Can a third party rely on the 12-month grace period for prior design disclosure?

The threshold for design protection in the EU is low. The design must be new and have individual character (Art. 4(1) Community Design Regulation, ‘CDR’). This is the case if no identical design or design with an identical overall impression has been disclosed to the public before the filing or priority date of the design applied for (Art. 5(1)(b) CDR and Art. 6(1)(b) CDR).

Art. 7(2) CDR provides a 12-month grace period for publications by the designer, his successor, or even third parties:

A disclosure shall not be taken into consideration for the purpose of applying Articles 5 and 6 and if a design for which protection is claimed under a registered Community design has been made available to the public:

(a) by the designer, his successor in title, or a third person as a result of information provided or action taken by the designer or his successor in title; and

(b) during the 12-month period preceding the date of filing of the application or, if a priority is claimed, the date of priority.

The purpose of this grace period is to allow the designer or its successor to test the products in which the design is embodied in the market (Recital 20 CDR).

What happens if the designer, the person disclosing the design, and the applicant of the Community design are not identical, and the latter two were not successors of the designer at the time of filing the application? Can they rely on Art. 7(2) CDR? This question is explored by the General Court in its recent judgment in Activa - Grillküche v EUIPO - Targa (Appareil pour griller) (case T-757/21).

Background

On 24 June 2015, the Chinese utility model no. CN 204 410 600, owned by Guangzhou Hungkay (‘Hungkay’), concerning a grill was published with the following image:

On 5 April 2016, Targa GmbH (‘Targa’) filed an application for registration of the following Community design, which is identical to the drawings in the Chinese utility model:

 

By agreement of 26 November 2016, Hungkay transferred all IP rights regarding the utility model for the EU to Targa. Hungkay and Targa agreed that the transfer shall take effect as from 7 October 2014.

By agreement of 28 November 2016, the initial designer of the utility model (being an employee of Hungkay) transferred all IP rights relating to the utility model to Hungkay, also with retroactive effect as from 7 October 2014.

Hungkay has been Targa’s supplier and they exchanged correspondence regarding the design of the grill since 2014.

On 14 November 2018, Activa – Grillküche GmbH (‘Activa’) filed an application for a declaration of invalidity arguing that Targa’s registered Community design lacks novelty and individual character because of the prior disclosure of the Chinese utility model shown above.

Both the Invalidity Division of EUIPO and the Board of Appeal rejected Activa's application for a declaration of invalidity. Activa appealed to the General Court.

The General Court’s judgment

The General Court agreed with the Board of Appeal.

It was undisputed that the publication of the Chinese utility model constituted disclosure within the meaning of Art. 7 CDR. The design was also disclosed less than 12 months before the application date of the registered Community design. The question was whether Targa could rely on the disclosure made by Hungkay to fall under Art. 7(2) CDR. Based on the specific facts of the case, the General Court answered this question in the affirmative.

The General Court referred to the principle of contractual freedom in EU law. The parties were free to transfer IP rights with retroactive effect as long as it is not contrary to the objective pursued by the applicable EU rules and does not involve a risk of fraud. The CDR does not contain a provision that prohibits the retroactive transfer of design rights.

The purpose of Art. 7(2) CDR does not speak against taking the agreement into account:--

It follows that the objective of the exception provided for in [Art. 7(2) CDR] is to offer a creator or his or her successor in title the opportunity to market a design, for a period of 12 months, before having to proceed with the formalities of filing. Accordingly, during that period, the creator or his or her successor in title can ascertain that the design concerned is a commercial success before incurring the costs relating to registration, without fear that the disclosure that takes place at that time may be successfully raised during any invalidity proceedings brought after the possible registration of the design concerned […]. Consequently, the aim of the exception provided for in [Art. 7(2) CDR] is to protect the interests of the designer and his or her successor in title.

The judges found that taking the agreements into account was specifically intended to protect the interests of the designer and his successors in title.

The General Court did not find a risk of fraud or collusive conduct. There were business relationships between Hungkay and Targa concerning the grill prior to filing the Community design application. The transfer agreements had been concluded two years before Activa's invalidity application was filed.

The validity and enforceability of the agreements between the designer and Hungkay, as well as between Hungkay and Targa, were not in dispute.

Comment

While the result seems reasonable, still questions arise from the General Court’s analysis.The conditions of Art. 7(2) CDR appear to be fulfilled regardless of the agreements between the parties. It stands to reason that the visual depiction of the grill in the Chinese utility model was published as a consequence of the designer having handed over the drawing to its employer Hungkay. Therefore, the design has been disclosed by “a third person as a result of information provided or action taken by the designer”, as required by Art. 7(2)(a) CDR.

Art. 7(2) CDR does not require that the applicant of the Community design (Targa) be identical to the designer (Hungkay’s employee) or its successor (Hungkay).

This notion is also supported by Arts. 14 to 16 CDR, which deal with the rightful owner of a Community design and the consequences of registration of a Community design by a non-entitled third party. In short, the designer (or its successor) can request to be recorded as the owner of the registered Community design. This claim would be pointless if the prior disclosure of the design by the designer, or its successor, would lead to the invalidity of the registered Community design applied for by the non-entitled third party. Assume that, in the case discussed above, there were no agreements between the parties. The designer of the grill could request EUIPO to become the registered owner of Targa’s registered Community design. However, such design could be declared invalid upon application of any third party because of the prior disclosure in the utility model by Hungkay.

Therefore, the agreements between the designer, Hungkay, and Targa do not seem relevant for Art. 7(2) CDR but for the question whether Targa is entitled to the registered Community design under Art. 14(1) CDR.