19 September, 2017

Throwing a Flag - The Use of an Amazon Listing can be TM Infringement and Passing Off

With more sales of goods being conducted online, it is often very difficult to distinguish your goods from a cascade of others, particularly on third-party selling platforms like Amazon. How these platforms often work is either by listing individual sales in isolation, therefore potentially swarming the website with similar, isolated sales of the same goods, or by lumping them together in one entry, promoting the best price for the consumer from all of the sellers on that listing (how Amazon works, for example). But with this mixing of sellers on a given listing could there be trademark infringement or passing off in these instances over the original goods being sold? A recent Intellectual Property Enterprise Court decision looked at this very question.

The case of Jadebay Ltd & Ors v Clarke-Coles Ltd (t/a Feel Good UK) dealt with the sale of aluminium flagpoles on Amazon. Jadebay sold the flagpoles under the trademark "Design Elements" (UKTM 2653159) on the platform through a licensor, which were listed under the seller "DesignElements" on the website. The defendant, Feel Good, listed their equivalent flagpole, with a lower price, under the sale Amazon listing, ultimately becoming the default seller of the goods on the listing. The claimants took Feel Good to court, alleging both trademark infringement and passing off due to Feel Good's use of the listing for inferior, non-identical goods, also excluding the trademark as above.

Judge Clarke, the presiding IPEC judge for the case, first considered the matter of trademark infringement. Under section 10(2) of the Trade Marks Act 1994, a trademark is infringed if, in short, it is used in the course of trade and there is a likelihood of confusion on part of the public, including association with the registered trademark.

The use of a sign in the course of trade includes "…offering or exposing goods for sale, putting them on the market or stocking them for those purposes under the sign", or simply used "…in the context of commercial activity with a view to economic advantage and not as a private matter". A variety of principles are applied when considering a likelihood of confusion, set out in more detail in the decision of Comic Enterprises Ltd v Twentieth Century Fox Film Corporation (discussed more here).

An alternate claim under section 10(3) of the TMA sets out that a trademark is infringed when it a person "…uses in the course of trade, in relation to goods or services, a sign which is identical with or similar to the trade mark, where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark".

Finally, the claim of passing off concerns the elements set out in Reckitt & Colman Product v Borden (discussed more here), which look at goodwill or reputation, misrepresentation leading to deception or a likelihood of deception, and damage resulting from the misrepresentation.

Judge Clarke then turned to analysing the issues at hand, starting with trademark infringement.

In her view, the average consumer would be an average flagpole-buying consumer, purchasing it for their home or commercial setting. The purchase would be driven by considerations of utility, quality and price rather than aesthetics or design, and that his purchase will be a considered one, rather than a whimsical or impulsive one, leading to an inclination of looking at the details and specifications of the listing used.

In terms of the use of the sign that was complained about, i.e. the name "Design Elements", the judge saw that it had been used by the Defendant. I her view "…[w]hether the sign complained of appears in the listing title itself, or in the descriptor 'by DesignElements', it still acts to indicate the origin of the goods for sale on the listing". The descriptor isn't merely a shop name, but an indicator of manufacturing origin, and a sign of their quality to the consumer.

Throwing your flags away isn't a viable option to avoid infringement
Looking at the actual similarities of the signed complained of and the registered trademark above, the judged had to consider their visual, aural and conceptual similarities (does it sound the same, look the same and cover the same or similar good/services). Their aural and conceptual similarities were not disputed by the defendant, so the judged quickly determined them to be identical. As to their visual similarity, the judge concluded that, as the trademark and the sign complained of share the same words in the same order, and while they are connected as one word, they are nonetheless separated by the capitalization of both words. Lastly, stylistically there were few differences between the two. Judge Clark therefore decided that the sign and the trademark had a high degree of similarity.

The judge then moved onto the next components in infringement. She swiftly determined that the sign is clearly used in the course of trade, and that it was used in relation to similar goods (i.e. the sale of flagpoles).

The next step is to establish a likelihood of confusion on the part of the average consumer. In her view, after a review of all of the circumstances, there was a high probability of a likelihood of confusion. This included factors such as the similarity of the sign and the trademark, careful consideration by the average purchasing consumer and the likelihood that the average consumer would think the product came from Design Elements. While she considered the lack of evidence of actual confusion, this didn't change the ultimate determination.

The judge concluded that there was therefore trademark infringement under section 10(2).

Judge Clark moved onto infringement under section 10(3). In looking at the trademark's reputation in the UK, the first limb of the test under the subsection, the judge saw that reputation in relation to the trademark only existed with the people who had bought a flagpole bearing the trademark. Without proper evidence as to the relevant public judge Clark couldn't establish that the trademark would have a reputation amongst a significant part of the relevant public. Infringement under section 10(3) therefore failed.

Finally, the judge turned to the claim of passing off, and determined that the defendant had passed off their goods as the claimant's.

It was quickly established that the claimant's business did have goodwill in the UK (albeit at a very low threshold on non-triviality). According to the judge, the sale of many flagpoles of a number of years, including garnering positive reviews, clearly demonstrated goodwill. The judge also agreed that a substantial number of members of the public would be misled by the defendant's listing, especially once the consumer would dive deeper into the details of the listing and the flagpoles themselves. Finally, the judge saw that almost every sale the defendant made would have been a lost sale to the claimant, and they had suffered damage as a result.

The case is quite the curious one, since it has, in effect, created a new type of trademark offense. Should someone use a pre-existing Amazon listing, they could potentially infringe on any associated trademarks, and would have to be careful to sell goods under that particular brand. The decision does set the bar quite high, and anyone selling authentic goods for a lower price would be safe, but anyone trying to ride the coat tails of a more well-known brand, selling inferior or different branded goods, might just fall foul of the precedent set.

12 September, 2017

A Point of Direction - UK Supreme Court Considers Direct and Indirect Patent Infringement

Due to the limited monopoly period in patents, infringement can be very problematic for the rightsholder, and would need to be dealt with as quickly as possible to maintain the competitive edge the patent provides. What remains tricky is establishing whether a competing product infringes on the patent, be it directly or indirectly. Drawing the line in the sand for the two types of infringement is very important, and judicial consideration on both might not be as clear as one hopes. In an attempt to clarify the position, the UK Supreme Court took on a case that involves two rivals in the pharmaceutical business.

The case of Eli Lilly v Actavis UK Ltd dealt with the chemical Pemetrexed, developed by Eli Lilly, used for the treatment of cancerous tumors. Used solely by itself the drug can be harmful, even fatal, and hence is not used as an anti-cancer drug. The side-effects of the drug could, however, be negated by using it in combination with vitamin B12 or folic acid and used for its original purpose. Eli Lilly has sold the combination drug, called Alimta, since 2004. The company also patented this combination drug in the EU (patent no. 1313508) including designations in France, Italy and Spain. Actavis proposed the launch of competing products that used pemetrexed together with vitamin B12, but, instead of using the same active ingredient Actavis would've used a different, albeit similar combination (differing from the patent claims). Eli Lilly alleged that the products would directly or indirectly infringe on their patent, with the matter ultimately reaching the Supreme Court in July.

The focal point of the matter is the use of a particular pemetrexed diacid or a pemetrexed salt with vitamin B12, which is specified in claim 1 of the patent, while Actavis uses a slightly different salt. Article 69 of the European Patent Convention sets out the extent of a patent's protection, which "…shall be determined by the claims. Nevertheless, the description and drawings shall be used to interpret the claims". A combination of the claims and its associated description should be used to determine the patent's remit of protection, i.e. could it include more compounds than the one set out in claim 1. The relevant provision for the infringement of patents in the UK is section 60 of the Patents Act 1977, which is governed by the above provision in the EPC.

