IP Value 2008

Transcription

IP Value 2008

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IP Value 2008
Building and enforcing
intellectual property value
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The business
magazine about
maximising
IP value
IAM magazine is, in my
opinion, the premier magazine in
the space of managing intellectual
assets for value creation. It
brings a fresh business driven
perspective, rather than a purely
legal perspective, on this issue.
I would highly recommend it to
anyone dealing with how to
manage and drive value from
intellectual assets.
David A VandenEinde
Senior Intellectual Asset Manager
Cargill Incorporated
Being a charter subscriber
of IAM, I have found useful articles
in every issue from the beginning.
I like the variety in the subject
matter and the depth at which
most articles explore. Your ability
to attract the best practitioners
of IAM to submit articles keeps
the quality and usefulness of your
publication at a consistently
high level.
Bruce Story
Senior Director, Intellectual Capital
Performance Businesses
The Dow Chemical Company
Intellectual property and other types
of intellectual asset are now of major
importance to companies. Intellectual
Asset Management (IAM) is the first
magazine specifically designed as a
single source of IP information for senior
decision makers in companies, as well as
for investors and analysts.
A combination of news, case studies,
interviews, profiles, feature articles and
data, IAM ensures that its readers are
always at the cutting edge of the latest
thinking and therefore best placed to
make the right decisions about IP.
IAM is an excellent
publication for helping with the
management of an intellectual
property portfolio. There is always
one article in each issue, and
often more, which is relevant to
our current business situation.
IAM is designed for:
• General counsel, IP counsel,
patent counsel, trademark counsel
Paul Johnston
Group Trade Mark Counsel
ICI Group Intellectual Property
• Fund managers, brokers, analysts,
heads of research at investment banks,
venture capitalists
• CFOs, CTOs, CIOs, CEOs
(or equivalent positions) at
IP-owning companies
Subscribers to IAM include:
3M; Air Liquide; Alcatel-Lucent; AT&T;
Avaya; BHP Billiton; Bird & Bird; Boeing;
Brown University Research Foundation;
BTG International; California Institute of
Technology; Cargill; Chevron; Cleary
Gottlieb Steen & Hamilton; Clifford
Chance; Covington & Burling; Danfoss;
Dolby Laboratories; Dow Chemical;
Ericsson; Fujitsu Siemens Computers; GE;
GlaxoSmithKline; Halliburton; Herbert
Smith; Howrey; Johnson Matthey; Jones
Day; Lockheed Martin; Marsh; Merchant
& Gould; Motorola; Nortel Networks;
Novozymes; Oracle; QinetiQ; Roche;
Smart & Biggar.
For subscription details or to request a
free trial, visit www.iam-magazine.com,
call Alan Mowat on +44 20 7234 0606 or
email [email protected]
• Lawyers in private practice
www.iam-magazine.com
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IP Value 2008: Building and enforcing
intellectual property value
An international guide for the boardroom
Managing editor Joff Wild
Editor Jo Moore
Sub-editor Carolyn Boyle
Cover design John Meikle
Production editor Richard Proctor
Distribution manager Amanda Green
Publisher Gavin Stewart ([email protected])
Publishing directors Tony Harriss, Nigel Page
Printed and bound in Italy by Legoprint SpA
IP Value 2008: Building and enforcing intellectual property value
is published by
Globe White Page Ltd
New Hibernia House
Winchester Walk
London Bridge
London SE1 9AG
United Kingdom
Tel
+44 20 7234 0606
Fax
+44 20 7234 0808
Email [email protected]
www.globewhitepage.com
www.buildingipvalue.com
First published 2002
ISBN 978-1-905773-03-9
Price GB£125 (inc P&P)
IP Value 2008: Building and enforcing intellectual property value
© 2007 Globe White Page Ltd
No photocopying: copyright licences do not apply
DISCLAIMER
This publication is written as a general guide only. It should not be relied upon
as a subsitute for a specific legal and/or other professional advice.
Professional advice should always be sought before taking any action based
on the information provided. Every effort has been made to ensure that the
information given is correct at the time of publication.
The publishers and authors stress that this publication does not purport to
provide investment advice, nor do they bear responsibility for any errors or
omissions contained herein. The views expressed in the chapters contained in
this publication are those of the authors. Copyright in the individual chapters
rests with Globe White Page Ltd and the authors.
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Contents
Foreword
7
Introduction
Law & litigation: United States
It’s time to take on economists
who criticise patents
Joff Wild, editor of Intellectual Asset Management
magazine
10
Patent enforcement: licensing and
litigation considerations
Bruce C Haas and Christopher V Beckman,
Fitzpatrick Cella Harper & Scinto
72
Managing intellectual property when
regulators rule
Alexander R Butler, IP Management Services,
a Thomson business
14
The intricacies involved in choosing
a pharmaceutical trademark
Dana R Kaplan and Michael J Freno,
Kenyon & Kenyon LLP
76
Royal(ty) succession: the evolution of
IP-backed securitisation
Jay Eisbruck, Moody’s Investors Service
19
Compliance with the written
description requirement in chemical
and pharmaceutical patents
Rachel Teitelbaum and Mark S Cohen,
Pearl Cohen Zedek Latzer LLP
European technology M&A: a market perspective
Christian Lucas, Morgan Stanley
25
80
Get your assets in gear: aligning IP strategy
and business strategy
Ron Carson, Innovation Asset Group
31
The recipe for CIPO success
Rob Sterne, Sterne Kessler Goldstein & Fox PLLC,
and Ron Laurie, Inflexion Point Strategy LLC
84
Due diligence or discount on valuation:
what’s it to be?
Malte Köllner, Triangle Venture Capital Group
39
Analysing the impact of the Supreme
Court’s eBay decision
Blair M Jacobs, Sutherland Asbill & Brennan LLP
Law & litigation: Latin America & the Caribbean
Key advisory issues
Intangible assets: recognising and
exploiting their value
Ryan Miller, Ben Moore and Phil Rees, Deloitte
46
Don’t get your wires crossed: common
pitfalls in licence agreements
Elizabeth Gutteridge and Neil Hargreaves, Deloitte
51
Supply chain restructuring: IP transfer
pricing and taxation
John Henshall, Deloitte
54
Law & litigation: global
The ever-expanding extraterritorial reach
of patents
Bernd Allekotte, Grünecker, Kinkeldey, Stockmair
& Schwanhäusser
60
Protecting well-known and famous marks:
a global perspective
Clark W Lackert and Maren C Perry,
King & Spalding LLP
63
4 Building and enforcing intellectual property value 2008
68
Argentina Border measures: registration
of trademark rights with Customs
Ricardo Richelet III, Richelet & Richelet
90
Ecuador Four key steps towards
93
building a strong IP portfolio
Flavio Arosemena Burbano and Nadia Molina Camacho,
Arosemena Burbano & Asociados (AB&A)
Jamaica Trademark owners draw the battle lines
Dianne Daley and Nicole Foga, Foga Daley & Co
96
Mexico A balanced relationship? The interface
between IP law and competition law
Arturo Pérez-Arredondo and Héctor E Chagoya,
Becerril, Coca & Becerril SC
100
Venezuela Tackling inactivity: legislative
remedies against the PTO
José Gregorio Torrealba-Rodriguez,
Hoet Pelaez Castillo & Duque
104
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IP Value 2008
Building and enforcing intellectual property value
Law & litigation: Europe, Middle East & Africa
Netherlands Amending the Patents Act:
major changes on the horizon
Erik Nijs, Nederlandsch Octrooibureau
Cross-border: Africa
Countdown to kick-off: the 2010 FIFA
World Cup comes to Africa
Nola Bond, DM Kisch Inc
108
Cross-border: Europe
152
Norway All change for Norwegian patent
155
legislation, damages awards and court procedures
Amund Brede Svendsen and Ida Gjessing,
Advokatfirmaet Grette DA
Increasing flexibility and attractiveness:
the ratification of the London Agreement
JF Bretonnière and Cécile Cailac,
Baker & McKenzie SCP
111
Poland Is Poland sufficiently armed for
the war on counterfeiting?
Bartosz Krakowiak, POLSERVICE Patent
and Trademark Attorneys Office
159
European patent system: the growing
need for reform
Ian Craig, Field Fisher Waterhouse LLP
115
162
The Microsoft decision: the evolution
of compulsory licensing in the European Union
Pierre-André Dubois and Shannon Yavorsky,
Kirkland & Ellis International LLP
119
Portugal Implementing the EU IP Rights
Enforcement Directive: an ongoing challenge
César Bessa Monteiro, ABBC – Azevedo Neves,
Benjamim Mendes, Bessa Monteiro,
Cardigos & Associados RL
The interface between patent enforcement
and technical standards
Jochen Bühling, Krieger Mes & Graf v der Groeben
123
France Online trademark infringement:
key issues before the French courts
JF Bretonnière and Cécile Cailac,
127
Germany The MPEG-2 Case: Dusseldorf
131
courts lead the field in patent expertise
Axel Verhauwen, Krieger Mes & Graf v der Groeben
Hungary Trademark oppositions: extending
134
protection against bad-faith registrations
Michael Lantos, DANUBIA Patent & Law Office LLC
Iceland Fast-moving IP development
shows no sign of slowing down
Gunnar Örn Harðarson, Arnason Faktor
138
Israel Court enforcement: the only option
for Israeli patentees
Kobi Meir, Pearl Cohen Zedek Latzer
141
Italy A new challenge: the evolving
procedural rules for IP disputes
Paolo Perani, Perani Mezzanotte & Partners
145
Romania Supplementary protection certificates:
166
extending protection for medicinal and plant products
Cristina Popa, Rominvent SA
Russia Changes to IP legislation ring in the
new year
Ekaterina Tilling and Igor Motsnyi,
Pepeliaev Goltsblat & Partners
169
South Africa Bucking the trend: new
developments in the IP field
Ron Wheeldon, Ron Wheeldon Attorneys
173
Spain Modernisation of IP law continues
176
Miguel Vidal-Quadras Trías de Bes and Oriol Ramon
Sauri, Amat ‫ ׀‬Vidal-Quadras Advocats
Sweden IP law adapts to address new challenges 180
Stefan Widmark, Per Josefson and Claudia Wallman,
Mannheimer Swartling
Switzerland IP protection comes to the fore in
Switzerland
Marco Bundi and Benedikt Schmidt,
Meisser & Partners
184
United Kingdom Reviewing the scope of
patent law: key decisions from the UK courts
Pierre-André Dubois and Nicola Russell,
189
Lithuania Latest developments present
149
new challenges
Erikas Saukalas, METIDA law firm of Reda Žabolien
Building and enforcing intellectual property value 2008 5
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IP Value 2008
Building and enforcing intellectual property value
Law & litigation: Asia-Pacific
Australia The impact of changing legislation
on IP owners
Carolyn Harris, Amanda Jones, Peter Hallett and
Robynne Sanders, Watermark
194
China & Hong Kong Recent developments in
intellectual property
Cedric Lam, Isabella Liu and Janet Wong,
Dorsey & Whitney LLP
198
India The changing face of intellectual property
Pravin Anand and Sumeera Raheja,
Anand And Anand Advocates
203
Indonesia Progress in IP protection – but
much still to be done
Zain Adnan and Brett McGuire,
Rouse & Co International
207
Japan New examination practice: changes
under the new Patent Law
Yoshitaka Sonoda, Sonoda & Kobayashi
Malaysia IP owners reap benefits of innovative
protection measures
Michael Soo, Olivia Khor and Kai Ling Gan,
Shook Lin & Bok Kuala Lumpur
New Zealand Confronting the impact
of technology
Mark Gavin and Joe Edwards, Russell McVeagh
219
Pakistan Recent trends in patent enforcement
Hasan Irfan Khan, United Trademark &
Patent Services
223
Sri Lanka A right to original expression:
the role of copyright law in modern industry
Sudath Perera and Shanika Gunawardena,
Sudath Perera Associates
226
Taiwan Developing special procedures for
229
patent prosecution
Yu-Lan Kuo and Charles Chen, Formosa Transnational
Thailand Inclusion on Priority Watch List sets
IP enforcement alarm bells ringing
James Evans, Rouse & Co International
233
211
Vietnam International integration triggers
IP development
Chris Vale and Han Le, Rouse Legal
237
215
Contributing firm directory
242
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Foreword
It is a great pleasure to welcome you to the sixth edition of IP Value: Building and enforcing
intellectual property value. Now firmly established as the leading publication of its kind, IP Value
2008 presents a comprehensive range of chapters addressing crucial issues faced by IP owners
worldwide. IP Value 2008 draws together world-class expertise across a variety of industries to
provide senior executives with comprehensive guidance on key IP topics in a user-friendly
format, without unnecessary technical jargon. Like its predecessors, IP Value 2008 presents the
full range of IP-related topics considered from both national and cross-border perspectives.
IP Value 2008 does not seek to offer specific advice and should not be read as if it does.
However, the expert contributors to the book raise various key issues that senior executives
should consider when dealing with intellectual property. The commitment of all our authors to
providing expert insight underpins the book and ensures its continuing reputation as a vital
reference tool for IP rights owners and their advisers, no matter where they are based.
To ensure that IP Value 2008 maintains its reputation of publishing to the highest standards,
only those firms and organisations with demonstrable expertise and track records in the field of
intellectual property were invited to contribute. We would like to thank all those who submitted
chapters for their hard work and their continued commitment to this project. We would also like
to thank NASDAQ, Morgan Stanley, Deloitte, Thomson Scientific and Moody’s Investors Service
for all their assistance during the production of IP Value 2008.
Jo Moore
Editor, IP Value 2008
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Introduction
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Page 10
Joff Wild
Editor of Intellectual Asset Management magazine
Introduction
It’s time to take on economists who
criticise patents
“Every year, the US economy suffers a consumer welfare
paragraph from “Quantifying the Costs” explains why
loss of an estimated $25.5 billion because current patent
substandard patents are harmful: “Substandard patents
law deters productive research, imposes administrative
are harmful in (at least) three respects. In particular,
costs, and encourages excessive litigation,” read the
substandard patents may reduce future innovation by
opening sentence of a press release announcing the
discouraging research and development in a particular
publication of “Quantifying the Costs of Substandard
area for fear of infringing, or directing research away
Patents: Some Preliminary Evidence”, produced by the
from valid to substandard opportunities. This reluctance
Phoenix Centre. “These deadweight losses amount to
to enter could affect market structure and prices. Second,
over $200 for each US household and equal 8.5% of the
substandard patents may induce unnecessary licensing
country's
royalties, distorting the incentives the patent system was
annual
spending
for
research
and
development,” it continued.
The paper, written by George S Ford, Thomas M
Koutsky and Lawrence J Spiwak and published in
designed to provide. Third, legal challenges to
substandard patents can result in socially wasteful
litigation costs.”
September 2007, is just one example of a growing
Notice the contrast between the assertion in the first
phenomenon – attacks on the US patent system made by
sentence – “Substandard patents are harmful in (at least)
economists. At a time when patents in the United States
three respects” – and the words used in the rest of the
are under the microscope as they have never been before
paragraph. A close examination will reveal that the very
– with the Supreme Court taking more patent-related
definite “are harmful” gives way to “may reduce”,
cases, the US Patent and Trademark Office seeking to
“could affect”, “may induce” and “can result”. In other
introduce a series of new procedural rules and Congress
words, the authors seem to be telling the reader that they
considering major reforms – such attacks are playing a
have no evidence to back up the claim they make at the
high-profile and influential role in the debate over the
beginning of the paragraph. Instead, they are making
future of US patent policy.
assumptions. These may well turn out to be correct, but
Like many similar papers that question the
contribution that patents make to innovation and
readers cannot possibly know because they are given no
definitive proof.
economic growth, “Quantifying the Costs” is very heavy
And what of these substandard patents in the first
on theory and full of the kinds of algebraic construction
place? Well, this is how they are dealt with: “Valid
that most non-economists will not understand. This
patents represent patents that are true inventions or
makes it a hard publication with which to argue – quite
discoveries in which the cost to society of granting a
simply, it is difficult to tell whether it is right or wrong.
twenty-year monopoly to the patent holder [is]
Yet those who have an interest in a continuing and robust
outweighed by the aggregate social benefit of the
patent system as a guarantor of IP value will have to find
invention or discovery itself. Substandard patents are
such arguments, as the headlines created by such reports
those which are granted that are of low quality (that is,
increasingly grab media and political attention.
for ideas that are not in fact new or non-obvious) or
One place to start would be an analysis of the kind of
which create risks for valid patents through litigation
language that such reports employ. At first glance, it may
and licensing. From the standpoint of our model, it is not
seem to be robust, but look a little closer and this is
necessary to assume that each and every patent of this
actually far from the case. For example, the following
sort is literally bogus, is created for a nefarious purpose,
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Introduction
or is of no private value to the patentee. Our analysis
importance
simply assumes that such patents fall below an operative
agreements; and argues that the term ‘intellectual
or ideal standard for approval and that they impose, on
property’ itself should be seen as a piece of propaganda
average, a harm to the economy as a whole but,
designed to convey a sense that patents and trademarks
specifically, a harm to so-called valid patents. More
are somehow more worthy of protection than would
directly, the addition of a substandard patent reduces the
otherwise be the case.
private marginal benefit of a valid patent, and
discourages
the
production
of
both
valid
and
of
IP
rights
in
international
trade
The professor’s overall thesis is summed up in the
abstract at the beginning of the article: “This paper
substandard patents (or inventions in general, whether
explores
patented or not).”
strengthened patent laws in the United States and the
a
paradox:
the
extensive
tilt
toward
However, surely low quality is almost always a
world economy during the 1980s and 1990s, even as
subjective concept. Obviously some patents are granted
economic research was revealing that patents played a
in the United States (and elsewhere) which should not
relatively unimportant incentive role in most large
be. There are many more that people are going to argue
companies’ research and development investment
about. But these arguments will occur only if the patents
decisions.”
turn out to have some potential value. It is then up to the
To support his point, the professor quotes work
courts to decide whether they are valid – or should even
carried out in the 1980s and 1990s which was based
have been granted in the first place. If they stand up to
around asking R&D and laboratory managers how
scrutiny in this post-KSR, post-eBay environment, what is
important the existence of patent protection was in
the problem? So, instead of substandard patents, perhaps
stimulating R&D efforts that would lead to the creation
we are talking about potentially very valuable patents
of new products and processes. In most industries
here. And what of university-created patents, so
outside the life sciences, the answer was that they were
important in the United States – are they all to be
not that important and were certainly less so than being
considered substandard because they are generally
first to market, having superior sales services, being able
licensed rather than exploited by the universities
to maintain secrecy and having the right manufacturing
themselves?
capabilities.
These are all important questions that authors such as
On the face of it, that would seem very persuasive.
Ford, Koutsky and Spiwak should be asked to answer
But think about it a little more carefully and maybe this
before their work is accepted. Whether the US patent
is not the slam-dunk that it appears to be at first sight.
system is flawed or not – and most agree that there are
R&D and laboratory managers may be working at the
aspects of it which could be improved – the fact is that
coalface, but they do not typically control the purse
the United States has been the world’s innovation
strings. Instead, strategic R&D expenditure decisions are
powerhouse for the last 25 years. Perhaps a better system
taken further up the corporate ladder. Who says that the
would have led to even more research and development
existence of patent protection is not a key factor for the
(R&D) and innovation, but the truth is that the United
money men? Shouldn’t they have been asked whether
States has not done too badly out of what is currently in
they would release funds for R&D if there were no
place – in terms of both new products and jobs and
patents available to protect what came out the other end?
economic growth. Before the system radically reformed,
Another argument Scherer makes is that while patent
the United States would surely have to be very sure that
applications have risen substantially as greater
what replaces it will give it at least the same level of
protection has become available, especially since the
success as it has now.
creation of the Court of Appeals for the Federal Circuit in
Such thoughts should also be at the forefront of
1982, there has been no equivalent jump in the growth in
people’s minds when they read another work produced
R&D spending. This leads the professor to conclude that
this year, this time by the renowned economist FM
there is no evidence that increased protection has
Scherer, aetna professor emeritus at the John F Kennedy
stimulated R&D activity – which is fair enough. But what
School of Government, Harvard University. The latest
he does not say is that, equally, there is no evidence that
version of “Political Economy of Patent Policy Reform in
it has not. What is pretty unarguable, however, is that the
the United States” was also published in September 2007
passing of the Bayh-Dole Act in 1981, the creation of the
and is undoubtedly an impressive piece of scholarship. It
Court of Appeals for the Federal Circuit and the
traces the movement towards greater protection for
introduction of new types of patent protection in areas
patents in the United States from the late 1970s onwards;
such as biotechnology and computer software, which
explores how the United States has emphasised the
also occurred in the United States during the 1980s and
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Introduction
1990s, have coincided with one of the most creative
forward in R&D spending since the 1980s, according to
periods of commercialised US innovation there has ever
the professor this may actually be because companies
been.
have become more patent savvy and are targeting
No doubt this could be coincidence. But if it is, why is
resources in areas where there are fewer patents to
it the case that there has not been as much innovation in
muddy the water. It could be, for example, that
other parts of the world (eg, in Europe) where there is no
companies are deciding that $10 million spent on R&D in
central patent court, no general equivalent to Bayh-Dole
areas where it is still possible to carve out a really
and no equivalent levels of patent protection for
differentiating niche is more effective than putting the
biotechnology and computer software? Ironically, in the
same $10 million into areas where patents are clustered
same week that Scherer’s paper was published, the
tightly together. Certainly, a number of companies now
European Commission published research showing how
look very carefully at the patent landscape before making
much more the biggest US companies spend on R&D
R&D investment decisions and tend to funnel their
than their European equivalents (see “The 2007 EU
resources into areas with low patent density. In this way,
Industrial R&D Scorecard and European innovation
the existence of patents actually incentivises targeted
policy” below).
R&D, meaning not only that companies do not have to
Furthermore, while there have been no big leaps
spend so much money in order to get good returns, but
The 2007 EU Industrial R&D Scorecard and European innovation policy
Each year in its Industrial R&D Scorecard the
In addition to global rankings, the scorecard
European Commission identifies spending on R&D
produces two tables which detail the top 1,000
by both EU and non-EU companies as set out in their
companies in Europe and then the rest of the world.
annual reports. It does not look at percentage of
Judging by the results published for the European
income spent on R&D, so clearly favours large,
table, German and French companies seem much
multinational corporations over small and medium-
keener to make R&D investments than those from
sized enterprises, which are not capable of spending
the other big European economies (ie, the United
hundreds of millions or even billions of euros on
Kingdom and Italy), while the Nordic countries and
such activities.
the Netherlands all punch above their weight. As for
However, what the 2007 scorecard does show is
the rest, there are four Belgian, three Spanish and
that while more is being spent on R&D generally, the
two Irish companies, as well as one from
rate of growth among EU companies is lower than
Luxembourg, in the top 200 – and no companies from
among non-EU companies, especially those from the
elsewhere.
United States. Indeed, according to the research the
Given this, is it actually possible to build a single
United States is the R&D hotbed of the world, with
vision for Europe along the lines set out in the Lisbon
40 per cent of all spending identified coming from
Agenda? Despite years of closer political ties and
US companies. The top four investors in R&D all
increasingly freer trade, the economies of EU
come from the United States, as do 21 of the top 50.
member states and the ways their companies do
The global top 10 is as follows:
business still differ so widely. What is good for
Germany may not be that effective for, say, Greece or
1
Pfizer (approximately €5.8 billion)
Portugal; while the incentives that UK or Italian
2
Ford Motor Company (approximately €5.5
companies may need to make greater R&D
billion)
commitments are not necessarily going to be those
3
Johnson & Johnson (approximately €5.4 billion)
required by businesses based in France.
4
Microsoft (approximately €5.4 billion)
5
Daimler Chrysler (approximately €5.3 billion)
6
Toyota Motor Corporation (approximately €5.2
billion)
7
GlaxoSmithKline (approximately €5.1 billion)
8
Siemens (approximately €5 billion)
9
General Motors (approximately €5 billion)
10 Samsung Electronics approximately €4.7 billion)
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Introduction
also that patents lead to more innovation in newer areas,
spread of scientific knowledge and development; and
not less.
that the products and processes developed by companies
Although all scrutiny of the patent system – whether
enjoying patent protection over the last 30 years would
focused on the United States or elsewhere – is to be
have been developed anyway. In fact, they need to show
welcomed, there is also a need to be far more sceptical
that there would have been even more progress. No ifs,
about work that is ultimately based on theory and
no buts, no maybes – just plain, solid, irrefutable proof. If
speculation. Those who advocate radical change have an
this
obligation to provide hard evidence that this will be
fundamental changes is just too much of a risk. After all,
positive. They need to demonstrate that weaker patents,
what happens if those that propose these changes
or none at all, would lead to greater levels of innovation;
without solid proof are wrong?
proof
is
not
forthcoming,
surely
making
that more would have been achieved in terms of the
Joff Wild is managing editor of IP Value 2008 and editor of Intellectual Asset
Management magazine (www.iam-magazine.com). He can be contacted by
email at [email protected].
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Page 14
Alexander R Butler
IP Management Services, a Thomson business
Introduction
Managing intellectual property when
regulators rule
It’s merger and acquisition (M&A) season: do you know
Previously, when one company acquired or merged
where your intellectual property is? For the nearly 32,000
with another, the amount paid for the target company
companies that have helped 2007 to be a record year for
was determined by assigning a value to its physical
M&A activity, the answer should be yes. The federal
assets, including such basics as the physical plant and
regulators are watching.
machinery employed in a business, plus ‘goodwill’ – a
According to data compiled by Thomson Financial,
smorgasbord of intangible assets too messy to be detailed
worldwide M&A activity for the first nine months of 2007
in the accounts. The new rules state that this simplified
increased by 50 per cent compared to the same period in
treatment of acquired intangibles is no longer enough.
2006, to reach $3.6 trillion in announced deals. This eclipses
Everything – including ideas that have not yet been fully
the totals for the whole of 2006, which were record-breaking
brought to fruition – must be counted.
at the time, in spite of mid-year credit market difficulties.
In this kind of capital markets environment, the
Communication between disparate stakeholders
majority of IP managers and accountants have been
This regulatory environment has created a new world
tasked with the labour-intensive job of assigning a dollar
order for IP managers. As frontline soldiers in the battle
value to a company’s intellectual assets. The accounting
for new ideas, this group knows better than most that
standards applied to the handling of intellectual
innovation is the currency of the new global marketplace.
property in a merger or an acquisition have become
Whether a computer company in California is
exceedingly complicated. Fortunately, the rapid pace of
reinventing the mobile phone or a start-up in Shanghai is
capital markets activity has accelerated the learning
pioneering alternative energy technologies, financial
curve for all stakeholders. Using a variety of IP
success will be determined by the ability to break new
management tools and techniques, it is possible to
intellectual ground. For companies that stake their future
achieve a measured, accurate reading of IP value. This
on ideas, there is nothing more important than actively
chapter outlines the requirements and describes the step-
and accurately managing that portfolio.
by-step process that many firms have followed to value
large portfolios of IP rights successfully.
