For the half-year to 30 June 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Alberto Bellan, Darren Meale and Nadia Zegze.

Two of our regular Kats are currently on blogging sabbaticals. They are David Brophy and Catherine Lee.

Sunday, 30 September 2012

Should We Allow the Overleveraging of IP Rights By Contract?

The most distinctive aspect of an IP licence is that it addresses both IP and contractual rights. When the licensor grants to the licensee, and the licensee accepts, the right to use the IP right under specified terms and conditions, the licensee risks a claim of infringement if he exceeds the scope of the grant and he enters into the unlicensed portion of the licensor's IP rights. As well, the undertaking to use the IP right in a specified manner creates a contractual obligation on the part of the licensee, the violation of which gives rise to a claim of breach of contract against the licensee.

This dual nature of an IP licence is well-recognized. Less appreciated, however, is the asymmetry that is created between the scope of the proprietary obligations that exist by virtue of the IP right and the potentially broader scope of contractual obligations that may be created under the licence, subject only to agreement by the two parties. Against that backdrop, an interesting question arises: how do we treat a contractual obligation that exceeds the scope of the IP right being licensed?

An example oft-encountered by this Kat is the provision in a licence agreement involving a trade secret under which the licensee undertakes not to reverse-engineer the trade secret being licensed. Set against this provision is a central tenet of trade secret protection, namely that lawful reverse engineering is permitted. In some countries, the right to reverse-engineer is anchored by statute, in others it is a creature of case law. In either situation, it is well-recognized that the right to reverse to reverse-engineer is part and parcel of the trade secret right. Thus, if the disclosee-licensee is able to reverse-engineer the trade secret without running afoul of some other IP right, such as copyright, the act of reverse engineering is permitted.

Let us assume that the licensee goes ahead and successfully carries out reverse engineering of the licensor's product. The licensor then sues for breach of the licence. The licensee defends by arguing that reverse engineering is permitted as a matter of trade secret law and that the right to do so is a matter of lex cogens in favour of the licensee. This Kat is not sure how such a scenario ultimately plays out.

At a less dramatic level, what is the obligation of the lawyers for the two parties in negotiating a trade secret licence with respect to a provision prohibiting reverse engineering? Do the lawyers for the respective parties have to mention during the course of negotiations that trade secret law permits reverse engineering, or is the ultimate fate of the inclusion of provision simply a matter of bargaining power, leaving the issue of the legality and enforceability of the provision to a later time?

Another example of the potential clash between the proprietary and contractual aspects of an IP licence arises in the context of trade mark consent agreement (lest readers jump on this Kat at this point, I recognize that a trade mark consent agreement is not precisely a licence, but the undertakings created raise similar issues for our discussion.) Even if the underlying dispute involves only registration of the respective marks of the parties, it is the case that the parties will sometimes seek not only to resolve the immediate issues, such as the form of the respective marks and the goods or services to be covered by the respective registrations, but more generally, they will address the terms and conditions by which the two parties agree to use their respective marks. In such a situation, the parties will be tempted to "wrap things up, once and for all", especially if the dispute involves multiple jurisdictions. In so doing, the final form of the consent agreement might include mutual undertakings that exceed the scope of the respective goods and services of the two parties as well to cover territories in which neither party has any enforceable trade mark rights.

Imagine that one of the parties begins to use his mark on goods that lie outside the scope his goods and services under the registration, but that do not fall under the goods and services of the other party. It would seem that a breach of contract claim exists, even if the plaintiff has no claim for trade mark infringement. If this is correct, then the parties, as between the two of them only, have expanded the scope of protection by means of contract. Can the allegedly breaching party nevertheless still defend by arguing that the undertaking is invalid and unenforceable?

This Kat's sense is to say "no". However, if this is the case and the contract claim stands, there is still something a bit troubling by the fact that parties can use a dispute over IP rights IP to leverage their respective rights beyond the scope of the IP rights themselves. The over-leveraging of financial assets, as consensual is it was, proved to be a root cause of our current financial crisis. Should the law take a similarly wary view of over-leveraging when IP licences and the like are involved?

Friday, 28 September 2012

Friday fantasies

The IPKat has often praised the IP community [sometimes unjustly, says Merpel] for its many virtues.  This week, that community has excelled itself.  Yesterday morning one of the Kat's academic colleagues, unexpectedly finding a blind student in his LLM class, put out a request for assistance.  Today he is the recipient of a large amount of advice and guidance, some of which is based on personal experience, and which is helping him to address his own challenge: that of ensuring that the student in question gets the best possible education in his chosen subjects. The lecturer has thanked the IPKat, who in turn thanks the readers of this weblog for their truly appreciated support, advice and guidance.


This has been a happy week for the World Intellectual Property Organization (WIPO).  On Tuesday the United Nations Agency responsible for intellectual property rights was cleared of UN sanctions-busting in the provision of technical aid to North Korea; then, a day later, news broke that WIPO hadn't crossed the boundaries of legitimate assistance to Iran. The IPKat imagines his friends at WIPO must be greatly relieved, but Merpel wonders whether this exoneration -- at the hands of the UN Sanctions Committee -- will be sufficient to satisfy the United States.


Around the weblogs.  "Does the IP system work for SMEs?", asks IP Draughts' Mark Anderson.  The answer is that the question is to broad to answer meaningfully, but that should not let us see how we can make it work better for them.  The 1709 Blog continues the debate as to whether the Meltwater v NLA copyright infringement litigation in England and Wales is about breaking the internet: no it isn't, says Simon Clark; yes it is, responds James Mackenzie.


Fellow Kat Robert Cumming spotted a small but intriguing item last weekend: a report in the Independent on Sunday concerning a study by the University of Missouri-Kansas City and the University of Kansas Medical Center. Using MRI technology to scan children's brains, the study claims that fast-food brands have become so ingrained that the sight of the famous logos associated with them actually triggers increased activity in areas of the brain which is known to be involved in reward-processing and in driving and controlling appetite. The study also claims that the same areas do not respond to well-known logos of a non-cibarious nature, though Merpel is willing to volunteer to see whether the same effect would be observed in relation to handbags and shoes.


Fresh reference.  Via the ever-helpful UK Intellectual Property Office the IPKat has learned today of another intellectual property case that has been referred to the Court of Justice of the European Union for preliminary rulings.  It's Case C-387/12 HI HOTEL HCF, in which a single question is asked, on the interpretation of Article 5(3) of Council Regulation (44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters:
"Is Article 5(3) ... to be interpreted as meaning that the harmful event occurred in one Member State (Member State A) in the case where the tort or delict which forms the subject-matter of the proceedings or from which claims are derived was committed in another Member State (Member State B) and consists in participation in the tort or delict (principal act) committed in the first Member State (Member State A)?"
The IPO, which invites comments by email to Policy at policy@ipo.gsi.gov.uk by not later than 4 October -- that's next Thursday -- has given some clues as to what the underlying litigation is about:
"... The referring court asks whether a court has jurisdiction to adjudicate both on copyright infringement in its territory and also on any contributing act which took place in another member state carried out by a party which assisted in the tort or delict in issue".

