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UK Supreme Court case: criminal sanctions for trade mark infringement

R v M; R v C and R v T

The Supreme Court has held that the criminal sanctions under section 92(1) of the Trade Marks Act 1994 (“the Act”) will apply to the sale or so called “grey” market goods as well as counterfeit goods.

The Supreme Court’s judgment, handed down last week, is good news for trade mark owners who may be considering seeking criminal sanctions against unauthorised dealers in grey and counterfeit goods, in addition to any civil remedies, even if trading standards or the police are reluctant to take action. This could prove a useful weapon in a trade mark owner’s enforcement strategy, particularly where an importer of grey goods, weighing up the financial sanctions or risk of an injunction being imposed upon them under the civil system, has decided that the rewards outweigh the risks. The possible criminal sanctions include a fine or imprisonment for up to 10 years.

The case (which has not yet reached trial) concerns bulk importation and sale of clothes, shoes and other goods affixed with the trade marks of leading fashion brands. The Supreme Court considered an interlocutory appeal in relation to the correct construction of section 92(1) of the Act; in particular whether it was an offence to sell goods which bear a trade mark owner’s mark without its consent, even where the trade mark owner had consented to the trade mark being applied to the goods. This subtle distinction required the Supreme Court to consider whether the criminal provisions apply to “grey market” goods as well as counterfeit or “black market” goods.

There are many reasons why such “grey market” goods may be produced; in the fashion industry such goods are called “cabbage” and are often the result of over-order necessary to take account of defects in production and are not authorised for sale (either in certain markets or at all) by the trade mark owner. In other cases, excess goods may be produced by manufacturers (or opportunistic employees) with the ulterior intention of making a quick and easy profit.

The Supreme Court held in no uncertain terms that section 92(1) did apply to such goods, and that any other interpretation would be “strained and unnatural“. The appellants’ arguments that it was necessary to refer to parliamentary debates to help ascertain parliament’s intention, and that the Crown’s construction of section 92(1) breached their Human Rights, were both given short shrift. Whether the goods were “grey” or “black”, Lord Hughes, in his leading judgment, held that “both are clear infringements of the rights of the trade mark proprietor” and both involve a deception of the buying public.”

There is a defence under section 92 if the infringer “believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark“.  The onus is on the infringer to prove such a belief.  This is particularly relevant to grey market goods, where it is only the sale which the trade mark owner has not consented to.  This will provide a defence to “innocent” infringers, such as those who acquire products in good faith.

Trade mark owners wishing to take advantage of the criminal provisions should note:

  1. Criminal sanctions require the trade mark owner to prove their case to a higher standard of proof; “beyond reasonable doubt” rather than the lower standard of “on the balance of probabilities”.
  2. The onus will be on the trade mark owner to prove the infringer is guilty of acting without the trade mark owner’s consent.  This is as opposed to civil cases where the infringer must prove it is more probable than not that the brand owner did consent to the infringers actions.
  3. The trade mark owner must also prove the infringer acted “with a view to making a gain for himself or causing a loss to another person” unlike civil cases where motive is irrelevant.
  4. To try to prevent the “innocent infringer” defence, trade mark owners should consider including a positive obligation in contracts with manufacturers, not to resell surplus stock. This may help to rebut any evidence provided by the infringer that their belief was reasonable.

Germany: Federal Network Agency imposes record fine for cold call advertising

The German Federal Network Agency for Energy, Telecommunications, Post and Railway, has issued a record fine of €300,000 against an electricity supplier for systematic cold call advertising.

Violations of the German Unfair Competition Act (UWG) generally involve the risk of competitors seeking cease and desist orders, or consumers claiming compensation. The violation of Sec. 7 UWG can – additionally – lead the Federal Network Agency to impose heavy fines on violating businesses.

Legislation:

According to Sec. 7 (2) UWG; telephone calls to consumers for sales purposes are illegal if the calling company is not in possession of an explicit and effective declaration of consent by the consumer. If the call is made to another business, it is sufficient to prove presumptive consent.

Sec. 20 (1) UWG then deems violations of Sec. 7 UWG to be an administrative offence, – but only if the call in question was made to a consumer.

According to settled case law, the protection of privacy is of higher value than the caller’s interest to promote or sell his goods or services (Federal Court of Justice, GRUR 1970, 523; 1989, 7531990, 280). However, even though there is established case law  relating to “cold calls”, quite a few questions have not yet been answered by the highest courts in Germany. For instance, the scope of preliminary injunctions or other court rulings banning a company from conducting cold calls is still subject to discussion. Does the scope extend to only the prohibited act in question, e.g. calling customers A and B, or also to any action that is still in the so-called “core area”, in which the characteristics of the prohibited action is expressed? In the past, courts have mostly shown a belief that the latter is true.