However, when it comes to assigning a dollar value to
the portfolio, many IP managers find themselves out of
their element. IP valuation is a collaborative affair, in
The rules of the road
which geographically dispersed teams of accountants,
Starting in June 2001 with the adoption of Statement of
attorneys, inventors, engineers and researchers must
Financial Accounting Standards (SFAS) 141, companies
assign with mathematical certainty a dollar value that
engaging in a merger or acquisition were required to
can withstand public scrutiny to completely intangible
assign a value to all assets, both tangible and intangible.
items such as patents, brands, in-process research,
That regulation was followed closely by SFAS 142, which
trademarks and copyrights.
further categorised intangible assets into finite-lived or
Before valuation can begin, it is essential to take a
infinite-lived assets. According to the regulation,
detailed inventory of the IP portfolio. This is no small
intangible assets with finite life spans are accounted for
task
at fair value and amortised over their remaining useful
maintain portfolios consisting of anything from between
lives. Those with seemingly limitless value are subject to
10,000 to 40,000 live patents, which are often managed by
an annual impairment test.
teams of IP attorneys. In a recent survey of IP managers,
when
many
innovation-minded
companies
29/11/07
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Page 15
IP Management Services, a Thomson business Introduction
Figure 1: Scorecard: Worldwide Announced M&A
1//1/2007-30/9/2007
1/1/2006-30/9/2007
% Change in
Region/Nation
Rank val US$m
No. of deals
Rank val US$m
No of deals
rank value
Worldwide
3,624,637.4
31,022
2,418,233.4
27,894
49.9
Americas
1,677,400.0
11,032
1,171,727.7
10,061
43.2
Central America
14,060.8
217
7,858.7
136
79.2
Mexico
13,355.9
166
4,955.6
108
169.5
South America
57,290.1
720
41,667.1
415
37.5
3,454.9
101
3,555.9
62
-2.8
Argentina
Brazil
Caribbean
North America
Canada
United States
Africa/Middle East
North Africa
Sub-Saharan Africa
Middle East
34,932.4
343
21,450.1
196
62.9
23,189.4
107
12,822.7
73
80.8
1,582,839.7
9,988
1,109,379.2
9,437
42.7
215,020.5
1,695
114,678.9
1,343
87.5
1,367,819.3
8,293
994,700.3
8,094
37.5
49,409.9
545
47,511.6
567
4.0
5,964.3
60
6,390.4
54
-6.7
23,712.6
282
21,020.1
329
12.8
19,733.0
203
20,101.1
184
-1.8
1,458,784.8
10,090
900,356.4
8,933
62.0
Eastern Europe
159,567.8
1,444
74,624.4
1,156
113.8
Western Europe
1,299,217.0
8,646
825,732.0
7,777
57.3
Europe
France
133,775.4
999
162,356.2
970
-17.6
Germany
121,194.5
1,283
93,340.0
1,227
29.8
UK
311,062.9
2,401
176,100.2
2,007
76.7
350,465.7
7,406
216,967.4
6,416
61.5
Asia-Pacific
Australasia
116,250.6
2,032
68,010.1
1,744
70.9
109,742.3
1,757
62,247.4
1,440
76.3
6,001.3
244
5,168.5
283
16.1
South East Asia
57,117.4
1,507
34,003.4
1,414
68.0
Malaysia
18,547.2
608
12,084.1
644
53.5
3,993.9
137
1,965.2
90
103.2
Australia
New Zealand
Phillippines
North Asia
China
Hong Kong
South Asia
Central Asia
Japan
134,488.6
2,984
80,564.2
2,268
66.9
48,967.0
1,710
28,200.5
1,347
73.7
24,911.1
747
23,565.6
564
5.7
38,325.4
826
31,852.1
954
20.3
4,283.7
57
2,537.6
36
68.8
87,880.3
1,949
80,491.0
1,917
9.2
Thomson Scientific found that 88 per cent of
even across continents. This common basis for
pharmaceutical companies and 70 per cent of large
communication is critical when attempting to get
corporations maintain multiple patent offices, typically
operationally and geographically disparate business
spanning the United States, Europe and Asia.
units to pool their talents.
Fortunately, most companies with large intellectual
asset portfolios use powerful management software to
Categorisation and tracking
keep track of their patents, trademarks, invention
Once intellectual assets are identified, they must be
disclosures and licensing agreements. The reporting tools
categorised. According to FASB 141 and 142, intangible
enabled by these types of technology platform make it
assets must be organised into the following categories:
easy to share data and collaborate between departments,
•
marketing-related intangibles (eg, trademarks and
29/11/07
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Introduction IP Management Services, a Thomson business
$800,000
4,500
$700,000
4,000
3,500
$600,000
3,000
$500,000
2,500
$400,000
2,000
$300,000
Number of deals
Rank value (US$m)
Figure 2: Worldwide Announced M&A Target Industry: January 1 - September 30 2007
1,500
$200,000
1,000
$100,000
500
Consumer Products
and services
Retail
High technology
Healthcare
Telecommunications
Consumer staples
Media and
entertainment
Industrials
materials
Real Estate
Energy and Power
Financials
$0
0
brand names);
lines, the team of accountants and IP managers will need to
•
customer-related intangibles (eg, customer lists);
create accurate measures for these assets that can be
•
artistic-related intangibles (eg, musical
monitored consistently over time. Tracking intellectual
compositions);
property is a regimented, rules-based process in which
contract-related intangibles (eg, licensing
every new entry into the IP database or change in the status
agreements); and
of a piece of intellectual property must be put through a
technology-related intangibles (eg, patents and
system of checks and balances to make sure it is consistent
software).
with all existing records entered from every corner of the
•
•
company. While the valuation process may be accelerated
Further, assets must be determined to be finite or
in the lead-up to a merger or acquisition, the underlying
infinite lived so that they may be properly accounted for
value of the portfolio will need to be maintained and
on the company balance sheet. Assets such as patents,
reported on a quarterly basis. This can be a big
licences, leases and other contract-related assets that
management task – in a portfolio of 40,000 patents, it is not
have a specific expiration date typically fall into the
uncommon for IP personnel to make between 500 and 1,000
finite-lived category. They will be amortised over the
changes to the content each week. If these new updates are
remaining life of the asset. Infinite-lived assets are items
not made in a consistent manner across the organisation,
such as brands and trademarks which, in theory, will
data integrity and accuracy will deteriorate very quickly.
continue to perform their intended function and generate
value indefinitely. These items are booked at fair value
Think like a chief financial officer
on the balance sheet and are subject to an annual
The goal of FASB 141 and 142 is to ensure that companies
impairment test, rather than amortisation, from the
measure, monitor and disclose the relationship between IP
effective date of FASB 141 and 142. Of course, the grey
rights and the company’s financial performance. These
area between finite and infinite-lived assets is
details must be managed continually so that changes in the
determining the expected useful life of an asset, which is
scope and strength of those rights can be translated into
subject to the effects of obsolescence, demand and
reportable indicators of financial performance. For this to
competition. It is at this intersection between the art and
happen, everyone involved – from IP attorneys to forensic
science of IP valuation that it is critical to pool the
accountants – must think like the chief financial officer of
insights of financial, legal and technological personnel,
the company. They need to know the portfolio inside out
who can together develop a consistent framework for
and to be able to speak about it in financial terms.
projecting the longevity of intellectual assets.
Once the entire portfolio has been parsed along these
When it comes to actually assigning a dollar value to
the portfolio, there are three primary methods:
29/11/07
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IP Management Services, a Thomson business Introduction
•
market approach;
and 142 to senior company management. The company’s
•
cost approach and
chief executive and chief financial officer will need to
•
income approach.
sign on the dotted line, certifying that the company’s IP
assets are fairly represented. Clear, concise and
In the market approach, a company’s IP assets are
consistent communication throughout the organisation,
compared to existing assets in the marketplace that have
and a clear, consistent method of tracking and managing
a known value. This is similar to an appraisal method of
the rights, are essential for this benchmark to be met.
determining a fair real estate price by examining the
recent
sale
prices
of
comparable
homes
in
a
Transparency without giving away the farm
neighbourhood. The cost approach values intellectual
The IP valuation process is a double-edged sword. On
property based on the cost of obtaining it. This is either
the one hand, it is easy to see why detailed cataloguing of
the purchase price or what the company paid the
intellectual assets adds a layer of efficiency to a
engineers and attorneys to come up with the idea, file the
company’s financial projections. However, by its very
patent application and carry out all the research and
definition intellectual property is the lifeblood of most
development that is part of this process. The income
companies’ competitive advantage. If filings give away
approach factors in the future income-producing
too much information, they may reveal trade secrets. If
potential of the intellectual property.
they disclose too little, companies run the risk of
In determining the best approach for valuing different
types of intellectual asset, access to industry best practice
incurring fines or fracturing their relationships with
investors.
can be invaluable. While competitive markets for
Many companies have found ways around this
technology products may contain dozens or even hundreds
problem by incorporating IP smokescreens into their IP
of comparable pieces of intellectual property to be used in
management process. While internally the disparate
a market-based valuation approach, other, new frontiers of
pieces of the business have identified the exact dollar
innovation will contain virtually no basis for determining
value of its various intellectual assets, the reporting of
the value of an idea. In such cases, the experience of the
that data may reveal itself in less obvious ways.
global universe of IP professionals can help to establish
guidelines. A number of IP research and information
The most prevalent diversionary tactics currently
being deployed include:
companies provide comprehensive industry best practices
and benchmarks for valuing hard-to-price assets.
Once valuation metrics are determined, the finance
•
patent filings under multiple subsidiary names;
•
strategic acquisitions of smaller, private companies;
side will have to weigh the impact of a merger or
acquisition on the bottom line. Often the valuation of
intangible assets can have a tangible impact on an
and
•
phantom projects that look like a new company
direction but are really just small, isolated tests.
acquirer’s earnings per share.
Consider the example of a pharmaceutical company
In each case the goal is simple: to secure patent
that has a large portion of its purchase price tied up in
protection for the firm’s most valuable ideas without
intangible assets (eg, current research and development).
giving away too much information about a strategic
It is not uncommon, in a pharmaceutical company
direction. This is a worthy goal in a world where the pace
acquisition, for the target company to be valued at
of technology development has shrunk the distance
upwards of $3 billion in excess of the tangible assets
between market leader and scrappy upstart. When
being acquired. However, if those intangible assets
handled properly, this offers a good defence for new
include several soon-to-be-expired patents, the value of
innovation while preserving a level of transparent
this finite-lived intellectual property will be greatly
financial reporting that drives efficiency.
diminished throughout the amortisation process. It is
conceivable that an intellectual asset valued at $3 billion
Cleanliness is next to …
at the time of acquisition could be worth half that
The single, unifying ingredient that makes every step in
amount in a matter of a few years. The consequences of
the IP valuation process possible – from pricing assets to
mispricing this transaction would be fatal for today’s C-
fending off competitive intelligence – is organisation. A
suite managers.
patent portfolio is no longer a safety deposit box into
Throughout the valuation process, it is critical for IP
managers
to
appreciate
the
importance
which companies throw all their good ideas and wait for
of
them to mature. It is a complex business instrument with
communicating accounting regulations such as FASB 141
implications that span legal, accounting, research and
29/11/07
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Page 18
Introduction IP Management Services, a Thomson business
Figure 3: Worldwide Announced M&A Target Industry: January 1 - September 30 2007
development, marketing and senior management.
spotlight on IP valuation, the underlying business
Constantly in motion and subject to the ebb and flow of
benefits of taking control of these assets are undeniable.
the business cycle, as well as ever-changing country
Weighing up the alternatives, it makes a lot of sense to
rules, a well-managed IP portfolio has the power to turn
invest in an IP management infrastructure that fosters
start-ups into multinational conglomerates, while an
communication across an organisation and enables the
improperly managed portfolio can sink even the most
business to harness the full power of its greatest assets –
promising business growth strategies.
its ideas.
While government regulations have placed a
Alexander R Butler is vice president, sales and professional services for
Thomson Scientific’s IP Management Services (formerly MDC).
Mr Butler has over 15 years of IP experience, with special expertise in
international business and global business development. He received a
BSc degree from The American University in Washington, DC with a major
in international economics and trade, and is an MBA candidate at Villanova
University.
Alexander R Butler
Vice president, sales and professional
services
Tel +1 703 310 5771
IP Management Services,
a Thomson business (formerly MDC)
United States
29/11/07
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Page 19
Jay Eisbruck
Moody’s Investors Service
Introduction
Royal(ty) succession: the evolution
of IP-backed securitisation
This
In recent years the securitisation of various types of
chapter
reviews
developments
in
the
intellectual property has evolved from a small niche
securitisation of the recently active IP asset classes (film
market utilised by individual artists or thinly capitalised
receivables, franchise fees, trademark licensing royalties
companies to a broader corporate financing tool used to
and patent licensing royalties), and suggests the likely
facilitate mergers and acquisitions, stock buy-backs and
direction of the market in the future.
risk transference to investors.
Moody’s has rated the majority of these transactions,
Film receivables
with original ratings ranging from Aaa to Ba3. Continued
Film receivables was one of the first IP asset classes to be
growth in the market is expected – with perhaps 10
securitised, with transactions as early as 1995. The
new transactions in 2008 – as more companies learn of
majority of these transactions have been ‘slate’ financings
the potential benefits of securitisation and investors
– that is, transactions collateralised by a portfolio of films
become increasingly receptive, due in part to the
to be released by a particular studio. Table 1 lists publicly
wider availability of historical information on asset
rated slate financings completed to date.
performance.
In the earlier transactions (the first nine in Table 1),
Table 1: Rated slate financings
Transaction
Studio
name
Approximate
Approximate
Senior bond
size ($million)
close
rating
Millennium Investors LLC
Fox
1,000
11/95
Aaa (wrapped)
Galaxy Investors LLC
Universal
1,100
6/97
Aaa (wrapped)
No 5 and 6
Destination
300
10/97
Not rated
DreamWorks Film Trust
DreamWorks
425
12/97
Aaa (wrapped)
Hollywood Funding
Village Roadshow
Films (BVI) Ltd
Village Roadshow
900
6/98
Aaa (wrapped)
DreamWorks Film Trust II
DreamWorks
550
1/00
Aaa/Baa3
Palisades Partners
Sony
300
3/00
A1
Galaxy Investors II LLC
Universal
1,000
5/00
Aaa (wrapped)
Village Roadshow Films II
(BVI) Ltd
Village Roadshow
1,000
2/03
Aaa (wrapped)
Melrose Investors LLC
Paramount
300
8/04
Baa2
Kingdom Films LLC
Disney
500
8/05
Baa2
MVL Film Finance LLC
Marvel
525
9/05
Aaa (wrapped)
Gun Hill Road LLC
Relativity Media
625
5/06
Baa2
(arranger)
29/11/07
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Introduction Moody’s Investors Service
Table 2: Comparison of key features
Old structure
New structure
Transaction example
DreamWorks Film Trust
Melrose Investors LLC
Studio rating
Unrated (unpublished rating
A3 (based on rating of corporate
below investment grade)
parent Viacom)
Transaction rating
Low investment grade (shadow rating)
Baa2
25 per cent of revenues at top of
100 per cent of costs at top of waterfall
P&A reimbursement
waterfall, rest after bondholder P&I
Subordination
4 per cent equity piece
19.6 per cent subordinated debt,
12.3 per cent equity
relatively little film performance risk was transferred
than earlier transactions) before principal and interest
away from the studio to investors. The transactions were
payments to bondholders are paid.
designed to accelerate the recovery of a studio’s costs for
This increased risk shifted the emphasis of Moody’s
the production of a film, but not the repayment of prints
rating analysis. In the older structures, the expected cash-
and advertising (P&A), and structured investors were in
flow coverage of the films’ revenues to the promised cash
a senior position to P&A payments.
flows to investors was considerable, assuming the films
With Paramount’s Melrose Investors transaction in
were actually produced. Therefore, the constraining
2004, issuers and intermediaries began using structures
factor on a securitisation’s rating was the studio’s rating,
that shifted greater risk to investors. The greater risk
which assessed the probability that it would be able to
tolerance of investors is demonstrated by the shift to
produce and market a sufficient number of films (usually
unwrapped transactions. Wrapped transactions typically
12 to 15). In contrast, in the more recent deals the
receive Aaa ratings as a result of a guarantee from a
expected cash-flow coverage, although significant, was
third-party
where
not nearly as strong, and the transactions received
transactions are wrapped they are generally structured to
insurance
company.
In
cases
ratings below those of the studios and required large
achieve at least an investment grade shadow rating – that
subordinate tranches to achieve investment grade
is, the risk faced by the insurance company is at least
ratings. A sample comparison of key features of these
Baa3.
structures is shown in Table 2.
The major change in the more recent transactions is
The Gun Hill Road LLC transaction also used the new
that reimbursement of P&A has been shifted to the top of
structure, but in a different form. This transaction was
the cash-flow waterfall ahead of structured bondholders.
the first film receivables transaction issued by an entity
The new deals also expand the way in which
other than a studio. Gun Hill was created by Relativity
securitisation is used in film financing. The more recent
Media to finance partially a slate of 18 films to be
transactions
studio’s
produced and distributed by two studios, Sony and
reimbursement of a slate’s production costs, but also
Universal. In contrast to prior transactions, in which an
serve as an additional source of funding for its ongoing
entire studio’s current output was securitised, Relativity
business, which reduces a studio’s continuing reliance on
purchased selected films from a studio’s overall slate that
its corporate parent. As a result, the studio has the option
met profitability targets set by its proprietary model.
not
only
accelerate
a
to produce a larger number of films and/or more
In late 2006 and 2007 Moody’s rated a number of
expensive films without having to seek additional
transactions in the private market that were sold into
partners, as it often needed to do in the past. The
asset-backed commercial paper conduits. These deals
Kingdom Films and MVL Film Finance transactions were
were issued by both major studios and third parties
also structured in this manner.
which, similar to the Gun Hill Road transaction,
From a credit perspective, bondholders in the newer
partnered with the major studios.
structures face more of the performance risk of the
Further future film securitisations involving the major
underlying slate of films. Moving full reimbursement of
studios are expected to follow the new structure used in
P&A expenses to the top of the waterfall has increased
the more recent deals, since it provides greater flexibility
this risk due to the much larger expense component that
and investors have been willing to accept the higher risk
must be covered (approximately two to four times larger
inherent in these structures. This structure has also
29/11/07
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Page 21
Moody’s Investors Service Introduction
Table 3: Franchise fee deals
Transaction
Issuer
name
Approximate
Approximate
Senior bond
size ($million)
close
rating
Arby’s Franchise Trust
Arby’s
290
11/00
Aaa (wrapped)
Athlete’s Foot IP Holdings
Athlete’s Foot
Private
08/03
Baa3
QFA Royalties LLC
Quizno’s
250
03/05
Baa2
DB Master Finance LLC,
Dunkin’ Brands
1,700
05/06
Aaa (wrapped)
Sonic
800
12/06
Aaa (wrapped)
IHOP
200
03/07
Aaa (wrapped)
Domino’s
1,850
04/07
Aaa (wrapped)
Series 2006-1
Sonic Capital LLC,
Series 2006-1
IHOP Franchising
LLC and IHOP IP LLC
Dominos’ Pizza Master
Issuer LLC, Series 2007-1
recently been applied to independent studios, although
$1.6 billion and a number of new features made possible
the transactions were not rated.
by the strength of the included brands. The transaction
replaced bank financing that had been put in place when
Franchise fees
private equity firms purchased the franchisor, Dunkin’
Franchise fee transactions are collateralised primarily by
Brands, from Allied Domeq, and was designed to contain
the royalties generated on sales at franchised locations of
many of the same features as traditional bank financings.
a name retail chain. Franchise fee deals completed to date
These included:
are listed in Table 3.
The Arby’s deal was retired successfully in 2005, as
•
were Quizno’s and Athlete’s Foot in 2006. Despite the
relatively good performance of these deals, the
years;
•
development of the market for this asset class has been
slow, due to the fact that the transactions were privately
no scheduled principal amortisation in the early
the ability to issue additional debt within the
securitisation under certain conditions; and
•
the lack of a named back-up servicer.
placed and relatively small. As a result, there has been a
lack of information about the deals available to market
Despite the added flexibility for the issuer, the
players, which has made them difficult to replicate, and
transaction achieved an investment grade shadow rating
there has been little incentive for investors to invest the
due to several risk-mitigating factors, including:
resources to understand the asset.
A positive development for the long-term prospects of
•
this asset class occurred in the Athlete’s Foot deal following
party to transfer management of the assets to a party
the bankruptcy of its parent company, Athlete’s Foot Brand
Inc, in December 2004. No creditor challenged the asset-
the power of the bond insurer, Ambac, as controlling
of its choice if performance deteriorates;
•
performance triggers that force the deal into early
backed structure during this period and cash flows to the
amortisation if the franchises perform worse than
transaction were not disrupted. This case demonstrated
minimum specifications; and
that the bankruptcy-remoteness of a franchise fee deal
•
limitations on future debt issued by the parent
structure could survive without challenge, which could
company, reducing the risk of potential disruption at
alleviate some investor concern about the effects of a
the manager of the assets.
potential bankruptcy of other deal sponsors, which are
typically low-rated or unrated enterprises.
Since the Dunkin’ transaction closed in May 2006
The major development in 2006 in this area was the
there has been increased activity in the asset class. Three
DB Master Finance LLC transaction, which securitised
large franchisors – IHOP, Sonic and Domino’s –
the franchise fees by the Dunkin’ Donuts, Baskin Robbins
completed similar transactions and it has been
and Togo’s brands. Totalling $1.7 billion in proceeds, the
announced that IHOP intends to utilise asset-backed
structure included two wrapped Aaa tranches totalling
transactions to finance its purchase of Applebee’s. In
29/11/07
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Page 22
Introduction Moody’s Investors Service
Table 4: Trademark licensing securitisations
Transaction
Issuer
name
Approximate
Approximate
size ($million)
close
Rating
Universal Credit Trust 1999-B
Bill Blass
25
11/99
Baa3
Candie’s LP (Iconix)
Candie’s
20
12/02
Baa3
Guess? Royalty Finance LLC
Guess?
75
04/03
Baa2
53
12/04
Baa3/Aaa (guaranteed)
MLA Multibrand Holdings LLC BCBG Max Azria
KCD IP LLC
Sears
1,800
05/06
Baa2
IP Holdings LLC
Iconix
152
04/07
Baa3
addition, franchise businesses outside the restaurant
by a highly rated third party, Wells Fargo Bank. Before
sector, such as brokerage fees and hotels, are also
this, no security issued through a trademark licensing
considering securitisation.
deal was rated higher than Baa2. In addition, less than a
year after the close of the transaction, the assets
Trademark licensing royalties
performed so strongly that they were used as security in
Trademark licensing securitisations monetise the future
a significantly larger corporate debt issuance that was
revenues generated by the licensing of a logo or brand
used to pay off the securitisation. Although not a
name. The five securitisations backed by trademark
guarantee of future success, both these events
licensing revenues that have been rated are listed in Table
demonstrate that market players gained comfort from
4. Most transactions in this market have originated in the
the strength of the BCBG brand.
fashion and apparel industry.
The most recent transaction, KCD IP, is notable for
The focus of the credit analysis in these transactions
being more than 20 times larger than the next largest
was the extent to which the trademarks will generate
trademark licensing deal, indicating that strong brands
sufficient future royalties to support debt service. The
with long performance histories can support large levels
analysis was supported by the history of royalties
of debt at investment grade ratings. It has been reported
(which, in these transactions, was considerable)
that KCD IP securitised Sears’ most valuable brands,
generated by the brands and the skill of the issuer to
Kenmore, Craftsman and Diehard, all of which had long
manage them successfully going forward. Managing the
track records and strong inherent value. This was also the
trademarks properly includes creating and maintaining
first completed trademark securitisation that did not
relationships with qualified licensees and producing
include an apparel brand.
effective marketing campaigns to sustain the brand’s
relevance with its target group(s) of consumers.
Patent licensing royalties
Royalties generated by the brands in all these deals
To date, securitisation of patent licensing royalties has
have exceeded expectations, although to date none have
been limited to pharmaceuticals. Compared to other
been upgraded due to the continued reliance on low-
technology patents, pharmaceutical royalties are better
rated or unrated brand managers.
suited to securitisation due to the high barriers to entry
The Candie’s deal, which originally closed at $20
in pharmaceuticals – largely due to the long
million when it included only the Candie’s and Bongos
development and regulatory approval processes for
brands, has become a flexible structure for its successor
drugs. This generally makes the risk of obsolescence
company, the Iconix Brand Group Inc. Iconix specialises
lower than for other types of technology patent, reducing
in owning, licensing and marketing a portfolio of
the potential variability of future royalty payments.
consumer brands, which also includes Badgely Mishka,
Joe Boxer, Rampage and Mudd. As each brand was
Four drug patent royalty securitisations have been
publicly rated to date, as listed in Table 5.
acquired by Iconix, it was added to the Candie’s vehicle,
Biopharma Royalty Trust includes the patent rights
which is now over $150 million. In April 2007 Moody’s
on a single drug, while the others include the rights on
rated this upsized Iconix transaction Baa3.
multiple drugs. Including multiple drugs with proven
Further developments in this sector were evident in
the MLA transaction. A portion of the debt issued in the
transaction was rated Aaa due to a guarantee provided
market acceptance generally provides greater diversity
to the pool, reducing credit risk.
The Biopharma deal hit a performance trigger shortly
29/11/07
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Page 23
Moody’s Investors Service Introduction
Table 5: Drug patent royalty securitisations
Transaction
Issuer
name
Approximate
Approximate
size ($million)
close
Rating
Biopharma Royalty Trust
Royalty Pharma
80
12/00
Royalty Pharma Finance Trust
Royalty Pharma
225
7/03
Not rated
Aaa (wrapped)
Royalty Securitization Trust I
Paul Capital
228
12/04
Aaa (wrapped)
Drug Royalty Trust 2005-1
Drug Royalty
68
3/05
Not rated
Royalty Pharma Finance
Royalty Pharma
1,400
04/07
Baa2
Drug Royalty
356
08/07
Aaa (wrapped)
Trust-Tranche B Term Loan
Drug Royalty LP 1,
Series 2007-1
after the involved drug marketer, Zerit, front-loaded its
Other players in the medical field have seen the
sales into a single quarter through a practice known as
success of these structures and are considering
‘channel stuffing’ (ie, where a company inflates its sales
securitisation as a possible method to help to fund the
figures by forcing more products through a distribution
development costs of new drugs. In 2005 the Milken
channel than there is demand for). As a result, although
Institute held seminars to discuss the viability of this
royalties were high in that period, the excess cash flows
approach. Due to the low success rate of drug research
(after covering debt service) were paid out to the
and the hard-to-predict acceptance level of newly
marketer and were unavailable to investors to make up
introduced drugs, it will continue to be difficult to create
for shortfalls that occurred when sales declined in
structures that achieve investment grade ratings unless
subsequent periods.
the structures are backed by diversified pools of assets.
Royalty Pharma Finance Trust was structured to be a
However, due to the high concentration in the
warehouse facility that allowed for the inclusion of
pharmaceutical industry, there are relatively few firms
additional patent interests if certain conditions were met.
with portfolios of sufficient size to obtain this pool
Due to the better-than-expected royalties generated by
diversification on their own.
the drugs in the trust, and the demonstrated expertise of
Alternative avenues to investment grade ratings
Royalty Pharma management in acquiring new revenue
could involve pools backed by drug royalties from
streams, the transaction has been increased several times
multiple pharmaceutical companies and transactions
and is now authorised to issue at over $600 million,
guaranteed by highly rated third parties. In addition,
compared to $225 million at closing. In 2007 Royalty
while there has been some activity in single drug
Pharma repaid its securitisation and transferred the
transactions, including a number that have been placed
assets to secure a more traditional term bank loan which
in collateralised debt obligations, it is likely that these
Moody’s rated Baa2. This loan gives the company the
deals would receive lower ratings and/or advance rates
flexibility to purchase new drugs without rating agency
due to their concentration risk. Overall, growth in this
or bond insurer review.
sector is expected to be relatively modest.
Jay Eisbruck is a managing director in Moody’s asset-backed finance group.
He has evaluated transactions backed by a variety of assets and currently
focuses on aiding the development of new assets. Mr Eisbruck has written
articles on structural innovations and general trends in the asset-backed
market. He holds an MBA in finance and a BSc in economics from New York
University’s Stern School of Business, where he was a Racoosin scholar.
Jay H Eisbruck
Managing director, New York
Tel +1 212 553 1658
United States
29/11/07
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Page 24
29/11/07
16:29
Page 25
Christian Lucas
Morgan Stanley
Introduction
European technology M&A: a market
perspective
At the start of 2007 Morgan Stanley produced a
than the rest of the economy. However, as soon as some
perspective on the European technology (tech) industry,
stability returned, tech activity was equally quick to pick
assessing performance throughout 2006 and looking
up again.
ahead to the trends expected to drive activity throughout
While consolidation is already well underway in
2007. Now, as 2007 draws to a close, the predictions of
areas such as telecommunications hardware and
key trends have turned out to be largely accurate. This
semiconductors, this is expected to continue to broaden
chapter summarises the key findings of the report and
into 2008, with sub-sectors such as IT services and
looks ahead to 2008.
software becoming increasingly busy.
