Submissions Sought on Cost Recovery Proposals
Following its fairly open high level consultation on fee structures earlier this year, IP Australia has now released a Cost Recovery Implementation Statement (CRIS) and seeks submissions on the proposed fee changes by 16th February 2020. Subject to any amendments the proposed fees will take effect from 1st October 2020.
IP Australia cost recovers against the following five activity groups: patents, trade marks, designs, plant breeder’s rights and the Trans-Tasman IP Attorneys system. The fees it receives from these five activity groups not only pays for the costs of the IP Rights Administration and Professional Registration program, but also covers the costs for its education and awareness program and the majority of the costs for its program involving advice to government and international engagement.
Within each activity group IP Australia cost recovers at the group level, rather than in regards to each individual fee within that group. This allows it to encourage the creation of IP rights by achieving recovery of the full costs associated with their processing across the average lifespan, which involves over charging of the low transaction cost renewal activity and under charging for the earlier examination etc activity. This also encourages IP rights holders to only renew their IP right if it is economically viable.
Individual fees can still be influenced by cost factors, such as with lower fees for on-line compared to paper based applications. IP Australia also attempts to charge the same fees where substantially the same process is performed in different activity groups. Notable proposed fee changes include:
Currently renewal fees increase in 5-year blocks after the first block which is 6-years long. It is proposed instead that the renewal fees will not only increase every year of the patent term, the amount of the increase between successive years will also increase, which collectively will result in increased revenue from renewals.
The current excess claim fee of $110 for every claim in excess of 20 at the point of acceptance would increase to $125 for every claim in excess of 20 up to and including the 30th claim and $250 for every additional claim thereafter. The preliminary search and opinion fee would go from $2200 to $950 and the fee for filing applications by non-preferred means would increase by $100.
Applications filed without using pick-list terms for the goods and services would be charged $400 per class instead of the current $350 per class, while the fee will remain at $250 per class for pick-list applications.
The fee for entering Australia from a Madrid Protocol application would increase from $350 to $400 per class.
The fee for requesting a hearing would be reduced, but the daily fee for being heard in person would increase, resulting in an overall increase in fees for hearings heard in person that last for 2 or more days.
For applications containing more than one design relating to a product or products belonging to the same Locarno class the fee for every extra design would be reduced from $250 to $200. The fee for filing applications by non-preferred means would increase by $100.
Renewals would increase from $320 to $400 if filed by preferred means and from $370 to $450 if filed by non-preferred means.
Plant Breeder’s Rights
Renewals would increase from $345 to $400 if filed by preferred means and from $395 to $450 if filed by non-preferred means. The fee for the designation of a qualified person (who performs various verifying and supervisory roles in relation to the plant breed) would increase from $50 per year to $240 for 3-years.
Trans-Tasman IP Attorneys
The application and renewal fees for Trans-Tasman IP Attorneys would increase by $50.
Georgia soon to Allow Validation of European Patents
The European Patent Office (EPO) has signed an agreement with Georgia which, when enacted in Georgia’s legislation, will allow European patents to be validated in Georgia.
When the agreement comes into effect, Georgia will join Morocco, Moldova, Tunisia and Cambodia as validation states for European patents. When a European patent gets validated in Georgia it will be exclusively subject to Georgian law.
CAFC Decision gives Guidance on Non-Abstact Improvement
In 18-1863 Koninklijke KPN NV v Gemalto M2M GmbH the Court of Appeals for the Federal Circuit (CAFC) overturned a District Court decision that invalidated a computer technology patent by finding that the appealed claims were not directed to the abstract idea of data manipulation.
The District Court’s judgment stemmed from Koninklijke asserting that their patent for an improved check data generating device had been infringed. Check data is generated from the primary data in a data block and is added to the end of that data block. Its only purpose is to check whether the primary data was accurately transmitted over a communications channel by comparing the check data at the transmission end with the check data at the receiving end. If they match, then it is assumed that the primary data was accurately transmitted. However, corrupted blocks of data can produce the same check data. If such production of coincidentally matching check data is produced by a systematic error rather than a random error, then there is greater scope for adverse downstream consequences. The patent seeks to solve this problem by varying from time to time the way check data is generated. The patent discusses various methods for achieving this, but the appealed claims involved a device that creates permutations on the original data by interchanging the positions of data elements within a data block.
