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Wednesday, 23 February 2005

SHADES OF GREY? ENGLISH REGISTERED DESIGN LAW JUST ABOUT CONSTITUTIONAL


From BAILII the IPKat brings you a remarkable constitutional law case involving design registration, Oakley Inc v Animal Ltd and others [2005] EWHC 210 (Ch), a decision of Deputy Chancery Judge Peter Prescott QC, 18 February 2005.

Oakley and Animal were rival makers of designer sunglasses. Back in May 1996 Oakley sold sunglasses made according to their design, applying a month later for registered design protection. Animal later brought out its own competing product, following which Oakley sued for design infringement. Animal, relying on the prior publication provisions of the Registered Designs Act 1949, said Oakley's design was invalid because Oakley publishing its design before it applied to register it. Oakley admitted the prior publication but said it didn't matter since the currently applicable law of prior publication, under EC Directive 98/71, provided a post-publication grace period of 12 months for filing an application.

The UK, being required to implement the Directive into national law by 28 October 2001, had two options with regard to the validity of the design regulations which were in force on that date. It could either adopt the law of validity prescribed by the Directive or it could keep its old national law. On 9 December 2001, in reliance on s.2 of the European Communities Act 1972, the UK enacted the Registered Design Regulations 2001, SI 2001/3949, which implemented effect to the Directive. By reg.12 the UK purported to avail itself of the derogation,which enabled the validity of existing registrations to continue to be governed by the 1949 Act. This favoured the position of Animal.

Oakley maintained that, (i) if the option to derogate was to be exercised at all, it should have been done by Act of Parliament and not by subordinate legislation made by the Executive, (ii) reg.12 was contrary to the constitution of the UK and thus ultra vires, (iii) if the option to derogate were to be exercised, it had to have been exercised by 28 October 2001, with the result that the purported exercise of derogation was contrary to the law of the European Union and therefore ultra vires. The court was asked to consider, as a preliminary point, infringement the validity of reg.12. This in turn depended on whether the Secretary of State had power to make it and the true construction of s.2 of the 1972 Act.

Specifically, two issues for the determination of the court were (i) whether a government minister or department could use the powers under s.2(2) to make regulations that brought about a result that was not mandated by a European obligation and, if such a power existed, how far did it go, and (ii) to what extent (if at all) might a Member State avail itself of a derogation after the final date by when a directive was supposed to have transposed the directive into its internal law as a matter of urgency.

Peter Prescott QC upheld the validity of the subordinate legislation and ruled in favour of Animal.

* Reg.12, as currently worded, would be ultra vires because the Secretary of State had no power under s.2(2) of the European Communities Act to make regulations that breached Community obligations. Parliament itself could do it, but only by expressly defying the 1972 Act or by repealing it. However, because of the doctrine of substantial severability, reg.12 took effect subject to the revision the court adumbrated and was thus valid.

* The combined effect of sections 2(2) and 2(4) was to enable the Executive, in appropriate circumstances, to legislate with all the force of an Act of Parliament and even to amend an existing or future Acts of Parliament. Thus s.2(2), combined with s.2(4), was an instance of what was known as a ‘King Henry VIII clause’, a power granted by Parliament to the Executive to make subordinate legislation which itself counted as if it were primary legislation.

* The general purpose of the 2001 Regulations to implement a Community obligation. However, reg.12 was not made for the purpose of fulfilling a Community obligation and, if anything, was for the opposite purpose.

* Section 2(2)(b) did not enable the Executive to make secondary legislation, with the potential to amend or repeal even an Act of Parliament, and to achieve a result not required by a Community obligation, merely because its purpose was in some way related to or arose out of that obligation. In short, if s.2(2) was given a narrow but purposive construction, as it had to be, it did not enable the attainment of a substantive result that was required neither by the Community nor by Parliament itself.

* The effect of reg.12 was to retain the old (1949 Act) law of validity in respect of registrations in existence at the time the Directive was implemented. Since this decision was a significant policy choice and had to be implemented by primary legislation, the Secretary of State had no power to make that decision and to implement it by secondary legislation: such a legislative act would be ultra vires.

* The purpose of the secondary legislator in this situation was to transpose a European directive. Even if he had exceeded his powers in one respect, such as by mistaking the true scope of the directive, or by legislating contrary to the directive, or by attempting to produce a substantive result required neither by the Community nor by Parliament, it would normally be clear that the substantial purpose of the rest of the instrument was to implement a Community obligation. That being in any event compulsory, it would be strange if the court felt obliged to cut down the whole. It could instead delete the offending part or even rewrite it so as to make it conform to the directive.

* Whether the UK was to avail itself of the derogation or not was clearly a significant policy choice. The power to make that choice and implement it in national law might have lain with Parliament alone, or it might have been available to the Secretary of State. But what was clear was that it did not lie with the courts. Were the court to accede to Oakley's submissions, the result would be that the UK would have a law of registered designs which, as regards the validity of existing regulations, was chosen neither by Parliament or (if that were relevant) the Secretary of State, nor required by the European Community. The 2001 Regulations purported to amend the text of the 1949 Act. That text was passed and amended by Parliament, and by Parliament alone. Thus Parliament enacted a particular legislative scheme which was to govern at least the validity of existing regulations.

* The somewhat paradoxical consequence of this was that the old law of validity, as defined by the 1949 Act, continued to apply to existing registrations, because that was what Parliament provided, just as it would have continued to apply if, instead of purporting to adopt the derogation, the Secretary of State had purported to eschew it.

* As to Oakley's point that, under the directive, the existence of the option to exercise the derogation disappeared on 28 October 2001 and that, once the deadline had expired, the opportunity to exercise the derogation had ceased to exist as a matter of Community law, this was not acte claire. If Oakley wanted to press that point, the court would refer the question to the European Court of Justice for a preliminary ruling.

Peter Prescott: has raised fundamental questions
relating to UK implementation of European IP rules

The IPKat marvels once again on Peter Prescott's scholarship and erudition (see his second judgment in Griggs v Evans for another example). He is however quite surprised that this issue has not been argued before and he's also a little shocked at the apparently fragile legal basis of existing UK design law. Merpel says, if Parliament can do what it wants and the courts can do what they want, why can't the poor old Executive do what they want too?"

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