M&A activity in European tech sector at near-record
Consolidation driven by the need for scale
levels
European tech companies are increasingly aware of the
In 2006 the value of merger and acquisition (M&A)
need for scale to offset high research and development
activity in the European tech sector reached $50 billion
costs and the risks associated with launching new
and European companies were involved in the two
products in the technology space. There is also increased
largest tech deals worldwide that year: as a buyer in the
pressure from low-cost competitors – mainly from China,
case of Alcatel/Lucent and as a target in the case of
Taiwan and Korea (telecommunications hardware and
Philips Semiconductors/NXP. This activity was in line
semiconductors) and India (IT services and software).
with the ongoing trend towards increased year-on-year
This continues to be a major driver of M&A activity in the
activity – in 2006 M&A volume surged by 65 per cent (as
European market, with European managers having no
compared with 2005), making it the second-strongest
option but to seek out acquisition opportunities. Scale is
year ever and the fourth year in a row characterised by
important. By growing customer numbers, companies
escalating activity. As has been seen, 2007 has turned out
can achieve economies of scale and remove duplication
to be another year of strong transaction volume, with an
in areas such as sales and marketing.
increasing number of multibillion deals being worked on
Bolt-on acquisitions have proved – and will continue
(eg, SAP/BOBJ and Nokia/TeleAtlas). Looking ahead,
to prove – themselves valuable as a means by which
deal making is expected to continue to be a feature of the
existing product offerings can be expanded. Although in
market, underpinned by the high cash generation and
many cases specific skills can be accessed through
strong capital structures of many tech companies,
licensing deals, companies often prefer to use the M&A
provided that benign equity market conditions prevail.
route in order to gain controlling access to critical
Tech can almost be seen as an amplifier of economic
conditions. Its three principal verticals – financial
intellectual property that can be used to strengthen their
product and service portfolios.
services, telecommunications and public services – are
plugged directly into the global marketplace and
Cash continues to be king
therefore fluctuations of demand are almost immediately
Cash continues to remain the preferred deal-making
reflected in the performance of this sector. When the
currency in this industry. Tech companies are generating
credit crunch hit in Summer 2007, tech activity was quick
more cash than ever before and, as a result, are looking to
to slow down, with most deals being put on hold almost
reinvest through M&A activity. At the same time, until
immediately and stock prices adjusting more quickly
recently there has been a benign interest rate
29/11/07
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Page 26
Introduction Morgan Stanley
Figure 1: European tech/M&A volume by consideration
100
3
7
11
5
7
5
8
11
15
19
90
3
16
16
27
32
36
80
23
59
6
7
35
70
19
24
29
31
7
45
48
60
27
19
8
19
50
97
86
40
4
77
79
78
69
30
59
46
20
52
74
64
58
56
50
48
42
37
10
0
1990
1991
1992
Cash
1993
1994
1995
Stock
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: Thomson Financial
Hybrid
environment, which has been a further factor driving
expected to continue to be a major force in the market
cash deals (which also tend to be more favourably
well into 2008 and beyond.
viewed by the capital markets). Figure 1 shows the
proportion of cash, stock and hybrid financings for
Sub-sector trends
European tech deals from 1990 to 2006.
It is interesting to take a look at some of the more active
sub-sectors within this industry.
An increasing role for private equity
Over the past year private equity investors have become
IT services
increasingly focused on the European tech sector. This
The area of IT services has established itself as a highly
was underlined by a number of landmark acquisitions,
active area with significant expansion by many
including
Silverlake’s
companies of their offshore capabilities as price pressure
investment in Thomson. A decline in gearing and strong
increases the focus on cost structures. European IT
cash-flow profiles across the industry have made this
services players are fast catching up with their US peers,
sector more attractive to private equity investors and,
building offshore capabilities as the reluctance of their
although the collapse of debt financing during Summer
customers
2007 undoubtedly had a negative effect on activity,
Consolidation within this sub-sector is being driven by
looking ahead it appears unlikely that private equity will
regional expansion and increased competition from low-
shy away from the excellent investment opportunities
cost players. The European IT services landscape is still
which are still available in European tech.
dominated by many regional players and the expansion
NXP
and
Amadeus
and
subsides
(eg,
Capgemini/Kanbay).
The statistics are quite emphatic. M&A activity by
of their footprint enables them to cut costs and compete
private equity in the European tech sector increased by
with global players for large contracts (eg, Logica/WM
46 per cent a year between 2000 and 2006, representing 30
Data and Logica/Unilog).
per cent of overall activity. In addition, private equity
funds have no shortage of money in their war chests.
Semiconductors
With such significant equity still available to invest and
The semiconductor sub-sector is being transformed by
relatively bullish risk appetites, these investors are
the advent of private equity. Lagging behind the US
29/11/07
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Page 27
Morgan Stanley Introduction
by
new companies enter the market. There has also been
consolidation among companies, including Agere/LSI
significant expansion of vertical market expertise, with
and Sandisk/M-Systems), for a long time European
larger players increasingly likely to buy smaller players
companies shied away from deal making. However, with
to gain sector expertise, thereby driving further industry
private equity investors becoming more aggressive on
consolidation (eg, Siemens/UGS).
market
(which
has
already
been
reshaped
acquisition multiples and more comfortable with the
cyclical nature of the technology sector, M&A activity is
Telecommunications hardware
likely to continue into 2008 (eg Infineon/LSI Wireless
Several large deals in this sub-sector have already
and NXP/Silicon Labs). Strong cash-flow generation has
happened. However, convergence is continuing to drive
been driving the increased leverage and higher cash
the need for companies in this sector to acquire
return to investors in this sector, and this has further
complementary products. A number of other factors are
served to boost the attractions of this sub-sector.
driving this trend. Bolt-on acquisitions help companies to
expand
their
product/technology
and
portfolio
Ericsson/Redback),
(eg,
Software
Ericsson/Marconi
and
The software sector was active throughout 2007 and
consolidation among their client bases drives the need
looks set to be busy in 2008. A number of factors
for scale. Telecommunications hardware providers have
underpin this. European companies in this sub-sector are
been forced to react to an increasingly smaller customer
increasingly keen to expand their footprints so as to
base as M&A activity among telecommunications
penetrate the US market. Many EU software companies
providers has gained momentum (eg, Alcatel/Lucent).
use M&A to expand into geographical markets where
At the same time, increased price competition from new
they do not already have a presence (or are weaker than
entrants has also been driving the need for scale – new
the local competition). This is particularly the case in the
arrivals such as Chinese firm Huawei have been
United States (eg, the Sage/Emdeon healthcare division
increasing the price pressure, requiring European players
deal and Dassault/Abaqus). New product delivery
to realise scale benefits (eg, the Nokia/Siemens joint
methods are transforming activity in this sub-sector; the
venture).
concept of software as a service is becoming increasingly
widespread, increasing tension among existing software
Solid momentum in number of deals and deal size
vendors – particularly among the server message block
While deal volume in 2006 was almost 50 per cent below
and enterprise-level customer relationship management
that in 2000, the average deal size was actually 35.3 per
and enterprise resource planning players as disruptive
cent higher. The number of mega-deals increased
Figure 2: Number of deals in European tech industries
150
850
140
800
750
130
120
700
120
650
110
600
100
550
90
500
450
80
70
65
63
60
51
50
300
45
42
400
350
55
250
40
31
30
20
19
15
13
9
10
27
200
28
23
8
150
100
11
50
0
0
1990
1991
1992
1993
Number of deals
1994
1995
1996
1997
Average deal size
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: Thomson Financial
29/11/07
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Page 28
Introduction Morgan Stanley
significantly during the year, culminating in deals such
Looking ahead
as:
There is no reason why deal-making activity in the
European tech sector should not continue to be strong
•
Alcatel/Lucent ($11.8 billion);
throughout 2008. Although deals in this industry are
•
NXP’s leveraged buy-out ($10.6 billion); and
very much tied to fundamental economic activity, the
•
the Nokia/Siemens joint venture (€25 billion).
basic trends driving activity are still very much in
evidence. As growth rates continue to decline and costs
The previous peak in 2000 was, to a large degree,
become an increasing pressure for tech companies, M&A
made possible by overvalued stock market transactions –
will remain a route by which companies can adapt to
only 42 per cent of deals in 2000 were cash financed, as
match market conditions.
compared with 64 per cent of deals in 2006. Figure 2
Morgan Stanley has been in the thick of activity to
clearly highlights the way in which the market has
date, advising on 11 of the 14 largest deals in 2005 and
developed.
2006. Figure 3 highlights these.
Figure 3: European tech deals greater than $700 million 2005-2006
Date announced Target name
Acquiror name
Rank value
Status
Jun 06
Nokia Siemes Networks
31,250
Pending
Nokia+Siemens
Mar 06
Lucent Technologies Inc
Alcatel SA
16,967
Completed
Aug 06
Philips Semiconductors
Investor Group
10,306
Completed
Mar 05
Amadeus Global Travel Distn
Warn Acquisition SA
5,436
Completed
Jan 07
UGS
Siemens
3,500
Pending
Sept 05
Skype Technologies
eBay Inc
2,645
Completed
Oct 05
Marconi Corp – Certain Assets
LM Ericsson Telefon AB
2,212
Completed
Aug 06
Dec 06
WM-data AB
Redback Networks
LogicaCMG PLC
LM Ericsson Telefon AB
1,647
1,486
Completed
Pending
Sep 05
Framatome Connections Intl
Bain Capital Inc
1,334
Completed
Dec 05
Sep 05
Gemplus Intl SA
Unilog SA
Axalto NV
LogicaCMG UK Ltd
1,196
1,194
Completed
Completed
Oct 06
Kanbay International Inc
Capgemini SA
1,144
Completed
May 05
lastminute.com
Sabre Holdings
1,067
Completed
Morgan Stanley involved
Technology M&A, 2006 $Bn # of Transactions
8
25
7
15
6
1
1
2
10
2
6
8
2
4
1
6
2
5
6.0
4.5
Deutsche
LB
54.7 30.2 28.7 25.7 25.6
6.4
M.
Mkt Share
8.0
7.1
22.6 20.4 19.3 14.5
8.4
DK
8.0
Lazard
8.9
UBS
6
17.1 9.4
JPM
D&T
28.8 27.9 22.2 18.6 18.6
0
MSS
9.5
BoA
HLH&Z
ABN AMRO
9.5
7
PwC
58.7 42.4 34.8 29.9 28.8
14.7 14.2 11.3
SG
BNP Paribas
CSFB
GS
JPM
29.9 21.6 17.7 15.2 14.7
MS
Mkt Share
6
10
1
5
0
12
15
6
20
Technology M&A, 2005 $Bn # of Transactions
20
CSFB
30
2.6
29/11/07
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Page 29
Morgan Stanley Introduction
Christian Lucas has been head of the technology investment banking group
since 2004. He has worked on numerous technology transactions and his
broader transaction experience includes working on the privatisations of
France Telecom and Portugal Telecom. Mr Lucas is fluent in English, French,
Spanish and Portuguese, and holds a BA from Assas Law School in Paris
(1992) and an MBA from Harvard Business School (1996).
Christian Lucas
Managing director, London
Tel +44 20 7425 5000
Morgan Stanley
United Kingdom
29/11/07
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Page 30
29/11/07
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Page 31
Ron Carson
Innovation Asset Group
Introduction
Get your assets in gear: aligning
IP strategy and business strategy
Much has been written about both business strategy and
assets. Estimates vary, but experts believe between 70 per
IP strategy. When it comes to business strategy, there are
cent and 90 per cent of the market value of publicly
many models, formulae and approaches that provide a
traded companies is attributed to intellectual property
framework
and
(Figure 1). Moreover, investment vehicles such as the
implementation. In contrast, it seems that most writing
Ocean Tomo 300 Patent Index have demonstrated that
about IP strategy discusses its importance, but does not
companies with comprehensive IP portfolios outperform
discuss its development and implementation. In fact,
other companies in terms of market valuation (Figure 2).
most writing seems to treat IP strategy and business
Consequently, the management of IP assets can no
strategy as two separate concepts, when in fact they are
longer be considered a discretionary function, nor is it
two sides of the same coin.
solely the domain of the legal department. It must be
to
assist
in
its
development
treated as a core component of business strategy. As
Intellectual property is important…
demonstrated in Figures 1 and 2, intellectual property
As the world transitions to a knowledge-based economy,
has a material impact on the valuation of publicly traded
IP assets are increasingly recognised as key business
companies. Moreover, according to a recent study by
Figure 1: Components of S&P 500
market value
Figure 2: 10-year performance tracking
Ocean Tomo 300® Patent Index
May 1997 – April 2007
100%
300
63.2%
67.6%
31.6%
20.3%
80%
250
60%
200
40%
20%
150
16.8%
32.4%
68.4%
79.7%
1975
1985
1995
2005
0%
Source: Ocean Tomo
Ocean Tomo 300
4/07
4/06
4/05
4/04
4/03
4/02
4/01
4/00
4/99
4/98
Intangible assets
4/97
100
Tangible assets
S&P 500
29/11/07
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Introduction Innovation Asset Group
PricewaterhouseCoopers (PwC), over 80 per cent of
accounting and royalty tracking by business units.
executives believe the importance of intellectual capital
Traditional legal systems and departmental processes do
to the value of their companies will increase over the next
not address these issues sufficiently.
three to five years.
Docketing
…But frequently mismanaged
Docketing systems are good at helping companies to
One of the primary objectives of publicly traded
ensure that they take appropriate actions by required
companies is to enhance shareholder value. If intellectual
dates. They do not determine whether these actions are
property can be attributed to somewhere in excess of 75
optimal for business. For example, a company with
per cent of the value of publicly traded companies, one
hundreds of patents could be wasting thousands of dollars
would expect the alignment of IP strategy with a
annually by maintaining patents that it does not use in its
company’s business strategy to be a top priority for
core business – but the docketing system does not care.
senior management. However, intellectual property
remains a poorly managed asset. According to the same
Spreadsheets
report by PwC:
Spreadsheets are often used to try to make up for
shortcomings in the functionality of docketing systems.
•
•
•
almost 70 per cent of executives believe IP
Companies use them to try to track additional
management is too often treated as a legal, not a
information about intellectual property. However,
strategic, issue;
spreadsheets are error prone, difficult to share and, when
over 60 per cent of executives believe current
used in conjunction with docketing systems, they can
accounting practices understate the value of
create a need for duplicate data entry. Duplicate data
intellectual property; and
entry increases the opportunity for errors. A study quoted
over 60 per cent of executives believe that their
in CIO Magazine found that on average, four out of five
companies could extract significantly more value
spreadsheets contained errors. The article went on to
from existing intellectual property and IP formation
describe a number of material spreadsheet blunders that
if they devoted more assets and attention to relevant
cost the respective companies tens of millions of dollars.
processes.
Shared directories
Why is there an IP dichotomy?
Shared directories on network servers are sometimes
If intellectual property is so important, why is it so
used in an attempt to overcome the inability of
frequently mismanaged? Over 70 per cent of executives
spreadsheets to be shared easily. Unfortunately,
believe a focus on short-term results inhibits the
information kept in a shared directory requires a lot of
development of sophisticated processes for managing
maintenance in order to ensure that the data is current,
intellectual property. The majority of executives
and version control becomes a new problem. Although
surveyed also believe that IP management is too often
shared directories may be a convenient place to dump
treated as a purely legal issue at the expense of the larger
bits of information, they are severely limited when it
business strategy. Since companies already have
comes to handling key relationships between IP assets
docketing systems in place to handle the classic legal
and business.
issues, the longer-term, more strategic issues are put off.
The focus on short-term results causes IP management,
Standalone databases
and related corporate performance, to remain somewhat
Some companies have tried database programs in an
behind. In an increasingly competitive world fuelled by
attempt to improve on the limitations of spreadsheets
rapid innovation, corporate consciousness of this
and shared directories. However, these databases are not
dynamic is putting intellectual property closer to the
geared towards sharing data with a distributed
centre of the table.
workforce. They require extensive IT resources and
custom programming, and are expensive to modify as
the business changes and grows.
Insufficient approaches
Intellectual property has business implications at many
None of the approaches or any combination of the
points across the enterprise, with each of these having a
tools described here suffices for the meaningful
role to play in its management – from targeted
implementation of strategic IP management. Still,
innovation in research and development to licensing
companies try to make them work; many different
opportunities
spreadsheets, databases and directories are deployed in
in
business
development
to
cost
29/11/07
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Innovation Asset Group Introduction
different areas of the company in an attempt to address
Stage 1: innovation – capturing, managing and
needs at departmental level. This creates a nightmare
protecting critical inventions
scenario of disparate data silos, each with its own risks of
It is well understood that innovation is a major driving
data inaccuracies and none with the complete business-
force in economic growth and development. The growth
oriented picture of the company’s IP assets.
of the more well-known innovative companies such as
Google or Apple demonstrates the value of capitalising
A new IP management paradigm
on innovation. Due to factors such as globalisation,
To deal with these shortcomings, industry consultants
increased competition, the growing impact of information
agree that companies must have IP management systems
and communications technology and the high pace of
that:
scientific and technological change, firms must not only
innovate more rapidly, but must also capture, protect and
•
sustain a repeatable process that spans multiple
manage those innovations more effectively.
departments;
•
can survive employee turnover;
Important but mismanaged as well
•
manage key variables for multiple types of
According to a survey by the Boston Consulting Group,
intellectual property;
innovation is a key strategic focus for many companies,
moves beyond prosecution/maintenance tools to
with 72 per cent of executives ranking it as a top-three
address business-level needs;
priority. However, nearly half of those surveyed remain
•
•
continually track and share information within the
unsatisfied with the returns on their companies’
company
investments in innovation.
regarding
known
and
emerging
To the extent that innovation is important, intellectual
competitive technologies and organisations; and
•
track and manage IP-related opportunities and
property must be equally if not more important as it is
agreements.
the vehicle through which companies protect their
innovations
for
strategic
and
economic
gain.
But how would a company implement such a system?
Innovations, inventions and ideas are captured and
What functional disciplines should be included? How
protected through patents, trade secrets trademarks or
does an approach such as this help to align a company’s
even publications. A well-aligned IP strategy becomes
IP strategy with its business strategy? The concept of an
similarly critical to the ability to innovate and capture
IP value chain is a good framework for answers.
these ideas in the first place.
In support of an IP management strategy, an
enterprise innovation management system should:
IP value chain: a cradle-to-grave approach to IP
management
The IP value chain model combines experience and
•
work seamlessly with the business-centric innovation
discussions with corporate IP experts, chief IP counsels,
efforts of the company, thereby linking future
IT directors and compliance offers at large enterprises
business requirements with the ability to create
with vast IP holdings. The IP value chain is a logical
framework that follows the evolution and development
valuable intellectual property;
•
create market-driven innovation by identifying and
of intellectual property from inventions and external
internally communicating the needs of the target
acquisitions
and
customers. This should translate into product plans,
commercialisation. It is a lifecycle model that follows
through
portfolio
management
development plans, research and development plans
intellectual assets from cradle to grave.
and the overall IP strategy;
Figure 3: IP value chain
Idea capture/
review cycle
Product/
IP relationships
Innovation
Patent filing
IP maintenance
Portfolio management
Value
determination
Licensing/
other agreements
Commercialisation
29/11/07
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•
•
•
enable the workforce, making it easy to receive new
owned approximately 29,000 patents, many of which had
ideas from the employee base in order to grow the list
little real value to the company. Dow performed a major
of promising innovations entering the value chain;
audit and business-use classification of the portfolio.
allocate resources – innovations should be rated,
Through this exercise, it gained an understanding of the
ranked and prioritised according to the stated
value of patents in the context of each business. Non-core
business strategy of the company. Budgets should be
patents were made available for licensing or were
allocated for the most promising innovations, either
abandoned.
for direct production or for licensing;
abandonment of many low-value patents, which in turn
be complete – non-patented innovations and pending
led to savings of $40 million in maintenance fees alone.
This
new
strategy
resulted
in
the
patent applications should still be managed as trade
secrets. Additional or alternative forms of protection
Portfolio management for everyone else
should be considered (eg, copyrights for source code,
How can other businesses improve their IP portfolio
collateral and other forms of expression, and
management? What can be learned from examples such as
trademarks as source identifiers or brand builders). The
Dow? The following guidelines provide a starting point:
ever-changing relationships, interdependencies and
time-sensitivity among these assets and related
•
•
customers and technology areas that are important to
activities should be tracked in real time;
the future needs of the business;
include experts in order to maintain visibility and
•
allow rapid input among need-to-know experts
across departments and outside the organisation for
inventory of assets – understand what is owned
within the existing portfolio;
•
ranking, rating and otherwise pushing innovation
categorise assets by stage of lifecycle, product line,
business unit, technology area and remaining useful
along the value chain; and
•
business strategy – understand the markets,
products, know-how, marketing and commercialisation
life;
measure progress, setting innovation targets for the
•
gap analysis – assess whether the portfolio profile
technology areas that are of greatest importance and
supports the business strategy of the company – that
measuring progress against those goals.
is, whether it has enough intellectual property in key
technology areas;
•
Stage 2: portfolio management – tracking and
Innovations, disclosures, patents, trade secrets and other
•
assets are added to the IP portfolio from different sources
over
time.
As
develop a plan to close the gaps – for example,
licensing, innovation or acquisition;
analysing IP assets
this
collection
grows,
competitors and key trends in order to determine
portfolio
management becomes an important function in the IP
strategy of the company.
As IP portfolios grow they become more valuable, but
competitive analysis – understand the IP profiles of
their strategy; and
•
IP landscape – scan the IP landscape to identify
broader trends and pockets of intellectual property
for acquisition.
also more complex to manage and more expensive to
maintain. Companies can spend millions of dollars
Actionable intelligence
maintaining patents that they do not use. Alternatively,
With this level of intelligence about its portfolio, a
they can underestimate the defensive value of patents
company can positively affect its business strategy by
and fail to protect their market. The net effect of
directing activities in other parts of the value chain. For
mismanagement could be lost market share, lower
example, at the innovation stage it can set and measure
margins, revenue shortfalls and a heightened risk profile.
IP production targets based on its market direction. In
Intellectual property is important. In many industries
the commercialisation stage it can take the assets that
it is the vehicle that protects competitive advantage. It
have been identified as non-core assets (those not
must be managed with the same discipline that
mapped to key areas of the business) for potential
companies apply to areas such as sales, marketing,
licensing.
finance and product management. However, it cannot be
managed without being measured – so companies need a
Stage 3: commercialisation – boosting revenues and
way to measure various aspects of their IP portfolios.
monitoring agreements
Dow Chemical is a frequently cited example of a
As with the other parts of the IP value chain, there is a
company which derived great benefits from measuring and
significant opportunity to improve business management
managing its IP portfolio. In the early 1990s the company
at the commercialisation stage. Statistically speaking,
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Innovation Asset Group Introduction
patents that are valuable in the context of out-licensing for
out-licensing business, an IP management system should
royalty revenues are exceedingly rare. Only 3 per cent of
allow a company to measure and manage its licensing
patents ever become royalty-generating assets and,
business with such features as:
according to some reports, the majority of licensing
agreements associated with this 3 per cent are
•
mismanaged to the extent that almost half of the licensing
royalties are under-collected by 25 per cent or more.
the ability to report on different business agreements
such as non-disclosures and joint ventures;
•
monitoring the relationships between licensing
The commercialisation stage should include the
agreements, intellectual property, products, services
necessary tools and procedures required to operate a
and other categorisation schemes and terms
licensing programme, including areas such as non-
management; and
disclosure agreements, licensing agreements and royalty
tracking. A good IP management system should:
•
•
•
•
managing payment terms and reminders, and
monitoring royalty payments.
facilitate business development with automated
Conclusion
workflows for non-disclosure agreements and other
Implementing an effective IP management strategy
contract requests, drafting, approval and printing;
involves adapting to business objectives and technology
support the negotiation and creation of licensing
shifts while increasing IP awareness throughout the
agreements with standard templates, clause libraries,
organisation. To accomplish this, companies should align
standard terms, custom terms and version controls;
intellectual property with business objectives using the
and
IP value chain as a framework. Table 1 summarises
enable management oversight.
requirements for closely aligning IP management
activities with business goals in the context of the IP
In addition to facilitating the day-to-day operations of an
value chain.
Table 1: Aligning intellectual property and business management along the IP value chain
Stage of the IP value chain
Innovation
Solution requirements for IP business alignment
• Provide easy access to invention disclosure forms (web-based).
• Automate workflow for rating, approval and prioritisation.
• Categorise inventions to relevant portfolio segments.
• Track competitive portfolios.
• Create a centralised repository of invention information and prior art.
• Track and relate potential acquisition portfolios.
Portfolio management
• Integrate data from disparate data sources to enable a holistic view
of the portfolio.
• Categorise assets based on business management vectors such as
products, departments, technology areas and outside counsel firms.
• Monitor characteristics and trends of the portfolio that are pertinent
to the company’s business objectives.
• Control costs.
Commercialisation
• Map intellectual property to licensing agreements.
• Manage workflow to automate and distribute tasks.
• Monitor incoming and outgoing obligations associated with the portfolio.
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Ron Carson is responsible for new accounts, channel development and
solution sales. Before joining Innovation Asset Group he was vice president of
strategy and marketing for an IP monetisation firm based in Cary, North
Carolina. Prior to that, he was director of marketing for HP Industry Solutions,
including healthcare, banking, telecommunications and e-commerce.
Ron Carson
Regional sales director
Tel +1 919 249 7799
United States
29/11/07
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Page 37
Register before
29 February 2008
for just 51,200
and save 5300
from the standard
delegate fee
IP Business
Congress 2008
A unique event
Bringing together IP leaders from around the world, the
Congress will demonstrate why more and more people
describe intellectual property as the pivotal business asset
of the 21st century. No one who has an interest in the
management and monetisation of IP rights will want to
miss this groundbreaking event.
The Congress comprises a one and a half day CIPO Summit,
organised by Intellectual Asset Management (IAM) magazine,
aimed at defining the role of the Chief Intellectual Property
Officer in business today, and the second European Live IP
Auction hosted by Ocean Tomo LLC.
For further information please visit
www.ipbusinesscongress.com
or contact Gavin Stewart at
[email protected]
Presented by
29/11/07
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Page 39
Malte Köllner
Triangle Venture Capital Group
Introduction
Due diligence or discount on valuation:
what’s it to be?
Patent
valuation
involves
numerous
economic
•
considerations. It also requires a technical understanding
the status of the patent and its patentability, lifetime
and geographical scope;
of the technology covered by the patent and the
•
ownership and contractual issues;
clarification of issues such as whether:
•
freedom to operate;
•
validity;
•
detectability (ie, whether patent infringement can be
•
the patent works;
•
it has industrial application; and
•
there are alternative solutions.
discovered); and
•
enforceability (ie, whether the patent can be enforced
against infringers before the courts).
Furthermore, the valuation process is influenced by a
number of legal points relating to the patent in question.
Other issues include:
These points can be clarified through patent due
diligence. The results of the due diligence can be taken
•
the scope of the patent;
into account in the valuation.
•
whether it can be produced on a large scale; and
•
whether it can be circumvented.
Alternatively, clarification of the points examined in
the due diligence can be omitted. There may be several
reasons for doing this, such as a limited due diligence
Default discounts
budget. However, saying that due diligence ‘can’ be
Legal aspects
omitted is not quite what happens in reality – rather, due
If certain legal aspects are not to be considered in a
diligence ‘is’ omitted. All too often people close their eyes
valuation, the resulting discounts need to be estimated as
to the legal risks involved in patent transactions or
follows.
valuations. However, there are sometimes good reasons
for omitting due diligence.
Status of the patent and patentability
Omitting due diligence leaves legal uncertainty. As
The discount for this aspect relates to the fact that there are
far as valuation is concerned, this uncertainty has to be
both granted patents and pending patents. If it is assumed
taken into account by discounting the patent value to a
that half the patents are pending and only half of these will
certain degree if the mean or expectation value of the
ultimately be granted in the desired form, a discount of 25
patent is to be expressed as a statistical expectation value.
per cent is a good first guess. A more thorough statistical
Thus, the issue is a simple one and comes down to a
analysis might have to be undertaken in future.
choice: due diligence or discounting?
It is unreasonable to ignore the legal angle (ie, to omit
Ownership
due diligence) and not to discount. This assumes that all
Only about 20 per cent of patents involve ownership
the legal questions have been answered positively, when
problems. Again, a more thorough statistical analysis
in fact they have not been answered at all. However, this
might have to be undertaken one day. Therefore, not
situation occurs all too often.
carrying out ownership due diligence would result in a
The most important legal points to be considered in a
due diligence relate to:
discount of 20 per cent. This value should be used as a
default discount in the absence of any grounds for a
different discount value.
