Parasitic copying: what the European Commission is reading ...

Hector couldn't help getting the feeling that
comparative analyses of an area covering
27 countries were getting a little too big
to read on the train home ...

On Monday the IPKat published links to a batch of documents relating to parasitic copying and trade secrets which had been made available online by the European Commission, but which he had not had time to read. He asked for readers' assistance in letting him know what was in them.

John Noble (Director, British Brands Group) has dug into one of them, the Hogan Lovells Final Report on Parasitic Copying for the European Commission, and he reports here on what he found:

"Comparative legal analyses are like buses. You wait for ages and then two come along at once. First was a useful chart summarising the regulations throughout Europe concerning the protection and infringement of parasitic copies (aka copycats or look-alikes) produced by the MARQUES unfair competition team (here). Then the European Commission (DG Markt) published an extensive two-part study it had commissioned from Hogan Lovells, Study on Trade Secrets and Parasitic Copying (Look-alikes) (MARKT/2010/20/D). This summary relates to the second part of that study, on parasitic copying. 

The commissioning of this study was perhaps prompted to some extent by AIM (the European Brands Association) and the British Brands Group, two organisations representing brand owners which had long complained of competitors mimicking the consumer packaging of familiar branded products and the significant differences in tools available to tackle the problem between EU Member States. The resulting study is an extensive 628-page report including appendices describing the legal framework and practices in all 27 Member States relating to protection against parasitic copying, as well as the enforcement options. 

The report is masterful in its impartiality and straight analysis. For example it sidesteps such issues as whether any available tools will be used by a brand owner when a copier may be a major supermarket customer. While mentioning Article 10bis of the Paris Convention as the source of some Member States’ approach to unfair competition law, it resists passing comment on whether their approach complies with that provision. It also expresses no moral judgement on whether such copying is a good or bad thing. 

Encouragingly for brand owners, the European Commission in its press release announcing the study is more forthright: 

Products marketed under a parasitic copying strategy – commonly referred to as "parasitic copies", "look-alikes", or "slavish imitations" - lead consumers to associate or confuse the two competing products. They take unfair advantage of the reputation of the products copied and divert sales. Companies suffering losses from parasitic copying should be in the position to react against such unfair practices.

The methodology adopted by Hogan Lovells comprised direct enquiries of intellectual property lawyers in each Member State via two successive questionnaires and a review of literature and other materials. It also undertook in-depth case studies of six Member States: Bulgaria, Germany, Italy, Spain, Sweden and the UK. 

The key findings of the Hogan Lovells study are:

-        All Member States offer some protection against parasitic copying but their effectiveness varies considerably, with copying flourishing in some jurisdictions as a consequence;
-        The most popular means cited in questionnaire responses for preventing parasitic copying was unfair competition law;
-        Unfair competition law varies by Member State, with some having evolved elaborate laws which address different forms of unfair competition while others have simpler systems, due in part to their recent history. Only two Member States do not have unfair competition, the UK and the Republic of Ireland, both having torts of passing off;
-        The majority of Member States have taken the view that parasitic copies are an example of an unfair commercial practice and national laws derived from the EC Unfair Commercial Practices Directive can be used to prevent them. In those countries, private entities can use these laws to take action against parasitic copies. However, Sahira Khwaja of Hogan Lovells in its press release provides some qualification, also reflected in the study:

“Member States do not regard the primary purpose of the Unfair Commercial Practices Directive to be the prevention of parasitic copies. Although it is open to Member States to prevent parasitic copying under the Directive, many choose not to do so because it focuses only on consumer protection, ignoring or downplaying the effects of business-to-business unfair competition. As a result, any protection provided is, at best, incidental.”

The UK Government’s refusal to grant brand owners a private right of action in its implementation of the Directive remains a strong bone of contention.

-        The UK’s law of passing off has limitations in countering parasitic copying as it depends on a court finding that a misrepresentation has been made that affects a trader's goodwill. It is then necessary to prove the evidential links to show that this causes the trader damage. Therefore, a parasitic copy actionable in one Member State would not necessarily be actionable under passing off in the UK;
-        As the vast majority of Member States use both trade mark law and unfair competition law to address parasitic copying, this suggests that unfair competition has something further to offer over and above trade mark law, including broader protection;
-        The range and types of remedies available in an action against parasitic copies are for, the most part, similar, although the number of those remedies and the ways in which they are applied may differ between Member States;
-        Four specific examples of copying were assessed in six Member States to assess the extent of any common approach. There was no consensus that any one example either constituted an actionable example or that it did not, demonstrating the differences across Europe and the difficulties for brand owners to know when a case may be actionable.

The key conclusions of the study are: 

-        the current regimes of protection available in Member States in respect of parasitic copying and the enforcement options open to rights holders are inconsistent and lead to different results in different Member States;

-        The different treatments afforded to parasitic copies could amount to a barrier to trade within the internal market of the European Union;

-        While the Unfair Commercial Practices Directive has improved the protection available against parasitic copies in a few Member States, this appears to be the exception rather than the rule.

Were the Commission to seek to harmonise the position on parasitic copying, the study makes the following recommendations: 

-        any parasitic copying legislation should include a clear and precise indication of its intended nature, its aims and objectives, so as to make it entirely clear to a Member State when the approach it had previously adopted is insufficient and/or inapplicable;
-        specialist courts should be the only judicial arena in which claims relating to parasitic copying claims are heard;
-        it would be worth considering the extension of relevant provisions in the Enforcement Directive (particularly those dealing with the provision by the defendant of relevant information concerning its activities and remedies) to parasitic copying cases so that they are uniformly and clearly available across the European Union.

So what next? As the European Commission has published the study, it has by definition accepted it, though this may not mean that it agrees with its conclusions and recommendations. In its press release it states, “The study provides the basis for reflection on the adequacy of the current legal framework throughout the European Union.” It doesn’t however specify what form that reflection will take or to what timescale. In the UK the publication of the study is timely, coming well before the publication of the Intellectual Property Office’s major study into parasitic copying being undertaken by the Intellectual Property Institute (IPI). Hopefully the study’s findings will be taken into account and reflected in the IPI’s findings. 

While the extent of its influence on European and national policy in relation to parasitic copying may be uncertain at present, there is no doubt that the Hogan Lovells study is both authoritative and definitive, providing irrefutable and substantiated evidence that remedies to parasitic copying vary significantly between Member States. As a result, taking unfair advantage of others’ reputations is going unchallenged, to the detriment of both consumers and the companies who invested substantially to build the reputations in the first place. The study represents strong evidence that can be added to the already extensive and continually growing evidence of the impact of such copying on consumers, exerting ever stronger pressure on those Member States where parasitic copying goes unchallenged to ensure adequate and effective remedies are put in place".

This Kat thanks John for his efforts, which are greatly appreciated.