After discussing the precedential history of patent infringement in both the UK and Europe, Lord Justice Neuberger, handing down the Court's unanimous decision, set out the proper test on patent infringement. In his view, to assess patent infringement matters, one has to look at two issues through the eyes of the person skilled in the relevant art. Namely, "...(i) does the variant infringe any of the claims as a matter of normal interpretation; and, if not, (ii) does the variant nonetheless infringe because it varies from the invention in a way or ways which is or are immaterial". He further specified that the second issue should viewed as not merely identifying what the words of the claim would mean to the skilled person, but also considering the extent if any to which the scope of protection afforded by the claim should extend beyond that meaning.

Lord Justice Neuberger then moved onto discussing the two issues above in more depth.

The first issue, in his view, is a straightforward application of claim interpretation, considering that the ingredients used by Actavis would not fall within the expression "pemetrexed disodium" in claim 1.

Steve wasn't a big fan of taking Pemetrexed 
The second issue proved to be trickier. Lord Justice Neuberger saw that, to determine what would amount to an 'immaterial' variation of the invention, it would be helpful to look at the three questions set out in Improver Corpn v Remington Consumer Products Ltd. These ask "i) Notwithstanding that it is not within the literal meaning of the relevant claim(s) of the patent, does the variant achieve substantially the same result in substantially the same way as the invention, ie the inventive concept revealed by the patent? ii) Would it be obvious to the person skilled in the art, reading the patent at the priority date, but knowing that the variant achieves substantially the same result as the invention, that it does so in substantially the same way as the invention? iii) Would such a reader of the patent have concluded that the patentee nonetheless intended that strict compliance with the literal meaning of the relevant claim(s) of the patent was an essential requirement of the invention?"

The judge then turned to answering the above three questions.

For the first question Lord Justice Neuberger quickly determined that both drugs work in the same way as the patented invention, ultimately comprising of a medicament containing the pemetrexed anion and vitamin B12. The drug will achieve substantially the same result, in the same way, as the invention.

In the light of the second question, Lord Justice Neuberger considered that the skilled person would appreciate that each of the Actavis products would work in precisely the same way as pemetrexed disodium when included in a medicament with vitamin B12. The use of different free acids or salts would not change this outcome, as they were clearly established as at the priority date of the patent, and the skilled person would clearly investigate their effects as a part of routine. A test for knowing whether the drugs work or not would, in his mind, is too strict.

In answering the third question, Lord Justice Neuberger diverged from the Court of Appeal's decision. He considered that the skilled person would understand that the use of ' pemetrexed disodium' would not limit infringement to only that particular salt – this just happened to be the one used during experimentation. He concluded that it is unlikely that any other pemetrexed salts or pemetrexed free acid would have been excluded from the scope of protection.

Lord Justice Neuberger ultimately saw that the patent had been directly infringed by Actavis. He affirmed his position even in the light of the patent's prosecution history, as reliance on it should be reserved to limited instances and not every matter concerning infringement. The judge also considered direct infringement in France, Italy and Spain, and concluded that the patent had been infringed in these jurisdictions as well.

Finally, the Court looked at whether the patent had also been indirectly infringed had they determined the patent to not have been directly infringed, also set out in section 60 of the Patents Act 1977. The parties argued about the manufacture and administration of the drugs, diverging on whether both contribute to infringement or not. Ultimately Lord Justice Neuberger determined that Actavis would have indirectly infringed Eli Lilly's patent if they knew, or it was obvious given the circumstances, that the drug would be used by dissolving it into a saline solution

The Supreme Court's decision in the case will be very influential, and redefines how direct infringement in particular is assessed. It'll be interesting to see how the new tests are applied to different types of patents, not just pharmaceuticals, and whether it will make proving infringement easier or more difficult.

05 September, 2017

Sales are Offline - Advocate General Allows for the Restriction of Third-Party Sales of Goods Online

Selling goods online can be incredibly lucrative, since the potential reach of your business can be near anywhere in the world to millions of people. Many companies therefore sell their goods either exclusively online, or through various third-parties, who could even purchase your goods and then resell them elsewhere without your permission. While the exhaustion of rights is quite pertinent in this scenario (e.g. more on which in relation to patents can be found here), could you still be able to prevent others from selling your goods? After a lengthy spell in the European Courts, a case dealing with just this question has landed on an Advocate General's desk, who has given their opinion on it only some weeks ago.

The case of Coty Germany GmbH v Parfümerie Akzente GmbH dealt with the sale of luxury cosmetics, made by Coty. The company sells its goods through a variety of distributors in a select network, all of which are contracted to do so under a distribution agreement (and its various undertakings). Akzente has been a Coty distributor for some years selling their goods via their retailer stores, including physical locations and via the Internet, primarily through Amazon.de. Coty wanted to make changes to their distributor agreement, which, among others, required that all goods sold online be sold via an electronic store window (not using websites like Amazon) to protect the brand and its image. Akzente refused the amendments, and Coty took the matter to court, which ultimately ended up going to the CJEU.

The crux of the case revolves around the Treaty of the Functioning of the EU and its provisions preventing the distortion of competition. Article 101 of the TFEU, in short, prevents companies from employing contractual measures that affect trade between Member States in a negative way. This could potentially include selective distribution systems, such as Coty's.

The CJEU faced four questions from the referring court, which primarily focussed on the applicability of Article 101 to the above facts.

The first question, as summarized by the Court, asked "…whether selective distribution networks for the distribution of luxury and prestige goods aimed mainly at preserving the luxury image of those goods are caught by the prohibition laid down in Article 101(1) TFEU".

The AG considered both parties' submissions relating to the first question, ultimately deciding that, in his opinion, that selective distribution networks for luxury goods would not be caught by Article 101. Following previous case law, the AG set out the three criteria that have to be met for purely qualitative selective distribution systems not to be prohibited under Article 101:

(1) it must be established that the properties of the product necessitate a selective distribution system, in the sense that such a system constitutes a legitimate requirement, having regard to the nature of the products concerned, and in particular their high quality or highly technical nature, in order to preserve their quality and to ensure that they are correctly used; (2) resellers must be chosen on the basis of objective criteria of a qualitative nature which are determined uniformly for all potential resellers and applied in a non-discriminatory manner; and (3) the criteria defined must not go beyond what is necessary.

Online sales definitely make life easier
The first criteria, necessity of the selective distribution system, needs to take into account the qualitative characteristics of the goods themselves, i.e. that it maintains the high quality of the goods when sold. This can include both the physical characteristics and the 'luxury' image of the goods. The AG summarized that "…the selective distribution networks relating to the distribution of luxury and prestige goods and seeking mainly to preserve the brand image of those goods are not caught by the prohibition laid down in Article 101(1) TFEU". Even so, the AG wanted the CJEU to clarify the possible prohibition of these types of clauses, which has been asserted under case law (particularly in Pierre Fabre Dermo-Cosmétique).

The AG considered that the case should not negate prior case law regarding the allowance of selective distribution networks under EU law, as its judgment only related to the review of the proportionality of a clause preventing the sale of goods online outright. However, he still observed that should the objective of protecting the prestige of the goods not be legitimate and therefore not allowed under EU law. Retaining the exemption for the above distribution systems is important for the preservation of trademark rights, which could be compromised if not allowed to be protected.

Ultimately, the AG set out that the answer to question one should be that such selective distribution systems should be allowed under Article 101, provided they conform to the three criteria set above.

The second question was summarized by the AG asking "…whether and to what extent Article 101(1) TFEU must be interpreted as meaning that it precludes the prohibition imposed on the members of a selective distribution system for luxury products, who operate as authorised retailers on the market, from using in a discernible manner third-party platforms for internet sales of the products concerned".

Following Metro SB-Groβmärkte, the AG set out that, to answer the above question, one would have to assess whether "…operators were chosen by reference to objective criteria of a qualitative nature, determined uniformly for all potential resellers and applied in a non-discriminatory fashion, whether the properties of the product(s) concerned require, in order to preserve their quality and to ensure that they are correctly used, such a distribution network and… whether the conditions defined are consistent with the principle of proportionality". He did note that only the necessity and proportionality criteria would have to be considered in this instance.

