An ACID response to a Katpost: criminal penalties for design infringement again

Merpel to the rescue as criminal
design debate turns rough ...

Way back on Friday 8 November, fellow Kat Darren reported (in "Debate - Should the UK have criminal penalties for design infringement?") on the previous day's debate on a subject that continues to generate both light and heat: the question whether a person who infringes a UK design right should be exposed to not only civil but criminal liability, by analogy to current provisions that apply to those who transgress trade mark and copyright laws. The spark that ignited debate was Clause 13 of the UK's Intellectual Property Bill which, everyone agrees, either goes far too far or nowhere near far enough.  For the record, and for the many people who have discussed it without ever having read it, this is what it says:

"13 Offence of unauthorised copying etc. of design in course of business

After section 35 of the Registered Designs Act 1949 insert— 

“35ZA Offence of unauthorised copying etc. of design in course of business 

(1) A person commits an offence if—

(a) in the course of a business, the person copies a registered design so as to make a product exactly or substantially to that design, and 

(b) the person does so—

(i) knowing, or having reason to believe, that the design is a registered design, and
(ii) without the consent of the registered proprietor of the design.

(2) Subsection (3) applies in relation to a product where a registered design has been copied so as to make the product exactly or substantially to the design. 

(3) A person commits an offence if—

(a) in the course of a business, the person offers, puts on the market,  imports, exports or uses the product, or stocks it for one or more of those purposes, 

(b) the person does so without the consent of the registered proprietor of the design, and 

(c) the person does so knowing, or having reason to believe, that—

(i) a design has been copied without the consent of the registered proprietor so as to make the product exactly or substantially to the design, and
(ii) the design is a registered design.

(4) It is a defence for a person charged with an offence under this section to show that the person reasonably believed that the registration of the design was invalid. 

(5) It is also a defence for a person charged with an offence under this section to show that the person—

(a) did not infringe the right in the design, or
(b) reasonably believed that the person did not do so.

(6) The reference in subsection (3) to using a product in the course of a business does not include a reference to using it for a purpose which is merely incidental to the carrying on of the business. 

(7) In this section “registered design” includes a registered Community design; and a reference to the registered proprietor is, in the case of a registered Community design, to be read as a reference to the holder. (8 )A person guilty of an offence under this section is liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding ten years or to a fine or to both; 

(b) on summary conviction in England and Wales or Northern Ireland, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both; 

(c) on summary conviction in Scotland, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum or to both.

[35ZB Section 35ZA deals with enforcement] 

[35ZC deals with forfeiture in England and Wales or Northern Ireland]

[s.35ZD deals with forfeiture in Scotland]"

Darren's report attracted a considerable volume of response from readers on both sides, some of which was even publishable.  More significantly, the Kats' collective received a long and serious response from the redoubtable Dids Macdonald, CEO of ACID (one of the debate's organisers) and a tireless advocate of an improved legal regime for designers.

Dids has responded, on behalf of ACID, to some of the many views expressed following the debate. This is what she says [interspersed with comments from Merpel, whose post this is]:

"We were disappointed about the IP Federation’s unwillingness to take part in our debate on 7 November. However, ACID had previously responded to all the arguments which they put forward here.  When Chartered Institute of Patent Attorneys (CIPA) Chairman Roger Burt could not attend due to a prior engagement, Jan Vleck of Reddie & Grose readily accepted our invitation and joined us to represent that well-respected Institute and we were delighted to welcome him and hear CIPA’s views. Positively, this has opened the debate to a wider forum. 

The IP Federation say that introducing criminal provisions will be chilling for innovation but, to date, has not provided any evidence.  We have provided compelling evidence that copyright-based sectors such as film, television, publishing, games and music have not suffered a chilling effect in innovation from having criminal provisions. Exactly the opposite is true, with these UK sectors excelling as global leaders. British brands, too, lead the way in innovation and of course trade mark infringement  has criminal provisions, under certain circumstances. [notes Merpel: CIPA has explained why in its view copyright and TM infringement are not analogous, observing that their subsistence, ownership and validity are very much simpler]. 

CIPA makes the argument that the infringement and the validity of registered or unregistered designs is a specialist matter and that the criminal justice system is not well-suited to consider this. Isn’t this equally true of the civil system?  [It would be, but for the fact that the civil system has specialist judges for this very purpose] When so few designers in the UK and in the EU actually register their designs, and we also understand these designs are not examined, there would appear to be a glaring fault in the respective registration systems, which maybe we should all address [a good point, says Merpel: registration systems can always benefit from critical evaluation, though the painful fact is that many designers are unwilling or unable, for understandable reasons, to pay the expense of a registered right]. 

In the UK only around 4,500 designs are registered annually. In the EU it is approximately 2,204 per country (it was around 5,175 for the UK in 2012); hardly representative of UK and EU designers. ACID, a relatively small 1,100 member organisation, has approximately 25,000 copies of designs logged on to its system  [to understand the figures better, Merpel would love to know the period of time over which those 25,000 designs were logged on]. In many cases the genesis of an ACID member's design audit trail is much more compelling than a registered design in documenting the stages of detail from the seed of an idea to marketplace.  The majority of ACID cases have relied on unregistered rights.  Providing a compelling audit trail in an infringement case can, and often has, lead to a positive result.  Through continuous education, members are advised to be very specific about the details of their design drawings at every crucial stage. [Merpel is entirely in agreement with the desirability of cultivating audit trails, which should form an important part of every designer's legal education --but this doesn't point specifically towards the criminalisation of design infringement].

