UK Opts Out of Unified Patent Court
The UK Government has confirmed that the UK will not be part of the Unified Patent Court (UPC), primarily on account of wanting to not be subject to rulings of the Court of Justice of the European Union.
The decision does not affect the UK's membership of the European Patent Convention (EPC), but means that it will not be possible to have unified litigation on all of the validations of a patent granted through the EPC if the UK is one of the jurisdictions that the grant is validated in.
It is widely considered that not having the UK in the UPC will also make the Unitary Patent (UP) less appealing. In particular, the majority of patentees only validate patents granted through the EPC in 3-5 contracting states, which usually includes the UK. If validation in the UK is sought it is cheaper to validate in each EPC state rather than seeking a unitary patent and validation in the UK unless the UP covers 4 or more EPC states. If the UPC and UP still come into force, then the decision on whether to opt-out of the UP would likely involve those cost considerations as well as the other pros and cons. Namely:
- A UP is only enforceable and revocable as a single patent;
- A UP must have the same scope in all jurisdictions;
- Renewal fee savings will be less significant if the UP is unlikely to be renewed up to its full term;
- A UP cannot be partially assigned, although it can be partially licensed.
Once the UPC Agreement comes into force it will automatically have jurisdiction over existing and future patents and applications in participating states, although during a transitional period of 7-years national courts can also have jurisdiction provided no action has been brought before the UPC if the patentee opts-out of the UPC. For EPs granted after the UPC Agreement comes into force the decision on whether to make it have unitary effect in (some or all of) the participating states needs to be made within 1-month of grant, although if a UP is opted for it will be deemed to have effect as such from the date of grant. UK business will still be able to use the UPC and UP to protect their inventions within the contracting EU countries.
Presuming the Unified Patent Court proceeds now that the UK has decided not to be a part of it, Italy will instead host one of the three central Courts, with the others being in Germany and France. The UK division was to host disputes regarding life sciences subject matter. It may be that the allocation of subject matter may be redistributed.
German Parliament’s Approval of UPC Ruled Unconstitutional
The German Federal Constitutional Court (GFCC) has now issued its decision upholding the constitutional complaint filed by a German Patent Attorney alleging that the German Parliament’s approval of the UPC violated the German constitution.
According to the official press release the majority decision held that the Act of Approval to the UPC Agreement is void as it was considered that the establishment of a court with supra-national court jurisdiction over matters otherwise dealt with by a German court would require a two-thirds parliamentary majority.
According to Article 23(1) of the German Basic Law if an Act of Approval to an international treaty that is supplementary to or otherwise closely tied to the European Union´s integration agenda substantively amends or supplements the Basic Law, then it requires a two-thirds majority. This requirement is in place so as to ensure that German sovereign powers can only be conferred to the EU or a supranational organisation by clear mandate given that fundamental rights of German citizens are being affected, and there are no exceptions to the rule.
The UPC was established as a special legislative procedure of the EU which required approval within each EU state in line with their constitutional requirements before it could have effect in that state. It remains possible that the German Parliament could seek a two-thirds majority under a new Act of Approval for the UPC. However, given the recent decision by the UK not to participate in the UPC in conjunction with the absence of Spain and Poland and possibly Hungary, it is also possible that the UPC project will be dropped.
2. Trade Marks
CJEU Confirms Relevance of Distinctive Character for Collective Marks
In C 766-18 Foundation for the Protection of the Traditional Cheese of Cyprus named Halloumi v EUIPO the Court of Justice for the European Union (CJEU) affirmed the relevance of distinctive character for collective marks and that in the global assessment thereof the interdependence of relevant factors needs to be considered.
The Foundation had opposed a Bulgarian company’s application to register a device mark which prominently featured the mark BBQLOUMI in classes 29, 30, 43 (including cheese and cheese flavoured goods) on the basis of their collective mark HALLOUMI for cheese. The EUIPO Opposition Division rejected the opposition and that decision was upheld by the EUIPO Board of Appeal and the General Court largely on account of the low degree of distinctiveness of the HALLOUMI mark and the low degree of similarity that the BBQLOUMI mark has to it.
Amongst its grounds of appeal the Foundation argued that the General Court failed to take into account that collective marks cannot serve to indicate a single commercial origin and can indicate a geographical origin and that the General Court’s determination of the likelihood of confusion was not correctly made.