Should the prohibition of the use of third-party platforms be used legitimately to protect the quality of the goods, the AG considered this to be allowable. Not only does it potentially ensure that the goods are authentic, but also protects the brand. Therefore the prevention of the use of third-party websites in a distribution agreement would not be contrary to competition law. Coty didn't prevent the parties from selling them online altogether, allowing the goods to be sold on the sellers' websites, just not on third-party sites like Amazon.

The AG also considered that the clause would not be disproportionate to the objective pursued. Due to the original supplier not being able to control the third-party pages in the absence of a direct contractual relationship with them (as opposed to with the distributors), the clause would be proportionate to reach the means of controlling quality. He concluded that the clause would therefore be compatible with Article 101.

Finally, the AG, under the guise of a hypothetical determination of an infringement of Article 101 in a clause such as in the matter, set out possible further provisions that might come into play in that event. This would be Article 4(b) and 4(c) of the Vertical Agreements Regulation. These relate to the restriction of the territory in which goods can be sold, and a restriction of passive sales respectively.

In short, the AG considered that the prohibition imposed on members of the distribution system was not a restriction on the seller's customers under Article 4(b). The clause only prevents the seller from selling on third-party websites, and not online entirely, which does not limit the territory or customers accessible to the seller. The prohibition was not a restriction of passive sales under Article 4(c) either, as the restriction only applies to third-party websites, and not the entire internet. Passive sales can happen via the seller's website just as well as from a third-party site.

The case will be very important to suppliers of luxury goods who wish to maintain the image and the distribution networks selling the goods in a very close and controlled fashion. The AG's opinion would seem to be correct, since the disallowance of these types of restrictions could genuinely dilute the image and value of luxury goods, and only guide the way in which the goods are sold, not preventing some avenues like online sales. In the end the CJEU will decide the matter, but it seems unlikely they will deviate from the AG's opinion.

Source: IPKat

29 August, 2017

It's Just not Fair! - York University's Copying of Works for Teaching not Fair Dealing

Since the decision in CCH (discussed more on this blog here), fair dealing has been very different in Canada, showing its flexibility and adaptability in modern copyright issues. Due to the much broader, US fair use comparable doctrine introduced in the CCH case, some could even argue that fair dealing has gone too far and become too strong of a shield. Even so, many cases have challenged, and will challenge, the notion of fair use and its extent, and a recent Federal Court decision looked at fair dealing yet again.

The case of Canadian Copyright Licensing Agency v York University dealt with with the distribution of study materials to students by York University in the form of Coursepacks. These information packs contained a course outline or syllabus, course notes, and course materials such as excerpts from books, journal articles, and other miscellaneous materials. The packs were produced by York University Printing Services (or at times external printers, e.g. Keele Copy Center).  The University did have a licensing arrangement with CCLA, which expired in 2010, but was renewed on an interim basis. The University then terminated the arrangement, remaining outside of CCLA's copyright licensing scheme. Remaining outside of the scheme would force the University to monitor its compliance with copyright laws (including fees and reporting). CCLA wanted to enforce the previously agreed interim tariff, and took York University to court, with the University counterclaiming fair dealing for any reproductions.To protect their interests, York University published its own copyright guidelines in the absence of a different agreement.

The first point of contention was whether the Interim Tariff would be enforceable against York University regardless of their termination of the tariff.

According to Justice Phelan, handing down the Court's judgment, the historical development of collection societies and their fees for the use of copyright protected works shows legislative intent to provide the societies "…with effective enforcement mechanisms against users who are not subject to an agreement and who reproduce, without authority from owners or without the benefit of an exception (e.g. fair dealing), copyright protected works covered by the collectives". These tariffs are legally binding subordinate legislation, which has no opt out capability. Only if "…York did not copy any works in Access’s repertoire, if it obtained proper permission to copy those works, or if the copying was exempt by law… then the tariff would not be applicable". Ultimately the Court concluded that the Interim Tariff would be mandatory and that CCLA would be entitled to the recovery of the royalties and other associated costs.

The Court then moved onto the consideration of whether the use by York University would fall under fair dealing.

The basis for fair dealing in Canada is CCH Canadian Ltd v Law Society of Upper Canada (discussed more here), which sets out, much akin to fair use in the US, the criteria for fair dealing to be established. They are that the use is an authorized purpose under section 29 of the Copyright Act (such as education), and that the use is 'fair'. The fairness of any use has no set definition, but is assessed based on 6 non-exhaustive factors: a) purpose of the dealing, b) the character of the dealing, c) the amount of the dealing (amount of copying), d) alternatives to the dealing, e) the nature of the work, and f) the effect of the dealing on the work.

As the threshold for establishing that a use falls under an authorized purpose is low, the Court quickly concluded that the use by York University was indeed for education. The Court then took on the assessment of fairness, looking at each of the factors above individually in relation to the facts at hand.

Teaching methods vary greatly, irrespective of coursepacks
Firstly, what the purpose of the dealing was. The Court considered that the initial assessment of the authorized purpose of the use and the first fairness factor had a great deal of overlap. To mitigate this, they aimed to find out the 'goal of the dealing', rather than its purpose, which they determined to be the allowance of access for students to various teaching materials. However, due to the termination of the Interim Tariff, and the introduction of the copyright guidelines, the Court saw that the goal of the dealing was two-fold: "…Education was a principal goal, specifically education for end user. But the goal of the dealing was also, from York’s perspective, to keep enrolment up by keeping student costs down and to use whatever savings there may be in other parts of the university’s operation". The goal therefore was not simply an altruistic furthering of education, but to also to cut costs. The factor was not deemed to be strongly in favor of fairness.

Secondly, the Court looked at the character of the dealing. This includes the examination of how the work was dealt with, the number of copies made, and the extent of its dissemination. Data provided by York University was very unreliable, according to Justice Phelan, due to largely deficiencies in user access data. Justice Phelan concluded that the issues with the data and poor witness evidence from York University weighed towards unfairness under this factor.

Thirdly, the amount of dealing was looked at. This is not a simple consideration of the quantity of material used, but also a qualitative one on the importance of the part that was copied. What the Court focussed on were the copyright guidelines issued by York University, which specified a 10% limit to copying from a single work, without discussing the qualitative element. Due to this lack of qualitative control, works were copied indiscriminately and multiple times for different courses. The Court therefore failed the amount of dealing assessment, as there was nothing fair about the amount of dealing used.

Fourthly, the Court took on considerations for alternatives to the dealing. Should there be no alternatives the factor can weigh in favor of fairness, due to the necessity of the copying. The volume of material from varied sources used in teaching, as evidenced by York University, did show a degree of necessity for the copying. While there were alternatives, there were no free alternatives to use, which subsequently left the Court to conclude that the factor favors York University.

Fifthly, what the nature of the work is. As most of the materials copied were academic or creative works, they required a great deal of creativity, complex analytical analysis, skill, perspective, and judgment by authors. Due to the significant skill, effort, and investment involved, the nature of the works weighs against York University, especially considering their treatment by both the copiers and the guidelines issued by the University.

Finally, the Court considered the effect of the dealing itself, for example, on the creators and publishers of the work. This could amount to a possible element of competition with the original work in the marketplace.  The creation and distribution of the coursepacks at issue have shown a decrease in sales and licencing revenues for CCLA, especially after the issuing of the copyright guidelines. The Court concluded that "…the Guidelines have caused and will cause material negative impacts on the market for which Access would otherwise have been compensated for York’s copying".

The Court ruled against York University, disallowing their counterclaim for fair dealing as the University failed on 5 out of 6 factors as discussed above. York University have stated that they will appeal the decision.

