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European IP Bulletin, Issue 6, November -
Hot Topics
Hot Topics
1. European Parliament Adopts Controversial Amendments to Proposed Directive on Computer Implemented Inventions
At the plenary session on 24 September 2003, the European Parliament adopted an amended text for the proposed Directive on Computer Implemented Inventions (“CII’s”). The amendments adopted at this, Parliament’s first reading, illustrate the extent to which the Open Source Community has succeeded in lobbying MEPs with a view to severely limiting the level of protection afforded to CII’s, including software inventions. At the same time, questions are raised over the effectiveness and appropriateness of patent protection in technological industries in general. The text adopted by Parliament has very considerable disparities with the text originally proposed by the Commission and reverses many amendments adopted by its own Standing Committee under the guidance of Labour MP Arlene McCarthy.
The Commission’s original proposal recognised the importance of patents in stimulating innovation in the European packaged software market (worth €39 billion in 1998). It went on to identify problems with the status quo, principally the ambiguity caused by the specific exclusion from patentability of computer programs and potential differences in case law, in particular between national courts of member states and the boards of appeal of the EPO. To avoid a negative impact on the functioning of the internal market, the proposed directive is intended to harmonise national laws in respect of CII’s and make the conditions for patentability more transparent.
Following the usual legislative procedure, the Commission’s original proposal was passed to both the Council of Ministers and the European Parliament. The Council of Ministers considered the proposal and reached a common position in November 2002. At the same time, the European Parliament had referred the Commission’s proposal to a Standing Committee, The Committee on Legal Affairs and the Internal Market (“JURI”). This committee of experts was and continues to be steered by Arlene McCarthy.
While a review of all significant amendments from Parliament’s first reading is outside the scope of this update, the amendments include amendments to Article 2(a) concerning the definition of a “computer-implemented invention” and Article 2(b) which now defines a fourth requirement for patentability in the form of a “technical contribution”. Technical contribution is defined in terms of “natural forces to control physical effects beyond the digital representation of information”. This language is much narrower than existing requirements for a technical contribution and is used thought the text.
Two new subsections to Article 2, namely Article 2(ba) and (bb), further extend these definitions and additionally define “industry” within the meaning of European patent law to mean “the automated production of material goods”.
The new provisions also define “technical field” very narrowly and specifically rule out inventions involving the processing, handling and presentation of information from belonging to a technical field.
Interestingly, new Article 4(b) provides that solutions to technical problems will not be considered patentable inventions merely because they improve efficiency in the use of resources within a data processing system. This is among several amendments which seek to preclude patent protection for CIIs causing technical effects within computer apparatus.
Articles 5(1)and 5(1a) would constrain the claim format available for CIIs to a product (e.g. a programmed device) or a technical production process. Patent claims to a computer program, either on its own or on a carrier, are excluded explicitly.
Articles 5(1b) and 6(a) exclude the production handling, processing, distribution and publication of information, in whatever form, from infringement. Further, the use of a patented technique for a significant purpose, such as ensuring conversion of the conventions used in two different computer systems or networks so as to allow communication and exchange of data there between, is not considered to be patent infringement under the adopted text. This language is broad enough to undermine the value of patents outside software and computing fields.
Other amendments and new articles concern:
(i) an obligation on the Commission to monitor the impact of patent protection on software innovation, particularly among small and medium sized enterprises.
(ii) an obligation on patentees to include program listings and make them available without restrictive licensing terms.
(iii) an obligation on the EPO to review its operating procedures in the public interest; and consideration of whether a grace period is useful in patent systems.
The latter two issues at least appears not to bear particular relevance to CIIs.
With the first reading now complete, the next stage in the legislative process is for the Council of Ministers to modify the proposal by adopting a common position. The European Parliament can then accept the draft directive or reject it with further amendments.
In the event of continued disagreement between the Parliament and the Council, the directive will be referred to a conciliation committee in an attempt to reach an agreement. If no agreement is reached in that process, the proposal is deemed not to have been adopted (i.e. it fails), and the law remains unchanged.
The situation now has many parallels with that following early drafts of the Biotech Directive, which also included unworkable texts. Some commentators have tried to rationalise the deliberately radical position adopted by the Parliament as an intention to get all their bargaining chips on the table ahead of negotiations. Others have suggested Parliament’s text is unworkable or inappropriate in so many respects it raises doubts over whether amendments can be made within the general principles adopted by the Parliament. Unless the proposal fails to be agreed or the Commission withdraws it as unworkable, there is a real possibility that aspects of this defective legislation will be adopted as part of a Directive. It is therefore important that sufficient education and debate ensues, among members’ clients, relevant industry and professional institutions to ensure the ramifications for technological industries in general are fully appreciated.