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Introduction Triangle Venture Capital Group
Freedom to operate
Scope
For freedom to operate, the same value applies. Few
The scope of a patent relates to whether it really covers
patents depend on other patents. However, if this is the
the product or process that it is meant to cover. Since
case, 100 per cent of the patent value can be at risk.
some patents cover only very specific technical features,
Discounting 20 per cent seems reasonable if due
a small change in the product (eg, an improvement
diligence is omitted.
following research and development results) can lead to
a complete loss of patent protection. Therefore, a
Validity
discount value of 20 per cent is reasonable.
Once a patent has been granted, there is still a possibility
that it may be invalidated through an opposition or by
Production
the courts. Fortunately, this rarely happens. In Europe,
In the development and production process many ideas
only around five per cent of granted patents are
at the beginning turn into few products in the end.
challenged. However, bearing in mind that only 10 per
Therefore, there is only a small probability of reaching
cent of all patents are of useful value, there is a 50 per
the end of the process. However, the question is where
cent probability of a useful patent being attacked. Even
in the process the patent and project stand at the
worse, almost every patent that is enforced through
moment. In addition, projects fail in the process not only
litigation will be attacked by the infringer. Thus,
because production is not possible, but also for a
assuming a 50 per cent probability of attack seems
number of economic reasons. An isolated technical
reasonable. Statistics from the patent courts show that
hurdle may be the cause for failure in about one-third of
when a patent attack occurs:
cases. Therefore, using 33 per cent as the default
discount is fair.
•
one-third of patents survive unharmed;
•
one-third are fully revoked (at least in Germany); and
Circumvention/breadth
•
one-third survive in a restricted form.
The question of whether and how to work around a
patent involves an intricate mixture of technical and legal
Therefore, using a 50 per cent survival rate as a rule of
issues. Whether a technically possible alternative
thumb seems reasonable. In total, the probability of a
solution to achieve the technical advantages derived
valuable patent being invalidated after grant is 50 per
from the invention really amounts to circumvention
cent multiplied by 50 per cent, resulting in a probability
depends on whether the alternative technical solution is
of 25 per cent.
an equivalent infringement of the claim. This is a legal
question. Statistically speaking, 50 per cent of all patents
Detectability
can be circumvented within a timeframe of two to three
Can infringement of the patent be detected? This is not
years.
always easy to do, particularly for production methods
within factories and for certain software patents. For the
Applying default discounts
moment, assume a 25 per cent discount for this question.
Table 1 shows the default discounts.
It may be that in future, a sound statistical foundation to
In practical terms, if there is no due diligence a patent
find the default discount value for this aspect is
must be discounted by 95 per cent, leaving a value of five
established.
per cent. This does not seem unreasonable, since only
around 10 per cent of patents have a useful value. If
Enforceability
everything except freedom to operate and invalidity is
Once infringement is discovered, will it be possible to
covered, a discount of 40 per cent applies.
enforce the patent before the courts? In the United States, it
These discount values represent only a first educated
is said that only 50 per cent of cases can be won. However,
guess. A deeper understanding might result in more
this 50 per cent includes the invalidity defence, which was
accurate values. The default discounts might differ
isolated above. Therefore, it is reasonable to use 25 per cent
between industry sectors and from country to country.
as a default discount to cover all other pitfalls.
They will also depend on the value of the patent in
question. A valuable patent is more likely to be attacked.
Technical aspects
Some of the default discounts will vary over the lifetime
In addition to the legal aspects of due diligence, more
of the patent or product. In such cases, the money might
technical aspects can also have a major influence on the
be better spent on due diligence.
value of a patent.
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Triangle Venture Capital Group Introduction
Table 1: Default discount values
Aspect
Default discount (per cent)
Status of the patent, patentability
25
Ownership/contracts
20
Freedom to operate
20
Validity/invalidity
25
Detectability
25
Enforceability
25
Scope
20
Production
33
Circumvention
50
The probability that the patent in question can fulfil
Relevance
Fortunately, not all of these questions are relevant in all
the intended function is influenced by some of the legal
situations. The question of relevance may be answered in
or technical aspects mentioned above. However, not all
an upstream manner: what determines the value of a
functions are influenced by all aspects. Table 2 explains
patent? Generally, value is determined by the functions
which function can be presumed to be influenced by
that a patent is designed to fulfil. For example, a patent
which aspect.
To establish a monopoly, a patent must fulfil all
can be used:
aspects mentioned above. If the purpose of the patent is
to establish a monopoly to protect products and
only to prevent a competitor from entering a certain field
future products;
(ie, as a defensive patent), the freedom to operate is
•
as a defensive patent to block competitors;
irrelevant. This is more or less true if the patent is used as
•
as a bargaining tool in cross-licensing deals;
a bargaining tool. Use for reputation purposes or internal
•
for licensing out;
motivation requires none of these aspects. Every case
•
for patent transfer and mergers and acquisitions;
may have its own answer as to which aspects are relevant
•
to confuse or intimidate competitors;
and must be considered, either by due diligence or by
•
for reputation purposes only; or
discounting.
•
for internal use or internal motivation.
As a rule of thumb, no discount is justified for a
Freedom to operate
Validity/invalidity
Detectability
Enforceability
Scope
Production
Circumvention
Monopoly
+
+
+
+
+
+
+
+
+
Blocking
+
+
+
+
+
Cross-licensing
+
+
+
Status
Ownership/contracts
Table 2: How the different functions of a patent relate to different aspects
Function/aspect
•
Licensing
+
+
Patent transfer
+
+
Confusion/intimidation
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Reputation
Internal motivation
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Introduction Triangle Venture Capital Group
Table 3: Efficiency of due diligence for different aspects
Default
Relevance/
Effective
Due diligence
Due diligence
discount
impact factor
discount
costs
efficiency
Status
25%
100%
25%
0.4 units
63%/units
Ownership
20%
100%
20%
0.6 units
33%/units
Freedom to operate
20%
50%
10%
10 units
1%/units
Validity/ invalidity
25%
100%
25%
4 units
6%/units
Detectability
25%
100%
25%
0.5 units
50%/units
Enforceability
25%
100%
25%
2 units
13%/units
Scope
20%
100%
20%
0.3 units
66%/units
Production
33%
100%
33%
200 units
0.2%/units
Circumvention
50%
100%
50%
2 units
25%/units
merely internal use of a patent. On the other hand, if the
impact factor to obtain an effective discount value. The
patent is to be used to establish a monopoly or in
example shown in Table 3 is a due diligence for a patent
licensing or patent transfer, there is much to be
valuation for a patent that is to establish a monopoly. In
considered. Under these circumstances, significant
this case, only the freedom to operate has an impact
discounts are needed if due diligence is omitted.
factor of less than 100 per cent. The impact factors
generally allow the adjustment of the model to reflect
Impact
different scenarios (eg, the different functions of the
The above considerations primarily revolve around
patent).
valuation – and yet they have helpful and practical
implications
for
due
diligence
planning
and
management.
The penultimate column shows the due diligence
costs for the individual aspects. The numbers are taken
from the author’s experience and are (of course)
Even if a legal or technical aspect has been identified
debatable. They may vary according to the case. The
as relevant to the case at hand, not all aspects have a 100
costs are given in the form of units instead of actual
per cent negative impact if they are found to be
amounts of money, since these might vary too much. One
unsatisfactory. For example, if the freedom to operate is
unit can be thought of as $1,000 or €1,000.
missing for a patent, there may still be variants of the
The final column sets out the level of legal certainty
product which are not blocked by the third-party patent.
that can be bought for $1 or €1. It tells a company how to
Freedom to operate is often a question of detail, and
spend its money in the most efficient way. If a company
therefore has only a 50 per cent negative impact on value.
starts the due diligence by checking the scope of a patent
Similarly, in general, the invalidity of a patent
(ie, whether the patent covers the product), it can achieve
covering a product will not stop a company from selling
the product – although it is now without protection and
without a monopoly position, it may not be less
Table 4: Working order of a patent due
diligence for a monopoly function patent
successful. Thus, in regard to company value or a
decision on whether to invest in a company, the
Order
Aspect
(certainly far below 50 per cent). On the other hand, with
1
Scope
regard to patent value rather than company value,
2
Status
invalidity has a 100 per cent impact on the value.
3
Detectability
4
Ownership
invalidity of a patent does not have a high impact factor
Managing due diligence
5
Circumvention
All the information is now present to answer the
6
Enforceability
following questions: how can a company achieve the
7
Validity/invalidity
greatest legal certainty with a limited budget? What
8
Freedom to operate
should money be spent on?
9
Production
Table 3 combines the default discount values with the
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Triangle Venture Capital Group Introduction
a certain degree of legal certainty for a limited amount of
Comment
money.
This chapter has considered quite theoretical matters.
Summarising the example, the order for due diligence
The practical consequences of this theory are as follows:
suggested by the final column is set out in Table 4.
If the function of the patent, the decision to be taken
•
and the impact factors are different (as they are for
investment decisions), the order may be different.
now be quantified;
•
The company would have to choose whether to work
Default discounts should be employed to take legal
uncertainty into account (ie, when no due diligence
from one to nine or whether the situation or budget
limits it to choosing a subset. In the latter instance, the
The up-to-date qualitative issue of due diligence can
has been performed); and
•
It is possible to plan due diligence in situations where
subset should probably contain the upper rows of Table
– as is almost always the case – the due diligence is
4, with some of the lower rows being omitted and the
performed with a limited budget.
discount method being used for these aspects.
What a company chooses to do ultimately depends on
the value in question and the budget – but it is now in a
The question that should be kept in mind throughout
this process is: due diligence or discount?
position to establish a rational basis for this choice.
Many of Malte Köllner's clients are investment funds which he advises on IP
matters. He is a member of the German standards committee for patent
valuation. He is editor of the leading patent law journal in German-speaking
countries. He has authored numerous publications on intellectual property
and venture capital, including a handbook on the Patent Cooperation Treaty.
He is a regular lecturer on intellectual property and its exploitation, including
due diligence and patent valuation. Dr Köllner is a German and European
patent, trademark and design attorney, and a partner of Köllner & Partner,
Patentanwälte.
Malte Köllner
Partner
Tel +49 6251 800 830
Germany
Dr Johannes Gierlich, a trainee with Köllner & Partner, Patentanwälte, helped
with the preparation of this chapter.
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Key advisory issues
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Page 46
Ryan Miller, Ben Moore and Phil Rees
Deloitte
Key advisory issues
Intangible assets: recognising and
exploiting their value
As economies have evolved over time, so have
Intellectual capital is the cumulative knowledge of a
businesses evolved from being physically intensive to
business which allows for knowledge transfer and
relying more on intangible assets. The purpose of this
leverage. It creates a competitive advantage and
chapter is to provide an overview of the valuation of
represents a combination of human capital, intellectual
intangible assets and to provide evidence of intangible
assets and intellectual property.
asset value.
Intellectual assets represent the codified tangible or
The chapter first sets out descriptions and examples
physical descriptions of specific knowledge to which a
of intangible assets. It then discusses the common
company can assert ownership rights. They include, but
methodologies used to value intangible assets and how
are not limited to, know-how, contracts, permits and
these relate to valuations for financial reporting
licences and non-compete agreements.
purposes. Finally, it gives examples of how companies
‘Intellectual property’ is a term used for various legal
can recognise intangible asset value in the marketplace
entitlements which attach to certain names, written and
and the resulting implications in respect of the
recorded media and inventions. These assets may:
heightened awareness of intangible assets.
•
generate premium pricing on products or services;
Overview
•
create a competitive cost advantage;
Intangible assets can be broken down into three areas as
•
enable companies to overcome barriers to entry;
shown in Figure 1: intellectual capital, intellectual assets
•
establish technological superiority; and/or
and intellectual property.
•
enhance market share.
Figure 1
Intellectual property
Intellectual assets
Patents
Trademarks/trade names
Copyrights
Trade secrets
Know-how
Contracts
Permits and licences
Non-compete agreements
Intellectual capital
Human capital
Customer capital
Organisational capital
Distributor capital
Supplier capital
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Deloitte Key advisory issues
For these reasons, intellectual property is becoming a
more important factor in mergers and acquisitions.
could be exchanged, or a liability settled, in a current
transaction between knowledgeable, willing parties in
According to Statement of Financial Accounting
an arm’s-length transaction”, as set out in Appendix A
Standards (SFAS) 141, intangible assets can be
of International Financial Reporting Standard (IFRS) 3.
categorised into five broad areas:
In order to value intangible assets for financial
reporting and tax purposes, one or more of the
•
•
marketing-related intangible assets:
following generally accepted valuation approaches is
•
trademarks and trade names;
utilised.
•
service marks, collective marks and certification
marks;
Market approach
•
trade dress;
In the market approach, recent sales and market listings
•
newspaper mastheads;
of comparable assets are gathered and analysed. If
•
internet domain names; and
necessary, adjustments are then applied to these
•
non-compete agreements;
observations to recognise differences in characteristics
customer-related intangible assets:
between the subject assets and the comparable assets in
•
customer lists;
order to indicate a fair value for the asset.
•
order or production backlog;
•
customer
•
•
•
•
contracts
and
related
customer
Income approach
relationships; and
The income approach is based on the premise that the
non-contractual customer relationships;
value of a security or asset is the present value of the
arts-related intangible assets:
future earning capacity that is available for distribution
•
plays, operas and ballets;
to the subject investors in the security or asset. Within the
•
books, magazines and newspapers;
income approach, there are several methodologies,
•
musical works;
including:
•
pictures and photographs; and
•
video and audiovisual material;
•
the discounted cash-flow method;
contract-based intangible assets:
•
the excess earnings method; and
•
licensing, royalty and standstill agreements;
•
the relief from royalty method.
•
advertising, construction, management and
supply contracts;
Discounted cash-flow method
•
lease agreements;
The most commonly used income approach to the
•
construction permits;
valuation of securities or individual assets is a
•
franchise agreements;
discounted
•
operating and broadcast rights;
forecasting the appropriate cash-flow stream over an
•
use rights;
appropriate period and then discounting it back to a
•
service contracts; and
present value at an appropriate discount rate that
•
employment contracts; and
considers time, the value of money, inflation and the risk
technology-based intangible assets:
inherent in ownership of the asset or security interest
•
patented technology;
being valued.
•
computer software and mask works;
•
unpatented technology;
Excess earnings method
•
databases; and
This method is predicated on the basis that the value of
•
trade secrets.
an intangible asset is the present value of the earnings it
cash-flow
analysis,
which
involves
generates, net of a reasonable return on other assets
The ability of companies to exploit and protect these
which also contribute to that stream of earnings.
assets is one of the main factors influencing and driving
the value of intangible assets.
Relief from royalty method
The principle of the relief from royalty approach asserts
Valuation methodologies
that the value of an intangible asset is what the owner
Valuation professionals generally consider intangible
would pay to license the asset if it did not own it. In other
asset valuations to be more of an art than a science. ‘Fair
words, the value equates to the cost avoided by not
value’ can be defined as “the amount for which an asset
having to pay a royalty.
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Key advisory issues Deloitte
The purchase price allocation process generally falls
Cost approach
Under the cost-based methodology, the value of an
into four broad categories:
intangible asset is estimated by reference to the costs that
would be incurred in order to recreate the asset. It
•
identification of intangible assets;
assesses the theoretical cost of the labour and materials
•
estimation of discount rate;
necessary to construct or acquire a new asset of similar
•
valuation analysis; and
utility to the subject asset. The cost approach is not
•
reconciliation of results.
considered to be an appropriate approach for valuing
income-generating intangible assets as generally it does
Intangible asset identification
not capture any future profits associated with the
The identification phase of a purchase price allocation
intangible asset.
involves identifying intangible assets that meet either the
separability or contractual criteria as set out in the
Application of valuation approaches
accounting standards. The identification process
When valuing intangible assets, the market approach is
typically involves having discussions with management
the most preferred approach as it provides market
and reviewing sales purchase agreements, due diligence
evidence as to what third parties have paid for
documents,
comparable assets. However, in practice, this approach is
documentation.
public
filings
and
other
internal
difficult to apply as typically there are very few
comparable public transactions involving readily
Discount rate
separable intangible assets.
Once the intangible assets have been identified, the next
One example where market information is available
step is to estimate the overall discount rate for the target
relates to patents, trademarks and trade names. While it
company. At this stage, a weighted average cost of capital
is possible to gather information related to the royalties
(WACC) analysis is prepared based on estimates of
paid for certain patents, trademarks or trade names, in
required equity rates of return and after-tax costs of debt
reality this information can be difficult to apply as the
based upon a group of peer companies. In addition to the
transactions involving brand or patent royalties often
WACC, a business enterprise valuation is prepared in order
also include the right to use other intangible assets. In
to estimate the internal rate of return in the transaction. The
addition, many transactions involving intangible assets
cash flows in the internal rate of return analysis should
are carried out for internal transfer pricing purposes and
consider whether expected synergies in the transaction
are not available to the public.
would be considered unique or market participant
Therefore, in the majority of cases, comparable market
data is not available, which results in valuation
synergies. These cash flows serve as the basis for the cash
flows used to value the identifiable intangible assets.
professionals relying on both the income and cost
approaches to estimate the fair values of intangible assets.
Valuation analysis
The next phase involves the valuation of the intangible
Valuations for financial reporting purposes
assets using the generally accepted valuation approaches
In March 2004 the International Accounting Standards
(ie, market, income and cost).
Board adopted IFRS 3 – Business Combinations, which
requires the valuation of all assets, including tangible
Reconciliation of results
and intangible assets and liabilities acquired in a
The final phase of the purchase price allocation process is
transaction. IFRS 3 was adopted by all companies listed
to reconcile the fair value results. This process consists of
on the London Stock Exchange for periods commencing
preparing a weighted average return on assets analysis.
January 1 2005 and became mandatory for companies
As part of this analysis, the weighted returns for each net
listed on the AIM for periods commencing January 1
tangible and intangible asset are added up and compared
2007. Given these requirements, the valuation of
to the WACC to check the reasonableness of the
intangible assets has become much more important.
intangible asset discount rates. As part of this process, a
IFRS 3 followed the Financial Accounting Standards
valuation practitioner should consider the risk of each
Board’s issuance of SFAS 141 in June 2001, requiring all
intangible asset in relation to the others and in relation to
public companies in the United States to perform a
the overall return expected for the business and for
purchase price allocation, which involves estimating the
goodwill. Typically, intangible asset required returns
fair value of all assets and liabilities assumed in
tend to equal or exceed the overall WACC, but require a
transactions carried out from January 1 2002.
lower return than goodwill.
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Table 1
As % of total purchase price
(1)
Identifiable
Total intellectual
intangible assets
property
Min
0%
0%
Max
111%
86%
31%
12%
Average
Identifiable intangible assets/intellectual property
27%
12%
sample size
30%
30%
(1)
‘Total purchase price’ is defined as common equity, preferred equity, and interest-bearing debt
The value that the markets attribute to intangible
Evidence of value
To give a snapshot of which intangible assets companies
assets is also evidenced in the stock markets on a daily
are
transactions,
basis. As shown in Figure 2, the market capitalisation of
approximately 30 of the largest transactions in 2006 in the
the FTSE 100 as of August 31 2007 was approximately
United Kingdom and the United States were considered
three times the book value of the equity, which indicates
(where information related to identifiable intangible
that a significant proportion of companies’ market value
assets was readily available in public filings).
is derived from and influenced by intangible assets
recognising
and
valuing
in
For each transaction, the fair values attributed to
intellectual property, total identifiable intangible assets
(these figures exclude real estate companies and financial
institutions).
and goodwill were gathered. These intangible asset
Another example of intangible assets’ value in the
values were then compared to the overall invested capital
marketplace involves financial securitisation and
in the transaction. For the purposes of this analysis,
collateralisation. Since 1995 the Development Bank of
‘invested capital’ was defined as the fair value of common
Japan has granted more than 250 loans to venture capital
equity, preferred equity and interest-bearing debt.
firms where the collateral for these loans includes
As shown in Table 1, companies recognised and valued
identifiable intangible assets in 90 per cent (27 out of 30) of
patents, patent applications and copyrights of computer
programs.
Other examples providing evidence that intangible
the transactions researched, with intellectual property
being recognised and valued in almost half of those
assets have perceived value in the marketplace include:
transactions (12 out of 30). Overall, the values associated
with the total identifiable intangible assets on average
•
securitisation of music or image rights;
represented almost one-third of the total purchase,
•
IP applications;
suggesting that these assets are not insignificant.
•
IP protections;
Figure 2
£ billions
1,400
FTSE 100 – market value v book value
Market value
1,200
1,000
800
600
400
Book value
200
0
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professionals have experience valuing intangible assets.
•
litigation/disputes;
•
corporate transactions;
•
transfer pricing; and
create greater transparency, these standards have
•
licensing.
brought more attention to intangible asset values.
Regardless of whether the accounting standards
As intangible assets continue to grow and companies
Implications
continue to hire executives specifically to manage
Proponents of SFAS 141 and IFRS 3 believe that the
intangible assets, the need to measure and value
adoption of these standards will result in more
intangible assets accurately increases. More importantly,
transparency given the disclosure of the values
knowing and understanding the value of a company’s
associated
assets.
intangible assets will become increasingly important as
Opponents of the recent accounting standards believe
companies try to align these values with their strategic
that intangible assets cannot be effectively measured on a
planning decisions and management of the business.
with
the
acquired
intangible
consistent basis and that only a limited number of
Ryan Miller is an assistant director in the valuation group within Deloitte’s
corporate finance practice in London. He is on secondment from Deloitte’s
Dallas office. He has over seven years of valuation experience in the United
States and the United Kingdom, specialising in the valuation of intangible
assets and intellectual property for financial and tax-reporting purposes.
He holds a BA and an MBA in finance from Texas Christian University and
is a CFA charter holder.
Ryan Miller
Assistant director, London
Tel +44 20 7936 3000
Deloitte & Touche LLP
United Kingdom
Ben Moore is a director in the valuation group within Deloitte’s corporate
finance practice in London. He leads Deloitte’s global IFRS valuation
committee, which looks at technical and other issues relating to IFRS, and
has over 10 years of international valuation experience. He holds a BA in
economics from Exeter University and is a qualified accredited chartered
accountant.
Ben Moore
Director, London
Tel +44 20 7936 3000
United Kingdom
Phil Rees is an assistant director in the valuation group within Deloitte’s
corporate finance practice in London. He has valued shares, businesses and
intangible assets in a variety of situations. He has advised on the valuation
of intangible assets and royalty rate setting in both contentious and
commercial contexts. He holds an MPhys from the University of Oxford and
is a member of the Institute of Chartered Accountants of England and Wales.
Phil Rees
Assistant director, London
Tel +44 20 7936 3000
United Kingdom
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Elizabeth Gutteridge and Neil Hargreaves
Deloitte
Key advisory issues
Don’t get your wires crossed: common
pitfalls in licence agreements
As more companies introduce inspection programmes
Getting the rate right
and thus need to perform royalty investigations of their
Where a licensee produces a variety of products and the
licensees, misreported royalties continue to be found on a
licensed intellectual property contributes a greater
regular basis. The reasons for these misreported royalties
proportion of value to some products than others, the
are numerous and fall into four broad categories:
parties may apply differential royalty rates so that the
royalties properly reflect the value contributed. A variety
•
wilful under-reporting (luckily, this is still rare);
of mechanisms are used in licence agreements to achieve
•
clerical errors (eg, arithmetical errors on manual
this, including:
royalty returns, use of spreadsheets with inaccurate
formulae and transposition errors);
•
•
sales of all royalty-bearing products); and
•
the segmentation of products into defined groups
with different royalty rates for each; and
system failures (eg, the failure to identify and capture
•
sliding scales of royalty rates based on the selling
contract interpretation (ie, licensees adopting a
price of the finished products, often with floor and
different interpretation of the agreement to that
ceiling rates.
intended).
Where sliding scales of royalty rates are agreed based
Misreporting due to clerical errors or system failure is
on the selling price of the licensed product, in some cases
usually uncontested and can be resolved quickly, with
licensees have taken a unilateral decision to move from a
the licensee making a payment within a few weeks of the
royalty on the finished product to applying a rate to a
inspection.
licensee’s
transfer price that is assigned to the particular
commitment to resolving any system weaknesses, will
component containing the licensed intellectual property,
generally leave the business relationship with the
leading to a significant reduction in royalties.
This,
together
with
the
licensor intact. In contrast, differences of contract
interpretation can take months to resolve and may tie up
By way of example, take the following, rather
simplistic, sliding scale:
considerable management resources. They are more
likely to damage the relationship and contribute to a
Net selling price
Royalty rate
climate of distrust, ultimately leading to litigation in
Less than $10
6 per cent
some cases.
$10.01 to $20
5 per cent
4 per cent
This chapter, which is based on many years of royalty
$20.01 to $30
inspections, highlights some of the areas where
$30.01 to $40
3 per cent
ambiguous contract wording or the adoption of a ‘one
More than $40
2.5 per cent
size fits all’ approach has led to disputes over royalties,
sometimes many years after the agreements have been
If a newly developed finished product sells for $100, a
signed and often involving large sums of money. It is
scale royalty rate of 2.5 per cent applies and the royalties
important for the licensor to understand a licensee’s
would be $2.50 a unit. If the licensed intellectual property
business and distribution channels at the outset, and to
is contained within just one component of that product
revisit the agreement regularly as the business and the
with a transfer price of, for example, $15, a licensee may
use of the licensed intellectual property develop.
seek to adopt a rate of 5 per cent from the table above and
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the royalties will be just $0.60 a unit (5 per cent of $15).
Such clauses need to be drafted carefully and
reviewed regularly as the licensee’s business develops
understated net sales and the parties should agree on an
acceptable formula early in the life of the contract to
avoid misunderstandings later on.
and new products are introduced. This will avoid a
situation where a licensee takes advantage of a loose or
Allowable cost
outdated definition to adopt lower royalty rates for new
The deductions allowed in calculating net sales to which
product categories.
the royalty rate is then applied constitute a common
source of disagreement between licensee and licensor.
Selling price
Therefore, the definition of ‘net sales’ should be made as
Problems frequently arise where licensed products are
unambiguous as possible.
sold to sister companies or other related parties, either
Take, for example, the following wording: “Net sales
for distribution into their local market or for
shall mean the gross invoice price after deducting any
incorporation into other products. Most licence
credits, normal discounts and freight charges.” In a
agreements include clauses to deal with this – for
recent royalty investigation, this wording led to two
example: “‘Net sales’ shall mean the regular selling
significant areas of disagreement:
price… in a bona fide arm’s-length transaction.”
In a recent example in the consumer electronics
•
What is a normal discount? The licensee regarded
industry where royalties were based on a percentage of
prompt settlement discounts as normal, but the
net sales, a licensee was using overseas subsidiaries to
licensor argued that when it signed the agreement it
distribute products in each of the major territories. The
did not wish to subsidise the licensee’s attempts to
selling price that it was using for the royalty base was the
improve its working capital by allowing discounts
price charged to the overseas subsidiary rather than the
for prompt payments as a deduction.
ultimate customer.
•
What were the freight charges? The licensee did not
In this case, the subsidiary did not make a profit on
invoice freight charges to its customers but
the resale of the products but raised the selling price to
developed a complex and highly subjective formula
cover its own costs. The licensee argued that as its own
for allocating its total freight costs to the licensed
distributors did not make a profit and it would use the
products.
services of external distributors if this function were not
performed in-house, the lower selling price to the
The following alternative clause might have avoided
subsidiary, rather than the ultimate customer, should be
this misunderstanding: “Freight and insurance charges
adopted as the royalty base. The licensor argued that the
may be deducted provided that they are itemised on the
price should be that charged by the distributor to the
invoices. No deduction shall be allowed for uncollectible
ultimate third party as that distributor was in the licensee
accounts or prompt settlement discounts.”
group and its sales were the point at which the goods left
the group. The licence agreements did not specifically
Credit for returns
address this channel to market and the parties eventually
Another area prone to misinterpretation is allowances for
negotiated a compromise settlement.
returned products. Take, for example, the following
Problems can also arise where licensees simply do not
have a benchmark arm’s-length price as all production
clause: “For each licensed product sold or distributed by
the licensee, a royalty will be payable.”
may be sold to related parties (which are not party to the
This clause is silent on the treatment of returned
licence agreement) and incorporated into other products.
products and a strict interpretation would be that no
A number of alternative approaches have been adopted
credit is allowable as the royalty is payable upon
by licensees where agreements are either silent or
shipment. Many licensors simply assume that credit can
ambiguous in this area, for example:
be taken for a returned product, particularly if that
product is repackaged and sold again, generating a
•
simply using the internal transfer price as the
second royalty. However, licensees may have sound
assumed net selling price;
commercial reasons for not allowing the deduction of
•
using cost plus a standard margin; or
returns (eg, to control the amount of products entering
•
taking the third-party price of the closest available
the market) and may seek to recover these royalties.
product.