The case will potentially have profound effects on Universities in Canada, particularly on those who might not be under a licence from the CCLA. As the case will be appealed the future of the decision remains uncertain, potentially even reaching the Supreme Court down the line, yet professors, librarians and administrators at Universities need to be careful in the meantime. This writer does not purport himself to be a Canadian copyright expert, and the decision has received quite a bit of criticism, so he will refrain from making sweeping comments on the validity of the decision.

22 August, 2017

Toblenone - The Battle of the Peaks Begins Over the Toblerone Shape

Imitation is thought to be the greatest form of flattery, but in the world of IP, this is often the opposite of the case. Copying the looks of a product can be quite beneficial for the copying company, riding on the coattails of a potentially well-known look of a product, especially if they are undercutting the price of the original. This blog has discussed issues of generic packaging before, and the notorious KitKat saga, but none of the cases have looked at the matter of changing the shape of the original product, yet still seeking protection over the shape.

A recent case discussed in the Guardian has shed a new perspective, as discussed above, relating to the Toblerone chocolate bar. Poundland, a UK discount retailer selling products predominantly at £1, launched their Toblerone competitor Twin Peaks earlier this summer, aiming to compete against the reduced size Toblerone bar. This change featured bigger gaps in the Toblerone bar between the iconic triangular peaks, due to rising ingredient prices.

The matter has since gone to court, with Mondelez (the company that owns the Toblerone brand) arguing (possibly among other grounds) trademark infringement. Poundland have counterclaimed (possibly among other grounds) for invalidity and argued that "…the triangular prism shape of the Toblerone bar, which was registered under an EU trademark in 1997, is no longer distinctive partly because of the existence of the new version". Adding to this, they argued that "…any good reputation enjoyed by the Toblerone bar trademark has been “irretrievably abandoned” by the launch of the product with bigger gaps between its nine chunks, which the public “consider unfavourably in comparison”".

Mondelez put a wholly different spin
on the change to the Toblerone bar
The crux of the question is therefore whether the trademark registered by Toblerone (EUTM 31237) would no longer be distinctive due to the change in the Toblerone chocolate bar, and even if it's distinctive, whether the Twin Peaks bar creates a different impression so as to not infringe on the trademark or other possible rights under common law.

Arguably, Poundland potentially do have a point. The Toblerone bar has reduced its size by about 10%, and changed its shape from the registered 12 peaks to 11, with the gaps between the peaks has doubled by this writer's estimate. The base of the bar has also arguably become thinner. The Twin Peaks bar does not feature the wider gaps of the new Toblerone bar, including having a curved gap rather than a flat one, and splits the peaks into two. The Twin Peaks bar is also sold in a loosely fitting wrapper packaging, rather than a hard triangular cardboard package.

Case law has looked at changes to earlier registrations, and it does not necessarily bode well for Toblerone. In The Coca-Cola Company v OHIM the cola manufacturer changed the look of their iconic bottle, removing its distinctive fluting, and due to this change the EU General Court rejected their application for a lack of acquired distinctiveness, as "…[the bottle] was a mere variant of the shape and packaging of the goods concerned, which would not enable the average consumer to distinguish the goods from those of other undertakings". It is possible for the registration to be attacked (although the name and the triangular packaging will still arguably remain protected), so Toblerone would benefit from a new registration for the reduced size bar, unless it is simply treated as a stop-gap while prices are still high for some ingredients.

The Toblerone question is a very curious one, and this writer for one would love to see the case actually go to court (but heavily doubts this will happen). The point of changing the shape of a product with an existing trademark registration hasn't been dealt with by the judiciary much at all, so more light on this issue would be very helpful for both would-be registrants and competitors alike.

Source: The Guardian

15 August, 2017

Into the Slammer - The Sale of 'Grey Goods' a Criminal Offense, Says UK Supreme Court

The sale of branded goods can be a complicated affair, especially when the line between counterfeits and 'authorized' goods can be blurry at times. This is highlighted in the sale of 'grey goods', which are items obtained from licenced manufacturers without the authorisation of the licensor. Having discussed the criminality of the sale of grey goods last year (more here), the decision of the Court of Appeal was appealed by the defendants, ultimately ending up on the desk of the Supreme Court, which handed down its judgment in early August.

The case of R v M, C and T concerned three defendants (including one company), who were engaged in the importation of branded goods into the UK that were manufactured outside the EU. These goods included notable brands such as Ralph Lauren, Adidas and Under Armour. Many of the goods were duly accepted as being counterfeits, but a significant portion of them were ones made by authorized manufacturers, but not authorized for sale to other parties. The defendants were taken to court for, among other offenses, the unauthorized use of trademarks (a criminal offense).

The focus of the case is section 92 of the Trade Marks Act 1994, which sets out that a person commits an offense under the Act if the proprietor "…sells or lets for hire, offers or exposes for sale or hire or distributes goods which bear, or the packaging of which bears [a registered trade mark]". There is a separate offense under section 92 for the possession and control of such goods, for which the defendants were prosecuted as well. The defendants' appeal argues that section 92 would only relate to the counterfeit goods and not the 'grey goods' as set out above.

The defendants argued that the phrase "such as sign" in the Act would only apply where the sign has been applied to the goods without the authorization of the rightsholder. As 'grey goods' have had the sign applied to them with the consent of the rightsholder, section 92 would not apply to those goods, but only to truly counterfeit goods.

Lord Justice Hughes, handing down the Court's unanimous decision, rejected this argument. In his view, the use of the phrase "such a sign" refers to "…a sign which is 'identical to, or likely to be mistaken for, a registered trade mark'", not just in instances where it has been applied without consent. This means that 'grey goods' would be caught by section 92 just as well as counterfeit goods would be.

Making fakes ain't easy
The judge also noted that all three offenses set out in section 92 are separate, not cumulative, and that both intent and the application of a sign without the authorization of the rightsholder apply to all three offenses. This is important, since the defendants argued that there is a link between the first and the second offense (subsections a and b), which, if the offenses are separate, could not be the case. Lord Justice Hughes emphasised that there is no ambiguity or obscurity in the law that would require a further investigation into Parliament's meaning of the section, particularly in relation to the defendants' argument on the different meanings of counterfeit and 'grey goods' (and subsequent differing treatment under section 92).

Lord Justice Hughes acknowledged that there has been a distinction between the two in the case of R v Johnstone; however, the distinction came about through the facts of the case, and does not reflect the general view of the Court on 'grey goods' and counterfeit goods.

The defendants further argued that due to the exhaustion of rights in the goods under EU law, and subsequently section 12 of the Act, any further objections to the sale of the goods would be limited to very narrow special cases, such as changes or impairments to the goods. The Court rejected this argument, as the exhaustion of rights only relates to civil law, not criminal, nor would it be useful in interpreting the construction of section 92.

A further argument put forward was that the more stringent test of a mental element used in the previous Trade Marks Act 1938 would exclude 'grey goods' from the current Act due to the previous Act only applying to only 'true counterfeits' (and therefore carrying over into the new Act in intention). The Court rejected this interpretation, as the previous Act would have included 'grey goods' due to its inclusion of goods irrespective of the authorized application of the mark onto the goods or not. Lord Justice Hughes also mentioned that, in his view, the sale of 'grey goods' and counterfeits would both be unlawful, as "…[b]oth may involve deception of the buying public".

Finally, the defendants argued that the construction of section 92 to include 'grey goods' would infringe on their human rights to enjoy and keep their possessions. The Court rejected the notion that the defendants have any rights in the trademarks affixed on the goods, even though they have the right to the goods excluding the marks. While they could sell those goods without the marks on them, the Act prevents them from misleading purchasers and infringing on the marks while doing so. The defendants are not deprived of the goods they own, but only regulated in the manner of the disposal of the goods. Lord Justice Hughes concluded that there was nothing disproportionate in the imposition of criminal sanctions under the Act, which legitimately balances "…the rights of the proprietor to protect his valuable trademark and goodwill, and those of the person who wishes to sell goods which he has bought".

Ultimately the Court rejected the appeal and allowed for the criminal trial to proceed.