And here's some background to another reference.  Last week's Friday Fantasies featured a mention of Case C-360/12 Coty Prestige Lancaster Group GmbH v First Note Perfumes N.V. The IPKat wondered what the background to this Bundesgerichtshof reference was.  Now he knows, since his friend Kai Hendrik Schmidt-Hern (Lubberger Lehment, Berlin), who firm is involved in the matter on behalf of Coty, has told him. In short, First Note sold a perfume article called "Blue Safe for Women" (illustrated, right) to a German reseller. Kai continues the narrative thus:
"We filed claims against First Note before the Regional Court of Düsseldorf based on Community trade mark (CTM) 3788767 (illustrated, above left)) -- 
as well as on the basis of comparative advertising (Sec. 6 II No. 6 UWG - perfume clause), "passing off" and free riding (Sec. 4 No. 9a, b UWG) with regard to the design of Coty's product "Cool Water Woman" (illustrated, right).

The Regional Court of Düsseldorf turned down the claims due to insufficient similarity of "Blue Safe" to the CTM and to the "Cool Water Woman" design. The High Court of Düsseldorf dismissed the action as well, however this time due to a lack of international jurisdiction pursuant to Art. 93 V CTR and Art. 5 No.3 Regulation 44/2001. According to the taking of evidence before the High Court, the article had changed hands in Belgium and the reseller had imported it to Germany to resell it there. We argued that First Note had contributed to the resale in Germany by selling the article and by knowing that the buyer would resell it in Germany. The High Court, however, held that liability as a contributor to the resale in Germany was subsidiary to liability for the direct infringement in Belgium. In the High Court's opinion, liability as a contributor does not establish international jurisdiction of the German courts, when the same act by the defendant has caused liability for a direct infringement in a different member state. 
In its reference decision, the Bundesgerichtshof dismissed the notion that liability as a contributor is subisidiary to that as direct infringer for the purpose of international jurisdiction. It submitted the questions regarding Art. 93 V CTR and Art. 5 No. 3 Reg. 44/2001 as shown below to the ECJ. In our case, "Member State A" obviously is Germany and "Member State B" is Belgium".
Merpel is puzzled as to why "Member State A" is obviously Germany. She always thought it was A for Austria, B for Belgium, C for Czech Republic, D for Denmark, E for Estonia, F for France, G for Germany, H for Hellas, I for Ireland ...

Breaking: Updated Draft Agreement on Unified Patent Court published

The AmeriKat waiting for the
consolidated texts of the Draft
Agreement and Proposed Regulation....
After months of waiting, this morning the Cypriot Presidency published the new draft of the Unified Patent Court agreement. The draft incorporates elements agreed at the 5 December 2011 Competitiveness Council and June's European Council meeting - all of which have not, until now, come to light.

The main changes, as set out in the covering memo, are as follows:
1. The definition of “European patent” in Art. 2 point (5) has been adapted to make it clear that the Court shall have the same jurisdiction with regard to European patents as national courts currently have. In this context, Art. 15b has been moved up as Art. -15 in order to clarify that the jurisdiction of the Court does not lag behind the jurisdiction of national courts in the area of patents as far as the exclusive competence of the Court in that area is concerned.
2. Article 5(3) has been amended in order to clarify that it will be possible to set up an additional local division for every one hundred patent cases.

3. Article 6(3) was amended in order to clarify what happens in situations where the exact number of 50 cases occurred.

4. In Article 6(4), the term "permanent" in the expression "permanent legally qualified judge" was deleted in order to align the wording with the preceding paragraphs. In the same paragraph, the reference to “regional list” was deleted, given that no such list is provided for in Art. 15.

5. The institutional provisions relating to the Administrative Committee, the Budget Committee and the Advisory Committee have been moved into Chapter I. For the Budget Committee, a new paragraph (3a) has been added to allow for the Budget Committee to adopt its rules of procedure.

6. In order to avoid possible misunderstandings, Union law was moved up in the list of sources of law for the UPC in Art 14e.

7. The terminology of Articles 14f to 14h has been aligned with that of Articles 6-8 of the draft UPP Regulation, the acquis and international Treaties.

8. In Article 21, the reference to the Statute was erroneous given that the latter does not contain any provisions on the costs relating to the functioning of the Centre. The current version proposes therefore that such costs be covered by the budget of the Court, in line with the costs for the training framework for judges (see Art. 20).

9. The previous Article 27 was split into two Articles (i.e. 26a and 27) in order to distinguish more clearly the question of legal capacity from the question of who may have legal standing before the Court.

10. In Article 28, an effort was made to clarify the status and the role of patent attorneys in the proceedings before the Court. Account has been taken of the fact that the concept of "patent attorney" might not be known in all Contracting States.

11. The provisions of Chapter IV (Powers of the Court) have been aligned more closely to the corresponding provisions of the Enforcement Directive.

12. The Final provisions have been streamlined. Article 58f (Languages of the Agreement) has been aligned on the corresponding provision of the EPC. Finally, Article 59 provides now for a single entry into force of the Agreement, which shall depend inter alia upon the prior entry into force of any amendments of Regulation (EC) 44/2001 are deemed necessary to accommodate the setting up of the UPC.

13. Finally, in Article 6 of the Statute (Immunity of judges) the wording has been aligned to that concerning judges of the Court of Justice of the European Union.

The AmeriKat has not yet had an opportunity to scrutinize the consolidated text but the location of the Central Division as proposed by the EU Council in June (Paris with divisions in London and Munich) have now been included in updated Draft Agreement. She also notes that Articles 14f-14h were amended to match the wording of Articles 6 to 8 in the Proposed Regulation - meaning that for now Articles 6 to 8 remain in the Proposed Regulation.

The Draft Agreement will be discussed with the Friends of the Presidency group on 5 October 2012, in advance of the European Parliament's Legal Affairs Committee meeting on 10-11 October 2012. The AmeriKat will be back to report on any further updates.

Thursday, 27 September 2012

Plain packaging and the European Commission: is there a mixed message?

Plain packaging but no need for a health warning? Christo's Reichstag
Proposals for standardised packaging of tobacco products, which not so many years ago were regarded as little more than a distant threat, have become reality in Australia and look likely to do so within the European Union. The IPKat has hosted pieces both critical and supportive of the principle (see eg here, here and here), and expects to do so again in the near future as the debate becomes more sharply focused.  In this context, here's a fresh piece by Christopher Morcom QC (Hogarth Chambers) which takes the latest European Commission health and environment proposals to task :
"The European Commission's threat to Intellectual Property Rights and innovation

Following soon after the closure of the UK Department of Health's consultation on 'Standardised Packaging' for tobacco products, the German newspaper Die Welt has drawn attention to plans of the EU Commission who are said to be "Ready to Strike Against Tobacco Industry" (here). It is reported that "Brussels wants strict regulation of pack sizes, sales, and ingredients of cigarettes - and is already thinking about the next tightening". Indeed, Commissioner Dalli (Directorate General Health and Environment: DG SANCO) seems to have produced a revised draft Directive on tobacco products containing extreme measures, which represent a real threat to intellectual property rights (IPRs).

