most. iii) A genuine trade secret, by contrast, remains confidential even after the employee has left and can still be protected, and may be able to be kept confidential indefinitely. Unfortunately, the courts have declined to define exactly what is or is not capable of being a trade secret of this status; although they have expressly acknowledged that secret processes can be, they have also stated that many other kinds and elements of information may be. The Court of Appeal has roughly defined a trade secret as information: –

Which is used in the trade or business

–

Whose dissemination is limited or discouraged by the owner and

–

Which if disclosed to a competitor would cause real or significant harm to the owner.

This is helpful only in that it sets the level of importance of the information: if a business would suffer only trivial or transient harm as a result of its disclosure, then it cannot be a trade secret as such. The Court did not want to limit business secrets purely to technical information; they said that plans for discontinuance of old products and introduction of new ones were also capable of qualifying. Case study: Faccenda Chicken v Fowler Faccenda Chicken Limited were a breeder, slaughterer and distributor of fresh chickens to butchers and caterers; Mr Fowler was for several years their sales manager. While working for Faccenda, Mr Fowler came up with the idea of distributing chickens by refrigerated vans to a wide area across the Midlands. Each salesman had an area to cover and visited customers at least once a week carrying sufficient produce for each customer’s standing order; however, customers were free to take more or less than their usual quantity on any given occasion. Faccenda also charged different prices to different customers. In December 1980, following an accusation of theft (of which he was later acquitted) Mr Fowler resigned and subsequently set up his own company to distribute fresh chickens in competition with Faccenda. He placed a newspaper

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advertisement for salesmen and recruited five former Faccenda salesmen – with their accompanying knowledge of Faccenda’s customers, routes and delivery schedules. Faccenda Chicken were outraged and sued Fowler, his company and their other former employees for breach of confidence in this information. The judge reviewed the details of the allegedly confidential information and was not impressed. As to the details of delivery routes and schedules, he found that these were clearly not capable of being business secrets in their own rights. The method of selling from refrigerated vans was part of Mr Fowler’s own skill and knowledge, which he could not be prevented from taking away with him. The pricing information was, perhaps, more sensitive, but here it counted against Faccenda Chicken that they had only attempted to claim confidentiality for the entire package of information as a whole. Given the inclusion of the trivia of delivery routes and so on, the court considered that the inclusion of such items in the package threw light on the claim of confidentiality for the whole – and held the whole non–confidential.

Potential licensees Information concerning new techniques and products is frequently disclosed in the context of negotiations, where the inventor for example requires additional backing in order to exploit their idea and seeks a development partner or licensee. Although the negotiations may be centrally concerned with one particular invention or idea, discussions may cover a variety of matters not directly connected with the principal subject matter. It will be a question of fact whether such extraneous material is also confidential between the parties. Case study: Seager v Copydex Mr Seager was an inventor who had an idea for a new form of carpet grip, which he entered in a competition being sponsored by the Daily Mail. The entry was seen by a Mr Preston of Copydex Ltd, who were a major manufacturer of adhesives. Mr Preston thought Mr Seager’s KLENT carpet grip could form a useful addition to Copydex’s product range and got in contact with him to discuss it. For one reason or another, the negotiations dragged on for over a year but never reached any successful conclusion. At one meeting in the course of the negotiation, Mr Seager told Mr Preston about another carpet grip he had thought of, which he expected to be slightly cheaper to manufacture. However, Copydex said that they wanted the original KLENT and no more was said. Copydex denied that they had seen any substantial details about the alternative grip. When the negotiations broke

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down, Copydex applied for a patent for an alternative grip which proved virtually identical to Mr Seager’s alternative and began marketing it. When Mr Seager sued, the court found that even if no one at Copydex did truthfully remember having heard Mr Seager’s explanation, the coincidence between the two grips could only be explained by their having unconsciously used the information he had given them. This was especially convincing given that Mr Preston, named as the inventor in the patent, had no technical background whatsoever.