The case will undoubtedly be hugely influential, especially for rightsholders who wish to prevent the sale of 'grey goods' in the UK market. This writer would agree with the interpretation of the Court, as the inclusion of 'grey goods' under section 92 makes sense, since one can draw an analogy between them and counterfeit goods due to the lack of authorization during their initial sale to the ultimate distributor. Should a proprietor wish to sell the goods without the marks they would be wholly entitled to do so, provided no other rights exist in the goods. The case seems to have finally settled the matter of 'grey goods' in the UK, at least for now.

Source: JDSupra

08 August, 2017

Please Clarify - Two-Color Inhaler Trademark not Clear and Precise, says Court of Appeal

Trademarks can offer very powerful rights to rightholders, particularly in more general areas like colors or shapes (color marks have been discussed more here). While one has to appreciate the rights afforded through trademarks, they still have to be narrow and defined enough to attract any rights, as too broad of a mark will undoubtedly fail in registration or will potentially be invalidated after the fact if it slips through the cracks. With this in mind, just how defined do you have to be when you register your mark, both in its graphical representation or the possible descriptions attached to the mark? The UK Court of Appeal took this matter on earlier this summer, giving trademark holders something to chew on.

The case of Glaxo Wellcome UK Ltd (t/a Allen & Hanburys) v Sandoz Ltd concerned a trademark registration for an asthma inhaler, and more specifically, its color scheme. The registration consisted of an image of the inhaler, with a descriptor beneath it setting out that "…The trade mark consists of the colour dark purple… applied to a significant proportion of an inhaler, and the colour light purple… applied to the remainder of the inhaler". The inhaler was also sold in a more typical 'boot' shape, which still included the above colors. After discovering that a competitor, Sandoz, had been selling a competing product with a very similar color scheme, Glaxo took the matter to court and sued Sandoz for trademark infringement. Sandoz subsequently counterclaimed for invalidity due to the vague description of the mark, which could be applied to a number of products, not just as was represented in the registration. After a loss at first instance, Glaxo appealed and the matter ended up in the Court of Appeal.

Lord Justice Kitchin, handing down the majority judgment, started with the registration of color trademarks. The CJEU has discussed this in its previous case law, particularly in Libertel Groep and Heidelberger Bauchemie. The cases concluded that a single color or multiple colors applied for as a trademark can be considered as such if "…it has been established that, in the context in which they are used, those colours or combinations of colours in fact represent a sign; and the application for registration includes a systematic arrangement associating the colours concerned in a predetermined and uniform way". This means that the colors alone would not be registrable, but, so long as a proper arrangement of them is produced, it is possible to register the colors.

Bill wasn't sure what the mark was at all
The Court highlighted the issues with the descriptions of multiple colors used in various registrations, where wording like "predominant colour applied to the whole visible surface" is used to describe the mark in addition to any graphic representation. This description leaves the mark unclear, as 'predominant' implies the amount of the color used, but leaves the 'how' completely out of it. As Lord Justice Kitchin observed: "…in order to fulfil its role as a trade mark and meet the requirements of precision and clarity, the sign must always be perceived unambiguously and uniformly". Without this the level and extent of protection is unclear, and the mark should not be registered, since "…if the authorities and the public are left in a state of confusion as to the nature of the sign then these requirements will not be satisfied".

Lord Justice Kitchin further noted that, when considering the precise make-up on a mark, one has to consider both the pictorial representation and the description that accompanies it. The description can clarify the mark if the pictorial representation is ambiguous or unclear, potentially making the mark valid. Both the image and the description should be treated as equal in this assessment, and considered as a whole.

The Court then dealt with the three possible interpretations of the mark put forward by Glaxo.

Firstly, Glaxo claimed that the mark consists of the precise arrangement of the dark and light purple colours shown in the pictorial representation, spikes and all. Lord Justice Kitchin swiftly rejected this argument as, to his mind, it would be nearly impossible to tell how the 'spikey' arrangement would be applied to an inhaler. If the shape were simpler, it could be possible to determine how it would be applied or would look like on an inhaler, but the mark, as represented, is unclear in its application. The verbal description remained too general as well, which left the mark wholly imprecise.

Secondly, Glaxo argued that that the abstraction shown in the picture is merely illustrative of the mark. The judge yet again rejected Glaxo's argument, as in his view the abstraction is not clear on its application on the inhaler, and the use of the colors differs in each of the pictures from the others. The verbal description does not illuminate the mark's application any further either, as mentioned above.

Finally, Glaxo argued that the mark consists of any proportions of the dark and light purple colours falling within the terms of the verbal description. Lord Justice Kitchin didn't agree with this argument, and considered that the public and other companies would be "…left in a position of complete uncertainty as to what the protected sign actually is". Ultimately, the judge saw that the mark "…lacks the clarity, intelligibility, precision, specificity and accessibility that the law demands", leaving it unclear to the public at large.

The Court therefore dismissed the appeal, and decided that the trademark was indeed invalid under Article 4 of the Directive.

The case is a very important reminder on the need to be precise and clear when applying for a trademark, particularly if it’s one that is difficult to set out, such as color trademarks. Any applicant should have their mark drafted very carefully, using both the pictorial and verbal descriptions to their full advantage, potentially even showing the mark's application on the products themselves.  In the end, the general nature of the mark was Glaxo's undoing, and this writer would love to see the matter debated in the Supreme Court, but thinks that's very unlikely.

01 August, 2017

Distinct as Ever - Google Not a Generic Term, Says US Court of Appeal

When a particular brand becomes hugely successful, it more often than not becomes very valuable, but even the biggest of players are not protected from the ill effects of popularity. A big problem that many brands face is the generification of their brand, i.e. it becomes so well-known and associated with a particular type of good or service that consumers use it to refer to all of those goods or services. Through this the distinctiveness of the trademark becomes diluted, and potentially is lost entirely. Many companies will therefore fight to protect their brands and to establish proper trademark use guidelines (for example, INTA has a set of guidelines for online use) to combat this issue. A case that has dealt with the 'generification' or 'genericisation' of trademarks has been going on in the US for over 5 years (discussion on the first instance decision here), culminating in a Court of Appeal decision in mid-March.

The case of Elliott v Google Inc. deals with the registration of over 760 domain names by David Elliot, which incorporated both the word "Google" and other well-known brands, such as Disney, in the domain name. Google subsequently objected to the registrations, lodging a complaint at the National Arbitration Forum (handling the domain name disputes for the provider). NAF ruled in Google's favor, and the complaint then lodged proceedings in the Arizona District Court for the cancellation of the Google trademarks under 15 USC section 1064(3) as being "...primarily understood as a generic term universally used to describe the act of internet searching". Elliott's case failed at first instance for lack of evidence as to this fact, and the matter since was appealed to the Court of Appeals.

The main question for the Court therefore was whether 'Google' had become generic through use; however, as noted by the Court: "…The mere fact that the public sometimes uses a trademark as the name for a unique product does not immediately render the mark generic". Consumers would have to consistently, and for a prolonged period of time, use the marl for it to become arguably generic. Judge Tallman set out the legal test for this, which looks at "…whether the primary significance of the term in the minds of the consuming public is [now] the product [and not] the producer".

Judge Tallman continued that the claim for the genericness of a product or service always has to relate to a particular type of goods or services the mark is registered for. Elliott had defined this as 'the act of searching the internet'; however, the marks are not registered for these types of services. The Court rejected his argument, due to a lack of particular good or services designated for which the mark has become generic for.

Elliott's main argument in the proceedings related to the potential use of 'Google' as a verb to describe the act of searching the internet (using Google or not) by the relevant public, having therefore become generic. The Court rejected Elliott's argument, since he failed on two fronts: he failed to recognize that a claim of genericide must always relate to a particular type of good or service, and that he erroneously assumed that verb use automatically constitutes generic use.