Since the European Parliament vote against ACTA last July, it seems that IPRs, most unfortunately, continue to be inadequately regarded. Any proposed form of standardization of packaging is an assault on IPRs and would undermine the Commission’s professed willingness to maintain the EU as a competitive place in a favourable environment to creativity and innovation.

Commissioner Barnier, in charge of the promotion and defence of IPRs, is playing a key role for companies in motivating them to create and innovate. The draft proposal of DG SANCO undermines his wish to link investment in innovation with effective protection of IPRs. Other sectors whose products are considered as “dangerous for health” are already coming under consideration both in the UK and in Europe. Companies in such sectors and the IP community in general may justly expect Commissioner Barnier to address the legality of the DG SANCO proposal from the point of view of international conventions (TRIPS, Paris Convention and European Convention on Human Rights), as well as the general impact on IPRs lawfully acquired in respect of legal products.
It is therefore to be hoped that Commissioner Barnier will be considering all these aspects as a matter of urgency. If the proposal were to be adopted by the Commission, it would send a negative message to the IP, business and investment communities: "Intellectual property rights are not welcome any more in the EU".

Finally, regarding the UK Consultation, it is to be hoped that the UK Minister for Intellectual Property has been asked to consider the impact of the proposals for "Standardised Packaging" from the legal point of view. We now have a new Minister, Lord Marland, who has the opportunity and the responsibility to consider the proposals in the light of IP laws and the UK's obligations under the treaties referred to above. It is important that he should take advantage of that opportunity".
This Kat, as he has said before, is a militant non-smoker but a believer in the need for the integrity of intellectual property rights, and that includes trade marks for unpopular and indeed dangerous products too: he also feels that, if governments want to do something about smoking, there are more direct and immediate ways to tackle it.

Health warning but no need for plain packaging
Is Christopher Morcom's case overstated?  Many readers will feel that the rejection of ACTA by the European Parliament is not part of this debate: it was not a rejection of the need to protect IP but a swift response to a groundswell of popular opposition on the streets of Warsaw and on the internet.  No-one accused the United States of rejecting the need to protect IP after the sudden and dramatic abandonment of PIPA and SOPA and the European Parliament is probably no different. Likewise, many may feel that an attack on the right to deploy tobacco brands and livery in the traditional manner does not send out a message that the EU is discouraging innovation and investment, but rather that the EU is seeking to channel innovation and investment from markets which it wishes to shrink and towards markets where it wishes to see growth. Be that as it may, Christopher is right to suggest that different organs within the Commission should not be seen to be pulling in different directions -- and it would be good to know exactly where Commissioner Barnier and his team stand in relation to the position of DG SANCO.

Of more interest to this Kat is the possible extension of plain packaging to other classes of products. At the recent MARQUES meeting in Athens, Massimo Sterpi's Workshop on plain packaging (noted in brief on Class 46 here) looked at the counter-intuitive possibility that plain packing would increase smoking, not decrease it and also discussed the prospects of plain packaging for alcoholic products -- which like tobacco products can cause disease and death -- and confectionery and snack foods the over-consumption of which can lead to obesity and the increased risks of diabetes and heart disease.

Teaching IP to blind students: insights wanted

Can anyone help a distinguished reader of this weblog who is also a very fine teacher of intellectual property law? He writes:
"I walked into my maiden postgraduate IP law class (exclusively non-UK/EU students) yesterday, and I discovered that one of my students is blind. Nobody had informed me in advance.

However, everyone is most concerned about how best to support the student. I have contacted the UK Intellectual Property Office who will be able to help out with audio files; I am hopeful that the EPO and WIPO can also offer some support. I have had a rake on the internet for IP texts in Braille, and - predictably – found very, very little. At this time I am very unsure that the University can offer adequate support at such short notice, for example in respect of converting academic texts into Braille or audio recordings. It is all very complicated at the moment!

My other concern is what I can do to integrate him into class debates, to enable him to participate. Yesterday, it worked very well when the class was split into groups for initial discussions/brain-storming on IP generally. But I am really unsure in what way I should adapt my teaching methodology. At the moment, we have to work with three-hour timetabled slots which I use to provide some input (usually with help of PowerPoints) for about 40-50 minutes, and then seminar discussions on a topic which students had time to prepare for in advance (tailored topics plus reading list). Sometimes, students present on a particular issue, or there are library exercises.

I wonder whether you have any experience in integrating blind students into a class-room setting, or maybe you know a colleague who does? Also, would you know of any ports of call where I could get audio files on IP law subject matter, or information in Braille?

I am very sorry to spring this on you, but I would be eternally grateful for any advice you are able to provide!".
This Kat has no personal experience of teaching blind students, though he well remembers his student days when one of his college friends, who was deaf, received no assistance at all and was even required to attend supervisions in which he was unable to participate, in order to satisfy university regulations. If any readers have experience, ideas or information, can they please share them -- ideally as soon as possible! Please post your comments below or email them to the IPKat here.

Wednesday, 26 September 2012

Puzzled by comments in the UK, a German lawyer speaks out on the unitary patent

A very weary AmeriKat taking
a break on her unitary patent
update papers
The AmeriKat enjoys so many things about reporting on the unitary patent - the never-ending saga of not quite knowing what is going on, the always aggressively drafted comments posted on her reports and the weariness that comes with continually updating a series of updates (see such updates here).  But of all these little perks of the job, her favorite is entering into e-mail debates and communications with readers from across the globe on one of the hottest topics facing the European patent community.  