Again, the key is to have clarity in the terms – for
example: ‘Net sales’ shall mean the gross invoice price
Each of these approaches can result in significantly
less any credits for returns of licensed products.”
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Penalties and interest
either by the licensee or the auditor, between notification
Most agreements will include clauses to encourage
and closure of the audit could count towards the 5 per
accurate royalty reporting, including interest on overdue
cent threshold.
amounts and the payment of audit fees if royalties are
found to be underpaid, usually by over 5 per cent. The
Conclusion
following is a common clause: “The audit will be at the
This chapter has highlighted five areas where royalty
licensor’s expense unless it reveals an underpayment of
clauses in licence agreements can be misinterpreted and
royalties of 5 per cent or more, in which case the licensee
may lead to friction between the parties. These can be
shall reimburse the licensor for the cost of such audit.”
avoided at the drafting stage if the licensor spends time
This may seem a straightforward clause, but consider
the following scenario, which is not uncommon.
understanding the licensee’s business, its supply chain
and distribution channels. The ‘one size fits all’ approach
Upon notification of an audit, a licensee performs its
is not always appropriate. But that is not the end of the
own review of historic royalties and finds an
story – the parties should not just leave the agreement to
underpayment resulting from clerical or system errors.
gather dust, but should carry out regular reviews to
The licensee admits to this underpayment when the
ensure that it still meets the parties’ needs as new
audit team arrives on site to carry out its work. The
products are developed and new channels to the market
review itself identifies further underpayments which are
open up. It is important to identify any ambiguous or
less that 5 per cent but, added to this voluntary
outdated clauses early on before the parties become
disclosure, which breach the 5 per cent rule. Should the
entrenched and large amounts of back royalties are at
full inspection cost be borne by the licensee? Are the
stake.
royalties identified in-house revealed by the audit as they
It is not just the licensor that benefits from
came to light following the notification? Would the
unambiguous agreements that are regularly reviewed as
licensee have carried out its own review but for the
the licensee’s business develops. A clear understanding
notification? These are all valid questions.
on both sides of the operation of the royalty clauses
Licensors should consider making the definition of an
avoids later misunderstandings that can tie up
‘underpayment’ identified by an audit clear in the
management time, prove a nasty financial surprise and
agreement. For example, any underpayments identified,
lead to acrimony.
Elizabeth Gutteridge leads Deloitte’s forensic intellectual property practice.
She has extensive experience in investigating licensing disputes and
quantifying damages resulting from the infringement of IP rights. She also
advises on the valuation of IP rights and the setting of royalty rates. Ms
Gutteridge holds the Professional Certificate in International IP Law. She is a
fellow of the Institute of Chartered Accountants of England and Wales and a
member of the Licensing Executives Society.
Elizabeth Gutteridge
Partner, London
Tel +44 20 7936 3000
United Kingdom
Neil Hargreaves is a director in Deloitte’s forensic and dispute services
practice and has worked with some of the world’s largest IP licensing
organisations to develop compliance and enforcement programmes. He has
led over 50 forensic royalty investigations in a variety of industries throughout
the world, resulting in the recovery of millions of pounds of under-reported
royalties. He has a degree in pharmacology and is a chartered accountant
and a member of the Licensing Executives Society.
Neil Hargreaves
Director, London
Tel +44 20 7936 3000
United Kingdom
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John Henshall
Deloitte
Key advisory issues
Supply chain restructuring: IP transfer
pricing and taxation
In the early 1990s businesses began to transform
which might be unfamiliar to some:
corporate efficiency and profitability by taking a holistic
•
intellectual property that must be transferred;
view of their operations and optimising their supply
•
intellectual property that can be regenerated;
chain networks – the complex web of suppliers,
•
mandatory intellectual property; and
production and research and development facilities,
•
notional intellectual property.
distribution centres, sales subsidiaries, channel partners
and customers. An ideal commercial structure involved a
Intellectual property that must be transferred
regional entrepreneur operating with the assistance of
The first category comprises those elements of
country entities acting as contract or toll manufacturers
intellectual property that belong to the country entity
and commissionaire sales, or simple distributors,
absolutely and are transferable only by contract: patents
supported by shared service centres to take care of back-
in products or services, copyright in operating manuals
office functions. Today this business model and its
or database rights. These are valuable business assets and
derivatives have become the ‘best in class’ and are used
if they must be made available to the new entrepreneur,
extensively in almost every industry.
then as their owner the country entity must be properly
Since those first business transformations, entities
rewarded. If this type of intellectual property is
have become less complicated; manufacturing entities
transferred absolutely, it must be sold at a market price.
now concentrate on that alone and sales entities can focus
If intellectual property is licensed to the entrepreneur,
on customer care. Entities need access only to the
then similarly, the licence or royalty must be at a market
intellectual property required to perform their specific
rate. Occasionally there is an opportunity to move
functions. Manufacturers hold on to production
intellectual property from the entity to the entrepreneur
intellectual property but not to any underlying
without creating a tax bill. Apart from the efficacy of such
intellectual property in the product itself; sales companies
planning (where available), there may be little to argue
keep customer lists and relationships but relinquish the
about with the tax authority except for the valuation of
brand. Therefore, much of the intellectual property in the
the sale price, licence or royalty.
product or service and the brand becomes centralised in
the entrepreneur, which is typically located in a country
Intellectual property that can be regenerated
that has a business-friendly environment and tax rate. So
Now things become a little more interesting. Not all
what does this mean from a tax perspective?
valuable intellectual property has the same rigidly
Tax authorities in a number of countries have been
imposed framework of ownership as is seen in patents or
presented with a steady flow of tax audits for such
copyright. Brand value, for example, is the emotional
conversions where function and intellectual property
connection of the consumer base to goods or services; an
have left the entity in its country. They will often
expectation of future value based on past experience or
question whether to levy an exit tax charge for lost
perceived benefit. Brand value, which is goodwill, is
intellectual property and in some countries the
generated by the product or service, the everyday
application of transfer pricing principles in this area has
activity of business and activities such as advertising and
become controversial. This chapter divides intellectual
promotion. Although brand value is connected to the
property into four categories, the third and fourth of
trade name or mark (which is the shorthand to evoke the
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brand response in consumers), the registered owner of
Mandatory intellectual property
the name or mark is not necessarily also the owner of the
Sometimes legislation provides that a country entity
goodwill (in whole or in part) for tax purposes. In the
owns certain intellectual property and that compensation
case of a licensor and a licensee, for example, if the
should be paid if that is lost to it. Within the European
activities of the licensee either qualitatively or
Union, member states have introduced rules pursuant to
quantitatively go beyond those which would be expected
the EU Commercial Agents Directive 86/653/EEC). In
of a licensee in respect of the product or service given
the United Kingdom, for example, the legislation
that licence rate, the licensee can also become part-owner
enacting the directive is contained in the Commercial
of the brand value for tax purposes.
Agents (Council Directive) Regulations 1993 (SI
This tax concept should not be surprising as it mirrors
1993/3053).
commercial case law in some countries (eg, in the United
A ‘commercial agent’ subject to these rules is defined
Kingdom see the House of Lords decision in Scandecor
as “a self-employed intermediary who has continuing
Marketing Ltd v Scandecor AB [2001] UKHL21), but the
authority to negotiate the sale or purchase of goods on
point is picked up in Paragraphs 6:36 to 6.38 of the
behalf of another person (the ‘principal’) or to negotiate
Organisation
and
and conclude the sale or purchase of goods on behalf of
Development publication Transfer Pricing Guidelines for
for
Economic
and in the name of that principal”. Although there are
Multinational
Administrations.
several exclusions, in addition to these the law sets out
However, from a tax perspective this can have two
the compensation that must be paid to the agent for
significant implications.
losing the right or ability to continue with the
Enterprises
and
Cooperation
Tax
First, there is a risk. If in the past the licensee has
relationship and to profit from the goodwill that it has
taken on activities or financial burdens that go beyond
helped to build in the principal’s business. It is not
those which would be expected of a licensee, the country
possible to derogate by contract to the detriment of the
entity might already have economic ownership of a
agent, so this compensation is mandatory. In group
valuable asset for tax purposes. Failure to identify these
situations, many countries require that the tax return of
situations means that the benefit of that asset might be
the discontinued agent reflects this compensation,
removed from the country entity as a consequence of the
regardless of whether it is paid.
restructuring, thus creating an exposure to tax. It is
therefore critically important to identify these situations
Notional intellectual property
before the conversion takes place so that they can be
So far, the tax analysis of potential transfers of
planned for and managed.
intellectual property has contained no surprises as it has
Second, there is an opportunity. If brand value is
been aligned with commercial law and practice.
owned entirely by a country entity which currently holds
However, some countries are so fearful of the loss of tax
the trademark (and trademarks fall into the first of the
base through business transformations that they are
four IP classifications listed above), by allocating the
taking innovative steps to argue for a taxable disposal of
control and cost of activities that generate brand value to
some form of intellectual property merely because the
another (eg, the entrepreneur), future value will be
annual profits earned by the country entity are lower
created by the entrepreneur such that over time it will
than under the previous business model. This stance is
become entitled to a reward for use of the brand without
aimed more at dissuading multinationals from making
having to transfer the trademark from the country entity
the transformation than at taxing them for doing so. The
to the entrepreneur. This does not mean that existing
basis of this argument is that the country entity has
brand value is passed to the entrepreneur. The country
transferred the opportunity to make profits to someone
entity will continue to own and be rewarded for the
else – it is argued that this right to make profits is a
current brand value, which will decline over time as a
valuable item of intellectual property and the transfer of
mirror to the growth of brand value in the hands of the
such a right should be taxed.
entrepreneur. As there is no transfer of the existing asset,
there should be no exit tax charge.
Some tax authorities (eg, in Germany) have
introduced transfer pricing interpretations that codify
The last paragraph closed on a cautious note – “there
this approach. Companies with German subsidiaries
should be no exit tax charge” – rather than a firm
need to be aware that specific rules for the interpretation
conclusion because sometimes there are other factors that
of transfer pricing will be applied by German tax
can give rise to an exit charge or to a claim of an exit
auditors that deem an exit charge to arise based on the
charge by a tax authority.
‘transferred potential profit’ argument. The value of the
transfer would be calculated using a discounted cash-
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flow valuation of the subsidiary before and after the
between them with effect from the end of the then-
restructuring of the German entity. Other countries, such
current production season. Baird argued that this was
as the United Kingdom and Italy, do not have specific
unlawful as it had a right to believe, from past
rules but will already try to argue the same position from
interaction, that the relationship would continue long
first principles.
term and would be terminable only upon the giving of
The question therefore arises as to whether it is
reasonable notice, and that the notice period should be
indeed arm’s length to recognise such an exit charge and,
three years. In the absence of three years’ notice, Baird
if so, in what circumstances. As the circumstances of each
claimed lost profits of £38.5 million and costs of £15.1
business reorganisation are different, it is likely that in
million. Unfortunately for Baird, the court found that in
some cases this argument will have validity, while in
the absence of a contract giving these rights to the
others it will not.
manufacturer, there was no way to infer them, and its
When one third party decides to discontinue a
damages claim was rejected. If no compensation is due
business and another third party wants to carry it on, this
between independent parties, this does not support a
usually results in a sale of the business. In such cases the
contention that compensation should be imputed when
future potential earnings of the business are taken into
related parties terminate similar business relationships.
account in setting the sale price of the business and this
gives rise to a price in excess of the value of tangible
Conclusion
assets, typically described generically as ‘goodwill’. The
Business transformations to create entrepreneurial
cash received in respect of this goodwill is taxable. In the
structures are becoming increasingly popular and are
case of a multinational group, a restructuring that brings
significant events for IP owners. Transfers of IP assets
about this kind of transaction will similarly give rise to a
have always given rise to a risk of taxation and this is no
taxable receipt for goodwill. However, there are many
different in business reorganisations of this kind.
other circumstances that may arise in a restructuring and
Increasingly, IP legal counsel, company secretaries and
not all end in the same result.
others charged with the commercial exploitation or
It is not unusual to find that a group parent owns the
protection of intellectual property will be called upon to
patents, brands and other valuable intellectual property
help the tax department to understand how intellectual
of the business and that the country entity uses these
property has been created and used in the business, so
under an existing licence. Suppose that the group parent
that plans can be put in place to minimise tax risks when
decides to terminate these licences and instead create a
the transformation takes place. In addition, these are the
new licence to the entrepreneur. This situation is different
people who can help the tax department to understand
from that described above as the country entity is no
the commercial and legal realities of intellectual property
longer in control of the transformation; it does not have
and thereby defend the business during tax audits.
the option of continuing with the existing business
model.
In
commercial
licensing
Particular care is required to identify IP assets that
arrangements
might not be obvious to the tax department, such as the
independent licensees are not entitled to compensation
shared brand value described above. However, the more
for loss of a licence unless this is specifically provided for
difficult challenge for the IP professional is in assisting
in the licence or the licensor terminates the licence in
tax colleagues to defeat arguments concerning the
breach of its terms. Similarly, in a related-party situation
transfer of notional intellectual property, as this will
the country entity, as licensee, would not be entitled to
require a strong grounding in commercial IP behaviour,
compensation for loss of any business that was reliant on
including case law, a flexible mind and the ability to
the licence.
explain these difficult concepts to a tax inspector who is
In many group situations a formal licence or
unfamiliar with IP law and practice.
agreement has not been created between the parties, but
Any business that is undergoing or planning to
commercial arrangements between unrelated parties
undergo a business transformation project should bring
may still give guidance. In the UK case Baird Textile
IP professionals into the core team to ensure that they
Holdings Ltd v Marks & Spencer plc ([2001] EWCA CIV
make the most of their specialist knowledge and skill
274) Baird was one of the principal suppliers of garments
base to avoid unpleasant surprises a few years down the
to Marks & Spencer for 30 years until Marks & Spencer,
line.
on October 19 1999, terminated all supply arrangements
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John Henshall is a member of the transfer pricing group. He deals with
defence, planning and documentation issues for clients in a wide range
of industries. Mr Henshall is a leading expert on the transfer pricing of
intellectual property and lectures on this subject. He has been consulted by
overseas governments on the modernisation of their approach to international
taxation and his team was voted the top global transfer pricing team by
Euromoney and International Tax Review.
John Henshall
Tax partner, London and Zurich
Tel +44 20 7936 3000 (London)
Tel +41 79 24 26 014 (Zurich)
United Kingdom
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Law & litigation
Global
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Bernd Allekotte
Grünecker, Kinkeldey, Stockmair & Schwanhäusser
Global
The ever-expanding extraterritorial
reach of patents
For the most part, patent litigation is a domestic issue.
owner not only in the country where the patent is
Although today there is much talk of international patent
registered, but also in other countries where infringing
litigation, in practice the international aspect is often
actions occur.
confined to organising litigation in various countries. For
example, consider a situation where a defendant
A matter for senior executives
company allegedly infringes parallel patents in the
Even though most infringement cases do not raise
United States, France and Germany. In the vast majority
issues concerning the extraterritorial reach of a
of cases, patent litigation would be initiated in the three
specific patent, the number of such cases has risen
countries more or less simultaneously and each of the
significantly and is often underestimated by patent
three
and
practitioners. The resulting damage for a company
disadvantages for the respective parties. In fact, the
can be substantial, so knowing what to look out for is
lawsuits may lead to different results, although the facts
highly beneficial.
lawsuits
would
have
advantages
to be assessed by the respective domestic courts may be
It is certainly detrimental to a company if it is
the same. Cases such as this occur frequently. However,
confronted with an aspect of a patent conflict that has not
they can usually be divided into parallel domestic
previously been identified and assessed, such as the
infringement actions. In practice, the international aspect
potential extraterritorial reach of a specific patent.
of such litigation is usually confined to organising the
Therefore, companies should:
work of the in-house and outside counsel and litigators
involved to keep track of developments, ensuring that
•
make sure that there is a general awareness within
there are always up-to-date status reports and that the
the company – and the IP department in particular –
arguments brought forward in the respective domestic
that patent disputes can extend beyond a country’s
lawsuits are in line with each other. Experience shows
that precise and reliable case organisation is one of the
boundaries;
•
factors which carries such international litigation
or existing dispute has an international aspect and
through to a successful result.
In some cases, however, the borders between the
ask the IP department to assess whether a potential
may involve cross-border issues; and
•
identify and resolve the resulting issues.
countries affected by the defendant’s infringing
distribution activities are indistinct. Previously, most
It
may
appear
as
though
the
question
of
cases of patent infringement were deemed to be limited
extraterritorial reach of patents is purely troublesome.
to activities performed wholly within one country, with
On the contrary: for patentees, the advent of new
few exceptions. However, the increasing importance of
technologies and the cross-border implications of patents
the global marketplace and the rise of new technologies
reveal the potential to target an infringer in a single
have gradually required patent holders to move away
jurisdiction (or at least fewer jurisdictions).
from the limitations of a country-by-country analysis of
This chapter does not attempt to identify all potential
infringing actions and instead turn towards the potential
scenarios that may lead to the consideration of the
extraterritorial reach of domestic patents. The meaning
extraterritorial reach of a specific patent. Rather, it aims
of the term ‘extraterritorial reach’ is that under certain
to alert IP specialists as to the implications of the
circumstances, patents are deemed to protect the rights
extraterritorial application of patents.
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Grünecker, Kinkeldey, Stockmair & Schwanhäusser Global
the United States. According to the Federal Circuit, a
Practical scenarios and case law
potential
system claim is used at the place where the system as a
extraterritorial reach of patents stem from the United
whole is put into action of service (ie, the place where
States. In this respect, it should be noted that Congress
control of the system is exercised). In contrast, the court
has expanded the territorial reach of US patent law.
held that a process claim was not used within the United
Section 271(f) of the US Patent Act, which was adopted in
States “unless each of the claimed steps is performed
1984, imposes liability for exporting ‘components’ of a
within this country”. The court held that the BlackBerry
patented invention for assembly abroad. Moreover, in
system (which had a component that was located in
1998 Congress added Section 271(g) of the Patent Act,
Canada) infringed the product claims, but not the
which created liability for importing into the United
process claims. Under the court’s decision, it appears that
States, or selling, offering for sale or using in the United
infringement of method claims is more limited in regard
States, a product made by a process that is protected by a
to the extraterritorial reach of a specific US patent
US patent, irrespective of where that process is actually
compared to infringement based on system claims.
Most
of
the
cases
dealing
with
the
performed. Some recent cases are outlined below.
Voda v Codis Corp
Microsoft Corp v AT&T Corp
In this context, the 2007 decision of the Federal Circuit in
In the 2007 Supreme Court decision Microsoft Corp v
Voda v Codis Corp is also of interest. Strictly speaking, this
AT&T Corp the US Supreme Court reversed a Federal
is a decision relating to the jurisdiction of US courts to rule
Circuit decision and held that software that had been
on the infringement of foreign-counterpart patents, rather
created in the United States and exported to foreign
than a case dealing with the extraterritorial reach of
countries on a master disk to be copied and implemented
domestic patents. While the district court had allowed the
on computers located outside the United States was
patentee to add claims of infringement of foreign-
outside the reach of the domestic (US) patent law. AT&T
counterpart patents from France, Germany and the United
held a patent on a computer used to encode and
Kingdom to the action, the Federal Circuit declined to
compress
Microsoft’s
decide whether the district court had jurisdiction. Even if
Windows systems had the potential to infringe this
it had, the district court had abused its decision to exercise
patent in that it allowed a computer to process speech in
this jurisdiction: as the Federal Circuit put it,
the same manner as was claimed by AT&T’s patent.
“considerations of comity, judicial economy, convenience
However, Microsoft did not sell Windows itself to foreign
and fairness” constituted compelling reasons to decline
manufacturers which install this software onto the
jurisdiction in this case. This decision does not settle for
computers they sold. Rather, Microsoft sent each
good the issue of whether a US patentee can successfully
manufacturer a version of Windows (a master disk),
introduce claims stemming from foreign-counterpart
which the manufacturer used to generate copies. It was
patents in a US litigation. However, it does show the
the copies – and not the master disk received from
attempts that may be made in litigation to attack an
Microsoft – which were installed on the computers of the
infringer in one court when arguing that not only
foreign manufacturer.
domestic, but also foreign patents are infringed, and that
recorded
speech
digitally.
The Supreme Court held that only a copy of Windows
both patentees and (potential) defendants should be
(and not Windows in the abstract) qualified as a
aware that such far-reaching jurisdiction of courts must
‘component’ under Section 271(f) of the US Patent Act, and
always be taken into consideration.
that Microsoft did not supply such a copy since it was not
the master disk supplied from the United States, but rather
Outside the United States
the foreign-made copies of that disk, which triggered
The extraterritorial reach of patents plays an increasing
liability when combined abroad. Therefore, the Supreme
role in jurisdictions other than the United States.
Court declined to give Section 271(f) of the US Patent Act
In the 2007 Radio Clock II decision of the German
an extensive interpretation, acknowledging that this
Federal Supreme Court, the defendant owned a patent
provision is an exception from the general rule that
concerning a display-setting detection device for a
domestic (US) patent laws do not apply extraterritorially.
clock radio. The plaintiff manufactured wheelwork
mechanisms for clock radios and exported these to a
NIP Inc v Research In Motion
foreign company, which used them to manufacture clock
In NIP Inc v Research In Motion, decided by the US Federal
radios, which it in turn supplied to a German (ie,
Circuit in 2005, the court addressed the scope of the US
domestic) distributor. The defendant-patentee regarded
Patent Act regarding activities both inside and outside
the marketing of the alarm clocks as an infringement of
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In
contrast
Global Grünecker, Kinkeldey, Stockmair & Schwanhäusser
its patents and sent a warning letter to the German
to
cases
of
contributory
patent
distributor. The plaintiff claimed, among other things,
infringement, the German courts apply a more lenient
that it was entitled to an injunction against the
attitude in cases of direct patent infringement.
defendant-patentee on the grounds of a wrongful
In Radio Clock I (2002) the Federal Supreme Court
warning letter sent to the German distributor. The
dealt with a situation where the defendant had known of
Federal Supreme Court held that, as a general rule,
the patentee’s German patent and had manufactured
contributory patent infringement can also be committed
directly infringing radio-controlled clocks in Hong Kong.
by exporting means that relate to an element of the
The defendant had given these to a third party in Hong
patented invention, if the resulting product (which is
Kong in order for the third party to transport the clocks
manufactured abroad) is intended to be delivered to
to Germany. The Federal Supreme Court held that the
Germany. In this decision, the court did not need to
German courts had jurisdiction over the defendant
decide this issue because the appeal was rejected on
because it had intentionally caused the infringement in
other grounds. This case shows that a domestic company
Germany.
is not necessarily shielded from liability under domestic
patents if it exports into other countries.
In addition, German case law provides that if
individual parts of a patented device which clearly need
In a decision handed down by the Mannheim District
to be assembled together are manufactured in Germany
Court in 2004, Pressure Control Device, the district court
and then exported, this constitutes infringement of the
declined to assume jurisdiction in contributory patent
German patent, even though the protected device is
infringement cases if a foreign company delivered parts
assembled abroad. Similarly, the German courts have
to another foreign company that produced directly
held that in certain circumstances a domestic device
infringing products that were subsequently delivered to
patent might be infringed even if only a semi-ready
Germany. In this case, the patent at issue concerned a
device is exported and the final assembly takes place
control device for measuring tyre pressure. The French
abroad.
defendant offered certain measuring devices with
specific features in France to a French company, X, which
Summary
in turn delivered them to Germany. The plaintiff-
The cases cited here reveal that the courts have already
patentee alleged that the defendant knew that these
dealt with complex fact patterns – and more such cases
devices were to be incorporated (by X) into a tyre
are expected to arise. Globalisation also has an impact on
pressure control system according to Claim 1 of the
patent litigation and the issue of the extraterritorial reach
patent. The court denied jurisdiction because the
of domestic patents is constantly evolving. Senior
defendant had made neither an offer nor a delivery in
executives should be aware of this and should take
Germany. It was argued that any other holding would
precautionary measures in order to be ready. Early
constitute “a boundless extension of the protection of a
consultation with IP specialists will help to maintain a
domestic patent”.
competitive advantage in a globalised economy.
Bernd Allekotte is a partner in the Munich office of Grünecker, Kinkeldey,
Stockmair & Schwanhäusser. His practice focuses on litigation, particularly
patent, trademark and unfair competition cases. Mr Allekotte is admitted
to the New York and German Bars. He deals with infringement actions before
the German district courts and courts of appeal, and handles aspects of
international law, representing clients in patent disputes covering several
jurisdictions.
Bernd Allekotte
Partner, Munich
Tel +49 89 21 23 50
Grünecker, Kinkeldey, Stockmair
& Schwanhäusser
Germany
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Clark W Lackert and Maren C Perry
King & Spalding LLP
Global
Protecting well-known and famous
marks: a global perspective
What are famous trademarks and why are they entitled
brands. The increased globalisation of trade has made
to more protection than standard trademarks? How do
the protection of famous and well-known marks even
international treaties extend protection for famous
more important. However, many global brands are not
trademarks? How do local laws extend protection for
used or registered in every country. So what protection is
famous trademarks? What are the limitations of these
available when a well-known global brand is infringed in
treaties and laws? Are there steps that companies with
a country where the mark has not yet been used or
famous marks should take to secure protection?
registered? A review is needed of the issues pertinent to
Standard trademark laws protect trademarks used
the protection of well-known or famous marks, including
and/or registered for goods and/or services in a
a review of key international treaties and examples of
particular country within the concept of the likelihood of
local laws and separate registers for famous marks.
confusion. For well-known marks, there are three types
of additional protection:
Relevant treaties
Paris Convention
•
•
•
Case law has confronted the issues of the scope of
The modern concept of the ‘famous’ trademark is codified
protection and when protection should be extended
in Article 6bis of the International Convention for the
beyond the special goods and/or services for which
Protection of Intellectual Property (the Paris Convention),
a mark is known (the principle of speciality). As a
which uses the French expression ‘notoirement connue’ –
general principle, the more well known a trademark
literally ‘notoriously known’ or, in better English, ‘well
is, the wider the scope of protection afforded to it due
known’. Implementation of the Paris Convention varies;
to an increased likelihood of confusion as to the
for example, the IP protection provisions of the
source or sponsorship (particularly in today’s climate
convention are enforceable in the United States only once
of licensing and merchandising both well-known
incorporated into local law. The heart of protection for
luxury marks and cartoon characters).
well-known marks is found in Article 6bis of the Paris
Apart from the likelihood of confusion, there is an
Convention, which states in part that member countries
inherent property right in the trademark that can be
agree “to refuse or to cancel the registration, and to
protected from dilution.
prohibit the use, of a trademark which constitutes a
Trademarks that have a higher degree of reputation,
reproduction, an imitation or a translation, liable to create
recognition or fame are singled out for broader
confusion, of a mark considered by the competent
protection by treaties, statutes and case law
authority of the country of a registration or use to be well
including, in some instances, protection without use
known in that country as already being the mark of a
or registration of the mark in the country at issue.
person entitled to the benefits of this convention”.
This provision also applies to similar marks that
This chapter refers interchangeably to famous, wellknown and reputation marks.
derive their essential elements from a well-known mark
or are “an imitation liable to create confusion”. The
Today, consumers move freely across borders and
provision was developed to protect owners of
information has exploded over the Internet. As a result,
unregistered marks that were widely known in the local
companies have been able to develop strong global
marketplace against registration and use by third parties.
branding and build international markets for their
Further, under Article 6bis interested parties have at
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Global King & Spalding LLP
least five years to request cancellation of such a third-
trademark is well known by stating that “account shall
party registration. If an offending mark has been
be taken of the knowledge that member obtained as a
registered in bad faith, “no time limit shall be fixed for
result of promotion of the trademark”. There is no
requesting cancellation”. A well-known mark need not be
requirement that a mark be in actual use – that is, that
registered locally in order to obtain protection against
there be sales of the trademarked goods in the country
misuse on similar goods under Article 6bis. Moreover, the
where the infringing activity occurs.