Firstly, the Court highlighted Elliott's lack of specificity in setting out the particular type of goods or service the verb relates to. While he did set out that 'Google' related to the act of searching the internet in general, there was no inherent link between the claim of genericide and a particular type of good or service. In other words, Elliott's claim only relates to a broad, undefined action, rather than a particular good or service the mark is registered for.

Junior was unnerved by his own 'googling'
Secondly, the use of a trademark as a verb, according to the Court, does not automatically mean it has become generic. Elliott's argument was that a trademark should only be used as an adjective, and should it be used as a verb it would lose its source-identifying function and become generic. What the Court highlighted as the key consideration, as set out in Coca-Cola Company v Overland Inc., is "what… customers [were] thinking or whether they had a particular source in mind [for the goods or services in question]". What remains key is the consideration is the customers' inner thought processes regarding the goods or services, irrespective of the trademarks use as, for example, a verb or a noun.

This has been referred to as 'discriminate' and 'indiscriminate' use, where the consumer uses the mark as a verb or otherwise either with consideration of the underlying source or not, i.e. being happy with an alternate product or service being used instead of the namesake. The Court assessed that the main inquiry would be "…whether the primary significance of the word "google" to the relevant public is as a generic name for internet search engines or as a mark identifying the Google search engine in particular", not simply has the mark has been used as a verb or not.

The Court then moved on to evidentiary matters. In determining whether the mark in question would have become generic, the claimant is "…required to identify sufficient evidence to support a jury finding that the primary significance of the word "google" to the relevant public is as a name for internet search engines generally and not as a mark identifying the Google search engine in particular".

Elliott's evidence largely comprised of consumer surveys and generic use by media and consumers at large. Elliott also produced three expert witnesses, who argued that 'google' is used in a generic sense when it's used as a verb. In most of the evidence the word 'google' had simply been used as a verb, which, as the Court pointed out above, does not in itself make a word generic.

The Court concluded that Elliott had failed to produce sufficient evidence that the relevant public primarily understands the word "google" as a generic name for internet search engines and not as a mark identifying the Google search engine in particular.

The case shows that some battles might not be worth fighting. The evidentiary hurdle that a claim has to climb over in a claim for genericness is quite high, and as this case shows, even the biggest of players might not be as exposed as you think. Trademarks offer a versatile and flexible set of rights, which cannot be thwarted by a simple claim of verb use; however, rightsholders still need to remain vigilant over any claims of genericness from third-parties, especially if the name is of some note.

Source: JDSupra

25 July, 2017

Seeing Red - Registration of Red Shoe Sole Potentially Invalid, Says AG Szpunar

The color of a product or a logo can often be just as memorable as its shape, design or quality. When you think of a Coca Cola bottle, do you think of the color red? If you see a chocolate bar draped in purple, do you think of Cadbury? Colors are a great differentiator, and the more striking the color the more you tend to probably remember it. That's why many companies register a particular color as a trademark in relation to their goods or services, protecting that very association from competitors. In a similar vein, could you register a trademark that incorporates a color with your product, for example in conjunction with a shoe? A recent case involving this has been going through the European courts, and the Advocate General has finally given their two cents on the matter ahead of the CJEU's decision.

The case of Christian Louboutin SAS v Van Haren Schoenen BV concerns the registration of a mark in Benelux by Louboutin, comprising of a high-heel shoe with a red sole. Only the sole was registered. Van Haren made and sold similar red-soled shoes, and upon identifying this, Louboutin took the company to court for trademark infringement. Van Haren challenged the infringement opposing the mark's registration, claiming invalidity. Having made its way through the Dutch courts, the case ultimately ended up with the CJEU, and prior to their judgment Advocate General Szpunar aimed to give the court guidance on the issue.

The question referred to the Court was "[i]s the notion of ‘shape’ within the meaning of Article 3(1)(e)(iii) of Directive 2008/95... limited to the three-dimensional properties of the goods, such as their contours, measurements and volume (expressed three-dimensionally), or does it include other (non three-dimensional) properties of the goods, such as their colour?" In essence, the question asks whether a 'shape', as defined in the Directive, can include colors as well as the actual three-dimensional shape of an object.

The Advocate General first considered the classification of the mark and its impact on the registration. He determined that the classification of the contested mark is a factual assessment to be made by the referring court. That consideration does not prevent the CJEU from making remarks which may guide that court in making its assessment. He also saw that the classification of the goods does not necessarily have any legal consequences regarding the goods. Even if the mark is a 'position mark', which some parties argued it was, it doesn’t prevent that mark from consisting of the shape of the goods (i.e. the color). He then concluded that "…it is for the referring court to determine whether the mark at issue in the present case is a per se colour mark or a mark consisting of the shape of the goods, but also seeking protection for a colour".

To determine whether the mark is a color mark per say, or consists of the shape of the goods, as defined in the Directive, the Advocate General set out the test as "…the referring court should carry out an overall assessment, taking into account the graphic representation and any descriptions filed at the time of application for registration, as well as other material relevant to identifying the essential characteristics of the contested mark, where applicable". One would also have to account for whether the mark was registered as for the color only, or if the shape was incorporated in the registration as a part of the color.

The CJEU could impede Cindy's new color schemes 
The Advocate General rejected that the color, albeit restricted from applying to a particular shape, would not in itself limit the mark to simply a color mark. Instead "…what must be determined is whether the sign derives its distinctive character from the colour in respect of which protection is sought per se, or from the exact positioning of that colour in relation to other elements of the shape of the goods". Therefore the Advocate General accepts that it is possible for the mark to apply to the position of the color as well.

When considering the actual mark that was registered, the Advocate General saw that, even though the contours of the shoe were not a part of the registered mark, its placement on the shoe was very relevant. The mark sought to protect simply a red sole on any high-heeled shoe, irrespective of its shape. He finally thought that "…[t]he contours of the sole appear in any event to be a negligible element of the mark, which derives its distinctive character from the unusual positioning of the coloured element and, potentially, the colour contrast between different parts of the shoe".

Although the Advocate General considered that the mark, at least on the outset, would be one that consists of a shape in conjunction with the color, he still aimed to analyse both possible outcomes in more depth.

Firstly, whether the mark consists of a color per say. As established in previous cases, colors per say don't have distinctive character; however, they may become distinctive through use. The registration, even so, shouldn't prevent other proprietors from using the color for goods of a similar type. The Advocate General ultimately concluded that "…if the contested mark were to be classified as a ‘mark consisting of a colour per se’, it would be appropriate to hold that it did not fall within the scope of Article 3(1)(e)".

Secondly, whether the mark consisting of the shape of the goods and of a certain colour. The Advocate General set out that, to answer whether a mark consists of both the shape and the color applied to it, one has to heed the logic and scheme of Article 3(1)(e), i.e. to prevent the registration of marks that would impede fair competition. The Advocate general considered that any shape that incorporates color in the mark would have to be analysed under Article 3(1)(e) as a part of the overall assessment of the sign. This would apply even under the new Directive.

He concluded that "… Article 3(1)(e) of [the] Directive… does potentially apply to signs consisting of the shape of the goods which seek protection for a certain colour". The mark in question would also be, in his view, potentially caught by the Article and therefore invalid. He also observed that, while the color potentially does add value to the mark (and potentially falls under Article 3(1)(e)(iii)), the value added only relates to the intrinsic value of the shape (for example, is it commonly used and therefore valuable) and not the reputation of the proprietor or the mark.

The Advocate General clearly sets the stage for the CJEU to find that color marks applied to a particular shape would be invalid, as the protection of a color to an indeterminate amount of soles could prevent fair competition. Less conventional trademarks could be hindered by a negative decision by the CJEU, and it remains to be seen how they navigate this paradigm in the light of the expansion of registrations through the new Directive 2015/2436. Should the shape be taken into account the mark could survive, but it looks like Louboutin might have to simply rely on their goodwill in passing off in the future.