The AmeriKat has particularly enjoyed her e-mail correspondence with one of these readers, Dr. Ulrich Blumenröder.  Dr. Blumenröder, a lawyer in the Munich office of IP firm Grünecker, emailed her this evening with observations from a German IP lawyer's perspective.  Ulrich has this to say:
"Public comments in the UK on the Unitary Patent are puzzling. They dance around issues which are, at least to this author, of greater importance.  Maybe the ideas of a German lawyer may re-focus the discussion:
1. Bifurcation 
Long after the question on the location of seat of the Central Division settled, the never ending story about bifurcation nevertheless continues. UK lawyers seem to see the world of IP (at least England’s world) coming to an end if the currently planned system comes into existence as the current drafts (to the extent known) provide. They shout out to the IP community on this issue as if there were no tomorrow.  
It is moot to further discuss whether bifurcation is good or bad. It has been discussed over and over again. But for the fact that Germany and others live with bifurcation and have done so for quite some time without arriving at improper results (in the end), the implementation of the possibility of bifurcation will stay on the Draft Agreement. It is more noteworthy that it will not take place as often as feared by British lawyers, and likely only in clear cases where nullity of the patent is likely anyway. Contrary to unstated fears, the possibility of bifurcation will not take work away from British lawyers either (although of course one wouldn't mind that from a purely personal and business point of view). 
Why do I say this?  Plaintiffs can and will select the forum they consider best for their case. They will consider the speed of the respective forum, its qualification and experience, the costs, perhaps the language and the likelihood that the decision will be accepted by the defendant. As far as these issues are concerned plaintiffs will continue to make their choice mostly as they have done previously. Germans will swear that German judges (at least two of them will sit on the panel of a German local division) are the best, and the British will continue to imply that judges from the continent have no particular expertise and that only a British forum (with at least two British judges) can properly decide a case. If the patent is strong these criteria are all that will be of relevance for the selection of the forum. 
Dr. Blumenröder
The cases where the patent is shaky are those of more interest. British lawyers are concerned that plaintiffs will turn to fora where bifurcation will take place and the invalidity proceeding will be handled before the Central Division in Munich or Paris. Apparently, the fear is that not only Germans quarrelling among themselves will select such a local division (in Germany) but that British and non-European plaintiffs will make the same decision. However, what would be the benefit of such selection? The respective plaintiff knows that necessarily a nullity action will be filed and that an appeal of either action, nullity and infringement will be appealed. As a result one court, the Court of Appeals in Luxembourg will have jurisdiction over the joint proceedings within – hopefully – two years from filing. All that the plaintiff gains from inducing bifurcation is an infringement decision some 3 months earlier and one infringement decision which does not clarify either validity or infringement of the patent. Rather the plaintiff has to wait for a longer time to have the case properly decided. The consequence is easy to guess: plaintiffs will turn to a forum which in addition to speed, experience, price and language offer to decide both validity and infringement, i.e. the Central Division. Hence, plaintiffs will no longer rely on German panels as they do so far, if – yes if – German judges in local divisions do not adapt. They will, however, adapt. They are ambitious and proud and want to decide patent cases. And they want both the money and the prestige of being a European judge. With the technical judge at hand they will decide nullity actions. Even for those wishing to litigate in English they will provide options irrespective what might be said at this moment in time. And Germany will happily staff the panels.

Thus, plaintiffs will stay in Germany. The possibility of bifurcation will not be the reason. German plaintiffs and German judges will simply not apply it.

2. A Go for the Unitary Patent System? 
As contentious as the position on bifurcation may be between German and British lawyers, the main issue is that the European Parliament and EU Council will have to find a solution on how to deal with the (likewise endlessly discussed) question of the inclusion of Articles 6-8 of the Proposed Regulation. A solution is expected by 10-11 October, the next session of the Legal Affairs Committee of the EU Parliament.  
Notwithstanding the controversy of Articles 6 to 8, the hopes for implementation of the proposals in the near future might still be delayed. It is worthwhile to recount the events of the Summer:  
European Parliament President Martin Schulz
(i) The European Parliament must vote for the Draft Regulation. If not it will  not come into existence. Its Legal Service has issued an (unpublished in unredacted form) legal opinion arguing that removing Articles 6-8 from the Proposed Regulation will violate EU-law. Its Legal Affairs Committee has publicly said so and insisted on having Articles 6-8 in the Proposed Regulation. The EU Council (perhaps reluctantly) gave in. The EU Parliament has gained substantial self confidence which is publicly attributable to its new president Martin Schulz (who is (a) a German and (b) a member of Social Democratic Party, the opposition party to Merkel’s party). 
(ii) By mid-June everything was set.  The EU Council only needed to agree on the seat of the Central Division (an issue in which the European Parliament has no interest) on June 29 and the EU Parliament was to vote only five days later. Yet, the EU Council did not only decide on the seat but suggested to remove Articles 6 to 8 from the Proposed Regulation. UK Prime Minister David Cameron threatened to pull out of the entire system unless either the seat of the Central Division went to London or Articles 6 to 8 were removed. Hollande and Merkel (and apparently all others) gave in and “informed” the European Parliament how it was to vote. 
(iii) The European Parliament and its Legal Affairs Committee were fuming.

Now, where is the compromise? Shall the EU Parliament announce that it has been wrong with its legal opinion all along and that they of course will “obey” the EU Council? Or is it for UK Prime Minister Cameron to say that he was not quite serious when he threatened about the seat and/or Art. 6-8? The only promising sign is that all sources usually willing to comment on strategy in the European Parliament or in the German Ministry of Justice have all gone quiet. No comment at all or at least none with substance.
Ulrich and the Kat look forward to comments on the above observations and any thoughts on what a compromise might look like - readers can also e-mail Ulrich directly at Blumenroeder@grunecker.de.

In the meantime, Ulrich tells the AmeriKat that he is looking forward to seeing British lawyers in courts all over Europe.

Hermès counterfeiter sentenced to life

The AmeriKat, definitely
not sporting a Hermes
scarf...sadly...
The AmeriKat was saddened to have missed her and the IPKat's good friend, Michael Lin (Marks & Clerk - Hong Kong) during his recent visit to London and was further saddened when she was informed that he would be missing the AmeriKat during her upcoming trip to Hong Kong.  However, she was delighted when an e-mail from Michael plopped into her inbox with news of a recent Chinese counterfeiting case involving Hermès.  Michael reports:
"In a recent case out of China’s Heyuan Intermediate People’s Court, Xiao Zhenjiang, the leader of a counterfeiting gang was sentenced to life in prison and all of his belongings and property was ordered confiscated for counterfeiting almost GB £9,900,000 of luxury goods, specifically HERMÈS handbags/purses. The other gang members received sentences of from seven to ten years imprisonment and fines from GB £49,000 to GB £78,000. According to the Heyuan court, here, Xiao was reportedly a repeat-offender and the gang was allegedly passing off the goods as genuine. 
This case stands out due to both the severity of the sentences as well as the huge amount of counterfeit goods at stake. Furthermore, the court specifically referred to the market value of the goods if they had been genuine, a calculation not often seen in Chinese counterfeiting cases. Such a calculation has important implications in criminal sentencing and whether or not the prosecutor will accept a case for criminal prosecution. Thus, this case is good news for brand owners, as the anti-counterfeiting group QBPC has been advocating for this type of value calculation for many years. 
Due to the adverse effects on patient health, harsher, multi-year imprisonment sentences are becoming more common in cases relating to counterfeit pharmaceuticals and health products. However; this is the first case I’ve seen which provides such long sentences for counterfeiting luxury goods. "
Yikes.....the AmeriKat wonders if this sentence will indeed have the deterrent effect that this type of sentence is obviously designed to have.  She hopes that Michael will keep her and readers updated on any developments.

Heyuan here.
Hey Yuan here.
Hey Juan here.