Paris Convention does not specify how the mark came to
Article 16(3) of the TRIPs Agreement expands Article
be well known in that country – that is, the convention
6bis of the Paris Convention to allow for the protection of
does not require that the mark actually be in use in the
well-known marks on non-competing goods and services
country, provided that it is well known. Therefore, Article
by stating that “Article 6bis of the Paris Convention shall
6bis creates an international basic floor of protection for
apply, mutatis mutandis, to goods or services which are
well-known trademarks against use or registration on
dissimilar to those in respect of which a trademark is
identical or similar goods and against trademarks which
registered, provided that use of that trademark in
are reproductions, imitations or translations.
relation to those goods or services would indicate a
Article 10bis of the Paris Convention addresses aspects
connection between those goods and services and the
of unfair competition protection of well-known marks that
owner of the registered trademark and provided that the
may not fall under Article 6bis. Under Article 10bis
interests of the owner of the registered trademark are
members “are bound…[to provide] effective protection
likely to be damaged by such use”. In order to qualify for
against unfair competition”. The article prohibits:
the extended protection of Article 16(3), the famous mark
must be registered, although countries may go beyond
•
•
•
acts of competition which are “contrary to honest
such protection – for example, by protecting unregistered
practices”;
famous trademarks from dilution. Thus, Article 16(3)
acts of competition which are of “such a nature to
provides potential grounds for anti-dilution protection
create confusion… with the establishment, the goods
for well-known or famous registered marks. Even where
or the industrial or commercial activities of a
there is no confusion or lost sales, dilution prohibits the
competitor”; and
unauthorised use of a famous mark on unrelated goods
“indications or allegations… liable to mislead the
in a manner that blurs or tarnishes the unique drawing
public as to the nature, the manufacturing process,
power or value of a famous or well-known mark.
the characteristics, the suitability for their purpose or
quality of the goods”.
From the text of these articles, it is apparent that the
TRIPs Agreement provides two important innovations
concerning well-known trademarks: protection for well-
Thus, the Paris Convention provides protection for a
known service marks and protection for registered well-
mark that is well known in a country even when that mark
known marks concerning dissimilar goods under certain
is not used or registered in that country if a third party:
circumstances.
Equally
important
is
the
TRIPs
Agreement’s extension of Paris Convention protection to
•
•
registers or uses the same or similar mark for similar
all WTO countries pursuant to Article 2(1) – a significant
goods; and/or
achievement. Accordingly, even though the TRIPs
uses the same or similar mark in a manner that
Agreement itself is not self-executing, the WTO
constitutes unfair competition (eg, misleads the public).
mandates adherence and thus its power has been greatly
expanded by worldwide compliance. Since the TRIPs
Each country has interpreted the extent of protection
Agreement is considered a basic floor of protection, WTO
to be provided – for example, certain countries require
members are free to extend protection (eg, by protecting
some form of minimal contact with the country, despite
unregistered famous marks against infringement
what the Paris Convention states.
through use on dissimilar goods).
TRIPs Agreement
Local laws
The scope of Article 6bis of the Paris Convention was
United States
extended to include services by virtue of Article 16(2) of
Although the United States is a member of the Paris
the World Trade Organisation (WTO) Agreement on
Convention and the TRIPs Agreement, Congress has
Trade-Related Aspects of Intellectual Property Rights
enacted specific legislation to implement this obligation
(TRIPs). Article 16(2) of the TRIPs Agreement provides
and the courts are divided on whether the treaty provisions
members with a guideline for determining whether a
are self-executing. Some argue that applying the terms of
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King & Spalding LLP Global
the Paris Convention would create serious conflict with the
Registers of famous marks
principle of territoriality – a long-established principle
In general, specific registers of famous marks do not
under US law that trademark rights arise from use, without
exist, but trademark owners may seek recognition in
which no such rights exist. However, some US courts have
individual cases. For example, in China, a trademark
afforded protection to the famous marks of foreign entities
owner can seek well-known trademark recognition in
in the United States in the absence of actual use or federal
individual cases. To date, over 40 marks have received
registration of the marks in the foreign country. The
this status, including two owned by foreign companies:
Supreme Court has been petitioned to address a split in the
GILLETTE (in English characters) and SPRITE (in
circuit courts on this issue.
Chinese characters). In Japan, the Industrial Property
Digital Library lists marks that have been designated as
well known in decisions by appeal examiners and court
European Union
The
EU
Trademark
Harmonisation
Directive
judges. In Brazil, a trademark owner can claim that a
(89/104/EEC), which harmonised basic elements of EU
mark deserves highly renowned status when filing an
member states’ law, creates protection for marks which
opposition or administrative nullity proceeding. In the
have a reputation (Article 4(3)). In the UK interpretation,
European Union, the Intellectual Property Office of the
such marks are protected against infringement for similar
Czech Republic publishes a list of well-known
and dissimilar goods (Section 10(3) of the UK Trademarks
trademarks, which is informative only and has no legal
Act 1994), whereas well-known marks are protected only
effect. The Russian Federation maintains a register which
against infringement for identical and similar goods
currently recognises over 50 trademarks as well known,
(Section 56 of the UK Trademarks Act 1994). Well-known
and Ukraine, Belarus and Bulgaria all maintain registers
marks are protected through implementation of the Paris
of well-known marks.
Convention and Article 16 of the TRIPs Agreement.
A register of famous marks is beneficial because it
avoids expensive proof issues as to whether a trademark
Canada
is famous at the time of a dispute and the recognition of
In Canada, there are no specific provisions for famous or
famous marks is simplified by referring to a single list.
well-known marks. In assessing the issue of confusion,
On the other hand, a register of famous marks may be too
the reputation (or fame) of a mark is one of several
limiting as such registers typically exclude more than
factors that a court may take into consideration.
they include and, as a result, a mark that is famous but
However, for confusion to occur there must be either:
not on the register may not receive the protection it
deserves. Further, the criteria for inclusion on a register
•
a likelihood that prospective consumers will
may vary from jurisdiction to jurisdiction, making
mistakenly infer that the goods and services provided
reliance on a single list difficult.
under both marks are supplied by the same entity or
•
its licensees; or
Conclusion
a link between the source of the goods and services
The increase in global recognition of world brands has
supplied under both marks.
heightened demand for famous mark protection for
trademarks, service marks and domain names. The
The fact that a mark may be famous does not in itself
TRIPs Agreement has made it mandatory to enforce
provide absolute (or a different form of) protection over
famous mark protection in all WTO countries and it may
other marks.
therefore be expected that famous mark protection will
be expanded. The debate on whether separate registers
Mexico
of famous marks are desirable will continue and each
In Mexico, well-known trademarks have special protection
country will continue to develop its own case law,
which is governed by the principles of territoriality and
interpreting local laws and establishing compliance with
specialty. Further, treaties and conventions are considered
the Paris Convention and the requirements of the TRIPs
supreme laws, so adherence to the Paris Convention and
Agreement. Owners of global brands should consider
the TRIPs Agreement supercedes local law.
seeking registration protection for their marks in any
countries where unauthorised third-party use of the
China
marks would be seen as a problem meriting action. It is
Chinese trademark law explicitly protects well-known
inevitable that the 21st century will see an ever-
marks for similar and dissimilar goods and services.
increasing level of protection for well-known trademarks
as they become true world brands.
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Global King & Spalding LLP
Clark Lackert is head of the IP practice group in the New York office.
He practises primarily in trademark, domain name, licensing and anticounterfeiting matters and handles trademarks for several Fortune 200
multinational companies. He is a WIPO arbitrator for domain name disputes
and consulted on the implementation of the WTO TRIPs Agreement.
Mr Lackert is listed in the global top 25 trademark lawyers in Best of the
Best 2005. He chairs committees for the ABA, INTA and AIPPI.
Clark W Lackert
Partner, New York
Tel +1 212 556 2329
King & Spalding LLP
United States
Maren Perry is counsel in the IP practice group in King & Spalding’s New York
office. She represents a wide range of clients in all aspects of trademark,
unfair competition and copyright law.
Maren C Perry
Counsel, New York
Tel +1 212 556 2375
King & Spalding LLP
United States
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Law & litigation
United States
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Bruce C Haas and Christopher V Beckman
United States
Patent enforcement: licensing and
litigation considerations
The value of owning patents continues to grow in the
Income-based models are the most objective and often
United States. As Alan Greenspan recently observed,
the most accurate, focusing on sales of the patented
“The economic product of the United States has become
technology itself.
predominantly conceptual”. As a result, patent
Any reliable valuation method involves forecasting
enforcement has become a primary source of revenue for
the potential exploitation of the patented technology and
a wide range of industries. Manufacturing giants,
is therefore subject to some inaccuracy, just as the
including IBM and General Electric, now enforce patent
valuation of investment securities depends upon the
portfolios as a leading source of revenue growth –
vagaries of future income and is subject to potential
according to Deloitte, since 1993 IBM has earned over $10
fluctuation. The patentee should consider:
billion from enforcing its patent portfolio. Effective
patent enforcement is even more important as
•
the value of the patent to the patentee’s core business;
manufacturing operations are increasingly moved
•
the value of the patent to the patentee’s competition
offshore to less-developed countries.
In short, patent owners can no longer afford simply to
and other third parties; and
•
the value and costs of maintaining exclusivity versus
file away their patents and wait for infringers to appear.
the value and costs of sharing the patented
Maximising the value of patents requires careful
technology.
planning and continual diligence. According to the
Harvard Business Review, each year US companies fail to
capitalise on over $1 trillion-worth of patent assets.
After assessing the value of patents, companies seeking
to remain competitive need to develop well-reasoned
Effective management of a patent portfolio requires a
strategies, accounting for the risks and potential rewards
careful assessment of the value of each patent (to both its
of patent enforcement options. Those enforcement options
owner and competitors) and the costs, risks and rewards
generally fall under the two broad categories discussed in
of licensing and litigation options. Aside from the need to
this chapter: licensing and litigation.
predict royalties and potential damages claims, the
An effective patent enforcement programme may
assessed value of a patent or patent portfolio may direct
involve licensing, litigation or a combination of both.
a company towards licensing or litigation in the first
Costs and benefits vary according to several factors,
instance. Less valuable patents may simply not be worth
including:
the expense of litigation focused on that one patent, but
may be successful licensing subjects and may be raised
•
the unique technology;
defensively in response to claims by an infringer.
•
the value to a competitor;
Several methods are widely used to assign a value to
•
the strength of the patent; and
patents, none of which is universally accepted to the
•
the stage of the patent lifecycle.
exclusion of all others. Valuation methods can be broadly
divided into three main categories: cost, market and
In any licensing programme, litigation readiness is an
income-based methods. Cost-based methods are the least
important element. Similarly, licensing options may be
sophisticated and focus on the patentee’s own expenses
relevant in litigation. Thus, the considerations for each
and assessment of the patent’s value. Market-based
category are not mutually exclusive and must be considered
methods focus on sales of comparable technology.
together in devising a sound enforcement strategy.
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Fitzpatrick Cella Harper & Scinto United States
Licensing
prepared to realise that value based on production or
Licensing is often viewed as a compromise because it
marketing infrastructure, making licensing a better
requires the patent owner to share his or her intellectual
option than litigation. Where the patented technology is
property. However, it can also lead to significant market
within the patentee’s core business, however, sharing
expansion and generate new sources of revenue for the
technology with competitors (even for a reasonable
patent owner through the business relationship. It is also
royalty) may be counter-productive. Licensing may also
generally less expensive than pursuing litigation.
involve the loss of some level of control over how the
patented technology is exploited. A poor licensee may
Benefits
not exploit the full potential of the technology or, worse,
Successful licensing is cooperative in essence and
may tarnish the reputation of the technology. Non-
therefore bears generally lower expenses than litigation
exclusive licences, a thorough background investigation
in terms of public and business relations, as well as legal
of the licensee and licensing provisions for quality
costs. Successful licensing may enhance a company’s
monitoring and control can reduce but never eliminate
reputation in the industry. By taking a licence, a licensee
those risks.
acknowledges the legitimacy of patent rights and sets the
While the costs of licensing may not always approach
trend for cooperation. In addition, licensing revenue
the costs of infringement litigation, they are substantial
provides a predictable stream of income. In the United
and may include expenses related to investigating the
States, licensing revenue is increasing as a proportion of
potential
overall business revenue. According to Kevin G Rivette
eventually, sharing revenue.
licensee,
negotiating
the
licence
and,
and David Kline, authors of Rembrandts in the Attic:
If licensing negotiations fail, many of the backfire
Unlocking the Hidden Value of Patents, during the 1990s
risks associated with litigation may be realised. For
annual patent licensing revenue in the United States
example, in 2006 Sun Microsystems Inc unsuccessfully
increased from approximately $15 billion to over $100
attempted to license software technology to Network
billion. Deloitte estimates that in 2007 patent licensing
Appliance Inc. Network Appliance responded with a
revenues will total approximately $500 billion.
patent infringement suit against Sun in late 2007 in
With increasing frequency, companies are acquiring
regard to its own patent portfolio.
patent rights ancillary to or even beyond their core
Although licensing patented technology may appear to
business. Strategic alliances with other companies
provide good benefits at a low cost, poorly drafted licence
already positioned to exploit the technology often create
agreements can often prove costly and sometimes fatal to a
a win-win situation. In return, the other companies may
business. When drafting any patent licence, considerations
also seek to partner with respect to technology which the
of exclusivity versus non-exclusivity and running royalties
patent owner is ill situated to exploit.
versus paid-up royalties must be carefully weighed. In
In addition to the avoided costs of litigation, the costs
of developing, manufacturing and marketing a patented
addition, a reasonable escape clause is always wise in case
the licensee proves to be less than a good partner.
product or process can be reduced or even eliminated
through licensing.
Texas Instruments was an early success story in
Other considerations
Litigation may be necessary
enhancing the value of its patent portfolio with a successful
Successful licensing strategies do not exclude the possibility
licensing programme. In the early 1990s this computer
of litigation. Aside from the potential for default by the
hardware company extracted hundreds of millions of
licensee, which would lead to even more complex litigation,
dollars from a large but ageing patent portfolio. It was the
litigation readiness is required for optimal licensing
first company to yield over $1 billion from a patent
negotiations. Licensing negotiations often succeed more
portfolio alone, separate from manufacturing operations.
efficiently if there is a credible threat of litigation.
More recently, IBM has generated between $1.5 billion and
Demonstrating that a company has already built a strong
$2 billion in patent licensing revenue annually. Thomson
case during negotiations will disabuse any potential
Corporation generates 75 per cent of its total earnings
licensee of the notion that it might be unwilling to litigate.
through licensing revenue – $390 million a year.
Know your licensee before entering an agreement
Disadvantages
A reasonable competitor with a history of making licences
Because licensing represents a compromise, the patent
work will generally enhance the outlook of licensing
holder must cede some value of the patented technology
options. In contrast, an unreasonable infringing competitor
to the licensee. It may be that the patent holder is not
with a history of contesting the valid patent claims of
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others should be approached about licensing only with
patent enforcement than by initiating litigation. Well-run
great care. Approaching a recalcitrant infringer with a
litigation signals commitment and may provide leverage
licensing proposal could simply warn the infringer of a
in negotiating future licences and royalties. Litigation
potential claim, providing the opportunity to sue first in a
against wilful infringers may provide for treble damages,
jurisdiction of its choice in a declaratory judgment action.
attorneys’ fees (in exceptional cases) and interest. With a
recalcitrant infringer, immediate litigation with no
Consider patent lifecycles and timing
licensing negotiations may be the most effective approach.
In general, patents at the beginning of their lifecycle
There are many examples of cases where patent
present better licensing opportunities. Depending on
litigation has enhanced patent value and ultimately has
other operations, the patentee may need the stream of
been responsible for significant business success. For
income from a licensing programme before litigation
example, Polaroid’s effective litigation to enforce its
may
Licensing
instant camera patents resulted in an award of almost $1
negotiations can also provide insight into market
billion and is credited with shutting down competitor
demand and the strength of the patent, without the risks
Kodak’s instant camera operations. More recently, in
associated with litigation. In contrast, it may be that a
NTP Inc v Research in Motion Ltd the plaintiff obtained a
patent nearing the end of its lifecycle is already heavily
$612.5 million settlement following a complex litigation
licensed to other parties, reducing the benefit to a new
history with remand from the Court of Appeals for the
potential non-exclusive licensee and making that
Federal Circuit. An initial damages judgment of $23.1
potential licensee less motivated to negotiate a licence.
million was raised to $53.7 million after the plaintiff
become
economically
feasible.
established wilful infringement. A looming injunction
Litigation
then threatened to halt the defendant’s multibillion-
In contrast to licensing, patent infringement litigation may
dollar BlackBerry handheld email device operations
be viewed as an uncompromising approach to patent
altogether, leading to the stratospheric settlement. As
enforcement or the result of a failed compromise. As such,
part of the settlement, the defendant obtained a
the patent holder seeks to recover the entire value (or more)
perpetual licence to the technology it had been selling.
of its patented technology and maintain exclusive control.
However, in most cases the costs and risks associated with
Disadvantages
patent litigation are greater than with licensing. Patent
Although litigation can lead to a significant financial
litigation is a formidable weapon and must be carefully
return and the exclusion of competitors, there are two
wielded. In the wrong hands or under the wrong
main disadvantages: cost and uncertainty.
The cost of litigation is always high when compared to
circumstances, patent litigation can destroy those who
initiate it, leaving the intended target unscathed.
licensing. For this reason alone, licensing may be the best
option for a smaller, start-up organisation facing
Benefits
infringing activity with respect to complex technology.
In many respects, the benefits of litigation represent the
Patent litigation also involves a substantial cost in terms of
inverse of the risks of licensing. For example, whereas
human resources and business infrastructure, including:
with licensing there is a risk of ceding control over some
aspect of the patented technology, litigation seeks to
•
case preparation;
maintain exclusive control, avoiding the risks of lost
•
employee distraction;
commercial exploitation or tarnishment of the property.
•
attendance by witnesses, including the inventors;
Litigation provides the opportunity to ensure that
competitors are excluded from practising the patented
and
•
document production.
invention. If the patented technology is within the patent
holder’s core business, ceding market share and profits
Due to the complexity of innovative technology, the
to direct competitors through licensing may be counter-
outcome of patent infringement cases is difficult to predict
productive and the threat of infringement litigation may
both at trial and on appeal. A recent study indicates that,
present greater value. Litigation puts competitors on
on average, district courts find in favour of patentees only
notice that patent rights will be enforced vigorously,
60 per cent of the time. This unpredictability in outcome
reducing the risk of future infringement. Litigation also
increases on appeal. For example, the Court of Appeals for
provides for greater certainty with respect to ending a
the Federal Circuit has overturned district court claim
competitor’s infringing activity.
constructions in almost half of the appeals it receives
There is no better way to demonstrate seriousness in
relating to claim construction.
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The risks associated with litigation do not end with
costs
and
uncertainty.
As
many
products as they applied to its own portfolio and
sophisticated
obtained the injunction, shutting down a key
corporations and their legal teams have learned, patent
Motorola product – a product that was arguably
litigation presents onerous and often unpredictable
more
backfire risks, ranging from the risk of losing proprietary
infringement it sought to vindicate in bringing suit.
important
to
its
operations
than
the
trade secrets in discovery to facing counterclaims from a
defendant’s competing patent portfolio. The following
Other litigation considerations
cases provide examples of those risks in practice:
If litigation is the option that ultimately makes the most
sense, companies should be prepared to litigate
•
Qualcomm v Broadcom (No 05cv1958B (SD Cal 2007)):
vigorously. Litigation should never be pursued half-
This recent patent infringement case brought by
heartedly. Litigants should also be prepared for
Qualcomm illustrates how the conduct of litigation
disruption and surprises (eg, in regard to document
itself can create new exposure for a patent holder.
production, employee time and testimony).
patent
Companies should also choose the defendant
infringement action against Broadcom and found
carefully – picking a single, weak opponent and gaining
itself facing penalties for failing to locate and produce
an early victory may set a positive track record for future
certain emails to the other party during litigation.
licensing negotiations, but it also gives future
Qualcomm’s legal officers and outside counsel
defendants, which may have more litigation resources, a
argued vigorously that the failed production was
preview of the case.
Qualcomm
inadvertent
brought
and
due
an
to
unsuccessful
the
enormity
and
complexities of its business operations and document
The risk of public and business relations fallout
should also be considered in any litigation strategy.
systems, but the court was not persuaded.
•
Motorola Inc v Hitachi Ltd (750 F Supp 1319 (WD Tex
Conclusion
1990)): This case demonstrates the risks of a
Thorough analysis and seasoned judgement are required
competing patent portfolio (particularly in complex
to determine the best patent enforcement strategy. The
technological products) and the dangers of suing a
decision of whether to litigate or to license requires
longstanding business partner. Motorola brought suit
tempered consideration of all the relevant factors – some
against its longstanding business partner, Hitachi, in
of which defy arithmetic evaluation, but may nonetheless
the field of microprocessors, only to find itself on the
undercut more concrete factors. Although licensing
receiving end of an injunction based upon Hitachi’s
provides greater short-term certainty and litigation
counterclaims for patent infringement. Having
provides greater ultimate certainty, each represents a
worked with Motorola for years and even having
compromise of risks and rewards not suitable to every
licensed the very patents at issue from Motorola in
circumstance. Eternal vigilance is the cost of realising a
other instances, Hitachi understood Motorola’s
patent’s maximum potential by licensing or litigation.
Bruce Haas has been a partner at Fitzpatrick since 1989 and focuses his
practice on complex patent litigation. He has extensive courtroom experience
and has served as lead trial counsel in patent infringement litigations
involving pharmaceuticals and mechanical devices. Mr Haas’s practice
involves many diverse technologies, including high-strength fibres, aerospace
materials, automotive parts, plastic container manufacturing, pharmaceuticals
and electrochemical devices. In addition to litigation, he has wide experience
in patent arbitration, patent evaluations and opinion work.
Bruce C Haas
Partner, New York
Tel +1 212 218 2290
United States
Christopher Beckman’s practice focuses on patent litigation in the chemical
and pharmaceutical arts. Prior to joining Fitzpatrick, Mr Beckman served as
a judicial clerk at the Supreme and Appellate Courts of the State of
Connecticut and practised as a litigator with a leading general practice and
IP law firm. His prior experience includes patent litigation in a wide range of
technologies, as well as copyright, trademark and government investigation
work.
Christopher V Beckman
Associate, New York
Tel +1 212 218 2251
United States
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Dana R Kaplan and Michael J Freno
Kenyon & Kenyon LLP
United States
The intricacies involved in choosing
a pharmaceutical trademark
In addition to extensive research as to the chemical
connection with pharmaceutical preparations, laboratory
composition
product,
research and development services; thus, no registration
pharmaceutical companies often face another hurdle
was granted). Moreover, owners of once-distinctive marks
when it comes to naming their product. Pharmaceutical
can lose protection by failing to police their marks. For
companies must consider not only what might be an
example, in 1897 Frederich Bayer & Co isolated
attractive trademark for their product, but also how that
acetylsalicylic acid and branded a drug product called
mark fits with the chemical and generic names for the
Aspirin, which it registered as a trademark in Germany in
compounds in that product.
1899. After the First World War other manufacturers began
of
a
new
pharmaceutical
to sell identical products under the name ‘Aspirin’, which
General considerations for all new trademarks
ultimately led to the mark’s inability to identify a single
For all products, a trademark should:
source (ie, Bayer).Therefore, the name no longer functioned
as a trademark and aspirin is now a generic term in the
United States.
•
identify a single source;
•
be capable of distinguishing one product from
•
At the other end of the spectrum, fanciful and
another; and
arbitrary marks enjoy the greatest legal protection. A
be protectable under the laws of the country (or
fanciful mark is a newly coined term which had no
countries) in which the product will be marketed.
meaning prior to its adoption. Arbitrary marks are
existing words used for goods which bear no logical
Marks are categorised on a sliding scale of
relationship to the goods on which the term is used (eg,
distinctiveness, from fanciful and arbitrary marks, which
APPLE for computers). Although choosing a fanciful or
are the most protectable, to suggestive marks, descriptive
arbitrary mark is the safest route to legal protection,
marks and, finally, generic terms, which are not protectable
companies tend to shy away from entirely fanciful or
since they do not function as trademarks. Some examples
arbitrary marks because, at least initially, the mark has no
along this spectrum of protection include the following:
recognisable meaning to the public. Typically, companies
need to engage in extensive advertising campaigns in
order to introduce new arbitrary or fanciful marks.
•
fanciful – KODAK;
•
arbitrary – APPLE (for computers);
•
suggestive – COPPERTONE, WHIRLPOOL;
suggestive one, where a consumer has to make some
•
descriptive
mental leap to determine how the mark relates to the
•
–
ROLLERBLADE,
The next strongest mark in the spectrum is a
WEIGHT
WATCHERS; and
good
generic – aspirin.
COPPERTONE mark does not describe any major aspect
or
service.
For
example,
although
the
of a sun-tan lotion, it suggests the deep skin tone
Generic terms enjoy no legal protection. Companies
achievable
through
using
the
lotion.
Thus,
rarely fall into the trap of choosing a generic term as the
COPPERTONE is considered a suggestive, and thus a
trademark for a new product, although it does happen (eg,
strong, trademark. Suggestive marks are powerful
In re Cell Therapeutics Inc, 67 USPQ2d 1795 (TTAB 2003), in
because they are memorable, create positive associations
which the US Patent and Trademark Office (USPTO) held
with the good or service and can be registered without
the term ‘Cell Therapeutics Inc’ to be generic for use in
proof of the public’s recognition of the mark.
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Kenyon & Kenyon LLP United States
A descriptive mark is one which describes a major
and harmonise generic, non-proprietary drug names
property of the product for which it is used (eg, In re
through
Gyulay, 820 F 2d 1216 (Fed Cir 1987), in which APPLE PIE
classification system based on pharmacological and/or
was held to be descriptive of apple pie-scented pot
chemical relationships. In the United States, the US
pourri). The USPTO refuses to register purely descriptive
Adopted Names Council assigns a US Adopted Name
trademarks as registration would prevent others from
(USAN) to new therapeutic substances to be marketed in
using common words to describe their goods or services.
the United States. Its international counterpart, the
However, descriptive marks can be transformed into
International Non-proprietary Name Committee of the
protectable trademarks in a number of ways, the most
World Health Organisation, assigns an International
common being through marketing and advertising. As a
Non-proprietary Name (INN). Both the INN and the
result of advertising, the public may associate a
USAN designations are deemed generic per se and can be
descriptive mark with a single source, at which point the
used by competitors.
an
application
process
and
a
naming
mark could be considered to have acquired secondary
Obtaining a USAN is required before filing a new
meaning. The descriptive mark can then function as a
drug application with the US Food and Drug
trademark and be registered at the USPTO.
Administration, even if an INN already exists for the
In choosing a new brand name for a pharmaceutical,
drug, and a company will typically apply for a USAN
a company should consider the distinctiveness (or lack
during the Phase I or II clinical trials of the investigative
thereof) of the proposed mark. Whereas generic marks
new drug application process to ensure that the USAN is
cannot be registered or protected, fanciful, arbitrary and
ready for a new drug application. In applying for a
suggestive marks are assumed to be distinctive without
USAN, in addition to proposing a name a company must
proof of public recognition, which can save time in
provide necessary chemical information about the drug
acquiring a registration. Although these concepts need to
and explain the drug’s indications. Upon receipt of a
be considered each time a mark is chosen, there is a
completed USAN application, the council will examine
greater level of analysis involved in developing and
the proposed name for conformity with certain criteria,
branding a new chemical compound.
including:
Considering chemical, generic and trademark names
•
usefulness to healthcare providers;
for new pharmaceuticals
•
patient safety (ie, whether patients will confuse the
In developing a pharmaceutical companies must first
drug with another drug based on the similarity of the
choose valid generic names to designate the new drug.
names);
Unlike consumer products, which usually have one
•
adherence to prescribed nomenclature rules;
name associated with them, a pharmaceutical product
•
absence of conflicts with existing names;
typically has three names associated with it:
•
suitability for international use; and
•
ease of pronunciation.
•
a chemical name (eg, acetylsalicylic acid);
•
a generic name (eg, aspirin); and
•
a trademark or brand name (eg, BAYER).