The District Court found the independent claim and the stair-casing dependent claims of the patent to be ineligible because they are directed to an abstract idea and contain no saving inventive concept. In particular, it was held that the claims do not say how data is re-ordered, how to use reordered data, how to generate additional data, how to use additional data, or even that any data is transmitted.
The CAFC however found the stair-casing dependent claims to be patent-eligible because they are directed to a non-abstract improvement in the existing technological process of error checking in data transmissions. Dependent claim 2, which is incorporated into the other dependent claims, specifies that the device modifies the permutation of the data block over time. The CAFC found this to be a sufficiently specific implementation that qualifies as a non-abstract improvement over the ability of prior art error detection systems to detect systematic errors.
Nonetheless, Gemalto argued that the claims are ineligible because they fail to recite a last application step that uses the generated check data to actually perform error detection. They contended that the claims are doomed to abstraction unless they incorporate such a concrete application. However, the CAFC again found that the dependent claims are directed to sufficiently specific implementations that recite specific solutions and that they amount to more than a desired result. By being dependent on claim 1, claim 2 adequately captures how the improved result is achieved, namely by varying the original data by permutation before supplying it to the check data generating device and then modifying the permutation over time. On account of containing sufficient recitation of how the purported invention improved the functionality of a computer, the improvements captured by those claims were not recited at such a level of result-oriented generality that those claims amounted to a mere implementation of an abstract idea on a computer.
3. Trade Marks
Recent Decision Highlights Trade Mark Issues with Contract Manufacturing in China
A recent decision by the Supreme People’s Court has essentially reversed the position taken by the Court in an earlier decision on whether marks affixed to products contract manufactured by Original Equipment Manufacturers (OEMs) in China exclusively for export infringe Chinese trade marks.
The earlier decision given in late-2015 involved a Mexican entity that manufactured and sold hardware tools under the brand PRETUL, which it had registered in various countries, but not in China. Another party subsequently obtained registration for PRETUL in China for hardware items including padlocks and this was later assigned to a Hong Kong entity. When the Mexican entity later sought to have a Chinese OEM manufacture padlocks with the PRETUL brand the Hong Kong entity sued the Chinese OEM for trade mark infringement. The lower Courts upheld the infringement action, but the Supreme People's Court held that since the Chinese OEM manufactured goods were all to be sent to Mexico there was no infringement on the basis that there was no relevant use in China. While manufacturing ordinarily counts as use the Court ruled that there was no trade mark use as the use of the PRETUL brand did not fulfil the trade mark function of distinguishing the origin of the product in China.
Unlike common law countries China does not have a binding precedent system. Hence, prior decisions by superior Courts do not bind lower Courts, although they can be highly persuasive. The PRETUL decision was closely followed by a decision of a lower Court, which distinguished itself from the Supreme People’s Court ruling. The case involved a Chinese entity with a long used and registered Chinese trade mark which was recognised as well-known in China in 2000. An Indonesian entity registered the identical mark covering some of the goods in Indonesia. When the Indonesian entity outsourced the manufacturing to a Chinese OEM the Chinese entity sued the Chinese OEM. The Jiangsu High Court held that given the well-known status of the Chinese entities DONG FENG trade mark and the controversial ownership issue, the Chinese OEM has a higher level of duty to ensure that its actions do not infringe. The Court held that in the circumstances the Chinese OEM did not discharge its duty of care and that this damaged the Chinese entities interests and resulted in infringement. Nonetheless, where there is no higher level duty or where it is appropriately discharged the Court would have otherwise held in line with PRETUL that products manufactured by a Chinese OEM exclusively for export do not constitute trade mark use in China.
However, that approach of considering products manufactured exclusively for export as not constituting trade mark use in China has been criticised as degrading trade mark rights, which can affect the interests of a foreign based rights holder as much as a China based rights holder. For instance, if a foreign based rights holder obtains registration of their mark in China, but has a Chinese OEM manufacture their product and exclusively export it, is their Chinese trade mark vulnerable for non-use? There have been conflicting rulings in this regard. Does it also mean that Chinese Customs should no longer check whether branded goods are being legitimately exported? Are third parties able to have identically branded products manufactured and then exclusively exported from China as long as they are going to distinct markets?