Tuesday, 25 September 2012

Unitary Patent Update: It's back to school for the unitary patent




The AmeriKat sporting her A/W 2012 outerwear
The AmeriKat is perplexed that it is already the end of the September.  With the autumnal smells lacing the air, it can only mean two things:  cuter outwear and the kick-start of the final chapter of the unitary patent saga.  Following a summer which saw the various EU institutions, national governments and patent professionals musing on the legality of the inclusion of Articles 6 to 8, this morning Spain and Italy began presenting their case as to why the Council's 2011 decision to push forward the unitary patent proposals under the "enhanced cooperation" procedure breached EU law (see Spanish reference here and the Italian reference here).  With the Legal Affairs Committee of the European Parliament set to debate the final draft texts of the Proposed Regulation and Draft Agreement at the next session on 10-11 October 2012 and the Cypriot Presidency eager to pass the legislation, it all looks like a go for the proposed unitary patent system. 

In July, shortly after the EU Council's agreement on the location of the Central Division and the European Parliament's "emasculation" following the Council's suggested deletion of Articles 6 to 8 which delayed the planed vote on the proposals, the AmeriKat organized a debate.  The debate, chaired by Lord Neuberger, Lord Justice Aikens and Lord Justice Kitchin, aimed to flesh out the key points that concerned industry users and practitioners on the proposed system (official transcript here).  The debate drummed up strong views from across a diverse section of the profession and industry, as well as novel points on procedure and areas where work still needed to be done - for example, the need for a harmonized approach on accessory liability.

A few months on, last week, Bird & Bird hosted an event in their London office recapping the proposals and what is next.  The AmeriKat was unable to attend, but sent her trusty guest Kat and colleague, Lorraine Neale (Allen & Overy) to report on the event on behalf of the Kat.  Lorraine has this to say:
"Last Thursday, in the absence of AmeriKat who was having a very brief feline respite in the Channel isles, this guestKat attended a seminar entitled ‘A Pan–European Debate on the Proposed Unitary Patent System’, organised by Bird & Bird in their London offices. Her proudly displayed IPKat badge ensured that she received welcoming smiles, and a level of interest that she is unaccustomed to on these occasions …. Ah the hallowed status of being a Kat for an evening!
Introducing the seminar was Chelsea Roche, an Associate in Bird and Bird’s London IP Group, who gave an excellent overview of the current proposals for the proposed unitary patent. She was followed by Dr. Claus Becker, Associate and Patent Attorney in the Munich office, and Marie Wormser an Associate in the Paris office, who presented differing German and French perspectives on bifurcation, Articles 6-8 of the Proposed Regulation, and the location of the Central Division of the Unified Patent Court (All for One?). Taliah Walklett, Legal Counsel, Litigation, Legal and IP at Nokia, gave critical a perspective from industry, and finally Judge Colin Birss QC talking “from the perspective of someone who reads IPKat like the rest of you” gave a refreshingly down to earth and positive spin on the issues.
Acknowledging that the patchwork approach to patent protection in Europe is affecting the ability of European businesses to compete, Chelsea Roche addressed the question of whether the problems in the current system have been adequately addressed by the proposed unitary patent package. By way of a background she outlined the problems with the current system under the EPC, and then summarised the various attempts over the last 40 years to introduce changes to the system. Chelsea noted the major breakthrough/turning point in December 2010 when the process of enhanced cooperation allowed 25 member states to push ahead with the implementation of the unitary right (despite opposition from Italy and Spain whose June 2011 action against the Council was heard today). Ever since progress had been rapid – some saying too rapid, with the agreement on the text of the unitary patent package (two draft Regulations and one draft international Agreement), in December 2011 and at the end of June 2012, a compromise as to the location of the central division of the Unified Court. However controversy still reigned with respect to Articles 6-8 of the proposed Regulation, which define what amounts to infringement of a unitary patent (direct and indirect) and limitations to infringement. Chelsea explained that as these provisions will be governed by EU law; their inclusion in the Draft Regulation meaning that the Unified Court will be obliged to refer questions of their interpretation to the CJEU.  
Understandably people are concerned that this will lead to substantial delay, uncertainty and questions of substantive patent law being presided over by a nonspecialist judiciary. The EU Council has suggested the deletion of Articles 6-8, which did not go down well with the European Parliament, who considered this to be unlawful. As a result the vote on the Unitary Patent package, which was due to take place in July 2012 was postponed, and is now due to be discussed again on 10th October. Furthermore the Cypriot presidency is keen and pushing for an agreement to be reached by the 10th December 2012 . Chelsea then outlined two particularly contentious aspects of procedure: the ability of a local division of the Unified Patent Court to grant an EU wide injunction, and the discretion given to local and regional divisions to ‘bifurcate’ infringement and validity. She then handed over to her German and French colleagues for further discussion of these issues.

Germany loves France - or do they?
Dr Claus Becker took to the podium declaring that it was his intention to be the valiant defender of bifurcation (which musketeer?). He acknowledged that one of the main concerns regarding bifurcation was that it was pro-Plaintiff, as an infringement trial is generally faster that a validity trial, potentially leading to bigger companies, or even non practising entities (patent trolls) enforcing weak patents against SMEs. This coupled with an ability to obtain speedy injunctions could put the SME out of business. Claus pointed that ‘speed’ was favourable to the local company too, when faced with a foreign infringement of their IP rights, and that in any event it was possible to stay infringement proceedings pending the outcome of parallel revocation proceedings if the patent was ‘weak’. A second concern was that of claim construction, with bifurcation allowing different interpretations of the scope of protection (broadly in the infringement trial and narrowly in the validity trial). Claus believed that it was possible to avoid this with a cross consideration of case statements, and that in any event the proposed Appeals Court would ultimately iron these differences out by apply a uniform interpretation. With regards to the deletion of Articles 6-8, Claus opined that there was “much ado” in the UK, with a general consensus that these articles should not be included. In Germany the opinion was more polarised with several leading patent lawyers eg Dr Pagenberg and Prof Krasser favouring their deletion, whilst others such as Prof Tilmann ["Whose views are not those of Hogan Lovells", reminds the AmeriKat], believing them to be indispensable. The German Patent Attorney Association had declared that they could live with both solutions and do not really care!
Finally with regards to the Court’s location, Claus stated that the real concern in Germany was that, as the present draft encompasses several possibilities of transferring first instance cases from the local/ regional divisions to the central divisions, this could lead to a reduction of cases heard in Germany, with the consequence that the know-how and experience of the German IP judges in Dusseldorf, Berlin and Mannheim would be underutilised.
Marie Wormser, apologising to Claus, declared that he had unfortunately not won her over on bifurcation! Indeed she appeared steadfastly against it. Amongst several arguments put forward by Marie against bifurcation, was that being optional, it would result in some local and regional courts, in Germany (familiar with the system) and other small countries (not willing to rule on validity which is more technical), bifurcating, whereas in other countries like France or the UK, the local divisions would be more eager to keep the whole case together. There was a fear that this would increase forum shopping, this being facilitated by the fact that in the current Draft Agreement it is enough to have a ‘threatened’ infringement to give a jurisdiction to a local court. Marie advised that if one had to live with bifurcation, it would be imperative to ensure the introduction of sufficient safeguards into the current drafting of the Proposed Regulation: a stay of the infringement action should be systematic rather than remain at the discretion of the local/regional court, or alternatively if infringement proceedings are not stayed, the injunction should be subject to the compulsory depositing of a bond by the patent owner (currently at the discretion of the local /regional court).
Marie reported that the deletion of Articles 6 to 8 were much debated in France too, where there was a general reluctance to give jurisdiction over infringement to the CJEU. However Marie pointed out that the issues were very complex - one problem was that the basis for the draft Proposed Regulation is Article 118 para 1 TFEU and this article concerns the “establishment of measures for the creation of European Intellectual Property rights to provide Uniform Protection”. So the question is whether the deletion of Articles 6 to 8 from the Regulation is compatible with this legal basis. If removed would the Regulation still be valid? Would it not increase the risk for the Regulation to be invalidated by the CJEU?
Marie hoped that some clarity would emanate form the CJEU hearing on the 25th September. With regards to the Central Court’s location in Paris, the French people were obviously not disappointed, but that this was justified on the basis that the Paris courts already have exclusive jurisdiction in France over patent matters, and for more than 10 years they have been dealing exclusively with IP cases. Furthermore Marie believed that it is important to preserve the institutional and geographical independence between the Central Division(rule on the validity and infringement) and the EPO (the organ that is going to deliver the patent). Ending with the much used phrase, “We will see!” Marie acknowledged that there were a lot of uncertainties about the future of this Regulation.
Not what the AmeriKat will be wearing this Fall
Giving an industry perspective Taliah Walklett stated that a system that allowed for bifurcation would place European industry at a significant competitive disadvantage. A vicious circle could easily develop: businesses or distribution hubs in the EU will face an increased risk of injunctions from patent litigation, over competitors who have no assets in the EU. This will put European business under more pressure to reach cross-licenses with their non-European competitors. To secure those licenses in such a climate European business are likely to pay higher royalty rates than non-European competitors. This would limit cash that is available fro R&D purposes, and then also means that companies will apply for fewer European patents unlike their non-European counterparts. This in turn would lead to an increased risk of injunction, completing the circle.