Once the assigned staff member is satisfied that the
company has met the requisite criteria, the council
submits the name to the INN Expert Group for further
Chemical names
trademark clearance and linguistic evaluation. The group
A company which discovers a new drug cannot simply
screens the name to avoid words harbouring unintended
coin a new generic name for it. Rather, a pharmaceutical
negative connotations in other languages and potential
company must first apply for a chemical name in the
international trademark conflicts. If the group approves
form of a Chemical Abstracts Service (CAS) Registry
the name, the USAN is adopted and is entered into the
number. The CAS number is a unique identifier which
US Pharmacopeia Dictionary of USAN and International
differentiates a chemical compound from a database of
Drug Names and the CAS database.
millions of other compounds, each of which may be
Selecting a USAN is not easy and the guidelines set
out by the council’s Rules for Coining Names, which
designated by other chemical names.
enumerate factors it considers when reviewing an
application, should be followed. For example, whenever
Generic names
a
possible names should use existing USAN stems such as
pharmaceutical company must apply for a generic name
‘-actide’ for synthetic corticotrophins and ‘-bufen’ for
for its new compound. Two organisations standardise
non-steroidal anti-inflammatory agents. Moreover,
After
obtaining
a
CAS
Registry
number,
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United States Kenyon & Kenyon LLP
during the selection process companies should try to
that shipping a drug to a clinical investigator for use in
anticipate and avoid possible trademark issues. For
clinical trials during the Food and Drug Administration
instance, as a USAN is generic, a pharmaceutical
approval process can constitute use in commerce
company should avoid any overlap between the
sufficient to obtain a registration before the USPTO (eg,
proposed brand name and the proposed USAN.
GD Searle & Co v Nutrapharm, Inc, No 98-6890, 1999 US
Otherwise, it could face problems at the USPTO for
Dist LEXIS 16862, 1999 WL 988533 (SDNY Oct 29, 1999).
choosing a generic mark which cannot be protected.
Even without use, however, companies often opt to
In fact, not only will the council consider existing
file applications based on an intention to use the mark
trademarks as grounds for rejecting a proposed USAN,
before they begin actual use of the mark because the
but once a company obtains a USAN, the USPTO can
filing date of an application in the United States can
reject the proposed trademark based on that USAN.
afford the filer priority over a subsequent user of the
Although choosing a USAN usually involves a
same or a similar mark. Therefore, companies are wise to
company’s regulatory or in-house counsel rather than its
file such applications to try to preserve their priority over
IP counsel, ideally the two should work together to
names that they intend to use in the future.
streamline the process.
After the application is filed at the USPTO, an
examining attorney conducts a search of existing federal
Trademark selection
trademark registrations and applications to determine
The final stage in the three-part process is choosing the
whether the mark could be considered confusingly similar
actual trademark name. The name must be chosen with a
to a pre-existing trademark. If the proposed trademark is
eye towards avoiding any confusion not only with
similar to an existing trademark, especially where the
existing trademarks, but also with USANs and common
existing trademark is used in connection with similar
chemical names. Due to the potential health risks
goods or services (eg, they are both used for
involved, the USPTO often requires a lesser degree of
pharmaceutical preparations), the USPTO may refuse
likelihood
registration based on a likelihood of confusion. Although
of
confusion
in
order
to
reject
a
pharmaceutical mark.
the likelihood of confusion is one of the most common
Once a name is chosen and cleared by trademark
reasons for the USPTO’s refusal to register a new mark, the
counsel, the application process for a pharmaceutical
examining attorney can also refuse to register a mark for
trademark is similar to that for consumer goods – it
other reasons (eg, for being merely descriptive or generic).
includes filing the mark application with the USPTO
Once a company overcomes any outstanding refusal
with a description of the goods or services for which the
by the examining attorney, the proposed mark is
mark will be used (eg, “anti-cancer preparations” or
published in the Official Gazette. Any opposition to the
“pharmaceutical preparations for use in chemotherapy”
registration must be filed within 30 days of publication
in International Class 5). The application must also state
by initiating a proceeding before the Trademark Trial and
whether it is based on pre-existing use of the trademark
Appeal Board. If no opposition proceeding is initiated,
in commerce or whether it is simply based on a future,
the USPTO will register the mark provided that the
good-faith intention to use the mark. If the application is
applicant has shown proper use of the mark in
based on an intention to use the mark, the examination
commerce.
may continue, but the USPTO will not grant a
For both pharmaceutical and non-pharmaceutical
registration until the actual use of the trademark in
trademarks, prior to filing the company’s trademark
commerce is proven.
attorney should conduct a search of registered and
The actual use requirement can be quite different for
pending trademarks to anticipate those that the USPTO
a pharmaceutical product compared to an ordinary
may
consumer product because a pharmaceutical cannot be
examination of the trademark application. If the product
commercialised without regulatory approval. Therefore,
is to be marketed worldwide under a single brand name,
whereas use in commerce for a branded training shoe
the trademark owner should also consider a global
means actually selling or offering to sell the shoe in
search, the breadth of which largely depends on the
commerce, typically there is no such similar use for a
owner’s needs and finances. These searches help to avoid
pharmaceutical product which has not yet been brought
potential USPTO refusals and oppositions.
consider
confusingly
similar
during
the
to market. Instead, the courts have typically looked at
For pharmaceutical trademarks, the trademark
what kind of use is normal or customary in the industry
attorney handling the matter should also consider
to which the named product pertains. To that end, with
standard, common and chemical names to avoid
regard to pharmaceuticals the US courts have indicated
problems that might arise before the USPTO. To that end,
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the trademark attorney should consider whether the
trademark rights. For example, in 1976 Canada Packers
proposed brand name is too close to a USAN. For
Inc sought and secured a US federal trademark
example, in 2002 TopoTarget ApS sought to register
registration for CHENO for use in connection with
TOPOTECT for “pharmaceutical preparations for the
“pharmaceutical preparations, namely, bile acid”. Years
treatment of cancer” (Smithkline Beecham PLC v TopoTarget
later, Rowell Laboratories asked the USPTO to cancel the
ApS Corp, Opp No 91157491, 2004 TTAB LEXIS 504
registration, claiming that for a long time the trademark
(TTAB Sept 2 2004)). Smithkline Beecham opposed the
CHENO
registration on the basis that TOPOTECT was a slight
pharmaceutical industry as an abbreviated name for
misspelling or abbreviation of topotecan, which was the
chenodeoxycholic acid (Rowell Laboratories, Inc v Canada
generic USAN name of the applicant’s pharmaceutical
Packers Inc, Cancellation No 12,375, 1982 TTAB LEXIS 68;
product. Smithkline argued that the contemporaneous
215 USPQ 523 (TTAB 1981)). The USAN for the drug was
use of TOPOTECT as a trademark with the generic drug
‘chenodiol’. The Trademark Trial and Appeal Board held
name topotecan “presents a significant threat to public
that the prior abbreviated use of ‘cheno’ to refer to
health and safety and that both the World Health
chenodeoxycholic acid precluded Canada Packers from
Organization and USAN strongly discourage the use of
claiming trademark rights over the term and cancelled
USAN and INN generic terms as trademarks”. Although
the registration.
the Trademark Trial and Appeal Board denied
had
been
Pharmaceutical
used
generically
trademarks
merit
in
the
special
Smithkline’s request to prevent the registration on
considerations. Choosing the trademark and the USAN
summary judgment, TopoTarget ultimately abandoned
simultaneously can help to prevent expensive collisions
its application after a lengthy opposition proceeding.
in the USPTO. Although it is tempting for a
The trademark attorney involved in naming a
pharmaceutical company to draw on the USAN –
pharmaceutical should also consider common chemical
especially if it invented the drug compound and came up
abbreviations for a drug. Even if a pharmaceutical
with its name – the more distance between a new brand
company secures a trademark registration for a new drug
name and the universe of registered trademarks, USANs
product and the USPTO does not consider the similarity
and common chemical names, the fewer potential
of that mark to a USAN to be problematic, claiming any
problems there may be before the USPTO and thereafter.
common chemical name may result in the preclusion of
Dana Kaplan primarily counsels clients on trademark, unfair competition,
copyright and US Customs matters. Her experience encompasses all aspects
of trademark law, including litigation before the USPTO and in the federal
courts. Ms Kaplan holds a JD from George Washington University and a
BA from the University of Michigan. She was named as one of the top
attorneys in the New York metropolitan area by the New York Super
Lawyers – Metro Edition publication.
Dana R Kaplan
Partner, New York
Tel +1 212 908 6119
Kenyon & Kenyon LLP
United States
Michael Freno’s experience covers all areas of intellectual property
including patent, trademark and copyright matters. He has prosecuted
numerous trademarks before the USPTO and litigated patents related to
pharmaceuticals under the Hatch-Waxman Act. Mr Freno holds a JD from
Cornell Law School and a BA from Kenyon College. He has co-authored
numerous articles on trademark and copyright issues.
Michael J Freno
Associate, New York
Tel +1 212 908 6381
Kenyon & Kenyon LLP
United States
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Rachel Teitelbaum and Mark S Cohen
United States
Compliance with the written
description requirement in chemical
and pharmaceutical patents
The written description requirement in the chemical and
In re Barker, 559 F 2d 588 (CCPA 1977), cert denied 434 US
pharmaceutical industries is based on a unique, ever-
1064 (1978); Vas-Cath Inc v Mahurkar, 935 F 2d 1555 (Fed
evolving factual situation necessitating the application of
Cir 1991)).
what would otherwise be a technology-neutral statute. In
The absence of these requirements results in a non-
light of the range of issues presented, drafting,
enabling description of an invention (eg, a chemical
prosecution and enforcement strategies have become
compound or gene for which there is no disclosed or
more complicated, with the courts providing a rather
apparent production method) or an enabling disclosure
ambiguous guide as to what is sufficient. As the Federal
without sufficient description (eg, a specification
Circuit has warned, an issue involving written
describing a method of making and using a paint
description “must be decided on its own facts” and “the
composition made of functionally defined ingredients
precedential value of cases in this area is extremely
within broad ranges would be enabling for formulations
limited” (Noelle v Lederman, 355 F 3d 1343 (Fed Cir 2004)).
falling within the description, but would not describe
Codified requirement
676 (CCPA 1975)).
any specific formulation – see In re Armbruster, 512 F 2d
The ability to make and use an invention based on the
At a minimum, during examination an allegation of
patent’s disclosure necessitates adequate written
inadequate written description must be accompanied by
description – an objective codified in Chapter 35, Section
some explanation which notifies the applicant as to what
112(1) of the US Code, which sets out the minimum
is lacking. Section 2163.04(I) of the Manual of Patent
requirements for the quality and quantity of information
Examining Procedure expressly instructs the examiner to
that must be contained in a patent to justify granting it.
specify which claim limitation is lacking adequate
The written description requirement sets out the
limits of the claimed invention to ensure that:
support in the written description; however, Hyatt v
Dudas (Fed Cir 2007) demonstrates how minimal such
specification may be in order to shift the burden to the
•
•
•
the information is sufficient to teach the public to
applicant. In this case the written description rejection by
make and use the invention (the enablement
the examiner asserted that a claimed combination was
requirement);
inadequately described. After reviewing the rejection, the
the best mode of practising the invention is set out in
Federal Circuit found that the examiner’s focus on
the disclosure; and
“support for linkage” was sufficient to “clearly notif[y
the description is sufficient such that the public can
Hyatt] of what exactly the examiner felt was missing by
ascertain that the applicant was in possession of
way of written description”.
every element claimed in the invention.
Recent case law
While the purpose of the written description
In recent years the courts have revisited the question of
requirement is to state what is needed to fulfil the
which elements are necessary to fulfil the written
enablement criteria, the written description and
description requirement, with particular impact on the
enablement requirements are separate and distinct (see
chemical, pharmaceutical and biotechnology fields. The
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Pearl Cohen Zedek Latzer LLP United States
courts have invalidated numerous patent claims based
subject matter need not be described literally (the litmus
on a lack of adequate written description, raising
test is whether one skilled in the art would understand
questions as to what will be considered enough to fulfil
that the subject matter claimed is described in sufficient
the requirement. The courts have taken a more
detail as to attest to possession), a more stringent
reasonable stance than previously in terms of what
requirement is evolving in case law for descriptions of
constitutes adequate written description, as reflected in
chemical species.
two recent cases: Capon v Eshar (418 F 3d 1349 (Fed Cir
A written description of an invention involving a
2005)) and Boston Sci Scimed Inc v Cordis Corp (392 F Supp
chemical species “requires a precise definition, such as by
2d 676 (D Del 2005)). In both cases the court clearly stated
structure, formula [or] chemical name” of the claimed
that
description
subject matter sufficient to distinguish it from other
requirement need not involve the specific disclosure of
materials (see In re Fiers, 984 F 2d 1171; In re Smythe 480 F
every permutation of an invention, but should be
2d 1376 (CCPA 1973)). Therefore, an absolutely literal
commensurate with knowledge that comprises the state
description is required.
compliance
with
the
written
of the art. While these cases reflect the more formal
US Patent and Trademark Office (USPTO) practice
acknowledgement of the fact that the description should
espouses the principle that, in situations where the
be adequate, in this context possession may take on a
complete structure of an invention is not provided,
new meaning.
examiners should consider factors such as the “partial
With respect to written description, the Federal
Circuit held that:
structure,
physical
and/or
chemical
properties,
functional characteristics alone or coupled with a known
or disclosed correlation between structure and function”,
•
•
•
examples are unnecessary to support the adequacy of
and that “disclosure of any combination of such
a written description;
identifying characteristics that distinguish the claimed
the written description standard may be met even
invention from other materials and would lead one of
where actual reduction to practice is absent; and
skill in the art to the conclusion that the applicant was in
no rule requires that an adequate written description
possession of the claimed species is sufficient”.
of an invention involving a biological macromolecule
must contain a recitation of known structure.
Nonetheless, the courts have raised the bar in regard
to chemical and pharmaceutical inventions. The past few
years have been marked by a more stringent
The first holding is self-evident. As for the second, the
interpretation of the written description requirement
court held that, to the extent that written description
than is specified by the guidelines. Although in Enzo
requires a showing of “possession of the invention”, it is
Biochem Inc v Gen-Probe Inc (285 F 3d 1013 (Fed Cir 2002))
clear that an invention can be complete even where there
the courts stated that not all functional descriptions of
is no actual reduction to practice. Regarding the third
genetic material would fail to meet the written
holding, citing Capon the court held that where accessible
description requirement, in In Re Wallach (378 F 3d 1330
literature sources are clearly provided regarding the
(Fed Cir 2004)) the court rejected claims to a nucleic acid
relevant date, genes and their nucleotide sequences,
for a lack of adequate written description where the
satisfying the written description requirement does not
inventors disclosed a partial protein structure and
require either recitation or incorporation by reference of
characterisation of the protein’s function. In Wallach the
such genes and sequences.
court stated that the fact that the applicants were in
possession of the protein had no bearing on whether they
Standard for determining compliance
were in possession of the protein's amino acid sequence,
In terms of what the courts believe must be addressed in
while in Enzo the materials in question comprised the
a description requirement, the key question is whether
same species (ie, both were DNA). The court rationalised
the description clearly allows persons of ordinary skill in
the decision, stating that an isolated and thus physically
the art to recognise that he or she invented what is
possessed protein does not amount to knowledge of that
claimed (see In re Gosteli, 872 F 2d 1008 (Fed Cir 1989);
protein’s sequence or possession of any of its other
Ralston Purina Co v Far-Mar-Co Inc, 772 F 2d 1570 (Fed Cir
descriptive properties, and disregarding the directive
1985)), with the further qualification that the subject
that the description of an invention must enable any
matter of the claim need not be described literally (ie,
person skilled in the pertinent art or science to make and
using the same terms). However, these guidelines have
use
found unique, if disparate, application in chemical and
experimentation, and not without any experimentation.
pharmaceutical inventions. Although, in general, a
the
invention
without
involving
undue
In Capon the court remanded the case following an
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United States Pearl Cohen Zedek Latzer LLP
appeal to the USPTO Board of Patent Appeals and
claimed method, in addition to an assay which is
Interferences, in which the board had previously decided
purported to detect other compounds possessing the
that the specification of patents of both parties failed to
desired function, the written description and enablement
meet the written description requirement, thereby
requirements were met. Other recent Federal Circuit
dissolving the interference and cancelling the claims. The
decisions agree and reflect the fact-specific nature of the
board held that it could not be known whether all the
enablement and written description analysis. In Falkner v
permutations and combinations covered by the claims
Inglis (448 F 3d 1357 (Fed Cir 2006)) the court affirmed the
would be effective for the intended purpose, and that the
decision of the USPTO Board of Patent Appeals and
claims were too broad because they could include
Interferences denying a motion in an interference
inoperative species. Specifically, the board stated that the
proceeding, finding that a patent application relating to
references to prior art and disclosure of specific examples
vaccines having an inactivating mutation in a viral gene
provided in each party’s specification, in the absence of
satisfied both the written description and enablement
any sequence information within the specification, did
requirements. With respect to enablement, the court held
not provide adequate written descriptive support for the
that, in light of the fact that professional journals
invention. In contrast, the Federal Circuit held that since
published at the time of filing of Inglis’s application had
both parties presented specific examples of the
disclosed the DNA sequence of the poxvirus genome
production of specified chimeric genes, it was not
along with the locations of the essential regions, a person
necessary that every permutation within a generally
of ordinary skill in the art would have possessed such
operable invention be effective in order for an inventor to
knowledge: “[G]iven the ready acccessibility of the
obtain a generic claim, provided that the effect was
journals, the absence of incorporation by reference is not
sufficiently demonstrated to characterise a generic
problematic. Indeed, [a] patent need not teach, and
invention.
preferably omits, what is well known in the art.”
Similarly, in Boston Sci the court clarified that it is not
Similarly, in Invitrogen Corp v Clontech Labs Inc (429
necessary to have a complete, exhaustive description in
F3d 1052 (Fed Cir 2005)) the Federal Circuit affirmed the
order
description
district court’s rulings on enablement and written
requirement. In this case regarding the treatment of
to
comply
with
the
written
description, holding that a patent directed to a
cardiovascular disease with various therapeutic agents,
genetically
Cordis alleged that:
containing claims directed to a point mutation in reverse
modified
reverse
transcriptase
and
transcriptase were enabling, notwithstanding that the
•
Boston Sci’s claimed methods were not enabled;
specification failed to explain how to achieve RNase H
•
the claims to the genus were inappropriate as only a
minus reverse transcriptase with DNA polymerase using
limited number of species were described; and
the point mutation. The court noted that the claims were
only the intended result of the therapeutic agent was
not limited by the method of achieving the mutation,
actually described.
stating that “the enablement requirement is met if the
•
description enables any mode of making and using the
Boston Sci countered that the patent disclosure was
invention”. The court held that the patent teaching
enabling based on expert opinions and the available
regarding the deletion mutation was sufficient as it fully
technology and level of ordinary skill at the time of the
taught a method of making the claimed invention. As for
patent application.
written description, Clontech argued that the district
The court noted that no evidence was presented by
court erred in finding sufficient structure in the DNA
Cordis to prove sufficiently that someone skilled in the
sequence recited in the specification, and that it was
art would be unable to practise the claimed invention
within the knowledge of one of ordinary skill in the art
based on the disclosure. The specification described two
because the patent claims were not limited to sequences
specific
desired
recited in the specification and did not recite DNA or
characteristics for use with the invention, as well as an
protein sequences. The Federal Circuit disagreed. The
assay designed to allow one skilled in the art to
court noted that, in addition to the nucleotide sequence
determine additional substances for use in practising the
contained in the specification, at the time of the invention
invention. The court expressly stated that the fact that
reverse transcriptase genes were known and members of
experimentation using the specified assay may be
the reverse transcriptase gene family shared significant
necessary to practise the invention is not fatal for the
homologies from one species of reverse transcriptase to
enablement requirement, and that since specific
another. The court also recognised that the written
compounds were disclosed that could be used in the
description showed that the invention could be applied
substances
that
possess
the
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to reverse transcriptase genes of other retroviruses, and
for several CaMV 35S promoters at the time the
that the sequence for these other retroviruses was known
invention was made. The court specifically addressed the
in the art at the critical date. The court held that,
level of knowledge available to one skilled in the art,
inasmuch as the shared written description for the
although case law has indicated that written description
patents at issue set out the DNA and amino acid
can be satisfied solely by the fact that the deposit
sequences of a representative embodiment of the claimed
information regarding one of the constructs was
enzyme, and also disclosed test data that the enzyme
incorporated by reference in the application.
produced by the listed sequence had the claimed features
(ie, DNA polymerase activity without RNase H activity),
Conclusion
the written description requirement was satisfied.
Recent cases reflect the courts’ desire to find a more
Similarly, in Monsanto v Scruggs (459 F 3d 1328 (2006))
reasonable, more lenient interpretation of adequate
the Federal Circuit negated the defendant’s allegation
description than has been previously assumed (eg, in
that a patent directed to recombinant plants expressing a
Wallach). Nonetheless, these decisions do not address the
protein sequence of interest off a 35S cauliflower mosaic
narrow view taken by the Federal Circuit regarding what
virus (CaMV) promoter, which promotes herbicide
constitutes possession of a claimed invention. For
resistance, was invalid. The court noted that neither a
example, it appears that while one skilled in the art will
specific DNA sequence nor a biological deposit is
recognise that a particular description regarding a
required to meet a written description requirement if the
characterised protein and partial or even complete amino
biological material is known and readily available to the
acid sequence is sufficient to arrive at the nucleic acid
public – in this case, the promoter sequence was stated to
sequence which encodes the protein without undue
be known to those skilled in the art. The court further
experimentation, the courts may find sufficient technical
noted that those of ordinary skill in the art knew the
description for the nucleic acid sequence with a
DNA sequences of several strains of the CaMV virus, the
concomitant
location of the CaMV promoters and the DNA sequences
irreconcilable finding.
lack
of
possession
Rachel Teitelbaum is a registered patent agent admitted to the US Patent and
Trademark Office. She received her PhD in microbiology and immunology at
the Albert Einstein College of Medicine. Dr Teitelbaum has lectured at various
universities and congresses and has authored a number of articles regarding
aspects of IP protection. She has co-authored more than 12 publications in
the journals Science, PNAS, Nature Medicine, Immunity, the Journal of
Immunology and the Journal of Infectious Diseases.
Rachel Teitelbaum
Head of biotechnology patent group,
New York
Tel +1 646 878 0826
United States
Mark Cohen is chair of the life science practice group. He is a registered US
patent attorney experienced in patent prosecution in the pharmaceutical,
chemical, biological and medical device areas, licensing matters and client
counselling. Mr Cohen holds a JD from the University of Baltimore and was
admitted to the New York State and New Jersey Bar in 1994. He is currently a
contributing editor to the Journal of Biolaw and Business and he lectures on
biotechnology/pharmaceutical patent issues.
Mark S Cohen
Senior partner, New York
Tel +1 646 878 0804
United States
a
somewhat
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Rob Sterne
Ron Laurie
Sterne Kessler Goldstein & Fox PLLC
Inflexion Point Strategy LLC
United States
The recipe for CIPO success
The corporate best practice of assigning all-round
Packard. The founder of SAP read the seminal book
responsibility for maximising shareholder value from
Rembrandts in the Attic: Unlocking the Hidden Value of
investment in intellectual property to a single senior
Patents by Kevin G Rivette and David Kline and heard
executive has gained substantial momentum since
Rivette speak on IP asset optimisation at the World
the start of the new millennium. While the general
Economic Forum, and then began to focus on the
concept of the chief intellectual property officer (CIPO)
company’s intellectual property.
position is now supported in many circles, as yet there
is no consensus as to the precise formula for success.
Ingredient two: reliable performance metrics
The trailblazing initiatives undertaken by CIPOs at
The second essential ingredient for CIPO success
corporate titans such as Hewlett Packard, IBM, SAP and
involves the development of metrics for measuring the
Philips lead to the question of what the key ingredients
success of an integrated corporate IP strategy. Recent
for CIPO success are. This chapter offers some answers
celebrated flame-outs of high-profile CIPOs illustrate the
in the form of 12 essential ingredients.
dangers of over-promising IP returns and an inability to
quantify IP success.
The Hewlett Packard experience has succeeded
Ingredient one: support from board and chief
executive officer
because of the company’s ability to demonstrate
Perhaps the most important ingredient for CIPO success
dramatic increases in IP return. Hewlett Packard claims
is an IP mandate from the board of directors, as well as
that it has seen at least a tenfold increase in IP return
full support and involvement from the chief executive
since its CIPO position was created four years ago. It
officer. The board must enthusiastically embrace the
employs three measures to quantify IP return:
need for a well-articulated, comprehensive corporate IP
strategy that will:
•
the actual revenues obtained from IP licensing –
this includes both front-end licence revenues and
net present value of predicted licence royalty
•
maximise IP value;
•
minimise IP-related risk;
•
provide direction to management on how to
streams;
•
implement the return on IP strategy; and
•
measure
whether
implementation
quantification of the in-kind value obtained from
intellectual property – for example, this could
has
include the lower cost of products and services and
been
expanded business relationships (eg, joint ventures
successful.
or strategic partnerships); and
In turn, management needs to support and
•
the elimination or reduction of IP risk resulting from
implement the IP strategy and make it part of the
exposure to actual or prospective infringement
company’s structure.
claims by competitors, reduced royalty payments
Board mandates and the embracing of intellectual
due to the leverage of the IP portfolio and the ability
property by top management have occurred at
to move into new technology areas and markets
Hewlett Packard and SAP. Hewlett Packard’s board
without facing crippling infringement exposure –
mandated the CIPO position in January 2003 in response
this measure imputes value to such reductions of IP
to the post-merger integration of four IP-intensive
risk which, although sometimes difficult to quantify,
companies over a relatively short period of time: Digital
represent bottom-line (ie, cost savings) rather than
Equipment, Tandem, Compaq and the legacy Hewlett
top-line (ie, revenue generation) value.
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Ingredient three: business unit buy-in
contractual contexts (typically as a mix of the four modes
The third essential ingredient is the ability of the CIPO to
of IP protection – patents, copyrights, trade secrets and
develop buy-in for the IP strategy and implementation
trademarks), the CIPO can optimise the deal in ways that
from the heads of the important profit centres in the
create substantial added value. This IP optimisation is
enterprise. The CIPO must be an adept communicator
critical for obtaining the overall enhanced IP return
and consensus builder, able to identify grounds of shared
mandated by the board.
interests and opportunities. It is critical that such
Staffing plans can be created to process the many
business managers fully understand and support the IP
contracts each year that are typical in many enterprises
strategies being pursued to increase the profitability and
effectively so as to eliminate review bottlenecks and
asset creation of their centres.
reduce transaction costs. Hewlett Packard claims that
In reality, this takes time, patience and an
since the creation of its CIPO position, this IP review has
accumulation of successes that can be leveraged to obtain
been applied to over 5,000 proposed contracts and has
profiles of optimised IP models. This is a continual,
resulted in substantive IP changes in over half of these,
cooperative effort between the CIPO and the managers
which has produced significant benefits in IP returns.
which requires trust, real dialogue, accountability, followthrough and responsiveness. To establish this relationship
Ingredient six: direct access to top management
of trusted adviser to the business units, the CIPO must
Direct access to the chief executive officer or, in very large
possess the right personality traits, domain expertise,
enterprises, to an executive vice president is an essential
managerial skills and the ability to deliver results.
ingredient of CIPO success. The message from the CIPO,
who must constantly address a full spectrum view of
Ingredient four: adequate resources
intellectual property across the enterprise, should not be
A fourth essential ingredient is the resources given to the
filtered by the perspective of other personnel at a similar
CIPO to plan and execute the IP strategic plan. One
level, such as the general counsel (whose primary focus
approach employed successfully at Philips and SAP is to
is risk management) or the chief technology officer
give the CIPO a separate standalone organisation with
(whose primary focus is product development).
assigned people and allocated resources necessary to
The IP dialogue with the chief executive officer is
carry out all aspects of the IP strategy. This requires major
critical both strategically and tactically, and should be
reallocations of personnel and responsibilities in most
frequent and informed. Whether this direct reporting
established enterprises because the various IP functions
structure should be formal or de facto (ie, dotted-line
usually reside in different parts of the organisation, such
reporting) will vary from company to company because
as legal, research and development and finance,
chief executive officers typically already have six to nine
assuming they are being addressed at all.
people reporting directly to them. However, even if the
Many enterprises resist having a separate CIPO
reporting structure is de facto, it is essential for the chief
organisation because of institutional impediments to this
executive officer to engage fully in regular briefings and
change and because the IP function has historically
dialogue with the CIPO in order to master the key IP
resided in the office of the chief legal officer.
issues confronting the enterprise and to oversee the
Alternatively, the CIPO organisation can have
lesser IP issues and corporate processes.
strategic oversight over certain IP professionals or
functions which reside in the office of the general counsel
Ingredient seven: facility with all IP protection modes
or chief technology officer, such as patent protection or IP
The IP domains that most critically affect corporate value
litigation, as is done at Hewlett Packard.
depend on the business model of the enterprise. Usually,
utility patents are most significant in enterprises engaged
Ingredient five: involvement in all IP-related
in, for example, the design or manufacture of industrial
transactions
products, communication services and prescription
A dramatic increase in IP return can occur if the CIPO is
drugs. Trademarks or design patents often dominate in
given review responsibility for the IP aspects of all
business models involving consumer products and
corporate contracts and transactions. This creates the
services, and copyrights are most important for content-
opportunity for intellectual property to become a value
focused enterprises. However, in each business model
driver in every deal, which is often missed using the
the effective mix of the IP modes creates the greatest
conventional approach of having IP review only in
value. The CIPO for each type of business model must
limited circumstances (eg, for licences).
master all of these IP modes and optimally integrate
As intellectual property is usually present in nearly all
them for maximum return.
