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European IP Bulletin, Issue 4, August/September -
Hot Topics
Hot Topics
1. Have a Break – The House of Lords Refers to the ECJ in the Kit Kat Case
On 25 July the House of Lords in Société des Produits Nestlé S.A. and Mars UK Limited referred a question to the ECJ regarding whether the distinctive character of a trade mark may be acquired following the use of that mark in conjunction with another mark.
The ruling was in response to an appeal by Société des Produits Nestlé S.A. who had tried to register the phrase “HAVE A BREAK” in class 30. In the 1970’s Nestle, through its predecessors, had registered the slogan “Have a break…have a Kit Kat” and the name KIT KAT in class 30. It had also tried to register the phrase “HAVE A BREAK” as a separate mark. The application for “HAVE A BREAK” was refused and the appeal dismissed by Whitford J in March 1983. In 1994, the Trade Marks Act was passed implementing EU legislation providing for a community trade mark. Nestle made a further application for the registration of “HAVE A BREAK” in 1995.
Nestlé’s 1995 application was opposed by Mars UK Ltd. Mars was successful in its opposition on the ground specified in s.3(1)(b) of the Trade Marks Act 1994, namely that the mark was “devoid of any distinctive character”.
The appeal to the House of Lords by Nestlé was brought in order to determine whether the mark “HAVE A BREAK” is “devoid of any distinctive character” for the purposes of s.3(1)(b) and if so, whether the mark HAVE A BREAK had “acquired a distinctive character as a result of the use made of it” prior to the application under the Act
The Lords found that neither the Hearing Officer nor the Court of Appeal had erred in their consideration of the law and that, on the facts of the case, Nestlé had failed to show that the phrase “HAVE A BREAK” was inherently distinctive under Section 3(1)(b). Also, when used as a stand-alone phrase, without the phrase “…have a Kit Kat”, “Have a Break” did not have the distinctiveness required to meet the provisions of s. 3(1) of the Act to enable it to be registered as a trade mark.
The Lords concurred that if the ECJ rule is in the affirmative in answering the question referred, then it will be necessary to set aside the prior decisions in this matter, and to remit the matter to a different Hearing Officer to re-evaluate the evidence in the light of the preliminary ruling. However, if the ruling is in the negative, then the conclusions of the Hearing Officer and the Judge were correct as a matter of law, and the appeal based on acquired distinctiveness will also fail.
2. Adoption of New Copyright Bill in Germany
In April 2003 the German Parliament adopted the Bill on Copyright in the Information Society (the “Bill”). The Bill implements the EU Directive on the harmonization of certain aspects of copyright and related rights in the information society (2001/29/EC) and the WIPO Internet Treaties (WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty). The provisions of the Bill see a number of changes to the current German Copyright Act (Urheberrechtsgesetz), most of which address the need to adapt copyright law for the digital era. The Bill is currently being discussed by the German Upper House (Bundesrat).
The Bill creates a new exclusive right regarding public use of a copyright protected work which is counterbalanced by the implementation of limitations regarding the use of a copyright protected work without explicit consent of the author.
One of the most debated issues arising from the Bill was the right for individuals to make and retain a private copy of a copyright protected work and the need to limit copyright protection on works being used for the benefit of science and education. The Directive requires that there must be a limitation on the right of individuals to make and retain private copies of copyright protected work. In order to incorporate this provision the German legislator had to modify the current liberal provisions of the Copyright Act. The Bill still permits the making of private copies of copyright protected work, but this right is significantly limited by section 95(a) of the Bill which allows right holders to use copy protection measures to protect their copyright. To strengthen the rights holders’ position any avoidance or circumvention of the copy protection measures applied to a copyright work may result in heavy punitive fines.
Another controversial issue arises from section 52 of Bill, which establishes a new limitation on copyright protection if the exploitation of the work is for the benefit of science and education. According to section 52 teachers and scientists can make copies of articles and parts of books available, to a limited audience, for the purpose of education or science. The limited audience provision does not permit publication or circulation on the internet or unrestricted reproduction on an intranet. Publishers of scientific works have widely criticised this provision as it appears to be an unjustified interference with the property rights of the authors and editors. The result of the criticism is that section 52 is only planned to be introduced for a test period until the end of 2006.