Federal Network Agency:

According to Sec. 20 (3) UWG and 36 (1) No. 1 of the German Administrative Offences Act (OwiG), the Federal Network Agency is the competent authority for administrative fine proceedings following violations of the cold call ban.

The Network Agency’s official purpose is to promote effective competition in regulated areas and to ensure non-discriminatory access to networks. In order to enforce its regulatory objectives, the Federal Network Agency has been equipped with the right to, inter alia, information and investigation as well as, in certain cases, impose sanctions.

The Network Agency has now imposed a fine of €300,000 for conducting unlawful advertising calls relating to energy supply contracts. In this case, about 2,500 consumers had complained to the Federal Network Agency about advertising calls from the electricity supplier. Considering the number of cold calls that were made, the Federal Network Agency has imposed the highest legally possible fine, Sec. 20 (2) UWG. The electricity supplier can still appeal to the District Court Bonn against the decision.

In 2017, the Federal Network Agency has imposed fines amounting to over €800,000 for illicit cold call advertising. Companies whose business activities focus on direct marketing should develop strategies that enable them to continue to operate in the market without exposing themselves to the risk of fines.

China launches its annual piracy crackdown campaign: focus on online piracy of films and TV programs

China’s State Intellectual Property Office has recently announced, in a joint declaration with three other ministerial bodies, the launch of its annual online piracy crackdown campaign called the “Red Shield Net Sword Campaign” (红盾网剑专项行动). This year’s crackdown campaign promises to take a heavy hand against the unauthorized online distribution of films, TV programs and other copyrighted content. The campaign will last from July through November 2017. IP owners who time their enforcement efforts with the campaign may see better results, and more willingness to prosecute online copyright infringements.

According to the Notice, this year’s campaign will focus on the following infringement activities in China:

  • the unauthorized distribution of film & TV programs through cloud-services, deep-link technology and Internet programs and applications;
  • the illegal distribution of literary works, films and music via illegal set-top boxes, websites, APP stores, mobile apps and WeChat public accounts;
  • the sales and piracy of literary works, films and music through e-commerce platforms, whereby the authorities will closely scrutinize the duty of cooperation of the platforms in fighting such piracy.

During the campaign (and hopefully continuing thereafter), IP owners should benefit from swifter and more effective enforcement of IP rights via administrative complaints. They may also expect a higher level of deterrence as the administrative authorities will publish their punishment decisions as well as the results of the campaign. That said, while the campaign is a welcoming initiative, it is by no means a panacea to online infringement activities. IP owners must continue to be proactive and dedicate resources to enforcing their IP rights on China’s booming e-commerce platforms through multiple approaches. Nevertheless, the campaign offers an opportunity for IP owners to work closely with the administrative authorities and the online-sales-platform operators toward more efficient and effective online enforcement of their IP rights.

IP is at the heart of life sciences innovation

In recent years, technology and innovation has advanced at an unprecedented pace. Flying taxi drones, self-driving cars and 3D-printers immediately come to mind. However, exciting progress has been made in life sciences and the healthcare sector as well. With CRISPR, bionic limbs and 3D-printed tissue, the medical sector has never been closer to eliminating disease and prolonging life. It can be challenging to keep up with these developments while, at the same time, keeping an eye on the legal framework and protection.

This has been the topic of numerous conferences in 2017. To kick things off, possibilities to make medicines more accessible was discussed at the 13th Legal Affairs Conference by Medicines for Europe held in London in March. Discussions focused on antitrust law, the coming UPC and how Brexit affects patenting. Orphan drugs, transparency in clinical trials and compulsory licenses were also on the topic list.

The LESI Conference 2017 in Paris in April took a more practical approach and invited key players to discuss and share their experiences regarding recent developments. Participants discussed cell therapy, immunotherapy and how IPR can help the cutting edge advances in medicine. Another topic was how to bridge early stage inventions and commercialization. The implementation of software and digitization in the healthcare sector was also addressed. Finally, industry members debated whether advances in medical treatments and Bionics can help to permanently eliminate certain diseases and disabilities, whether wide-spread or rare.

Furthermore, the 9th Pharma & Biotech Patent Litigation Conference took place in Amsterdam in April. The focus of this event revolved around the challenges of litigation and the enforcement of IP rights in context with the pharmaceutical and biotechnological industries. The topics addressed had mainly a legal emphasis but took into account the particularities of the mentioned industries, so topics like latest trends in preliminary injunctions across Europe, litigation on biosimilars, and the CRISPR patent landscape were tackled.