18 July, 2017

Less Offensive - US Supreme Court Takes on Disparaging Trademarks

Issues surrounding race are incredibly difficult and complex things, and clearly have no single answer to address them fully. Many efforts have been made to address various nuances of race and racial negativity, one of which is the prevention of the registration of trademarks in the US that could disparage individuals of a given race. Even so, trademarks exist that could be deemed to be offensive and disparaging (more on which here and here), and this has created a great deal of discourse on their continued existence, and similarly on the registration of other potentially disparaging marks. Should these types of marks be allowed, or should society move on and reject all trademarks that might be considered disparaging? The US Supreme Court endeavoured to answer this question once and for all this summer.

The case of Joseph Matal v Simon Shiao Tam dealt with a rock band, The Slants, who sought to register their name as a trademark in the US. The term "slants" is a derogatory term for persons of Asian descent, and the band sought to, through the use of the negative term as their moniker of choice, to reclaim it and take away its negative meaning. After filing their application for the trademark, the USPTO denied the application on disparagement grounds under 15 USC section 1052(a). The band, under the name of its lead singer Mr Tam, challenged the ruling and took the matter all the way to the Supreme Court.

The crux of the case remained that would the clause preventing the registration of disparaging be unconstitutional, particularly in terms of the First Amendment right to free speech.

At first, after setting out the legislative history of trademarks, Justice Alito (delivering the majority's opinion) considered that, while there is a valid registration system for trademarks, one does not have to register a mark to enjoy its use. In the same vein, the marks can be protected on a federal level under the Lanham Act, particularly through common law rights in those marks. Even so, certain rights are conferred to the holders of the marks through registration, and it does therefore add value and further protections over those marks, making registration very important.

Justice Alito then moved onto the test of whether a trademark is disparaging. This is whether "…the likely meaning of the matter in question, taking into account not only dictionary definitions, but also the relationship of the matter to the other elements in the mark, the nature of the goods or services, and the manner in which the mark is used in the marketplace in connection with the goods or services… [and] whether that meaning may be disparaging to a substantial composite of the referenced group". Even if the applicant is of the 'disparaged' group of people does not negate any possible findings under the test. At first instance, both the USPTO and the Appeal Board determined that the mark sought was indeed disparaging.

Before discussing whether the clause is unconstitutional or not, the Court had to first look at whether the mark was, as determined at first instance, disparaging. Tam argued that, while the disparagement provision speaks of 'persons', it cannot apply to non-juristic entities such as ethnic groups, but only to natural and juristic persons (i.e. individuals and not undefined, albeit legally defined groups). The Court swiftly rejected this argument, as Tam's narrow construction does not match with that of the provision of USPTO's definitions, which set out much broader terms, speaking of not just 'persons', but also 'institutions' and 'beliefs'. Therefore, as the Court concluded, disparagement can apply to non-juristic entities just as well as juristic entities.

Justice Alito then moved onto the main focus of the case, i.e. the constitutionality of the disparagement clause itself.

Washington's newest football team's logo (trademarked of course)
The first arguments circled around whether trademarks are government speech, not private speech or a form of government subsidy. As a primer, all government speech is exempt from First Amendment scrutiny, and can therefore say whatever it pleases (at least in theory). Even though trademarks are registered by the USPTO, the office does not itself regulate what the message of each mark is, unless it is considered disparaging under the provision. The viewpoint of any particular mark is irrelevant, and registration does not mean approval of the mark by the government. Justice Alito rejected the cases referred to in the matter, and concluded that the registration of a mark is not government speech, but private speech. In her view: "…if the registration of trademarks constituted government speech, other systems of government registration could easily be characterized in the same way". She also aligned the matter with copyright registration as "…if trademark registration amounts to government speech, then copyright registration which has identical accoutrements would “likewise amount to government speech".

The US government also argued that precedent set shows that government programs that subsidized speech expression specific viewpoints are constitutional. Justice Alito quickly rejected this argument, since "…[t]he federal registration of a trademark is nothing like the programs at issue in these cases". While registration does, arguably at least, confer certain non-monetary benefits to registrants, it does not provide a direct monetary subsidy, which the cases discussed did.

Finally, the government argued that the disparagement clause should be sustained applying only in cases that involved 'government-programs'. Justice Alito, again, rejected this argument, setting out that "…the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers". The Court deemed that you cannot discriminate against a particular viewpoint, and the disparagement clause does do so, even if the subject matter is potentially offensive to a given group of people. The Court therefore concluded that "…the disparagement clause cannot be saved by analyzing it as a type of government program in which some content- and speaker-based restrictions are permitted".

The Court then finally moved onto the question of constitutionality. whether trademarks are commercial speech, and therefore can be restricted under limited scrutiny under Central Hudson. The case allows for a restriction of free speech that has to "…serve a substantial interest and it must be narrowly drawn". Justice Alito concluded that the clause fails the Central Hudson scrutiny on the outset. It was also argued that it serves two interests, including protecting underrepresented groups from abuse in commercial advertising. The Court dismissed this interest, as the First Amendment protects even hateful speech. The second one is protecting the orderly flow of commerce, where the trademarks, through their offense, prevent or reduce commerce through their use. Justice Alito dismissed this argument as well, as the disparagement provision is not 'narrowly drawn' to prevent the registration of only trademarks that support invidious discrimination, while applying to a very broad type of people, including the dead. In her final view "…If affixing the commercial label permits the suppression of any speech that may lead to political or social “volatility,” free speech would be endangered". The Supreme Court therefore deemed that the disparagement clause violates the First Amendment.

The case is a hugely influential one, which opens the door for a myriad of trademarks, particularly those that are offensive or have the potential to cause offense. Free speech is a double-edged sword, and an American near free-for-all free speech is a source of pride, but can cause issues for those who face abuse or humiliation at the hands of those using that right. The case will also have a knock-on effect in the Redskins litigation, undoubtedly clearing the path for the mark to remain registered. In the end, the Supreme Court seems to be completely right here, but this writer, being a proponent of a more limited free speech (although only for very narrow and specific exceptions), can't help but feel that this will pave the way for more offensive marks in the long term.

11 July, 2017

Results Breakdown - Canadian Supreme Court Rules on Infringing Websites and Google Search Results

When reading this case this writer pondered what he would do in a world without Google (or search engines in general). Finding information on a web that's very close to an unrestricted space is both very useful, and can produce results you never expected, both in the good and the bad. Through the sheer power of the search engine, finding details online is quite easy, and can present an ingenius searcher with plenty of legitimate and illegitimate materials. This still poses the question: should search engines have to, or be forced to, restrict their results, to prevent the infringement of someone's rights? While this question often falls due to issues of jurisdiction, the Canadian Supreme Court endeavoured to answer it in a Canadian context only last week (with the BC Supreme Court decision having been discussed here).

The case of Google Inc. v Equustek Solutions Inc. dealt with the sale of devices that allow complex industrial equipment made by one manufacturer to communicate with complex industrial equipment made by another manufacturer. Equustek have developed, manufactured and sold such devices for some time. Former employees of Equustek, having left the company, started their own competing company, which developed and sold a similar device online, over which an injunction was granted by the Canadian courts. After a long legal battle, the respondents fled Canada and abandoned the proceedings, with Equustek subsequently pursuing Google to remove the website selling the infringing devices from their search results. Having initially received the injunction (limited only to Google.ca), Google pursued the matter further in the courts, ultimately ending up in the highest court in Canada.

What the case was all about was whether Equustek could pursue a worldwide interlocutory injunction through the Canadian courts against Google and its search results.

Initially, the Court set out the three-part test that determines whether a court should exercise its discretion to grant an interlocutory injunction: "...[1] is there a serious issue to be tried; [2] would the person applying for the injunction suffer irreparable harm if the injunction were not granted; and [3] is the balance of convenience in favour of granting the interlocutory injunction or denying it. The fundamental question is whether the granting of an injunction is just and equitable in all of the circumstances of the case".