The new Bill promotes the harmonisation of copyright within the European Union. As the Directive established clear principles for domestic copyright legislation in the Member States the German implementation of the new Bill of Copyright does not contain any surprises. Nevertheless, as a result of entering the digital age there are still some important legal issues which need to be addressed, namely: the legitimacy of using Peer-to-Peer file swapping services; and clarification on the lawfulness of making copies of illegal resources. For these reasons the German Upper House has called for further restrictions to be imposed on the right of the individual to make and retain private copies of copyright protected work; copies made from pirate material for private use are to be forbidden. Finally, to address concerns regarding the growth of piracy and the commercial distribution of illegal copies of copyright works the Upper House is also considering a restriction on the sale of equipment capable of creating copies.
3. House Of Lords Comments On Need For Trade Mark Use
In R v Johnstone [2003] UKHL 28, the House of Lords decided whether the fact that the defendant’s activities do not amount to civil trade mark infringement is a defence to criminal trade mark infringement under section 92 of the Trade Marks Act 1994. To answer this question the House of Lords considered whether use of a registered mark as a trade mark (i.e. to denote the origin of the goods or services that bear the mark) is necessary for civil infringement under section 10. In reaching the conclusion that trade mark use is necessary, their Lordships’ opinions conflict with the ruling of the Court of Appeal in Arsenal v Reed [2003] EWCA Civ 96, who, in a ruling delivered one day before Johnstone decided that trade mark use is not necessary.
Mr Johnstone had been found guilty of criminal trade mark infringement under section 92 of the Trade Marks Act after “bootleg” CDs (unauthorised recordings made during a live concert) that bore the trade marks of various musical artists had been found at his home. The trial judge considered that section 92 was a “stand alone” provision so questions of civil liability were irrelevant to criminal infringement. Therefore, Johnstone was denied the opportunity to argue in his defence that there could be no criminal infringement without civil infringement and that because he had used the trade marked name of the musical artist to describe the performer who was featured on the CD, rather than to indicate the CD’s trade origin he had a civil defence under section 11(2)(b).
The House of Lords rejected the trial judge’s approach, holding that in order for criminal infringement to be found, civil infringement must first have taken place. Parliament cannot have intended to criminalise conduct that could otherwise be lawfully done and that does not infringe the proprietor’s rights. Additionally, the requirement that the defendant’s conduct must be done “without the consent of the proprietor” of the mark, assumes that the proprietor would otherwise be able to object to the defendant’s activities. Similarly, section 92(5), states that a reasonable belief in non-infringement is defence to criminal infringement. This would make no sense if civil infringement was irrelevant to the criminal provisions. Finally, if the section 92 applied to situations outside the definition of civil infringement this would effectively grant the proprietor of the mark a wider range of rights than he is granted under Articles 5 to 7 of Directive 89/104, which would be at odds with the harmonising aim of that Directive.
As a result, the House of Lords had to determine whether civil infringement had taken place. As the first step in its reasoning, the court had concluded that use as a trade mark (i.e. in order to indicate the trade origin of the goods or services on which the mark is used) is required for civil infringement. In reaching this conclusion, the House of Lords interpreted the ECJ’s ruling in Arsenal v Reed very differently from the Court of Appeal in its judgment in Arsenal v Reed. The House of Lords emphasised that the ECJ statement that the essential function of a trade mark is to guarantee the identity of the origin of the marked goods or services by enabling the consumer or end user to distinguish the goods or services from those with another origin without any possibility of confusion, and claimed that the ECJ had thought that the scope of the trade mark proprietor’s rights under Article 5(1)(a) of Directive 89/104 was coterminous with the function of registered trade marks. In other words, the proprietor can only control use of his mark that affects the function of his mark, that is the ability to indicate the origin of the goods or services on which it is used and that only use by a third party to indicate origin can affect that function. The English statute should be construed in accordance with the EU ruling and therefore, according to the House of Lords, trade mark use is required under sections 10(1) to (3). Whether trade mark use has taken place is a question of fact to be judged through the eyes of the average consumer of the goods in question. Regarding the trade marked name of a performer on music CDs, trade mark use will not have taken place if the name is exclusively an indication of the name of the performer whose music is on the disc and is unlikely to be understood as indicating any other connection between the performer and the disc because the use of the mark will be descriptive of the contents of the disc. Consumers’ perceptions of the performer’s name are a question of fact for every case, although their Lordships indicated that where the work on the CD is protected by performers’ rights, consumers may attribute the control that they would expect performers to exercise over their recordings to those performers’ rights, rather than to the use of the trade mark.