Personal information Personal information may also be confidential. For example, spouses can be restrained from disclosing to the general public the intimate details of their married life, although there is a fine line to tread as to where such information is genuinely confidential and where ‘mere tittle–tattle’ not worthy of protection. Only minimal protection has been accorded to the celebrity class, on the grounds that those who court publicity for favourable purposes can hardly complain about invasion of their privacy if other, less salubrious details, are later disclosed by third parties – particularly if the conduct disclosed took place in incomplete privacy. Outside the celebrity context, details of personal behaviour such as attendance at a confidential meeting may be capable of being protected.

Summary In general, confidentiality in trade secrets may be protectable if the following conditions are met: i)

The owner believes that the release of the information would either help their competitors or hurt themselves;

ii)

The owner believes that the information is not in the public domain;

iii) It is reasonable for the owner to believe both of the above; and iv) The information is of a suitable (ie non–trivial/public) quality, judged in the context of the usage and practice of the industry in question.

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Losing confidentiality What is the position where the allegedly confidential information has already, by one means or another, been disclosed to the public – possibly abroad, or in a limited context such as a speech at a seminar? Confidential information can be disclosed to an unlimited number of people without losing its confidential character, as long as each and every one of them receives it on terms of confidentiality. Where disclosure is not on such terms, then it is a question of degree as to whether or not it loses its ability to be seen as confidential. The number of people to whom it is disclosed may be relevant: if it is only a handful of people, then it may not destroy the confidentiality vis–à–vis the recipient, if the latter is not among those who would normally have formed part of the disclosure group. Where disclosure is for a specific, limited purpose, confidentiality may be preserved for all other purposes. Thus, disclosure for the purpose of negotiations will not enable the recipient to use the information other than in the course of the negotiations, as long as it can clearly be implied from the circumstances that the negotiations are conducted in confidence. Information supplied to professional advisers – solicitors, accountants and bankers – is received by them subject to strict terms of confidence. Similarly information supplied to officials under any sort of statutory requirement can only be used for the purposes envisaged by the statute. Finally, contractors and sub–contractors who receive information to enable them to carry out their contract will usually also be subject to an obligation of confidence, limiting them from using the information for other purposes. Where disclosure is to the world at large, the circumstances of the disclosure remain significant.

Disclosure at source: Even where information may have been disclosed at source, if public access to that information is in fact limited, a recipient of the information should not be allowed, by virtue of their breach of confidence, to get a head–start over the rest of the population in using the information. This ‘springboard’ argument applies in particular where anyone might have been able to reconstruct the confidential information. For example, construction drawings for many products could be produced by dismantling a sample and preparing drawings from the elements. Despite this, the construction drawings themselves remain confidential as a recipient of them can cut out the intermediate stages a competitor would normally have to go through and so obtain a ‘springboard’. If, on the other hand, the information publicly available is sufficient so that no additional work is needed

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by other interested parties, then the recipient of confidential information gets no springboard and accordingly will not be restrained from using it. The springboard argument is applied even if the confidential information is later published: the recipient may still be restrained even after the public in general are free to use the information – at least for the period for which the headstart might have produced a commercial advantage.

Disclosure by owner: Confidentiality in disclosed material is less likely to be preserved if significant disclosure has been made by the owner themselves – for example, where the owner company had let the supposedly confidential material be known to 43 per cent of its shareholders.

Disclosure by recipient: Where the information has become public as a result of the recipient’s own disclosure – as, for example, Peter Wright’s publication of his memoirs, Spycatcher – it is obvious that the information itself, having worldwide notoriety, can no longer be judged confidential. This does not undermine the owner’s right – if it could, then all any recipient would need to do would be publish – but it will affect the remedies available: the owner will only be able to get damages rather than an injunction. What is the position of a third party, to whom confidential information is brought by the recipient with a view to dissemination or publication? The answer is that as long as the third party knows the information to be confidential, they are under an obligation in good conscience not to publish it. Once the information has been disclosed to the public, then a third party cannot be required to treat it as though it still were confidential.

Expiry of confidentiality Where disclosure takes place under a contract which provides a time limit, and that has expired, confidentiality cannot be reimposed. In employee contracts, an obligation of confidence may naturally be found to last for a similar period to any restrictive covenant in the same contract. Information may in any case eventually lose its truly confidential character by becoming out–of–date and losing its commercial value. Thus, in faster–moving industries, a secret may be protectable only for a shorter time since thereafter its value will be lost in any case.