2. European Trade Mark Protection And Unfair Competition –Views From the UK & Italy
The importance of the issue of prior rights in the European trade mark system is clear beyond doubt. Prior registered rights leave the commercial situation relatively clear for both businesses and their legal advisors. Rigorous trade mark searches (and market research or ‘brand audits’) are always advisable before investing in trade mark registrations and launches of newly named products or services. Earlier registered rights can constitute a block to trade mark registration or can lead to legal action based on Member States’ unfair competition laws. Unused registered trade marks can, within the minimum use requirements (genuine use within 5 years of registration) , can constitute “abandoned vessels in the shipping lanes of trade” blocking new traders who wish to register signs as trade marks.
With the important decision of Inter Lotto in the Court of Appeal, a different form of prior rights - unregistered rights - are seen also to be of vital concern to business. Such earlier rights, like passing off rights, are not visible “abandoned” vessels blocking the shipping lanes of trade. Quite the contrary, these are “submarine” submerged rights which can be a major hazard to the owner of the registered trade mark, or the applicant for such precisely because they are often “fully manned” and progress at speed, building up substantial goodwill and reputation while the registered mark remains unused. Such marks often do not show up on the legal “radar” without rigorous due diligence by the prospective trade mark applicant, and in the case of passing off lack of intention to infringe or honest coexistence of marks is not a defence.
The European trade mark system makes explicit for these potentially unseen hazards to the shipping lanes of commerce, due to explicit carve-outs for unfair competition law and passing off rights in the First Harmonising Directive, stating that registered trade mark rights do not effect parallel passing off and unfair competition rights. Radical reversals in the draft Directive and its final wording show that the Commission steered away from harmonising these rights.
The parallel co-existence of passing off laws and the registered trade mark system results in interesting legal questions when unregistered earlier rights and registered trade marks collide. Commercially speaking, the existence of such prior rights can give rights which can be used against owners of registered trade mark owners who think their non-use is safe, and can result in very large amounts of damages and injunctive relief against the use of registered trade marks.
Denied permission to appeal by the Court of Appeal in the UK Camelot petitioned the House of Lords directly, who will decide on whether to grant an appeal soon.
On a European level, Inter Lotto raised two fundamental questions:
- Is there a possibility that earlier rights can continue growing past the date in which the registered trade mark takes effect?;
- Is there a possibility that simultaneous or even solely later use, after the registration takes effect (and prior to the expiry of the 5-years term to begin use the trade mark), can give rights under unfair competition/passing off, which may then be used against the owner of the registered trade mark when he comes to use the mark?
In England, the answer seems to be yes to both points, due to the parallel and separate nature of the tort of passing off and registered trade mark rights. As a result, due diligence for parallel rights is vital both at application stage and at the stage of first use of a registered trade mark.
It is of interest to look how other Member States have implemented this parallelism within its jurisdiction.
In Italy the issue concerning the protection of trade marks falls within the ambit of the Royal Decree No. 929 of 21 June 1942, as amended ( the “Law”) : the rights of the owner of a registered trade mark shall consist in the faculty to make exclusive use of the trade mark within the entire Italian territory, for 10 years from filing, indefinitely renewable. In particular, the owner shall have the right to prohibit third parties, who do not have the latter’s consent, from using a sign identical or similar to the trade mark for certain kind of goods and services.
As regards the protection of trade marks, under certain circumstances, a trade mark owner can rely not just on the Law but also on the protection provided by the Italian Unfair Competition Law. In this latter respect, it shall be noted that the factual requisites needed in order to enjoy the protection provided by the Unfair Competition Law are quite different from those provided by the Law.
In order to rely on the joint protection provided by both the Law and the Unfair Competition Law, it will be necessary to give grounds that the sign infringing the trade mark owner’s exclusive right, has been effectively used and that, as a result of such use, a risk of confusion relating to the business activity of the registration holder and the competitor arose for consumers.
According to the Law, any new sign which can be represented graphically, particularly words, including personal names, designs, letters, numerals, sounds, the shape of goods or of their packaging, colour combinations or tonalities, provided that they are capable of distinguishing the goods or services of one enterprise from those of other enterprises, may be registered as a trade mark.
In the light of the above, to register a trade mark, it must be different from all the others already existing for goods and services identical or similar to those for which said trade mark is intended to be used, a kind of novelty.
The Law clarifies that a sign shall not be new on the filing date of the relevant application, if it is identical or similar to a sign that is already known as a trade mark or sign distinguishing goods or services manufactured, marketed or rendered by others for identical or similar goods or services, and if the identity or similarity of the signs and the identity or similarity of the goods or services might create a risk of confusion for the public (including risk of association). Previous use of the sign does not destroy the novelty provided that such use does not impart notoriety or it imparts purely local notoriety. With regards to notoriety above the merely local, the test is whether, through distribution or marketing, it has become well known by consumers. Notoriety can survive periods of non-use if the consumers’ knowledge is still intact.
Parallel co-existence between unregistered signs and registered trade marks is provided for in the Law: “in the case of prior use by others of an unregistered mark that is not well known or is only known locally, such other people shall be entitled to continue to use the mark, and also to use it in advertising, within the same locality, notwithstanding the registration of the mark”.
Moreover, the Italian Civil Code provides that “who has previously used an unregistered trade mark, has the right to lawfully keep on using said sign, notwithstanding the registration obtain by others, within the limits of his previous use”.
