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

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.

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.

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.

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.

Thomas' new online venture would have to
end before it even began...

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

Printing on the Wall - US Supreme Court Rules on Patent Exhaustion

Discussed on this blog only a few weeks ago, the US Supreme Court decision in Lexmark can have huge ramifications for both patent holders and sellers of those products all over the world. When and if at all patent rights exhaust after the sale of a product, be it in the US or abroad, is an important question and will set clear boundaries for both buyers and sellers, potentially impacting the price and availability of products and services all over the world. Many IP practitioners have been waiting for the decision by the Supreme Court, who released it only some weeks ago.

By way of a brief primer, the case of Impression Products Inc. v Lexmark International Inc. concerned the resale of printer ink cartridges, for which Lexmark owned several patents, which they also designed and manufactured. Impression Products bought used cartridges both abroad and in the US, refilled them and resold them; however, Lexmark set conditions on the cartridges during their sale, preventing their reuse and resale by other companies. Lexmark took Impression to court, and the matter ended up with the Supreme Court, who were set to decide a major point of patent law, as to when patent rights have been exhausted (if at all) after the sale of the product containing the patent rights.

The first question the Court tackled was whether the sale of the cartridges in the US did indeed exhaust their rights in the patented aspects of the goods. 35 USC section 154(a) confers the right to make and sell patented products, but the provision does not set any express limitations on the right. However, case law has established that "[w]hen a patentee chooses to sell an item, that product “is no longer within the limits of the monopoly” and instead becomes the “private, individual property” of the purchaser, with the rights and benefits that come along with ownership". The law therefore has limits on the control that a patent holder can exert on products within their monopoly. After discussing the historical context of patent exhaustion, the Court swiftly determined that "…Lexmark cannot bring a patent infringement suit against Impression Products to enforce the single-use/no-resale provision accompanying its Return Program cartridges. Once sold, the Return Program cartridges passed outside of the patent monopoly, and whatever rights Lexmark retained are a matter of the contracts with its purchasers, not the patent law".

This rationalisation makes sense to this writer, since a near perpetual, inexhaustible patent right in products, even post-sale, could have huge ramifications on the resale market, and potentially even anti-competitive uses (which the prevention of the resale of cartridges by a competitor could be construed as). The Court summarised its position on this: "…patent exhaustion is uniform and automatic. Once a patentee decides to sell—whether on its own or through a licensee—that sale exhausts its patent rights, regardless of any post-sale restrictions the patentee purports to impose, either directly or through a license".

The Court then moved onto the issue of the importation and sale of cartridges bought abroad. This question has not been addressed much under patent legislation, but has been discussed in the Supreme Court decision in Kirtsaeng, which established that the first sale of a copyright protected work would exhaust the rights in that work, even if imported from abroad and sold in the US (having been initially made and sold lawfully).

The Supreme Court faced the wrath of
patent holders after the decision

Under the common law concept of exhaustion, as discussed in Kirtsaeng, there is no territorial restriction on the fact. A sale abroad would be, arguably, exhaustion of rights within the US, and would therefore allow the importation of those goods into the US without infringement. According to the court, the copyright concept of exhaustion would not be distinguishable from patent exhaustion, as this would "…differentiating the patent exhaustion and copyright first sale doctrines would make little theoretical or practical sense [as] …the two “share a strong similarity and identity of purpose". The person buying the goods abroad is not buying the patented rights, according to the court, and that "…exhaustion is triggered by the patentee’s decision to give that item up and receive whatever fee it decides is appropriate". The court therefore concluded that Lexmark's rights were exhausted when the cartridges were sold abroad, and Impression would not be infringing their rights by importing the goods to the US.

Justice Ginsburg was the only judge to dissent. In her view, patent rights were purely territorial, and that "…[b]ecause a sale abroad operates independently of the US patent system, it makes little sense to say that such a sale exhausts an inventor’s US patent rights". This would open the door for competitors to potentially sell those patented products in the US with no legal recourse by the patent holder. Arguably, Justice Ginsburg's perspective is wholly justifiable, and this writer would raise concerns over this fact as well. If patent rights are fully exhausted in the event of a foreign sale, there would be very few restrictions on doing exactly the above by competitors. Finally, she disagreed with the majority's application of Kirtsaeng with patent rights, as "…[a]lthough there may be a “historical kinship” between patent law and copyright law… the two “are not identical twins". The legislative framework for copyright and patents does differ, and a straightforward application of copyright concepts to patents might not be possible as the law stands today.

The decision is a very important one, and will have clear and strong implications to patent holders who rely on the retention of rights in the US, irrespective of where the products were sold. Time will only tell whether this opens the Pandora's Box of reselling "infringing" products in the US; however, this writer is certain that other avenues will be used for the sale of patented products, such as contractual vehicles, rather than relying on pure rights retention.

A Collective Effort - The Impact of the GDPR on Collective Management Societies

This article was kindly drafted by Axel Beelen, who writes the blog IP News (focusing on EU and Belgian IP developments). He can also be found on Twitter here. He is also a data protection specialist.