Judge Colin Birss QC revealing that he was “involved a bit in the Rules” but not in any negotiations for the unitary patent, said that he wanted to pick up on some positive notes because most of the discussion that one hears, especially in London, is negative. He thought that the unitary patent will happen - despite our moaning.  It was however essential to be using the appropriate and proper means, and our best endeavours to make it as good as we think it can be – because then it could turn out to be a really good system. ["Time to refocus our efforts, seems to be the message", says the AmeriKat] The system we end up with will necessarily be a compromise, and we need to get used to this. However Judge Birss thought that we should be positive that that we have gained a system which fundamentally looks quite a lot like what the British regard as a ‘proper’ court system – a system where you can have disclosure, discovery, and cross-examination of witnesses. It is important for those to whom these are important things, that we do not let this slip away.
Judge Birss thought that bifurcation was a compromise to the German/Austrian systems, and that in his opinion one can solve all of the problems that bifurcation is supposed to solve by having a good system of interlocutory relief. With respect to Articles 6-8, and the jurisdiction of the CJEU, Judge Birss acknowledged that there was a need for in European system to be governed by a European body. He thought that the Appeals Court could fulfil this function and he did not see why one necessarily have to go to a higher level. However he also acknowledged that most legal systems have to higher legal arrangement (UK, France, Germany), and that there was some value in having two instances of appeal. With regards to the deletion of Articles 6-8, although disclaiming that he was not an expert in these matters, he personally he did not think it mattered because his view was that once the instrument is passed the general application in European Law will put the Regulation into the jurisdiction of the CJEU in any event. As to the location of the Central Division, Judge Birss admitted that he completely agreed with the French. He believed that it was important that the real part of the Central Division was not in Munich. One really did not want to have a concentration of all things concerning patents in Europe in one place.
Judge Birss reminded everybody that the agreement is not just about unitary patents, it will also catch normal EP patents, and furthermore that contrary to what the EPO believe, it will impact them. He concluded (sharing Marie’s concerns) that this arrangement is a recipe for forum shopping. However, unlike Marie, he felt that there was a risk that more, rather than fewer countries, would begin to bifurcate, and that there would be a race to the bottom. At the moment the only two countries in Europe that bifurcate are Austria and Germany – and they are good at it.! In the future there may well be situations where there will be pressure on the courts and the court systems all over Europe to try and be better than the Austrians/Germans. Judge Birss concluded with the concern that there was a real risk that the legal systems will feel a pressure that the only way that they will have any patent litigation is by doing whatever it is faster, better, cheaper, maybe dirtier than other people - and that would be a really bad thing."
All-in-all, no surprises or outrageous opinions emanating from the seminar, but the session nevertheless acts as a useful summary of the issues that will be floating up to the top of everyone's minds this Fall (no, not Autumn) while memories of the Olympics and soggy, rainy summer days quickly fade away. 

The Amerikat will be back later on to report on any news following today's CJEU hearing and if the expected new consolidated drafts of the Regulation and Agreement are forthcoming.

P2P: Multum in Ipso

In this Kat's eyes, Peer to Patent remains a cherished concept which will surely come of age, even though it may be slow to gather momentum.  He has already posted various pieces on the UK's P2P trial (here, here and here). This morning he found himself the happy recipient of Peer to Patent Pilot, the 28-page final report on the experiences of the UK Intellectual Property Office in the light of this little experiment.  According to the Kat's friend Nigel Hanley:
"The idea behind Peer To Patent was to increase the number of observations from the general public, and the technology and research communities in particular, on patent applications using a Wiki style website. Although the pilot was limited to 172 applications in the computing field, the rate of observations increased from way below 1% to around 6%. Of these, over half the observations contained information that was useful to the examiner undertaking the examination of the application.

Other headline points show that there is interest in the idea of public participation in the patent process. The pilot ran between June 2011 and March 2012 and received over 6,500 visits from 91 countries.

As a result of the Pilot it is our intention to introduce an observations button to our Ipsum [Online Patent Information and Document Inspection] service to make it easier for members of the public to make comments. We will also be looking at making it easier for the public to comment on those applications that are published every Wednesday [Merpel wonders why the IPO is publishing applications every Wednesday. Why not just publish them once and have done with it, like everyone else?]."
The Report's conclusions are encouragingly upbeat:
"In summary, the UK pilot, operating in the context of the UK system, and with an approach geared to all patent applications, not just those volunteered for the system, has demonstrated, in line with the experiences in the US and Australia, that Peer To Patent can make an effective contribution to uncovering relevant prior art for examiners to use when determining whether to grant a patent application. The specific conclusions which can be drawn from the pilot are:
• Peer To Patent can make an incremental, but still significant, improvement to the ability of Patent Offices to obtain prior art relevant to patent applications.

• There is considerable interest among the Internet community in this concept [the IPKat hopes that the notion of an "Internet community" will soon subside since, increasingly, that community is the world at large, regardless of the subject matter or field of application of the technology for which a patent may be sought].