The failure of the trial judge to take these considerations into account made the conviction unsafe. However, the House of Lords also considered the defence to criminal infringement under section 92(5), holding that this applies not only to situations where the defendant has a reasonable belief that his activities do not infringe a trade mark, the existence of which he is aware, but also to instances whether his belief that he is not infringing stems from a reasonable belief that no relevant trade mark is registered. Finally, the court held that the evidentiary burden, where the defendant must raise an issue sufficient to require the prosecution to disprove it does not violate the presumption of innocence under Article 6(2) of the ECHR as it is applied to criminal trade mark infringement. States can derogate from the presumption of innocence if they can show a compelling reason for doing so. Such a reason can be shown when it comes to counterfeiting and allied activities because of the difficulty and importance of combating counterfeiting and the ease with which a defendant can raise an issue about his honesty.
4. The Trials Of Trade Mark Use
The Court of Appeal handed down judgment in Arsenal Football Club Plc v Matthew Reed [2003] EWCA Civ 96 on 21 May, following an appeal by the claimants against the decision of the High Court of 12 December 2002. Overruling that decision the Court of Appeal found for the claimants and held (1) that there was no requirement that use of a sign be trade mark use for trade mark infringement under the Trade Marks Act 1994 (“1994 Act”) section 10(1); and, (2) that trade mark use was not even the relevant consideration under the law. However, on 22 May 2003, the House of Lords concluded the opposite in the criminal case Regina v Johnstone [2003] UKHL 28 (22 May) that, “Non-trade mark use is not within section 10(1) to (3)”. (See above).
Arsenal concerned the sale of scarves and other merchandise by the defendant that bore representations of the Arsenal signs “Arsenal”, “Arsenal Gunners”, “Crest Device”, “Cannon Device”, all registered as trade marks. The claimants brought an action for passing off (which was dismissed) and trade mark infringement.
At first instance, the court had held that the presence of the Arsenal signs on the defendant’s goods would be perceived “as a badge of allegiance, loyalty or affiliation to those to whom they are directed. They would not be perceived as indicating trade origin”
Would non-trade mark use be sufficient for trade mark infringement? The court opined that if non-trade mark use was sufficient for infringement, serious inconsistencies would arise within the 1994 Act. That, in itself, was a strong indication that only trade mark use would amount to infringement of the rights of the proprietor. However, the court in British Sugar Plc v Robertson & Sons Ltd ([1996] RPC 281) had held that trade mark use was not essential for infringement and that decision was approved in the Court of Appeal’s provisional view in Philips Electronics Ltd v Remington Consumer Products [1999] EWCA Civ 1340 (5 May 1999).
The court therefore made a reference to the European Court of Justice (“ECJ”) for a preliminary ruling under Article 234EC. Was it a defence to a claim of infringement of a registered trade mark, that a third party’s use of an identical sign for identical goods was not trade mark use (i.e. indicating a connection in the course of trade between the goods and the trade mark proprietor)? If so, would a use which would be perceived as a badge of support, loyalty or affiliation to the trade mark proprietor provide a sufficient connection?
The ECJ stated that the essential function of a trade mark was to guarantee the origin of the marked goods to the consumer; that was a guarantee that all the goods bearing the trade mark had been manufactured or supplied under the control of a single undertaking which was responsible for their quality; and, that the exclusive right granted to a trade mark proprietor under article 5(1)(a) of the Directive was to enable him to ensure that the trade mark could fulfil its functions, particularly its essential function. So only a use which was liable to jeopardise that guarantee of origin could be restrained by the trade mark proprietor. However, the ECJ found that, in the circumstances of the case, the use of the Arsenal signs on the defendant’s merchandise did create the impression that there was a material link in the course of trade between the goods concerned and Arsenal FC. That impression was not dispelled by the defendant’s advertising that his goods were “unofficial”: some customers might still think the goods originated with the claimant. In those circumstances, the use by the defendant of the Arsenal signs on his goods was liable to affect the guarantee of origin of the goods, and the trade mark proprietor must be able to prevent that use. It was immaterial that in the context of that use the sign was perceived as a badge of support for or loyalty or affiliation to the proprietor of the mark.
At the resumed proceedings, the court summarised the ECJ’s analysis of the law, noting that the exclusive right under Article 5(1)(a) was conferred for the purpose of protecting the essential function of the trade mark, its guarantee of origin, and only for that purpose. It appeared to the court that the ECJ had found, “that where the defendant’s use of a mark is not intended by him, or understood by the public to be a designation of origin, there can be no infringement because such use does not prejudice the essential function of the registered mark”. On that basis the ECJ should have answered the court’s first question in the affirmative: non-trade mark use was a defence in an action for trade mark infringement. Importantly, the court held that the ECJ had made findings of fact contrary to those of the court: in particular, that the defendant’s use was trade mark use in that it created the impression of a material link between the goods and the trade mark proprietor. It was not within the ECJ’s jurisdiction on an Article 234 reference to make such findings and the court could not cede a jurisdiction to the ECJ which it did not have. Those findings would not be applied. The court therefore applied its understanding of the ECJ’s analysis of the law to the facts found at trial and found for the defendant.