Possibly in recognition of these criticisms a September 2019 decision by the Supreme People’s Court held that OEM manufacturing exclusively for export does not create an exception to trade mark infringement. Honda has registrations for HONDA in China covering vehicles, including motorbikes. A Myanmar entity which has registrations for HONDAKIT in Myanmar contracted with Chinese OEMs to apply the HONDAKIT mark to the kitset motorcycles that were manufactured for exclusive export to Myanmar. The Supreme People’s Court held that the use by the Chinese OEMs of the HONDAKIT mark infringed the HONDA trade mark registration and that the exclusive export to a country where the applied mark is registered does not affect the finding of infringement.
Consequently, the best strategy for an entity that is seeking to have their products manufactured by a Chinese OEM is to obtain registration of their trade marks before such manufacturing commences. If that is no longer possible, but where they still want to utilise Chinese OEM manufacturing, then it would be best to have that manufacturing done without affixing any branding. However, if it is not feasible to separate the branding from the manufactured product, and another entity has a relevant trade mark in China, then the remaining options are to seek invalidation of that trade mark or negotiate co-existence.
As previously noted, since 1st November 2019, it has become easier to invalidate registration following amendments to China’s Trademark Law that give greater protection against bad faith filings. Past bad faith filings are easier to remove on account of amendments that allow any person to file an opposition or invalidation proceeding on the ground of bad faith. Previously a contesting party had to establish that they were an ‘interested person’, which proved to be too high a burden for foreign rights holders who had no rights or use in China to rely upon. Future bad faith filings will be harder on account of amendments that allow examiners to reject applications that are identical or similar to well-known or highly distinctive marks in any class, as well as where a large number of applications are made without good reasons. Other amendments were made to disincentivise Chinese trade mark agents from filing trade mark applications that they know or which they should know contravene those criteria.
However, those amendments do not necessarily help when the foreign rights holder’s marks are not well-known or highly distinctive marks or when the Chinese registrant is making active use of the mark in China as it will be particularly difficult to establish bad faith in those cases. This highlights the importance of obtaining the relevant trade mark rights in China, even if there is no intention to sell any products in the Chinese marketplace.
CJEU Upholds Non-Use Removal During Clinical Trials Stage
In C-668/17 Viridis Pharmaceutical v EUIPO (not yet in English) the Court of Justice for the European Union (CJEU) held that a trade mark for a pharmaceutical could be removed for non-use during the clinical trials stage.
Trade marks registered with the EUIPO are vulnerable to a non-use removal action if they are not put to genuine use within 5-years of the registration date (or a 5-year period thereafter). Such non-use can be excused if there are legitimate reasons, and the issue in this case was whether being required to not use the mark until marketing authorisation has been achieved counts as a legitimate reason.
It is standard to take more than 5-years to bring a new pharmaceutical drug to market in the EU. However, the search for a trade mark for the new pharmaceutical drug usually starts early given that not only is the EUIPO class 5 register crowded, it can also be difficult to find a trade mark that is clear in all the jurisdictions of interest.
Viridis obtained registration for BOSWELAN in class 5 in 2007, but had a non-use revocation proceeding brought against the mark in 2013 while it was still under clinical trials. The revocation action was successful before the Cancellation Division of the EUIPO and in appeals from that including the recent decision by the CJEU.
In order to be a legitimate reason for non-use the primary reason for the non-use needs to be something that is beyond the control of the proprietor, have a direct effect upon the mark and make it impossible or unreasonable to use the mark. The CJEU noted that whether or not steps such as undertaking clinical trials constitutes a legitimate reason for non-use will depend upon the facts of each case. On the facts of this case it was found that Viridis’s actions had a significant effect on marketing approval not having been obtained before the non-use revocation action was instituted. In particular, the clinical trials application was only lodged 3-years after registration of the mark and Viridis could have shortened the duration of the clinical trials period by committing more financial resources to it.