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An obligation to keep information confidential which is imposed for reasons of public policy will last until that reason ceases to apply.

Transfer of confidential information Trade secrets and other confidential information, not being a clearly identifiable proprietary right like the other IPRs, cannot be transferred from one exclusive owner to another in the way that those can. Instead, the best that can be done is for the owner to agree to disclose the secret and all supporting information and materials to the proposed ‘transferee’, and simultaneously to agree not thereafter to use the information themselves nor to disclose it to any third parties. Thereafter, the new owner’s remedy for any leak of the information from the former owner is to sue for breach of contract.

Infringement What constitutes infringement? An obligation of confidentiality can be breached by either i)

Using the information or

ii)

Disclosing it to others.

Use of confidential information other than for the purposes for which it has been disclosed breaches confidentiality, even where it is not inevitable that through its use the information will be disclosed to any third party. Accordingly, any confidentiality clause should expressly forbid both use and disclosure, whenever either is mentioned. It can also happen that the confidential information is not itself being used but has formed the basis of further technical developments. Use of such derivative material will breach the confidentiality of the original material if the derived material is in fact a disguised embodiment of the original. If the information itself is no longer confidential, it is unlikely to be possible to stop the use of the derivative material, even if it is reasonable on the facts to treat it as a camouflaged embodiment. Further, even if the original information is still confidential, it will not always be true to say that the derived material is an embodiment of it; there will be a point of remoteness where the relationship is too tenuous to support such a claim.

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Remedies Criminal sanctions Confidential information is in an anomalous position compared to the more formal intellectual property rights, in that there are no criminal provisions specifically applicable, and it has fallen outside the scope of the general criminal law. It cannot be stolen, since it does not fall within the definition of ‘property’ which can be thieved. The confidentiality of information only affects the owner’s right under civil law to control the time and means of its publication; it does not affect its nature. Thus, an Oxford undergraduate who ‘borrowed’ a proof copy of an examination paper, read it but returned the actual piece of paper on which it was written, was acquitted of a charge of theft since the University had not been permanently deprived of any property. (It would have been different if any tangible property had been kept.) It has been argued that borrowing of this kind does permanently deprive the owner of some of the economic value of the information and therefore should be capable of being treated as theft, but so far without success. Other possibilities include charges under the 1906 Prevention of Corruption Act. This has been used in the situation where attempts were made by bribery or other corruption to obtain disclosure of another’s trade secrets. It could, for example, apply if an offer of alternative employment were made specifically for the purpose of obtaining the secrets the departing employee could bring with them. As always, however, where there are reasonable alternative explanations which could explain the offer – as, for example, the employee’s own skill and knowledge – it will be very difficult to prove the suspected ulterior motive. Civil remedies Depending upon the circumstances in which the confidential information was disclosed, the owner may be able to bring legal proceedings for breach of contract, breach of fiduciary or other duty of confidence and possibly for inducing breach of contract – for example, through causing an employee to divulge the information contrary to their contract. The preferred remedy will generally be an injunction to prevent the unauthorised further disclosure and/or use of the confidential information. This can be obtained at the outset of proceedings if the owner can establish sufficiently clearly: –

The confidential nature of the information;

–

The existence of a breach or threatened breach of confidence;

–

That the information is still confidential save for the defendant’s use/ proposed use of it; and

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The likelihood of damage to the owner’s business if the release of the information, or its use, is not stopped before the case gets to trial.