The Court of Appeal held that the court had misinterpreted the ECJ’s analysis of the law. The reference to the ECJ was based on the view that infringement depended on whether the use complained of was trade mark use. The ECJ had concluded that that was not the relevant consideration. The registration of a trade mark gave the proprietor a property right. The material consideration, which the court had not dealt with, was whether the use complained of was liable to damage that property right or be “likely to affect or jeopardise the guarantee of origin which constitutes the essential function of the mark.” That did not depend on whether the complained use was trade mark use.
Furthermore the ECJ had not made findings of fact that were inconsistent with those of the court. The ECJ’s concern was whether the complained use was liable to jeopardise the guarantee of origin of the trade mark not whether that use was trade mark use. So, even though the use by the defendant of the Arsenal signs on the merchandise would be perceived as a badge of allegiance, loyalty or affiliation (which was not a trade mark use in the judgment of the court), it did not mean that the use was not liable to jeopardise the guarantee of origin of the trade mark. The court should have followed the ECJ’s ruling and found for Arsenal. The Court of Appeal also overruled the court’s conclusion that Mr Reed’s use was not trade mark use and indicated that it would have found differently on the issue of passing off.
However, in R v Johnstone, an appeal to the House of Lords, concerned a prosecution under the criminal provisions of the 1994 Act, the House of Lords came to the same conclusion on the ECJ’s analysis of the law in Arsenal as the court at first instance. This is a very strong indication that, despite the Court of Appeal’s ruling, trade mark use remains the relevant consideration in determining trade mark infringement. Mr Reed has indicated that he will seek permission to appeal to the House of Lords.
5. Report Of The Commission On Intellectual Property Rights: The UK Government Response
The UK Governments has given its official response to the final report of the Commission on Intellectual Property Rights (“CIPR”), which it established in 2001. Broadly, the response is very supportive of the CIPR report, agreeing with many of their conclusions, and acknowledging that patents may not always be beneficial for development of less established economies.
In September 2002 the CIPR released the report “Integrating Intellectual Property Rights and Developmental Policy” which had been initiated as a result of a commitment in the government’s second White Paper on International Development entitled: “Eliminating World Poverty: Making Globalisation Work for the Poor” (December 2000). The CIPR declared that the internationally-mandated expansion of intellectual property rights was unlikely to generate significant benefits for most developing countries and likely to impose costs, and a number of recommendations were presented. In May 2003 the government published its response to the CIPR report “The UK Government Response to the Report of the Commission on Intellectual Property Rights - Integrating Intellectual Property Rights and Development Policy”. Responding to the CIPR report point by point the response addresses the following issues: general development; health; agriculture and genetic resources; traditional knowledge and geographical indications; copyright, software and the internet; patent reform; institutional capacity; and governance of international agreements. Broadly, the response by the government is very supportive of the CIPR report, agreeing fully with the majority of their conclusions. A few issues are discussed here.
In relation to intellectual property and the promotion of development, the government agrees with, amongst other things, the CIPR’s recommendation that there is a need for incentive policies in developed countries to promote technology transfer, for instance tax breaks for companies that license technology to developing countries.
Regarding health, the CIPR and the government agree on a number of issues, including the need for public intervention in combating diseases of developing countries either directly, e.g. through public funding or tax incentives to encourage private sector research, or through stimulating private-public partnerships. It was also agreed that much more needs to be done to increase access to essential medicines and that patented drugs should move freely throughout the developing world to encourage competition and provide access to lower cost drugs.
With respect to agriculture and genetic resources, it was agreed that developing countries should not provide patent protection for animals and plants, as is allowed under Article 27.3(b) of TRIPS, because of the restrictions patents may place on use of seed by farmers and researchers. Rather they should consider different forms of sui generis rights.
The UK government believes that intellectual property rights can play a vital role in the course of the development process for developing countries. It agrees with the CIPR that intellectual property right regimes can and should be tailored to take into account individual country’s circumstances within the framework of international agreements such as TRIPS.
The government committed itself to continuing to monitor the operation of the patent system and consider how improvements in the rules, nationally and internationally, might address any concerns, particularly as they might affect developing countries.
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