Most recently, the Life Sciences IP Minds 2017 conference was held in London in June. The agenda of this event covered themes including the future of the European life sciences market, patent arbitration in the area of biological sciences, and the challenges of the new emerging markets in the field of life sciences and their access to IP rights and protection.

As these examples show, medical advances have an increasing impact on the legal world. Developing appropriate patenting and licensing strategies will be key for fostering and keeping control of these innovations.

EU institutions vote for more books for blind and visually impaired people

Four years after signing the Marrakesh Treaty (introduced by the WIPO) to Facilitate Access to Published Works for Persons who are Blind, Visually Impaired, or otherwise Print Disabled, the EU institutions finally voted for its implementation. With over 600 votes, the European Parliament adopted the final compromise on 6 July 2017. The European Council ratified the compromise on 17 July 2017. Within one year after entering into force, the member states need to implement the requirements from the EU directive. The regulation will apply directly.

The upcoming Law

After a long debate on how to implement the requirements of the Treaty, the final compromise includes two pieces of legislation: a directive and a regulation. At the centre of the new legislation, there are three main issues:

  1. Copyright Exceptions: All member states need to implement a copyright exception for blind people and their organisations. The exception must include in particular the rights of reproduction, communication to the public, making available to the public, distribution and lending. Therefore, the consent by the right holder will no longer be required for making or using accessible format books and other printed materials. Some member states such as Germany already have exceptions for blind and visually impaired people. However, it needs to be checked whether they comply with the new provisions with a special focus on the online use of works.
  2. Cross-border Access: In many states, only 1% or less than of all books available are for blind and visually impaired people. With the new provisions of the regulation, the export and import of accessible format copies within the countries that signed the Marrakesh Treaty will be facilitated. Therefore, the number of accessible format copies will hopefully increase.
  3. Option for Compensation: The question whether a compensation for publishers has to be paid when their books are adapted into accessible format copies, is up to the member states to decide within certain limits of the directive. This option in particular has been highly combatted by the European Blind Union (EBU). EBU argues a compensation is in contradiction with the right-to-read objectives of the Marrakesh Treaty and questions the already existing compensation rules, e.g. in Germany.

US: Bioprinting – A life sciences and legal innovation

The patent eligibility of bioprinted products and processes has not been squarely addressed by the legislature or tested in courts. Arlene Chow and Nitya Anand explain what could be done in the future in this article, first published in issue #35 of IPPro Patents.

The medical industry is undergoing a radical transformation, thanks to recent advances in 3D (otherwise known as additive) printing. 3D printing creates three dimensional objects by building up layers of material. A commonly-used analogy is the building of a structure with layer upon layer of lego bricks. Bioprinting, in turn, takes the basic premise of 3D printing and applies it in the context of human cells and tissues—one of bioprinting’s most dramatic applications is the layered printing of living cells to form a 3D organ structure.

The hope is that such 3D printed organs can sidestep rejection (a major concern for organ transplants) and function as well as the original organ within a human. As with many cutting edge technologies, it is unclear whether innovators in this space can adequately protect their inventions with patents and more specifically, whether certain bioprinting products and processes are even eligible for protection.

“There is no legislative guidance on the undefined terms ‘directed to’ and ‘human organism’. This vague wording could negatively affect the patent eligibility of bioprinting innovations” Arlene Chow

“Innovators should capture their inventions with a wide variety of patent claims, framed to emphasise the manmade and non-naturally  occurring aspects of this cutting edge technology” Nitya Anand

The current patent eligibility framework… Read the full article

UK moves to implement Trade Secrets Directive

Tomorrow Hogan Lovells will join other interested parties at a round table meeting convened by the UK Intellectual Property Office to discuss the proposed approach to implementation of the new Trade Secrets Directive into English law.

The deadline for implementation of the Directive is June 2018, before Brexit, and so the meeting should be interesting on many levels.  English law largely complies with the Directive already but we will report back on what changes to the law the IPO envisages.


For more information on Trade Secrets or Brexit , please click the links to visit our Topic Center and view our earlier related post.

 

Major IP reforms foreshadowed in China’s Pharma sector.

On 12 May 2017, the Chinese Food and Drug Administration (the “CFDA”) issued several draft policies aimed at overhauling of the current regulations governing the Chinese pharma and medical device sector (the “Draft Policies”). Amongst the Draft Policies, those outlined in Circular No.55 would, if implemented, establish a more robust patent linkage system, a more extensive data exclusivity regime and create a Chinese version of the US Orange Book. In this article, we highlight some of the proposed changes.