Discussion Paper on Possible EU-NZ FTA Changes to Geographical Indications Legislation
Within the context of on-going Free Trade Agreement discussions between New Zealand and the European Union the Ministry of Foreign Affairs and Trade (MFAT) has released a discussion paper on potential changes to New Zealand’s geographical indication (GI) legislation, with feedback sought by Friday, 27 March 2020.
As part of the negotiation, the EU has proposed that:
a. New Zealand protect approximately 2,200 existing EU GIs for exclusive use by qualifying EU producers;
b. the EU will protect qualifying existing New Zealand GIs nominated by New Zealand; and
c. the parties agree a mechanism for adding new names to those lists of GIs in the future.
Currently New Zealand’s GI Act is limited to wines and spirits and meets the minimum requirements under the TRIPs Agreement in relation thereto. In order to give protection to existing EU GIs New Zealand’s GI Act would need to be extended to include foodstuffs. While there is currently some protection in New Zealand for foodstuff GIs under the Trade Marks Act 2002, the Fair Trading Act 1986 and the tort of passing off, this does not necessarily meet the minimum requirements under the TRIPs Agreement for protecting foodstuff GIs if that option of is taken. The TRIPs Agreement gives wine and spirit GIs a higher level of protection than foodstuffs by providing protection against their use even when:
- the true origin of the good is indicated; or
- the GI is used in translation; or
- that use is accompanied by expressions such as “kind”, “type”, “style”, “imitation” or the like.
If New Zealand’s GI Act is changed to include foodstuffs, feedback is sought on whether New Zealand should give foodstuff GIs the same level of protection as applies to wine and spirits. If so, should New Zealand follow the EU by extending that protection to: (i) transcribed or transliterated versions of a GI; (ii) use of the GI accompanied by the terms “method”, “as produced in”, “flavour” and “like” and (iii) use of the GI to identify an ingredient. Further feedback is sought on whether GIs should be protected from use on unrelated products.
The EU seeks to have plant variety and animal breed names only excluded from GI protection if the use of such names as a GI would be likely to mislead or deceive consumers, with their use as GIs is not otherwise necessarily ruled out. Currently the common names for wines and spirits are excluded from protection as GIs.
Currently where the same geographical name designates different areas (homonymous GIs ) they can each be registered as GIs subject to conditions imposed by the Registrar. The EU seeks to prohibit the registration of homonymous GIs if their use would be likely to mislead or deceive.
New Zealand’s GI register is run on a cost recovery basis, which due to the low number of GIs involves high fees. However, the EU seeks to have no fees payable in respect of GIs that get protection under the EU-NZ FTA.
Currently, a registered GI can prevent registration of a trade mark and vice versa. The EU seeks to extend GI rights by allowing a GI application to prevent registration of a later filed trade mark application. They have also proposed that a prior trade mark registration can only prevent registration of a GI if the prior trade marks reputation and renown and length of time it has been used means the proposed GI name is liable to mislead consumers as to the true identity of the relevant product.
The EU proposes that New Zealand’s GI legislation should require each GI to have a product specification, set by an appropriate body, which users need to comply with in order to legitimately use the GI. Currently New Zealand’s criteria are written into the legislation, but if it expands to include foodstuffs then this approach may be too unwieldly. The EU has also proposed that New Zealand legislation provide for control provisions applying to production.
In regards to enforcement the EU has proposed that in addition to the current judicial avenues open to interested parties for enforcing their rights that New Zealand should provide administrative enforcement by way of a public authority that can take enforcement action at the request of any interested party. It is also proposed that the current border protection measures be extended to include GIs.
The EU seeks to only allow GIs protected under the EU-NZ FTA to be cancelled if authorised by the EU or if the GI is no longer protected in the EU, meaning that such GIs will not be able to be challenged on the basis of becoming generic.
In noting Treaty of Waitangi considerations, the discussion paper notes from the WAI 262 report that GIs (at best) only provide an indirect mechanism to protect any kaitiaki relationship associated with those place names and products and that such kaitiaki relationship is what deserves protection, rather than the GI in isolation. Feedback is sought on whether the proposals affect recognition being given to kaitiaki relationships.