• To make the Peer To Patent system work effectively, effort will need to be put in to effectively “seed” communities who will be willing to contribute to the programme over an extended period of time [and interested parties, including commercial competitors, will increasingly feel the need to contribute whether they perceive themselves as part of a community of dedicated prior-art-digger-uppers or not].

• To more effectively use the Internet community, there needs to be clear communication of which applications would particularly benefit from assistance, for example by clearer communication of the results of examiner’s searches [the Kat agrees that better communication is needed, but he's not sure whether this should be examiner-driven. A patent applicant might feel a little picked-upon if his application is flagged for P2P assistance while that of another applicant in the same technical field is not].

• The use of social networking technologies such as Twitter and blogs can be a highly effective method for reaching out to certain communities, specifically in the computing sphere. They enable the effective leveraging of existing communication networks spanning the Internet".
In "Next Steps", the report again alludes to Ipsum, which
"... provides an alternative online platform to the Peer To Patent website for the online community to obtain information on patent applications as they are being examined. Augmenting this existing system with aspects of the Peer To Patent approach would seem the most straightforward way of taking forward the Peer To Patent work. The most feasible method would be to incrementally enhance the Ipsum service in a number of ways:
• The first step would be to add a direct link to the IPO’s online third party observations submission system from each Ipsum page, so that anyone examining the file would be able to immediately provide comments to the examiner if they wished. 
• This could be further augmented by providing a discussion forum, which could include details of submissions already made.

• To assist community building, applications could be made accessible in a number of ways, such as by how recently applications have been published, classification, bibliographic data such as numbers of citations found by the examiner relevant to novelty or inventiveness, or user-defined “tags”. This would enable reviewers to focus on applications of particular interest to them.
In addition to providing the technological infrastructure, the experience of the pilot has highlighted the need for effective engagement with the Internet community if the effectiveness of a Peer To Patent approach is to be maximised. The IPO should be able to capitalise on the profile already gained by the Peer To Patent brand [gosh, says Merpel, who would have thought that a report on P2P would contain a proposal for brand exploitation!], and seek to build links both through an online presence (blogs, social media) and through working with institutions such as the Technology Strategy Board and university computer science departments".
The IPKat would be delighted to hear from Peer to Patent aficionados, Ipsum users, patent applicants and their professional representatives as to what they think of this very practical next step.

UN gives WIPO the all-clear over North Korean sanction breach claims

Earlier Katposts here and here have drawn the attention of readers to the questions that have been raised regarding possible breaches of United Nations sanctions by the World Intellectual Property Organization (WIPO) in the provision of technical assistance to North Korea. Well, here's some good news for our friends in Geneva, which you can find in the following media release:
Decision of UN Sanctions Committee on WIPO’s Technical Assistance to DPRK

Geneva, September 24, 2012

PR/2012/720

The United Nations (UN) committee charged with overseeing implementation of Security Council resolutions relating to the Democratic People’s Republic of Korea (DPRK) has confirmed that WIPO technical assistance to DPRK does not violate United Nations resolutions. In a letter to WIPO Director General Francis Gurry, the Chairman of the Committee José Filipe Moraes Cabral, said
“I wish to convey the Committee’s understanding that nothing in the Security Council Resolutions 1695 (2006), 1718 (2006), and 1874 (2009) prohibits the technical assistance program that WIPO has carried out in the DPRK, including the transfer of those items cited in your letters or its attachments related to the transfer of equipment and software aimed at assisting the DPRK in developing technical capacity for intellectual property rights protection. Likewise, the Committee does not consider the second phase of technical advice and assistance with the configuration of the equipment and database software that will be provided to the DPRK to be prohibited.”
The letter also advises early consultation with the Committee. WIPO has already put in place measures to ensure that all managers must refer to WIPO’s Office of the Legal Counsel (OLC) for guidance and clearance any activity proposed in a country subject to UN sanctions. OLC will, wherever necessary, consult the appropriate UN sanctions committee.
Says the IPKat, this must be a huge relief.  Merpel says, that's North Korea accounted for, but the original allegations and subsequent investigations include Iran too.

Monday, 24 September 2012

Handbags at Dawn 3: ACID, goods in transit and the morality of fashion advertising

First to speak at this year's IP and Fashion post-lunch session was ACID CEO Dids Macdonald, who reminded us that every product in the shops is the result of a design process::"designing is not like sprinkling fairy dust: it requires skills that take years to develop", she noted.  Dids gave the background to the UK's current designs consultation, which closes on 2 October, and then gave us three anonymised case studies involving micro- versus macro-enterprises, in which small designers (and 87% of UK design companies employ fewer than 10 employees) have struggled to assert their rights against massive corporations. Since innovation through design is something in which UK designers excel, it is important to ensure that innovative design is adequately protected. The case studies made depressing reading, since neither the possession of an earlier and valid design right nor the establishment of a strong case of infringement guarantee success against the large resources, intransigence or inertia of the infringer can frustrate a claimant with limited resources. Dids then described the ACID IP Tracker, for "cost-effective tracking of confidential IP content to third parties".

Dids then threw out a challenge to the lawyers present: can they find a means of enabling disputes to be settled without the need for endless expensive letters between law firms? A sensible mediation scheme would be good, as would be greater support for ACID's voluntary code of conduct for retailers.

Following Dids came Alice Gould (Harrison Goddard Foote), speaking on the legal issues raised when infringing (or potentially infringing) goods aren't actually in the shops.  In 2011, the European Commission reported, 115 million goods were detained on their way into Europe -- over 55% of which are fashion goods (more than 65% if you include sports shoes).  Where do they come from? China and Hong Kong account for around 80% of them. The high figures and recent increases have been attributed largely to increased use of the internet and the postal delivery of individual orders. Health and safety issues are not just confined to medicines: shoes with toxic dyes and sunglasses which don't filter out the requisite rays are among other dangers.

Alice then took the conference participants through the relevant EU Regulations, of which there have been quite a few. She reminded us that non-commercial importations for personal use, grey good infringements, non-identical and goods in free circulation within the European Economic Area are not governed by customs detention rules. The Regulations can only be invoked where the IP rights owner has registered its interest with Customs. While this is free, it has to be renewed annually or it lapses. Even where the IP owner hasn't registered its interest, if notified by Customs that suspected infringing goods have been seized, it still has a short window of opportunity in which to register with its national authority. Under SI 324/2010 in the UK, there is a simplified procedure under which seized goods, following notice, can be destroyed.

Next Alice turned to transshipped infringing goods that were not actually put on to the market and the "manufacturing fiction" which, the Court of Justice said in the Philips/Nokia rulings (noted here by the IPKat), does not exist. In short, said the CJEU, the free movement of such goods can be suspended if they are suspected of being infringements, but can't be seized or destroyed unless there is proof that they infringe. There are however proposals to broaden the EU Regulations quite considerably -- though goods carried in personal luggage are likely to remain untouched. While IP owners and exclusive licensees will be able to seek to invoke these rights, no such power is given to their professional representatives.

