22 December, 2016

A Big Bite of the Apple - Supreme Court Decides the Fate of Design Patents

The two titans of technology, Apple and Samsung, have fought long and hard over many aspects of intellectual property law, especially ones relating to the design of the (now ancient, at least in smartphone terms) iPhone. The two companies have fought legal battles all over the world since 2011, with varying results for both parties. After a monstrous $1.05 billion award of damages to Apple in earlier cases by a jury, the matter ended up with the Supreme Court, who were destined to look at an aspect of design patents often overlooked by the judiciary, even if it was merely from a damages perspective. The Supreme Court handed down its judgment in early December.

The case of Samsung Electronics Co. v Apple Inc., dealt with design patents owned by Apple on aspects of the iPhone, in particular a black rectangular design (D618,677), the same with a bezel on a surrounding rim (D593,087), and a colourful grid of 16 icons on a black screen (D604,305). Samsung employed similar design aspects in its various smartphones (including the Galaxy S line), and Apple took them to court for infringement in the aforementioned design patents. What the Supreme Court were tasked to determine was the infringement, and subsequent award for damages for infringement, under section 289 of the US Patent Act.
The above section provides a remedy for damages when "[a] person who manufactures or sells “any article of manufacture to which [a patented] design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit". While this is more straightforward in instances of whole infringement of a simple, single article, it is more difficult, as admitted by Justice Sotomayor (handing down the Court's unanimous judgment), in cases with complex, multi-component items and subsequent profits using the infringing elements.
Complexity comes with a need for introspection
What remains key is the liability for the infringing articles where the designs have been applied, which has been traditionally set at "…the extent of his total profit, but not less than $250". This then means you have to initially identify the 'article of manufacture' to which the infringed design has been applied, and then calculate the infringer's total profit made on that article of manufacture.  The Court therefore had to decide "…whether, in the case of a multicomponent product, the relevant “article of manufacture” must always be the end product sold to the consumer or whether it can also be a component of that product". This would either enable the patent holder to claim all profits made by selling the Samsung smartphones (i.e. the whole phone), or restrict the damages that can be claimed (i.e. only allowing damages for the particular designs used, and not the whole phone) by the rightsholder.

The Supreme Court left quite a bit unanswered in relation to the question of when an article of manufacture would be the whole product, or simply a component thereof, which, at least to this writer's mind, is a huge part of this matter and many others involving complex technology. Arguably, as the decision will be sent to the Federal Court for a rethink, the lower rungs will have to fill this space; however, there is a chance that an agreement will not be reached (yet again) by the lower courts, and the Supreme Court will have to address this matter in the future.

Justice Sotomayor saw that, after a simple reading of the term 'article of manufacture' that it would encompass both an individual component of a product, or the product as a whole. Design patents can be acquired for both, and while a component has to be embodied in an article, the designs can themselves only cover those components.p
The Supreme Court ended up saying very little in their judgment, and the future of design patents, especially in the smart device space, will remain very unclear. Whether the Federal Court comes up with a good test for the above remains to be seen, but this writer for one thinks the Supreme Court should've added more meat to their decision. Although they did highlight some issues with the parties' briefs, one would have concieved that some more guidance was to be given. Either way, the decision is important, and sets the scene for Apple and Samsung to compete more for the future of their devices and their designs.

Source: IPKat

06 December, 2016

As Clear as Grey - Sale of 'Grey' Goods a Criminal Offense in the UK

The sale of counterfeit goods is a touchy subject, and definitely an issue that many rightsholders are attempting to tackle head on, particularly in the context of the Internet (a good example is the recent Cartier litigation, more on which here and here). Added to this is also the "grey" market, meaning items obtained from duly licenced factories; however, bought without the authorization of the original licensor. This is, as the name indicates, a grey area within the law, and whether the sale of 'grey' goods is actually an offense under the law remains unclear. While arguments can be thrown back and forth, a recent case in the Court of Appeal set to decide the criminal ramifications of the sale of 'grey' goods in the UK, on which the Court handed down its judgment early last month.

The case of R v C & Ors dealt with a limited liability company that sold shoes and clothing, the operation of which included several different defendants. In the course of their business, the defendants sold branded goods, such as Ralph Lauren, Adidas and Under Armor, attained from sources outside of the EU, both from factories that were and were not authorized by the original rightsholder (and subsequently sold without their authorization in both instances). The goods sold included "...goods which had been part of an order placed with an authorised manufacturer by the trade mark proprietor but then cancelled; goods part of a batch whose manufacture had been authorised but which, after manufacture, were rejected as not being of sufficient standard; or goods manufactured, pursuant to an order, with authority but in excess of the required amount" (none of the categories had been confirmed by the prosecution). None of the goods sold were a part of any authorized batches of produced goods or parallel imports. The parties were taken to court for the contravention of section 92 of the Trade Marks Act 1994. 

Counterfeit Criminals Countered by Caped Crusader
Having set the legislative scene for trademarks in general, the Court moved onto dealing with the criminal aspect of the case. What section 92 sets out is that a person commits a criminal offense if they, either causing loss or aiming to gain from, use trademarks on goods and sell them, or uses the same marks for advertising or packaging in general. While the provision is very similar to that of trademark infringement (a civil offense), what distinguishes the criminal aspect is the mental state of the infringer, i.e. that the act has to be done "with a view" to gain or cause loss. AS established by previous cases, there is clear overlap, and a criminal offense under section 92 cannot happen without civil infringement as well.

The defense tried to separate the application of the mark by an authorized licensee on the goods from ones where it was done by an unauthorized entity. The Court rejected this position as patently false. According to the Court, the wording in the provision does not support this line of argument. In particular, the Court highlighted the lack of implied consent on the part of the authorizing entity for the brands applied on the goods, especially in the case of 'grey' goods. Their sale was not, through the licensing of the marks, authorized to unauthorized third-parties.

The final argument put forth by the appellants was that of ambiguity, and required clarification on Parliament's intention. The Court swiftly dispatched with the argument, deeming that the language of section 92 was perfectly clear and required no discussion of Parliamentary debates as to its meaning. While the discussions in Parliament were often lacking in detail as to the meaning of a 'counterfeit' (i.e. would it include 'grey' goods), the Court still considered that "...Trade mark violation gravely undermines the value of a brand and affects legitimate trade. The very fact of a cheap sale of a an unauthorised branded item can both dupe a customer and diminish the market and overall value of the trade mark, in terms of perception of quality and exclusivity. In some cases moreover (for example, electrical goods or toys) very real issues of public health and safety can arise where the goods are fake or, even if originally manufactured with the trade mark proprietor's authorisation, are then rejected as sub-standard but nevertheless sold on without authorisation". Due to this potential impact on the brand and public safety, the sale of 'grey' goods would therefore be detrimental in a multitude of ways, and should be protected by criminal sanctions. The Court did concede that the definition of 'grey' goods does potentially raise issues with parallel imports, but discussion on this was kept limited, as it did not apply to the case at hand.

The Court of Appeal ultimately considered that the sale of grey goods could amount to a criminal offense under section 92.

The case is a very important one, especially as a reminder to those who wish to import goods from outside the EU, and don't do their due diligence as to their origin and legitimacy. Businesses would need to be careful and verify that the products sold would be fully authorized, even for sale if bought directly from the factory itself. This writer would hesitate to wager that the case will have major implications to businesses importing branded goods from abroad, since the courts are reluctant to push criminal prosecution, even in parallel importation matters; however, one needs to be careful to dismiss the possibility outright.