 At an ITMA seminar held at CIPA recently, a straw poll indicated that only seven out of 60-70 or so lawyers had experience of criminal law in practice, so it would seem that opponents are addressing this from a theoretical perspective.  The reality, as we understand it, is that for prosecution the criminal law requires not only the act, but a clear intention to commit the act, and that where there is doubt that this is present, this will render a prosecution marginal, even useless [Merpel wonders how a straw poll would have panned out at a seminar held by the Anti-Counterfeiting Group, where IP practitioners with an interest or experience in criminal enforcement tend to foregather.  In her view, though, a bigger barrier than practitioner inexperience, whether it exists or not, is the likelihood that defendants will routinely challenge the validity of the registered design].

Our understanding is that no criminal prosecution will be commenced unless two criteria are met; that a prosecution is in the public interest and that there is evidence on the balance of probabilities of the offence having been committed. The changes would be a deterrent, not a recipe for widespread prosecutions [this, Merpel thinks, is probably true: as Dids remarks below. even in the case of trade marks and copyright, there isn't much in the way of "widespread prosecutions" -- though she wonders whether there's any evidence of deterrence either]. Unfortunately lack of understanding of how the criminal courts work would appear to be affecting opponents’ views.

Design has had the same protection as copyright and trade marks for over 100 years and we have not see the floodgates open with criminal prosecutions during this time. Criminal provisions have been available for copyright and trade marks since 1862 and 1994 respectively and to date, history provides unequivocal evidence that criminal provisions have been used sensibly, sparingly and appropriately [Merpel wonders what "sparingly" means in this context.  Is it a euphemism for the reluctance of prosecution authorities to commit resources to prosecuting unless rights rights owners pretty well prepare the case for them, as organisations such as FACT have done for copyright?]. 

ACID’s “Anecdotal” Evidence: As an interior designer, then a product designer bringing new products to market, every time our company brought out a new product it was ripped off. Since ACID’s round table action group was started in 1996, we have been in the thick of it at grass roots to try and deal with this escalating problem, each year going to 12+ exhibitions each lasting three or four days; between 700 and 800 days of grass roots evidence of infringement. 

ACID’s legal affiliates (and there have been many who trained with us to provide support for an ACID mediation protocol) will confirm that copying/infringement is rife. Sadly, as design infringement was not considered a crime, we could not involve Trading Standards. On a positive note, out of the 3,000+ mediations, about 70% were resolved [that's most impressive, says Merpel, though she wonders how it supports the argument in favour of criminalising design infringement] So when ACID’s evidence is disregarded by a commentator as “anecdotal”, it is the result of hard experience at the coal face at every exhibition we attended, where new product usually had its first market entry. I challenge any lawyer in the UK to provide better examples of a complete disregard for the law, whether it is civil or criminal [Merpel discerns an interesting split in approaches here.  Economists, who like to quantify and assess human activity in market terms, will happily say that "the plural of 'anecdote' is not evidence -- but those who believe that IP protection is grounded on morality rather than economics will point to the question of an injustice, even in an individual case, as pointing to a lacuna or failure in the law.  Whether you call them anecdotes, special cases or whatever, they do help focus on the morality of the operation of the law]. 

ACID would be very interested to hear an interpretation from the theorists of the difference between what is morally, commercially and ethically right or legally wrong?  Laws are meant to protect the former. Over the past 18 or so years we have consistently demonstrated lone, micro and SME copying issues, providing attendant case studies to Government officials. When Professor Hargreaves was asked if he would accept this type of evidence, he agreed. Evidence is about the consequences of unlawful actions. Maybe this is why so few (three out of the total 258 submissions) even gave “designs” the time of day in the Hargreaves Review and yet design has changed most of our lives for the better. Now, however, critics are emerging. 

When the IPKat [a Kat, Merpel clarifies, rather than the Kat: the blog is composed by nine thoroughly individualistic bloggers. Getting them to agree nem con is a bit like, er, herding Kats ...] says that the figure of 94% (say infringement is blatant and deliberate) is subjective, maybe a visit to any design-led exhibition, such as the Birmingham NEC would reveal, first hand, the truth of the matter, which was supported by the two ACID surveys which ACID carried out. [But doesn't every claimant who loses a design case believe that he or she has suffered blatant and deliberate infringement?].

It is very easy to finesse the finer points of the law for those who are lucky enough to afford it. A UK designer’s average hourly earnings are between £14 and £20, substantially different to most IP lawyer’s hourly charges [Wait a moment, says Merpel, what a lawyer charges and what a lawyer earns are two quite different things.  Let's not forget establishment costs, not least of which is professional indemnity insurance, and the fact that many, many hours worked by lawyers are simply not chargeable to anyone ...]. And yet design spend in the UK is some 33.5 billion pounds, a significant contribution as a result of an army of talented designers from all disciplines (67% of whom have fewer than four employees). 