Only notorious prior use can kill the application to register the trade mark. In Italy it is possible that earlier rights can continue growing past the date in which the registered trade mark takes effect, but strictly related to the circumstance that the unregistered trade mark previously used was not well known or known only locally.
As regards the possibility that solely later use (after the registration takes effect) can give rights under unfair competition, which may be then used against the owner of the registered trade mark when he comes to use the mark, there is no case law on the issue, but there is argument to say that this would invalidate the 5 years’ protection against non-use for registered trade marks and so should be resisted. Due to the lack of specific provisions thereof, the issue in question needs to be evaluated in the light of the general principles governing the Italian legal system. Pursuant to our domestic law, the existence of a national trade mark registration serves the need of public information towards all the subjects involved within the Italian market.
Therefore, any traders using an unregistered trade mark identical or similar to the one registered but not used by the relevant owner for the same goods or services, prior to the expiry of the 5 years term, may not rely on the validity of his use, nor using as a defence his lack of information regarding the former registration. The problem here is what happens post-filing but pre-registration use of the same or similar mark by a parallel party in good faith, when the public can have no deemed knowledge of registration.
3. New EU Council Regulation To Strengthen Custom Action Against Counterfeit Goods
On 22 July 2003, the European Community adopted council regulation (EC) No 1383/2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights. It replaces the existing regulation (3295/94/EC).
The new regulation, which will enter into force on 1 July 2004, was adopted only 6 months after presentation of the proposal to the Commission, in response to the massive escalation in the number of counterfeit and pirated articles at the EU’s external frontiers. It sets out the conditions under which the customs authorities may intervene where goods are suspected of infringing intellectual property rights.
Counterfeiting and piracy are a threat to innovation and creativity. They currently account for between 5% and 7% of international trade and damage to the Community is estimated at over 2 billion euros. This type of fraud no longer concerns only luxury goods and often constitutes a real danger to consumers when medicines and food products are involved. Action by customs had already led to significant results but Frits Bolkestein, the European Commissioner for customs, is determined to strengthen the member states’ position against piracy and feels that the new regulation will be of considerable help.
The new regulation, introduces significant changes over the previous one. It’s scope is extended to additional intellectual property rights including rights relating to geographical indications and designations of origin and plant variety rights. The new regulation also provides that applications for actions submitted to customs authorities will be free of charge and their form and the information required is standardised. The quality of the information provided to customs by rights holders will be improved and the destruction of counterfeit products will be speeded up and facilitated, especially where goods presenting a risk to the health and safety of consumers are concerned.
The new regulation should enable customs authorities to improve checks at external borders and protect consumers and the EU economic area more effectively. It is considered to give greater legal clarity, make the rules more accessible for right holders and be a powerful legal instrument to tackle counterfeiting and piracy more effectively.
4. Procedural Amendments For Appeals In The UK Patent Office
The UK Patent Office has amended procedures relating to appeals made to the Court from decisions of the Comptroller, by Revised Tribunal Practice Notice TPN 1/2003 dated August 6, 2003. These changes are applicable to courts in England and Wales only. Furthermore, they are not applicable to appeals made to the Appointed Person (Trade Marks) and to the Registered Designs Appeal Tribunal. At present, intellectual property proceedings in the courts are governed by the Civil Procedure (Amendment No 2) Rules 2002 (SI No 2002/3219), which provide a new Part 63 of the Civil Procedure Rules 1998, together with a supplementary Practice Direction.
The amendments are:
A) The period to file notice of appeal to the court: Practice Direction 52 Paragraph 17.3
The Notice considers appeals from the Comptroller to be statutory [Paragraph 17.1 of Practice Direction 52], thus requiring notice of appeal to be filed within 28 days after the date of decision of Comptroller. The Comptroller, here, would have no discretion to direct a different time limit.
Since Sec. 16.3 of Practice Direction 49E, which prescribed different periods for patent appeals [14 days for matters of procedure and 6 weeks for others] has been abolished, the Notice holds that it is no longer necessary in patent proceedings for the hearing officer to determine whether the decision relates to a matter of procedure.
Furthermore, the Notice states that in accordance with Rules 52.4(3) and 63.17(3) and paragraph 17.5 of Practice Direction 52, the appeal notice must be served on all the respondents and the Comptroller as soon as practicable and no later than 7 days after it is filed.
B) Extension of the appeal period: CPR rule 52.6
The Notice states that any application for extending the time limit for appeals must be made to the court. The parties cannot extend the period by agreement. Furthermore, it is no longer possible for the Comptroller to extend the period at the request of a party.
The appellant who applies for extension from the court must state reasons for the delay and the steps taken before the application being made. In addition, the respondent has a right to be heard on such application.
C) Nature of the appeal: CPR rule 52.11
The Notice holds that appeal will be limited to a review of the Comptroller’s decision. Section 16.15 of Practice Direction 49E, which allowed a rehearing rather than a review, will no longer apply.
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