The rules surrounding personal data are about to change on 25 May 2018 when the new General Data Privacy Regulation (GDPR) will enter into force. Because collective management organisations (CMOs) process their members' personal data, they will have to be compliant with the GDPR next year. Fines can be very high in the case of non-compliance. Below you will find the key points introduced in the GDPR concerning CMOs.

Data-subjects’ rights enlarged and more defined

The processing of personal data is lawful only if, and to the extent that, it is permitted under the GDPR. If the data controller (here the CMO) does not have a lawful basis for a given data processing activity (and no exemption or derogation applies) then that activity is prima facie unlawful. A lawful basis would be the consent of the data subject to do so, contractual necessity, compliance with legal obligations, the vital interests of the data subject, necessary for public interest or the legitimate interests of the data controller.

The "legitimate interests" lawful basis, under Article 6, is the more difficult to understand. It requires the balancing of the legitimate interests of the CMO against the interests and fundamental rights of the data subject (the rightholder).

To be a member of a CMO, rightholders (for example, authors, publishers, artists and producers) enter into an agreement with the CMO. This contract will generally be the lawful basis for the future processing of the rightholder’s data.

Members must be informed before any processing

The GDPR requires that the members of the CMOs have to be clearly and fully informed about their set of rights, including new rights that have been introduced, before the collection and processing of their personal data. CMOs are strongly advised to adapt their privacy provisions, communications and information to meet the requirements of the GDPR.

CMOs will also need to ensure that they have effective systems in place to enable them to give effect to these rights without any costs to the rightsholders. In the case of non-compliance, fines can be very steep: €20 million or up to 4% of the total worldwide annual turnover of the CMO for the preceding financial year.

CMSs have gone through quite the change,
even before the GDPR (Source: Oatmeal)

The GDPR expands the existing set of rights provided in the 1995 Data Protection Directive, and creates several entirely new rights increasing the ability of members of CMOs to better control their personal data. CMOs must provide any requested information in relation to any of the rights of their members within one month of receiving such a request. Only where CMOs receive large numbers of requests, or especially complex requests, may the time limit be extended by a maximum of two further months. Internal policy enabling the CMO to quickly reply to a member request will need to be written.

Members’ rights under the new GDPR

In a nutshell, members have the following rights under Articles 12-22:

• Right of access: members of CMOs (as data subjects) have the right to obtain information relating to (i) confirmation of whether, and where, CMOs are processing their personal data, (ii) the purposes of the processing, (iii) the categories of data being processed, (iv) the categories of recipients with whom the data may be shared, (v) the period for which the data will be stored, (vi) the existence of the rights of erasure, rectification and restriction of processing and to object to processing, (vii) the existence of the right to complain to the DPA, (viii) the existence of, and an explanation of the logic involved in, any automated processing that has a significant effect on data subjects. Additionally, members may request a copy of the personal data being processed by their CMO;
• Right of rectification regarding any inaccurate personal data possessed by the CMO;
• Right to erasure (the "right to be forgotten"): following the Google Spain ECJ ruling of 2014, the GDPR now allows data subjects to request that their personal data be erased if (e.g.) the data are no longer needed for their original purpose (and no new lawful purpose exists) or the data subject exercises the right to object, and the controller has no overriding grounds for continuing the processing;
• Right to restrict processing;]
• Right of data portability: members will now have the right to receive a copy of their personal data in a commonly used machine-readable format, and request that these data are transmitted directly to another data controller (which could be another CMO). This new right has been the subject of Guidelines written by the Article 29 Working Party (Article 29 WP consists of representatives of the national supervisory authority in data protection);
• Right to object to processing for the purposes of direct marketing (including profiling); and
• Right to not be evaluated on the basis of automated processing: members have the right not to be subject to a decision based solely on automated processing which significantly affects them (including profiling). Such processing is permitted where (i) it is necessary for entering into or performing a contract with the data subject provided that appropriate safeguards are in place, (ii) it is authorised by law or (iii) the data subject has explicitly consented and appropriate safeguards are in place.

CMOs shall provide the data subject with all of this information at the time when personal data of the members are obtained.

A DPO to supervise the personal data activities

CMOs will have to appoint a Data Protection Officer (DPO) to supervise their personal data processing activities. CMOs will have to involve the DPO properly and in a timely manner in all issues which relate to the protection of personal data.

Each CMO will ensure that its DPO does not receive any instructions regarding the exercise of those tasks. The DPO cannot be dismissed or penalised by his CMO for performing his tasks. The DPO will directly report to the highest management level of his company. A DPO can be an employee of the CMO or an outside consultant.

The DPO may be contacted by the members with regard to all issues relating to processing of their personal data and to the exercise of their rights under the GDPR.

Conclusion

 For many collective management organisations, compliance with this new GDPR will be very challenging and expensive. They would be well advised to urgently carry out a legal assessment of the current status of their compliance in order to ascertain any gaps. CMOs will then need to implement adequate solutions and monitor their suitability. All of that before May 25th next year.