The CJEU noted from the relevant Regulations that the likelihood of confusion in respect of collective marks arises when the public might believe that the goods or services covered by the later applied for trade mark originate from members of the association or from undertakings economically linked to those members or to that association. The CJEU rejected the Foundation’s assertion that because indications of geographical origin can function as collective marks the distinctiveness requirement is different for such collective marks, finding that such marks cannot be devoid of distinctiveness as they need to fulfil a distinguishing function for consumers. The CJEU found no fault in the earlier Courts’ finding that the HALLOUMI mark has low distinctiveness, but did find fault with the General Court’s assessment of the likelihood of confusion. The General Court found that both marks are similar to a low degree phonetically, visually and conceptually and concluded from the low degree of distinctiveness of the HALLOUMI mark that there could be no likelihood of confusion. The CJEU noted that in doing so the General Court failed to follow precedent by undertaking a global assessment which takes into account the interdependence of relevant factors, and in particular whether the low degree of similarity could be offset by the identical goods covered by both mark. As such, the CJEU remanded the case back to the general Court for further consideration.
Higher Standard for Interim Injunctions if Likely to Finalise Litigation
In 2019 NZHC 3463 NXP Holdings Ltd v Winc Australia Pty Ltd the Judge granted leave to appeal the granted interim inunction to the Court of Appeal on several bases, including that the serious question to be tried threshold is not appropriate when an interim injunction is likely to finalise the litigation.
Under section 56 of the Senior Courts Act 2016 leave to appeal an interim injunction granted by the High Court in civil proceedings needs to first be made with the High Court unless the High Court order was a summary judgment or partial or complete strike out.
In the earlier judgment the same Judge granted Winc AU’s application for an interim injunction restraining NXP from using the NETXPRESS name and trademarks or any other confusingly similar mark. Both Winc AU and NXP are online retailers of office supplies, with Winc AU operating in Australia and NXP in New Zealand. NXP was formerly a division of Winc AU called Winc NZ but was sold with effect from 2nd July 2018 in order for Winc AU to comply with the New Zealand Commerce Commission’s criteria for allowing it to proceed with the purchase of another office supplies business. A Transitional Services Agreement provided for the separation of the Australian and New Zealand e-commerce platforms. The Sale and Purchase Agreement (SPA) provided that the sale was made free from all encumbrances with the transfer of all rights, although subject to a 12-month transition period Winc AU retained rights in its name, trade marks and other identifiers associated with it. The SPA also provided that NXP could use the www.netxpress.co.nz domain until 2 July 2019 and that for the following 6-months it would automatically redirect to a nominated website and after 2nd January 2019 NXP would have no remaining rights to use that domain name. However, NXP sought to continue using the word NetXpress to brand their ecommerce platform. When it was Winc NZ, NXP had the right to use the brand Net-Express, but on its own initiative changed this to NetXpress and used that mark in New Zealand before it was later registered by its controlling entity Winc AU. The Judge granted Winc AU’s request for an injunction to prevent NXP from continuing to use NetXpress on the basis that the prior use by Winc NZ counted as use by Winc AU and that for similar reasons Winc NZ did not have a continuous prior use defence. The balance of convenience was held to favour Winc AU on account of being the registered owner of the NetXpress marks.
One of the grounds for seeking leave to appeal is that the interim decision is likely to be the final decision because of the commercial realities of NXP having to undertake a significant rebranding exercise and the substantive proceedings not being held until 2021. It was argued that in that context the serious question to be tried threshold is not high enough as worthy cases can be ended before they are properly litigated. On the facts of the case the Judge held that an arguable error of law was made out in that regard.
The Judge also accepted that arguable errors of law occurred in relation to the assessment of goodwill. Firstly, while a Judge can put themselves in the shoes of a member of the public when considering whether actions or omissions are likely to mislead or deceive, in the absence of evidence they cannot do so for commercial customers. Secondly, there is precedent for the proposition that there is no presumption of fact that goodwill generated by the trading activities of a wholly-owned subsidiary belongs to the parent. What matters most is local perception, and in the absence of evidence from the relevant marketplace an arguable error was made out.
This further lead the Judge to hold that there was an arguable error in holding that the balance of convenience favoured Winc AU and found that it is in the interests of justice that leave to appeal be granted.
Given that being granted the right to appeal does not automatically result in a stay of execution of the order given in the appealed judgment the Judge also considered it appropriate to grant a stay until any further order of the Court of Appeal as without it the interim injunction would effectively finalise the litigation.
Copyright Ownership in Logos Confirmed as Key Ingredient
Recent Assistant Commissioner’s decision 2020 NZIPOTM 3 Mia Nathan-Joyce involved the rarely considered but important issue of copyright ownership in device marks.