Google agreed that there was a serious issue to be tried; however, they presented a multitude of arguments for the Court against the injunction. This included that the injunction is not necessary nor would it be effective; a third-party should not be bound by an order on another party (and therefore be subject to the injunction); and that issuing an interlocutory injunction with extraterritorial effect would be improper.

Search results - the great unknown (Source: xkcd)
Justice Abella considered that, due to the global nature of the Internet, any injunction involving multi-national, cross-border entities like Google would have to be applied globally. In short, as the majority of Google's business happens outside of Canada "...Purchasers outside Canada could easily continue purchasing from Datalink’s websites, and Canadian purchasers could easily find Datalink’s websites even if those websites were de-indexed on google.ca. Google would still be facilitating Datalink’s breach of the court’s order which had prohibited it from carrying on business on the Internet".

She also added that an interlocutory injunction, such as in this case, is therefore necessary to prevent the defendants' infringement online. Without Google's indexing of their site their business would not be feasible. Justice Abella also determined that there would be no issue with the freedom of expression, as no other nations' laws would be violated by the injunction.

The judge followed with the notion that this injunction would not affect Google's 'content neutral character', as it does not impose further monitoring obligations on the company, but merely the removal of the specified web addresses from its index. The same would not cause any undue expense on Google, which is something they already do for other illegal, more severe content online, and actively complies with DMCA notices over copyright infringement.

While the respondents' business can only thrive through Google's services, the court acknowledged that they are not responsible for the harm caused; however, Google has the power to end the harm by de-indexing the content. Ultimately, Justice Abella dismissed Google's appeal.

Two judges, Rowe and Côté, dissented from the majority's opinion, arguing that the injunction should not have been granted. In their view, the injunction's effects on Google would be final, with no recourse (unless to adjust its terms through the courts), and that Google is not a party to the dispute and should not be subjected to the injunction in question. Finally, the judges saw that the injunction is mandatory, with very little proven effect on its purpose, and the courts are presented with alternatives such as an asset freeze or injunctive relief against the ISPs preventing access to the website.

Ultimately, the case turns on the fact that it can open the floodgates for a stream of applications seeking similar injunctions, impacting both Google's business and the Canadian judicial system as a whole. The Court did leave the matter quite open, and this writer is confident that more applications will follow the decision, since, as the Court observed, Google already complies with similar obligations on a regular basis. Worldwide injunctions should not be a common weapon used, but an extraordinary one, so this writer does hope that the Canadian courts will restrict its application to only instances where they are truly needed.

27 June, 2017

Copyright Mutiny - The Pirate Bay is Communicating Works to the Public, says CJEU

Internet piracy has become a very common thing in the 21st century, and websites providing access to infringing materials, specifically torrent files, are booming. While these sites don't host material themselves, they provide links to files shared by the users themselves, potentially therefore facilitating this action. Rightsholders have, arguably rightfully so, been irate about this sharing of content, and have sought to challenge and shut down these websites. A case has been raging in Europe for some time (discussed more here), with both rightsholders and website hosts undoubtedly waiting for its conclusion, which is finally here after the CJEU handed down its judgment in mid-June.

By way of a short primer, the case of Stichting Brein v Ziggo BV and XS4All Internet BV concerns the communication to the public of copyright protected works. In the matter, Stichting Brein, a foundation that protects the interests of copyright holders, took two of ISPs to court seeking to force them to block access to the website The Pirate Bay (TBP). The site, for those unfamiliar with it, gives access to both torrent and magnet files, both of which are used in the facilitation of P2P connections, linking to particular files on the computers of users sharing those files, downloading them in small parts from the users as a collective. The CJEU therefore had to determine whether the ISPs could be compelled to block access to TBP.

As discussed above the matter hinged on whether TBP communicated the works to the public under Article 3(1) of the InfoSoc Directive. With this, the Dutch Supreme Court sought answers to two questions.

The first question, as summarized by the CJEU, asked "… whether the concept of ‘communication to the public’, within the meaning of Article 3(1)… should be interpreted as covering… the making available and management, on the internet, of a sharing platform which, by means of indexation of metadata relating to protected works and the provision of a search engine, allows users of that platform to locate those works and to share them in the context of a peer-to-peer network".

The CJEU set out what amounts to a communication to the public, which comprises of an 'act of communication' that happens to 'a public.

An 'act of communication' has to be assessed under a number of interdependent criteria that need to be fulfilled for the act to be deemed as one of communication. Among these criteria lie the indispensable role of the user and the nature of their intervention: "That user makes an act of communication when he intervenes, in full knowledge of the consequences of his action, to give his customers access to a protected work, particularly where, in the absence of that intervention, those customers would not be able to enjoy the broadcast work, or would be able to do so only with difficulty". In essence, if a user (or a website in this case) intervenes, with full knowledge of doing so, and gives access to copyright protected works that would otherwise be unavailable to the end-users, they would be making an act of communication. The users can also access the works whenever and wherever they please.

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A 'public' amounts to an indeterminate number of potential viewer, although the number would have to be fairly large. The communication above would also have to happen through a new technical means, not employed by the original communicator (if done so at all initially), to a 'new public', i.e. "…a public that was not already taken into account by the copyright holders when they authorised the initial communication of their work to the public". Finally, the profit-making nature of the communication, if any, is not wholly irrelevant to this assessment.

Following previous decisions, including in Svensson, BestWater and Stichting Brein, the Court established that "…any act by which a user, with full knowledge of the relevant facts, provides its clients with access to protected works is liable to constitute an ‘act of communication’ for the purposes of Article 3(1)".

TBP's platform offers the files for download when and wherever the end-user wants to using the torrent and magnet files provided in their index. Additionally, the Court saw that, while the files were uploaded onto the site by its users and not TBP, "…by making available and managing [the] online sharing platform… intervene, with full knowledge of the consequences of their conduct, to provide access to protected works, by indexing on that platform torrent files which allow users of the platform to locate those works and to share them within the context of a peer-to-peer network". Clearly, TBP's heavy role in the management of the index of the files plays an integral part in the copying of those files by the users. Without them the users would not, potentially at least, have access to the files, making TBP's role essential in the process.

Finally, the Court rejected that TBP only merely provided the physical facilities enabling or making the communication, as the website made the location and access to the files easier through its indexing and search facilities, while actively pruning the collection of files on their website to exclude dead or faulty links.

The Court concluded that the making available and management of an online sharing platform like TBP must be considered to be an act of communication.

The second hurdle therefore was whether this was done to a 'public'. In order to determine this, the Court has to consider both how many persons have access to the same work at the same time and how many of them have access to it in succession.

Many subscribers of both ISPs' services had accessed and downloaded files from the TBP website. The 'public' concerned also included all of the 'peers' on the torrent system, which amounts to, at a given time, potentially tens of millions of users. The communication therefore does happen to an indeterminate amount of people, involving a large amount of individuals – falling in the definition of a 'public' under the Directive. The users of the website would also not have been considered by the original communicators of the works, therefore being a 'new public'.

The Court ultimately concluded that: "…the concept of ‘communication to the public’, within the meaning of Article 3(1)… must be interpreted as covering… the making available and management, on the internet, of a sharing platform which, by means of indexation of metadata referring to protected works and the provision of a search engine, allows users of that platform to locate those works and to share them in the context of a peer-to-peer network".

The decision is a very important one, and sets the tone for the enforcement of copyright against torrent websites all over the Internet, not just TBP. Clearly, the Court placed a heavy emphasis on the active management of the website, its index, and the provision of the facilities to easily search and download infringing materials from the website. This writer would agree with this assessment, since, should a very active facilitation of copyright infringement be included under Article 3, this would open up the field for a tremendous amount of abuse as a result. It will remain to be seen how this decision will impact these websites, but it is clear that rightsholders will welcome this decision with open arms. 

Source: IPKat