Click here for the full article.

U.S. Patent Legislation: The STRONGER Patents Act of 2017

In June, three democratic senators (Chris Coons from Delaware, Dick Durbin from Illinois, and Mazie Hirono from Hawaii) and one republican senator (Tom Cotton from Arkansas) introduced the “STRONGER Patents Act of 2017.” One of the motivations for the bill appears to be that the U.S. Chamber of Commerce recently ranked the U.S. patent system 10th in the world.  Previously, the U.S. was always ranked first (albeit in the same report, the United States’ overall Intellectual Property system is still ranked first).  According to Senator Coons’ website, the bill would “enact balanced reforms to restore the U.S. patent system to the world’s gold standard.”  To achieve this, the bill seeks to alter the Inter Partes Review and Post Grant Review procedures put in place six years ago by the America Invents Act, and to reverse, or at least mitigate, several recent Supreme Court decisions.

Limits on IPR and PGR procedures: Claims can only be challenged once, and only by those facing a lawsuit

In what would be a significant reduction of the current scope of IPR and PGR practice, the bill proposes that a patent claim can only be challenged via an IPR or PGR once. Specifically, the proposed legislation states that “the Director shall not authorize an inter partes review [or a PGR] to be instituted on a claim challenged in a petition if the Director has previously instituted an inter partes review or post-grant review with respect to that claim.’’

The bill would also restrict IPRs and PGRs to any entity (or related entity) that has been sued for infringement or threatened with a lawsuit. Currently, anyone can request an IPR or PGR, regardless of whether it has been sued or threatened with a lawsuit.

Permanent injunctions become closer to the norm in patent litigation

In eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), the Supreme Court explained that a plaintiff seeking a permanent injunction must “demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.”

Under the proposed legislation, once infringement of a not invalid or unenforceable patent is found, a district court would presume that the first two elements of this test are met. A defendant would still be able to argue that it has overcome this presumption, or that the other two eBay factors do not support an injunction.  Still, if this provision was enacted into law, it would go a long way toward making permanent injunctions the norm in patent litigation, and this would likely shift negotiation power in favor of patent holders during licensing and settlement discussions.

Limited interlocutory appeals to the Federal Circuit Continue Reading

China: Cybersquatter asks Chinese court to declare its own domain names invalid

The Beijing Haidian District People’s Court has recently heard a case in which a domain name registrant requested the court to declare its domain name registration contracts invalid. In this somewhat unusual case, the court granted this request concluding that the object of the agreement was cyber-squatting, thereby cancelling dozens of squatted domain names.

The facts of the case were as follows: the registrant (plaintiff), a Chinese individual, signed domain name registration contracts with a Chinese registrar (defendant), and claimed that he was persuaded by this registrar to cyber-squat a number of domain names containing some famous brand names. The plaintiff claimed he was lured by the registrar with the promise of high economic gains which could be achieved through selling these domain names. It turned out that this “registrar” in question was in fact not an accredited registrar and could not handle the registration of the domain names by itself; so it outsourced the registrations to two other registrars. As such, the plaintiff argued that these three registrars colluded to deceive him. He therefore sought a declaration from the court that the registration contract was invalid and also asked for reimbursement of the registration fees.

In its judgment, the court declared the registration contract invalid on the basis of the following:

  1. the registrar did not actually have a domain name registration license;
  2. the registrar induced his client to cyber-squatting; and
  3. the registrant was persuaded to register over 30 such domain names for cyber-squatting.

The court confirmed that the first registrar should shoulder the primary liability. Having said that, the plaintiff did not get full compensation, as the court held that he did register the domain names in bad faith. As regards the two outsourced registrars, the court found them jointly liable with the first defendant as they were knowingly instrumental in implementing this cyber-squatting scheme.

The court ordered the registrars to reimburse part of the registration fees to the plaintiff, and also ordered the collective cancellation of the cyber-squatted domain names. At the time of writing, it is not known to the public whether the defendants have appealed.

This is not the first case where the Beijing Haidian Court found against domain name registrars for participating in cyber-squatting activities. Would these cases support a brand owner in tackling cyber-squatting by arguing in court that the registrars involved are liable or at least jointly liable? This seems like a potential strategy. One advantage would be that unlike domain name proceedings under UDRP, courts can grant compensation to a winning plaintiff, and in a cyber-squatting case the plaintiff may find that the registrars are in a better position to pay compensation. However, these cases are fact-sensitive. Chinese courts are also very stringent on the formality requirements of evidence. One critical piece of evidence to be able to use this strategy would be materials which can show a clear pattern of bad faith and cyber-squatting by the registrar involved.