In conclusion, Alice encouraged IP owners to conduct an audit and check precisely what rights they have, and take the trouble to register with Customs where appropriate. Do take action to discourage infringers, even if all it does is to shift infringers from your products to someone else's. Secure your supply chain and emphasise that you don't want to deal with any people who do get involved with infringements -- and join organisations like ACID. It's good to develop an early warning system with people in your business chain and with other businesses within your sector. Finally, lobby for changes in the law!

The final speaker on the programme was the Institute of Practitioners in Advertising's Rebecca Chong ("First and foremost I'm an intellectual property lawyer"), who found herself discussing the regulatory dimension of the advertising of fashion brands -- particularly to young and more vulnerable consumers.  Rebecca reviewed the various codes of advertising practice, which go so far as to address even advertising via social media such as Twitter.  The most important provision is s.3 of the Code of Advertising Practice on misleading and insufficient advertising, under which the post-production enhancement of Julia Roberts' skin by post-production techniques (air-brushing) led to a complaint against the advertiser being upheld.

Advertising for children has been the subject of recent government attention, particularly with regard to the commercialisation and sexualisation of children, topics addressed by the Bailey Review in 2011.  Anything that causes the physical, mental and moral harm of children is unacceptable. An example of an unacceptable advertisement (right) shows a young model in a sexually provocative context.  Even though the advertisement was placed in a magazine that was not directed at children, a combination of factors indicated that it was unacceptable.

Other advertisements have been condemned for encouraging children to develop an unhealthy body image, which in turn could damage their long-term health.

It's actually difficult for advertisers to maintain artistic integrity and display creativity while keeping in line with regulatory requirements and public concerms -- but the restrictions can also help the industry to demonstrate its creativity by channelling it into different directions.

Handbags at Dawn 2: fashion economics and design

First to speak after the coffee break was Nicola Searle, the Katonomist.  Nicola sought to describe and explain the points at which the fashion sector is the same, or quite different, from other sectors.  Since we don't discriminate between created works, some creative fashions are under-rewarded by an IP monopoly while others are over-rewarded. IP can also hinder the balance between the reward given to the initial innovator of a new design product and subsequent innovators.

Why are consumers so interested in paying premiums for status goods, or in buying counterfeit replicas? We  buy expensive goods in order to display our status. The best handbag today is the direct successor of the hunter with the best kill. Status signals only matter to people who know; they are far more effective in urban settings where people know less about each other than in rural settings, and they are more prevalent among people who are at the age at which they are capable of passing on their genes. The purchaser needs a reference group which can relate to the fashion purchase, and may send out counter-signals by deliberately shunning expensive and fashionable products as a means of showing his or her status and security.

Counterfeit goods send out ambiguous messages; they can both damage demand and increase it, and they do address the status needs of lower-income consumers. Within each reference group, there is a zero-sum game in terms of status, since each person's increase in status corresponds to someone else's diminution of status. Three types of consumer are identified by the economists: the snobs, the aspirants and the bandwagon. The snobs get to a fashion product first, followed by the wannabes. By the time everyone is getting on to the bandwagon, the snobs are already jumping off it.

A Wendy Brandes Swear-Ring: the idea
is simple, but protection is hard and costly 
Nicola explained how copying within the fashion sector can have the effect of speeding up the fashion cycle, making it necessary to innovate further.  Some elements of fashion, such as seasonal colours, can actually give economies of scale in terms of the bulk manufacture of dyes, fabrics etc.  And when clothing is in matching palettes of colour, consumers need purchase fewer garments in order to have a matching wardrobe.

Leading up to lunch, Aaron Wood (Briffa) reviewed the confusing condition of design protection for fashion in the UK, via national and Community design law.  He dealt with issues such as qualification of the protected party (do you have to be a UK or EU national in order to enjoy design right protection?), exclusions from protection (does it matter if your design is for a surface pattern rather than something more substantial?) and priority (can you still register a design if you have already sold goods which incorporate it?)

Tatty Devine: made good
use of social media in getting
the right result ...
Aaron then turned to the question of design litigation.  When can you get summary judgment? Not when there's an issue regarding ownership of the design and the chain of title, since that will have to go to trial. Do keep "splendid records" (SPLENDID being an acronym for Sales information, Pricing Information, Lifespan, Existing Designs and "Inspiration", Nature of Claim, Drawings, Identity of designer and assignment and Dates).

When deciding what to do about an infringer, decide your strategy: are you looking to frighten off small fry, to obtain publicity or to seek full relief?  Also, consider how an alleged infringer might respond to your moves. Defendants whose one product is an infringement of yours are more likely to stand and fight.

Brief from the AdvoKat: Hunting for IP's Nemesis

The AdvoKat
The Financial Times today contains a review article about intellectual property and in particular considers the US’s inclination to export its IP system to the world. The author, Alan Beattie, opens his analysis by making reference to Washington delivering the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) in the 1990s and the strong opposition to IP from developing countries which followed in the Doha Round of the World Trade Organization (WTO). The author then brings us up to date by reference to “controversial” talks about IP taking place in the context of the TPP (Trans-Pacific Partnership) and that the US has pressed Chile to tighten its copyright laws.  The author also reminds us that a complaint has been made by Ukraine, Honduras and the Dominican Republic against Australia at the WTO in response to its decision to require cigarettes to be sold in plain olive-green packaging.

Although the article lacks focus, the impression one is left with is that the export of a US IP system to developing countries is mostly a bad idea.  The article concludes, that few doubt there is a need for rules to protect IP but that such rules are mainly being written by the beneficiaries ["And just who are these beneficiaries?", the IPKat wonders].

Although the balancer of life,
the Greek Goddess, Nemesis,
would find difficulty finding
the creators of balance
in the IP system 
Articles like this are an easy target for criticism. There is however a point worthy of serious consideration. We know that monopoly rights are about balances between the need to protect ideas (for moral and commercial reasons) and the need to allow ideas to flow freely. Whether you are in Washington, Shenyang or Nairobi there is a balance to be struck. International treaties and government legislation provide the necessary framework for the existence and enforcement of IP rights but, other than setting the length of those rights, they say little about where the balance should be set in terms of breadth of protection. It is surely the breadth of IP rights which is a crucial factor in determining the extent to which ideas are allowed to flow through the economy. (For example, in patent law one gets little assistance from the legislature as to how broad a patent claim can be drawn if a novel gene or a novel chemical is identified; and in copyright one gets little legislative guidance as to how much material has to be taken for there to have been a copying.)  

Decisions on such matters are made by courts and patent and trademark offices. Such institutions build up a body of case law and judges and hearing officers build up personal experience of what is acceptable. 

But if not the legislature then what are the forces present at the macro level which are directing courts and administrative bodies to find where the correct balance lies? One might argue that ultimately it is the users – the monopolists and infringers – who affect the setting of this balance. This argument would be akin to the, now often criticised, ‘efficient market hypothesis’ in finance. On the other hand is the setting of the balance nothing more than a collection of largely subjective views which just happen to end up in a particular place?  

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