I would like to challenge the IPKat’s description that ‘ACID “evidence” always raises an eyebrow or two’ [the Kat said nothing: this was a reader's comment]. Having walked the exhibition floors for many years and witnessed unequivocal evidence of infringement, unfair competition and blatant copying, I and our ACID lawyers can speak from experience with attendant case studies. Government, at least, has not overlooked real evidence in this instance. 

The IPKat says he is troubled by the arguments in favour of criminalisation and the fact that he believes the information at the recent debate was misleading about the EU countries (Spain, France, Germany, Norway Sweden and Poland) having criminal provisions for both registered and unregistered designs [To be fair, one of the commenters confirmed that the requirement in Germany for criminality is higher than in the proposed UK legislation].  Clearly the UK unregistered design is a different legal animal to EU unregistered design and so, if this was not made clear, it was a mistake not by design. To a designer it is the principal of law and ethics and fair competition. 

Andy J said that registered design right is readily available to designers and of course he is right. ACID always recommends registration, but the problems are that for most lone, micro and SME’s it is simply not affordable. Even if one does obtain a registered design, the majority cannot afford to fight their corner and challenge infringement because of the time it takes from their business, the sheer cost of litigation and, often, the scale of the opponent [Merpel wonders how this statement measures up against ACID's own very substantial history of success].

A friend of an ACID member was in court a couple of months ago and at the end of his case he asked the judge how he felt about the case. The judge said that he was not interested in what was fair or unfair, what was right or wrong, what was moral or immoral; he was merely interested in the law.   What a sad state of affairs [But that's what judges do: they apply the law, impartially and without allowing their personal feelings to intrude. If they did anything else, wouldn't they be dismissed?]. 

Take Heather Culpan, MD of Burgon & Ball, founded in 1730, who employ 50 people and who have been copied 20 times in the past two years. For one of the cases, she had to take six weeks off from her day job of running her company,. She has said that their biggest single issue is blatant and deliberate IP infringement and the emergence of “me-too” products. Her latest “me-too” challenge follows receipt of an award for best new product. One of the Council members representing the organisation which set up the awards has produced a “me-too” product. What hope has her company of surviving another few years at this rate? 

Anonymous (why?) comments on the correctness of Sebastian Conran’s legal descriptions and terminology. Sebastian, like many designers, comment not in “legal speak” but about what happens in their design businesses and not about the dissection of which words are in the Act and which are not. That is why there is such a divide between design practitioners and lawyers/theorists who finesse the legal points of the law. Sebastian is not a lawyer.  Why would he use legal terminology to communicate what he does and what he wants to protect ethically, morally and legally as the creator of tradable IP? [Possibly because this was a debate about the desirability of a provision of a Parliamentary Bill, ventures Merpel. If it's any consolation, most of the Members of Parliament who vote on these things aren't lawyers either].

MaxDrei made the valid point about better access to law in Germany and I would agree. Having “inspired” and helped to set up the Messe Frankfurt Heimtextil protocol against copying for a few years back in the late 1990s, Germany as a whole takes a very strong belt and braces attitude and adopts a vociferous disapproval of counterfeiting and copying and the deterrent levels are high because of the little used ultimate penalties. 

Recently retired Mike Wickham said that Clause 13 may have all sorts of unintended and largely undesirable consequences if passed, but he does not go into any reason and fails to qualify this [indeed, he doesn't, agrees Merpel]. 

Jan Vleck says he has yet to be shown an example of something which warranted imprisonment. If he entered a jeweller’s and stole £20,000 worth of rings he would probably go to prison and he would lose his career because it is a crime. However, if he went into the same design-led jewellers, bought a ring, sent it the Far East to be reproduced and then sold the resulting product for half price, completely destroying the original designer’s market and livelihood, is this is OK? There is very little redress in the civil courts for such cases. But one is the physical theft of property and therefore a crime. The other is the potential theft of a designer’s livelihood and is not a crime. What is the difference?

The IPKat article concludes with concerns and asks what activities are so heinous as to be made crimes? Heinous is a very strong word and one which in this instance is used inappropriately and emotively [Alas, Merpel was not privileged to be present at the event. However, by all accounts, the use of emotive terms was shared out between the debaters and was not the prerogative of one side alone].

The bottom line is that, apart from dissecting each and every syllable and word which makes the law the law, there is very little law which actually protects the creators of tomorrow’s zeitgeist (the design leaders, the people who dare to make life better and the original creators of those “me-too” products) against those who are hell-bent on taking the faster track to market through theft.

Surely this is about right and wrong, ethics and IP, respect for the IP of others and supporting the creative industries at what they do best, as the positive link between creativity and innovation for which pioneers have become icons and trail blazers.  Designers require more understanding and awareness from the legal community about the issues they face [Merpel is not unsympathetic to calls for ethics and morality in IP, though such principles appear to have been edited out of the IP script so far as the European Commission is concerned. She racks her brain in an attempt to recall when she read anything from Brussels that suggested that copying was wrong, rather than that it was economically damaging].