In deciding whether to grant an injunction at an early stage, the Court will try to assess on which side the greater potential damage falls, and whether each side can adequately be compensated financially. If an injunction would effectively close the recipient’s business until trial, then this factor will tend to reduce the likelihood of an injunction being granted, since the damage may not be capable of being remedied. Additional factors may include considering whether the owner is genuinely interested in control of the information or is primarily concerned with reaping a due reward, or has brought the case oppressively. In such instances, even if the other factors point to the grant of an injunction, the court may refuse it and award damages alone. Once an injunction has been ordered, the majority of cases for breach of confidence tend to settle. A further form of relief which may be appropriate if the owner has a very strong case will be the Anton Piller Order, discussed at Chapter 3 above in the context of trade marks. This may enable the owner to act rapidly, allowing recovery of copies of any confidential documents or other materials, pending a hearing between the parties. The same cautions as to the extent of search and the care which needs to be taken in carrying it out apply as described previously. Alternatively, if the defendant is a reputable undertaking, then an order for detention, preservation, delivery up or inspection of documents or materials can be sought, as also described above. Damages can be awarded for breach of confidence, either instead of or in addition to an injunction. Where the obligation of confidentiality arises from a contract, then the measure of the damages to be awarded will be that which will put the owner in the position they would have been in had the contract been carried out correctly – that is, the owner’s loss of profits up to trial arising from the disclosure and wrongful use of the information. If the plaintiff would have licensed the information, then the loss will be the licence fees which could have been obtained. In theory, if the duty of confidentiality arises outside the contractual context, damages can also be awarded to cover future losses, but in practice these will be next to impossible to quantify. An alternative to damages is an account of profits. This may be appropriate where the owner has not suffered much loss themself, but believes that the defendant has made substantial sums by virtue of the information. Accusations of breach of confidence Where a dispute seems likely to arise, the recipient of supposedly confidential information should remember the possibility of applying to court pre–emptively

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for a declaration, either that the information is not confidential, or that the proposed disclosure or use would not breach any contractual or other obligation. This can, in the right circumstances, be an effective means of avoiding a drawn out and costly legal proceeding. There are, however, no grounds for obtaining damages for unjustified threats of proceedings for breach of confidence. Defences The principal defence to a claim of breach of confidence will rarely be of any assistance when dealing with commercial, rather than personal, secrets: it applies where the allegedly confidential information relates to the owner’s misconduct. As a matter of public policy, someone who brings ‘iniquity’ to light cannot be prevented from making it public or required to pay compensation. It is vital to bear in mind, however, that ‘there is a world of difference between what is in the public interest and what is of interest to the public’. In some circumstances, a recipient may disclose information believing that they are entitled, or even under a duty to do so. Defences of public or overriding private interest may, in appropriate circumstances, succeed. Again, these are of limited assistance where commercial secrets are concerned. Examples include the disclosure by the police of suspect identification photographs to local shopkeepers; disclosure of an adoption panel’s papers concerning a couple to the Local Government Ombudsman; and use by a firm of solicitors of papers relating to the affairs of a former partner, in bringing proceedings against him for breach of his duty to the partnership.

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Appendices

Further reading Bainbridge, D. I., Intellectual Property, 3rd edn., Pitman, London, 1996 Cawthra, B.I., Patent Licensing in Europe, Butterworths, 2nd. edn., London, 1986. Coleman, A., The Legal Protection of Trade Secrets, Sweet & Maxwell, London, 1992. Cornish, W.R., Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights, 3rd. edn., Sweet & Maxwell, London, 1996. Flint, M., User’s Guide to Copyright, 4th edn, Butterworths London 1998 Gallafent, R.J., Eastaway, N.A., Dauppe, V.A.F., Intellectual Property: Law and Taxation, 4th. edn., Longman, London, 1992. Gyngell, J. and Poulter, A., A User’s Guide to Trade Marks and Passing Off, 2nd edn., Butterworths, London, 1998 Mehigan, S and Griffiths, D. Restraint of Trade and Business Secrets Tootal, C., The Law of Industrial Designs: Registered Designs, Copyright and Design Right, CCH Editions Limited, London, 1990. Whish, R., Competition Law, 3rd. edn., Butterworths, London, 1993. Young, D., Watson, A., Thorley, S., & Miller, R., Terrell on the Law of Patents, 14th. edn., Sweet & Maxwell, London, 1994.

Useful adresses The Patent Office, Concept House, Cardiff Road, Newport, Gwent, NP9 1RH. The Trade Marks and Design Registries can also be contacted at this address.

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