On 31st July 2017 Mia Nathan-Joyce (MNJ) applied to register the LOVE SOUP FEED THE NEED device mark in respect of charitable services. While examiners do not routinely require applicants of device marks to show that they own the copyright in the device mark, they nonetheless can exercise their discretion to require proof of ownership if they have doubts about whether the applicant owns copyright in the device mark or has authority from the copyright owner to register it. In this case questions over copyright ownership arose on account of an application by another applicant – Julie Anne King (JAK) – on 24th November 2017 to register the identical mark also for charitable services. In February 2018 JAK gave a statutory declaration stating that she commissioned and paid for the work and as such qualified as the copyright owner. The examiner raised a contrary to law objection to MNJ’s trade mark application on the basis that on the available evidence MNJ is not the copyright owner , and invited her to provide evidence showing otherwise. MNJ responded with a statutory declaration in which she claimed that the device was not commissioned by anyone and that she claimed right to use it in respect of her trade mark application, and subsequently sought a hearing on the issue.
In assessing the evidence MNJ provided at the hearing the Assistant Commissioner found that it did not specifically address the issue of copyright ownership or MNJ’s right to use the device and either post-dated the application date or was undated. At the hearing MNJ claimed that the creation of the device was a collaborative process largely carried out on the Love Soup facebook page and through direct messaging and so sought to challenge JAK’s claim to copyright ownership in the device. MNJ also noted that JAK used a different device and had made televised statements to the effect that JAK had no need or want to register the device mark.
The Assistant Commissioner held there to be insufficient evidence to challenge JAK’s claim to copyright ownership by way of commissioning and noted that while heart shaped devices are common that the device mark has sufficient originality in order to be eligible for copyright protection. Further, while JAK was not using the device mark she still retained ownership of copyright and could commence using it at her discretion.
Unsigned Agreement Trumped by Totality of the Circumstances
In 2020 NZHC 143 Summit Building Services v Baxter the High Court overturned a District Court judgment and held that copyright in building designs was infringed even though the contract between the parties was unsigned.
In November 2012 the Baxter’s approached Summit Building Services with a view to possibly engaging them for their house build. Amongst the terms of Summit’s Preconsent Agreement was a clause specifying that their intellectual property such as copyright at all times remained with Summit and could not be used by any other builders or developers. The Baxter’s initialled and dated some of the clauses, but not the intellectual property clause and they did not sign the agreement.
The director of Summit, Mr Anthony Clark, is also the director of Competitive Homes and both of those businesses engage the third party Capital Precut Solutions Design (CPS) to draft some of their house designs. Under that arrangement all intellectual property remains with the instructing business as CPS merely customises the particular Summit or Competitive Homes design package selected by a customer.
From 19th November 2012 to 5th March 2013 the Baxters were sent 6 plans of the house design, five of which had the Summit name and logo on them, while the third had the Competitive Homes and CPS names on it and was marked ‘DRAFT ONLY’.
On 22 March 2013 Mrs Baxter notified Summit that they had decided to proceed with another builder, Grigor Construction Ltd (Grigor). However, about 10-days prior to that the ‘DRAFT ONLY’ plan was taken to Grigor, and subsequently the fourth plan was too. The final Grigor building plans were all but identical to the final Summit building plans.
The District Court Judge found the Grigor designs to be a substantial reproduction of and objectively similar to the Summit designs and that there was a causal connection for this, but held that Summit had not discharged its onus of establishing ownership of copyright in respect of the ‘DRAFT ONLY’ plan.
The High Court Judge readily found that the designs are graphic works in which copyright can subsist and that they exceeded the low threshold for originality. The Judge also found that authorship was established, noting from precedent that while the name appearing on drawings is indicative of authorship, it is not determinative, while also noting the public record of Anthony Clark’s shareholding in both Summit and Competitive Homes. Further, while the preconsent agreement was not signed, the first two plans had a copyright warning and the totality of the circumstances were found to support a finding of express agreement by the Baxters with the terms of the preconsent agreement. Consequently, the Judge held the Baxters to have infringed Summit’s copyright by authorising Grigor to copy the house plans produced by Summit.
In regards to damages the Judge held that Summit were not entitled to the profit that they would have received if they had been selected to build the Baxter’s house. Nonetheless, given that the Baxters derived a benefit from the plans Summit was entitled to a hypothetical licence based on what was actually used, which in this case was all six plans given that the plans copied from were part of a sequence.