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Ingredient eight: working knowledge of all relevant
strategic plan. These skills help the CIPO deliver what is
technologies and markets
promised by the IP function and to close opportunities
The technology focus of an enterprise drives its IP return.
that add IP value.
The CIPO must have a working understanding of all
relevant technologies in order to map the intellectual
Ingredient 11: people skills
property to them and to the business model effectively.
The CIPO must be an excellent manager of projects,
Often larger enterprises have a mix of related or disparate
processes and people. The myriad tasks that the CIPO
technologies embedded in their products and services.
must ensure are addressed and properly completed can
In addition, the business landscape of the enterprise
needs to be understood along with the competitive forces
quickly result in failure for an otherwise highly
competent CIPO.
at work and the emerging technology, market and
It is a challenge for a CIPO to be a highly effective IP
industry trends. This requires a deep understanding of
strategist, tactician and evangelist, while at the same time
the technology and business sectors of the enterprise and
being an efficient, effective and trusted manager of the IP
how they interrelate and map to the intellectual property.
function. These critical abilities are often honed in the
As this is key to IP success, some of the most effective
ranks of engineering managers and not in the legal or
CIPOs to date have come from business or technology
deal-making functions.
organisations and not from the legal profession.
Ingredient 12: leadership
Ingredient nine: IP litigation competency
As the CIPO position is new to many enterprises, the
IP litigation poses a significant risk in many contexts and
credibility of the person holding the CIPO position to his
the possibility of an injunction can bring the affected
or her superiors, peers and subordinates is critical. This
activities of an enterprise to a standstill. Although the
requires the CIPO to have the characteristics of a great
CIPO does not need to be a trial attorney to provide
leader in order to be successful.
sufficient oversight of the IP litigation function, a
The CIPO has to be trusted, respected and viewed as
practical, informed understanding of the realities of IP
a team player who looks out for the best interests of the
litigation is vital. IP litigation can often be solved with a
enterprise. The CIPO cannot be viewed as having a
settlement, requiring the CIPO to marry IP litigation
parochial IP agenda that transcends other conflicting
skills with transactional expertise in order to settle a
corporate objectives in a manner that produces a result
difficult case.
skewed in the IP direction, but not in the overall best
interests of the enterprise.
Ingredient 10: deal-making expertise
The CIPO must be a shrewd negotiator and adept at
CIPOs can be found
doing deals. This requires the CIPO to possess skills and
These essential ingredients for CIPO success must be
attributes usually honed in the world of mergers and
taken into account by the board and senior corporate
acquisitions. These skills are usually developed by CIPO
management in the:
candidates that come up through the corporate
development side of the enterprise and not through the
•
creation of the CIPO function in the enterprise;
legal function, although legal training does not
•
selection of the appropriate CIPO candidate; and
necessarily preclude success on the business side and
•
ongoing evaluation of the CIPO and the results
many in-house IP lawyers have migrated to the
obtained by the CIPO’s organisation.
corporate development or strategic planning groups.
However, many excellent IP experts do not possess
The potential for increased shareholder value and
the necessary business skills, background and/or talents
optimal management of the IP assets is great if these
to become effective CIPOs. Practical experience and
essential ingredients for CIPO success can be found in a
natural talent are what really matter in this context. They
single individual. They are few and far between, but they
are also important to the CIPO to assist in building
do exist.
consensus within the organisation and buy-in to the IP
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Sterne Kessler Goldstein & Fox PLLC/Inflexion Point Strategy LLC United States
Robert Greene Sterne has over 28 years’ experience in all aspects of
intellectual property, including strategic planning, protection, licensing and
litigation. He is internationally recognised as an expert on software and
business method patents, having been the lead attorney for IBM in the case
that led to the US Patent and Trademark Office software patent guidelines.
More recently, he served as Supreme Court co-counsel in KSR v Teleflex,
one of the most significant patent cases heard by the court in 40 years.
Robert Greene Sterne
Director
Tel +1 202 772 8555
United States
Ron Laurie is the co-founder and managing director of Inflexion Point Strategy
LLC, an IP investment bank based in Silicon Valley. He represents technology
companies and institutional investors in the acquisition and sale of
patent portfolios with strategic value and in the sourcing and execution of
IP-intensive M&A transactions. Prior to launching Inflexion Point, Mr Laurie
was a partner at a major law firm where he led IP teams in technology deals
worth over $50 billion.
Ron Laurie
Managing director
Tel +1 650 327 6400
United States
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Blair M Jacobs
Sutherland Asbill & Brennan LLP
United States
Analysing the impact of the Supreme
Court’s eBay decision
It has been more than a year since the Supreme Court
sometimes at “exorbitant” rates. In those cases, the
issued its opinion in MercExchange v eBay. In that
Kennedy concurrence observed that “legal damages may
opinion, the court overturned the Federal Circuit’s ruling
well be sufficient to compensate for infringement and an
that once infringement is found in a patent case, the
injunction may not serve the public interest”.
general rule is “that courts will issue permanent
injunctions
against
patent
infringement
absent
exceptional circumstances”.
Kennedy and his concurring colleagues questioned
whether financial damages might not be sufficient for
these types of company: “When the patented invention is
but a small component of the product the companies seek
The eBay decision
to produce and the threat of an injunction is employed
In overturning the Federal Circuit, the Supreme Court
simply for undue leverage in negotiations, legal damages
held that a patent holder seeking a permanent injunction
may well be sufficient to compensate for the
must satisfy a four-factor equitable test that the US courts
infringement and an injunction may not serve the public
have historically applied when considering requests for
interest.” Kennedy also noted the new economic reality
injunctive relief:
of business method patents, with their “potential
vagueness and suspect validity”, as potentially affecting
•
Did the plaintiff suffer irreparable injury?
the outcome of the four-factor test in such cases – that is,
•
Would remedies at law (eg, financial damages)
perhaps injunctive relief should not be granted when the
adequately redress the injury?
underlying patents are on shaky ground.
•
•
Does the balance of hardships favour injunctive
Chief Justice Roberts, in a concurrence joined by two
relief?
other justices, suggested that the courts take a lesson
Would equitable relief serve the public interest?
from the history books. Notably, this lesson points in a
different direction to the Kennedy concurrence. Roberts
As the Supreme Court rejected the Federal Circuit’s
held that although the four-factor test should be applied,
general rule regarding injunctions, the case was vacated
the reason that injunctions are generally granted in
so that the district court could apply the four-factor test.
patent infringement cases is that it makes sense. The
Although the court’s decision was unanimous,
patent laws grant patentees the right to exclude others
concurring opinions reflected a theoretical split between
from practising the invention during the life of the patent
the justices regarding the hypothetical types of patentee
(ie, through infringement suits) and it is difficult to
that might be entitled to injunctions. Justice Thomas
protect that right through a financial award.
observed that patentees who work in university settings
In the months following the Supreme Court’s
often lack the resources to commercialise their inventions
opinion, commentators argued about the potential
and must therefore rely on licensing to realise the value
impact of the opinion on patent injunctions. Most agreed
of their patents. Therefore, such patentees should not be
that it would be up to the district courts to apply the
categorically denied injunctions. Justices Kennedy,
four-factor test on a case-by-case basis.
Stevens, Souter and Breyer concurred in the opinion,
noting that the modern economics of patents have
The application of eBay
changed and that many non-invention practising patent
Cases involving non-competitors
holders use their patents solely for licensing fees,
Since eBay, district court decisions have largely confirmed
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Sutherland Asbill & Brennan LLP United States
that competitors in industry have a significantly greater
court that monetary compensation was adequate. The
chance of obtaining an injunction than non-competitors
court rejected the argument that the existence of a right
(sometimes referred to as patent trolls).
to exclude (a basic right of patent ownership) implied
Prior to the eBay ruling, patent holders enjoyed an
that monetary damages were inadequate to compensate
almost automatic right to injunctive relief upon the
for patent infringement. The court acknowledged the
finding that a valid patent was infringed. In eBay the
possible scenario of a violation of the right to exclude
Supreme Court modified that right by requiring
resulting in damages not compensable by monetary
plaintiffs to demonstrate, through four equitable factors,
award, but found that this was not such a case.
the fairness of an injunction on a case-by-case basis.
Significantly, Davis explained that if z4 were directly
The post-eBay decisions dealing with the injunction
competing with Microsoft in the product activation
issue commenced with z4 Technologies Inc v Microsoft Corp
software market, irreparable harm might exist because
(ED Tex, No 6:06-CV-142, 6/14/06) in the US District
Microsoft might be selling product to potential z4
Court for the Eastern District of Texas. In that case, Judge
customers.
Davis ruled that the principles of equity set forth in the
Analysing the final two equitable factors, the court
four-factor test did not call for an injunction against
concluded that the balance of hardships tilted in favour
Microsoft, notwithstanding a jury finding Microsoft
of Microsoft. The court largely based this finding on the
liable for wilfully infringing z4’s patents relating to
possibility of Microsoft having to redesign and re-release
product activation software. The ruling appeared to
all its Office software products, which are currently
signal a major shift in patent litigation practice as it was
distributed in 450 variations in 37 languages. Its
the first indication of how the eBay ruling could
Windows product currently has 600 variations in more
potentially affect defence strategies in patent litigation.
than 40 languages. The court ruled that the hardship of
The facts of the z4 Case are instructive. In April 2006 a
redesigning these software products outweighed any
Texas jury found that Microsoft and Autodesk had
hardships that z4 would suffer in the absence of an
wilfully infringed two of z4’s patents covering methods
injunction.
for limiting the unauthorised use of computer software.
Finally, Davis’s ruling cited possible harm to the
Both Microsoft and Autodesk use the anti-piracy
public interest if the court were to enjoin Microsoft:
program in some of their products. The jury ordered the
“Microsoft's Windows and Office software products are
two companies to pay z4 $133 million in damages.
likely the most popular software products in the world.
z4 requested that an injunction be entered against
Accordingly, the public interest is likely to be disserved if
Microsoft. In refusing z4’s request, the court applied the
a permanent injunction were entered against Microsoft.”
traditional four-factor test recommended by the High
Applying
the
four
equitable
factors
to
the
Court, concluding that z4 would not suffer irreparable
circumstances presented here, the court concluded that
harm in the absence of a permanent injunction. The court
imposition of a permanent injunction was not
began its analysis by rejecting z4’s argument that a verdict
appropriate. The ruling signalled a change in the US law
of infringement raises a rebuttable presumption of
surrounding injunctions in patent cases. Prior to the eBay
irreparable harm. Instead, the court diligently analysed
ruling, BlackBerry maker Research In Motion failed to
the facts relating to each of the four equitable factors,
persuade a court to stop an injunction based on the
providing a roadmap of possible considerations in future
inconvenience that its millions of users would have faced
hearings relating to questions of injunctive relief.
had the company been enjoined from offering its wireless
Davis ruled that because Microsoft used the
email service.
infringing technology as only a small component of its
Several other district courts have similarly denied
own software, z4 would not lose profits, brand-name
applications for post-eBay permanent injunctions where
recognition or market share as a result of Microsoft’s
the adjudged infringer was not a competitor of the
infringement: "[I]t is not likely that any consumer of
prevailing patentee.
Microsoft’s Windows or Office software purchases these
products for their product activation functionality.” In
Cases involving competitors
justifying the denial of an injunction, Davis also cited
In contrast, the district courts have been much more
Kennedy’s comment in eBay that if a patented invention
willing to enjoin infringing activities where the adjudged
is but a small component of the infringing product,
infringer has directly competed with the party seeking
monetary damages should be sufficient compensation. In
the permanent injunction.
this case, the large damages award (one of the largest
TiVo v Echostar, also from the Eastern District of Texas,
ever in a patent case in this jurisdiction) convinced the
provides a good example. In that case Tivo moved for a
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United States Sutherland Asbill & Brennan LLP
permanent
of
Buffalo opposed CSIRO’s motion by arguing that
infringement, seeking to prevent Echostar from selling its
injunction
following
a
finding
because Buffalo was not a direct competitor, it could not
infringing cable box digital video recorders (DVRs).
prove irreparable harm under the eBay enquiry. Davis
Echostar’s direct competition with TiVo was a crucial
rejected this position and granted the injunctive relief. In
factor in Judge Folsom’s decision to grant the permanent
doing so, Judge Davis first quoted from eBay, which
injunction.
“key
warned against “creating broad classifications”: “[S]ome
consideration in finding that the plaintiff suffers
patent holders, such as university researchers or self-
irreparable harm” was the loss of market share in a
made inventors, might reasonably prefer to licence their
newly established and highly competitive market. The
patents, rather than undertake efforts to secure the
court found it important that DVR consumers were
financing necessary to bring their work to market
“sticky customers” who tended to remain with the
themselves. Such patent holders may be able to satisfy
company from which they first obtained a DVR. As a
the traditional four-factor test, and we see no basis for
result, the injury caused by the infringement resulted in
categorically denying them the opportunity to do so.”
Indeed,
Folsom
stated
that
a
long-term customer loss.
Davis then explained that CSIRO had demonstrated
It is clear from Folsom’s opinion that irreparable
that its harm was not merely financial. Having its patents
injury can be established in highly competitive markets
challenged in litigation not only impugned CSIRO’s
where one competitor successfully demonstrates that
reputation as a leading scientific research entity, but also
another competitor is infringing its patents. Indeed,
forced CSIRO to divert millions of dollars away from
several other district courts have granted permanent
research and into litigation costs. According to Davis,
injunctions post-eBay following a finding of infringement
these lost opportunities cost CSIRO in potentially
and validity in situations where the infringer was a direct
valuable fields that it could otherwise have pursued,
competitor.
thus leading to irreparable harm.
For a short time it appeared that the rules regarding
This reasoning was significant because it gave hope to
injunctions were becoming clear. However, a recent case,
non-patent
again from the Eastern District of Texas, raises new
organisations, which often conduct business in a manner
questions. The Commonwealth Scientific and Industrial
similar to CSIRO. Davis’ opinion restored to universities
Research Organisation (CSIRO), which is Australia’s
and research organisations much of the bargaining
primary governmental research group, holds and
power that many thought had been taken away by the
licenses hundreds of US patents in many different fields,
eBay ruling.
practising
universities
and
research
including wireless networking. CSIRO does not
manufacture products, so its function is purely research,
Unclear future
testing and licensing.
The law relating to patent injunctions is still developing.
CSIRO obtained a patent relating to a process it had
For example, the ruling in the CSIRO Case is too narrow
created that corrected a major technical defect that had
to result in an injunction for non-practising licensing
hindered efforts to develop wireless technology. CSIRO
organisations or for venture capital groups that acquire
actively licensed its technology, which became a core part
and enforce patents. The ‘diversion of resources’
of 802.11a and 802.11g wireless standards. Both
argument accepted by Davis is unlikely to apply to
standards remain popular today.
organisations that cannot demonstrate substantial
CSIRO sought to enforce its patent against a number
ongoing research activities.
of major companies in the wireless networking field,
Nevertheless, there are potential arguments that have
including Belkin, Dell, Apple, Microsoft, Intel, Netgear,
yet to be considered by the courts relating to irreparable
Hewlett-Packard and D-Link. Buffalo Technologies Inc
injury suffered by individual inventors whose patents
manufactures wireless network products, including
are infringed. For example, evidence that others in an
routers, antennas and adaptors that use the 802.11a and
industry may refuse reasonable offers of a licence and
802.11g standards. Buffalo’s products are sold to a variety
continue to infringe a valid patent may be enough, in
of distributors and at retail outlet stores.
certain circumstances, to demonstrate irreparable harm.
In 2006 CSIRO sued Buffalo in the Eastern District of
The law relating to injunctions in patent cases will
Texas, alleging infringement of its patent. In November
undoubtedly continue to evolve as new factual scenarios
2006 Davis found the patent infringed by Buffalo invalid.
and new arguments are presented by creative patent
CSIRO subsequently moved for a permanent injunction.
holders.
Given CSIRO’s business model, many were dubious of
its chances.
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Sutherland Asbill & Brennan LLP United States
Blair Jacobs focuses his practice on IP litigation. He has achieved favourable
results for both plaintiffs and defendants in patent infringement, trade secret,
trademark, copyright and other commercial disputes. Mr Jacobs represents
clients in a variety of technical areas, including fibre-optic telecommunications
equipment, photolithographic equipment for imaging semi-conductor devices,
internet technologies, iris recognition security devices, computer hardware
and software, medical devices and pharmaceutical drugs. He graduated from
the University of Richmond School of Law.
Blair M Jacobs
Partner, Washington DC
Tel +1 202 383 0773
United States
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Law & litigation
Latin America &
the Caribbean
29/11/07
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Ricardo Richelet III
Richelet & Richelet
Argentina
Border measures: registration of
trademark rights with Customs
In the last three years the Argentine Customs Authority
2000. The TRIPs Agreement imposes minimum
has taken major steps to combat the growing problem of
standards of IP protection on its members. Regarding the
counterfeiting and its legal and fiscal consequences,
issue of counterfeiting, the agreement lays down basic
including the violation of IP rights and tax evasion.
border measures with which members should comply in
The government has passed certain regulations in
order to protect IP rights holders and consumers from
order to prevent the entry of counterfeit merchandise
onto the market.
such illicit trade and to attempt to limit the increasing
Therefore, in order to comply with the TRIPs
problem of tax evasion, thus taking the issue of
Agreement, Argentina has had to adapt its domestic
counterfeiting far more seriously than previously.
legislation and implement measures to establish the
minimum standards set out by the agreement. However,
Antecedents
the lack of specific customs regulations for IP protection
Before the passing of the new regulations, Customs relied
made it very difficult for Customs to prosecute
on the Customs Code to deal with imported and
infringements and for rights holders to prevent the entry
exported goods bearing actual or suspected counterfeit
of merchandise that infringed their exclusive IP rights.
trademarks. For many years the code appeared
The situation began to change in 2004 with the
inadequate for this purpose and the presence of
passing of Law 25,986 which, as part of the anti-tax
counterfeit products on the local market increased.
evasion rules, introduced modifications to the Customs
The code did not specifically prohibit the import or
Code in order to comply with the TRIPs Agreement
export of products that infringed IP rights (eg, patents,
standards and to close loopholes in the domestic
trademarks and copyrights). In order to prevent infringing
legislation.
goods from entering the country, the rights holder had to
apply to the courts for a precautionary measure under the
Regulations
corresponding IP legislation. The patent, trademark and
Article 46 of Law 25,986 expressly prohibits imports or
copyright laws set out provisions to penalise the
exports which, after a simple check, are found to
unauthorised use of IP rights. However, this solution was
comprise:
little used since, in order to apply for such precautionary
measures, the rights holder needed to know:
•
the origin of the merchandise;
•
the approximate date of its arrival into the country;
and
•
•
fake goods bearing a third party’s trademark(s);
•
pirated copies of products protected by IP rights; or
•
goods that otherwise infringe IP rights.
In cases where infringement is only suspected, Article
the importer’s name and the means of transportation
46 provides that Customs may suspend the delivery of
of the allegedly infringing goods.
the goods to the market for a period of seven working
days, during which time the IP rights holder may, upon
In 1994 Argentina signed up to the World Trade
notification by Customs, request appropriate judicial
Organisation Agreement on Trade-Related Aspects of
precautionary measures. However, Law 25,986 provided
Intellectual Property Rights (TRIPs), although the
that this provision would enter into force through a
agreement did not come into force in Argentina until
further regulation, which has never been issued.
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Richelet & Richelet Argentina
Customs understood the law to be directly effective
with more than one importer, licensee or distributor,
and held that the passing of the regulation was
each can register separately or the rights holder can
unnecessary in order for the law to apply. Thus, Customs
indicate the designated people by filing a writ with
ordered the application of Article 46 to all its offices,
because the fact that no regulation had been passed did
Customs;
•
the local Internal Revenue Service (IRS) identification
not constitute a legal impediment to the adoption of
code. If the trademark owner is a foreign person or
measures to guarantee the application of the law. This
entity without a local IRS code, but wishes to be
action has been accepted by the Supreme Court in
alerted of possible infringing imports into Argentina,
various cases. Customs’ decision was welcomed by
its designated agent can register the IP rights in the
practitioners and rights holders and constituted the first
Warning Register and use its own IRS code for that
step towards a series of complementary regulations
which came into force during 2006 and 2007.
purpose;
•
the trademark owner’s actual and legal domiciles in
As a result of this decision, several customs offices
Argentina. If the trademark owner does not have a
began to notify rights holders of the detention of
domicile in Argentina, its designated agent may use
suspected counterfeit merchandise. Several actions were
successful and a large number of goods were destroyed
its own domicile;
•
or sent back to the port of origin.
relevant information about the marks to be monitored
(including copies of the trademark certificates);
On October 10 2006 Customs created a new internal
•
relevant information about the goods protected by
division, the Trademark Fraud Division, whose role is to
the marks – one entry is required for each type of
verify commercial imports and exports that may violate
good
IP rights and notify the rights holders of such violations.
Harmonised Commodity Description and Coding
When faced with a potential infringement, the division
System; and
requests the relevant IP rights information from the
•
according
to
its
classification
in
the
the usual arrival ports (where possible).
Patent and Trademark Office.
If relevant, catalogues, brochures and/or samples of
Warning Register
authentic goods should also be filed with Customs in
In order to confront the issue of counterfeiting, Customs
order
has created further mechanisms to enhance its control
Furthermore, if the authentic goods bear a specific
over the entry of counterfeit merchandise and facilitate
characteristic, this should be included in the register. If
communications with rights holders. Thus, on February
the mark comprises only a figure or logo, this should be
20 2007 Customs issued Resolution 2216/2007.
included in the register in its respective colour or
Resolution 2216/2007 created the Warning Register to
to
facilitate
the
verification
procedure.
combination of colours.
deal with the technical and operational aspects of the
control of trademark fraud and counterfeit goods.
Procedure
Trademark and copyright owners can now register
All imports that declare a registered trademark in the bill
their exclusive rights with Customs through the Warning
of lading will be held at the border for three days from
Register. This is designed to facilitate dialogue and the
the date on which the import is officially registered by
flow of information between Customs and IP rights
Customs. During this three-day period Customs shall
holders, as well as helping to identify counterfeit
notify the rights holder or the registrant named in the
merchandise.
Warning Register (ie, the rights holder’s local
Registration on the register is not mandatory,
representative, licensee or designated agent) of the
although it is highly recommended, particularly for IP
situation and invite it to physically check the detained
rights holders which trade with Argentina.
merchandise in the presence of Customs officials in order
A registration is valid for two years and can be
renewed for further two-year periods by written request
of the registrant.
A
registration
to determine the authenticity of the goods.
If infringement is confirmed, the rights holder is free
to initiate the corresponding administrative and/or
must
include
the
following
information:
judicial actions.
The Warning Register has been operative since April
3 2007. To date, few registrations have been declared
•
the full name or designation of the trademark owner,
because of the novelty of the register and the precise
the authorised importer, the licensee and/or the
information it requires. However, a large number of
authorised distributor. If the trademark owner deals
applications are pending.
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Argentina Richelet & Richelet
Nonetheless, Customs has already begun to notify
goods will be placed on the market so that the relevant
rights holders or their designated agents of suspicious
customs authority and the rights holder can approve the
imports and exports. It verifies the trademark owner or
use of the trademark.
(if the trademark owner is foreign) the designated agent
Sometimes infringement is detected due not to the
and requests that within the three-day period the owner
poor quality of the goods, but rather to the low price of
or agent determine whether the goods are authentic and
the imported or exported goods. Once Customs has
then continues with an infringement procedure if
approved the bill of lading, it will verify the declared free
necessary. However, Customs has strongly advised
on board price against the usual price of the same goods
rights holders to proceed with registration of their IP
on the market. If the price difference is suspicious,
rights in the Warning Register since at present it has no
Customs will detain the merchandise and notify the
way of knowing whether the importer is connected to the
rights holder in order to determine whether the goods
rights holder. If the licensee, distributor and/or official
are authentic and/or are authorised for import or export.
representative is registered or listed in the rights holder’s
Thus, in addition to preventing the import and export of
entry, Customs need not waste time in notifying the
counterfeit goods, Customs is also working to fight tax
rights holder, but can instead authorise the delivery of
evasion, which is common in counterfeit goods
the goods to the market as there is evidence of an existing
operations.
relationship between the parties.
Although the resolution permits the registration of
Moreover, it is sometimes difficult for a trademark
copyright, in the first phase of its application only
agent to determine the authenticity of the detained
trademark owners and trademark registrations can be
merchandise. Therefore, Customs allows the designated
registered. The next stage is expected to allow rights
agent or trademark agent of the rights holder to take
holders to register copyrights, patents, utility models and
photos of the detained goods to send to the rights holder
industrial designs. However, a project of law has been
so it can determine the authenticity of the goods. In such
filed with the Senate which would exclude patent rights
cases, if the goods are fake, the rights holder must give
from Customs registration, although this has not yet been
written reasons as to why this is so.
approved as law.
Many cases have been dealt with in this way and a
large number of goods of all kinds have been destroyed
Conclusion
or returned to the port of origin. Most of the infringing
The measures established by Customs are a good tool to
goods detained at Customs were manufactured in China.
protect the exclusive IP rights of rights holders and
However, in light of the verifications that have
prevent the entry of counterfeit merchandise onto the
already been processed, Customs has ascertained that a
market. For many years trademark practitioners and
number of importers do not declare the trademark borne
rights holders have been requesting such border
by the goods in the bill of lading when the import is
enforcement measures. The process gives Customs and
officially registered. Customs therefore issued External
rights holders the opportunity to interact with each other
Note 21/2007, which establishes that if the importer
with the sole aim of protecting licit commerce. The
declares that the goods bear no trademark, it must
measures have been proven to work; it is hoped that they
inform Customs as to whether the goods will be sold
will continue to do so, and that cooperation between
commercially with no trademark or whether the
interested parties will become more fluent and effective
trademark will be affixed before they are sold, in which
in order to win the battle against counterfeiting and tax
case the importer must inform the country where the
evasion.
Ricardo Richelet III graduated from the Law School of the Argentine Catholic
University in 1999 and obtained an LLM in intellectual property from Franklin
Pierce Law Centre in the United States. He has been a partner in the firm
since 2004. He heads the internet and domain names and precautionary
measures departments, and is involved in trademark, patent and design
prosecution and litigation. He speaks Spanish, English and French.
Ricardo Richelet III
Partner
Tel +54 11 4313 0184
Richelet & Richelet
Argentina
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Flavio Arosemena Burbano and Nadia Molina Camacho
Ecuador
Four key steps towards building
a strong IP portfolio
Ecuador offers IP owners a user-friendly system for IP
example, certain types of IP asset may be unenforceable
protection. The country has established a modern IP legal
in Ecuador even though they are protected abroad.
framework and is a party to major international treaties
Prohibitions in regard to the registration of trademarks
dealing with intellectual property, including:
and service marks include a prohibition against
registration of a shape that provides a technical
•
the Berne Convention;
advantage to the product or of a colour where there is no
•
the Paris Convention; and
proof of strong, acquired distinctiveness. In addition, in
•
the World Trade Organisation Agreement on Trade-
regard to patents, Ecuador does not follow the policy
Related Aspects of Intellectual Property Rights.
espoused by other countries (eg, the United States) that
anything is potentially patentable; instead, the national
In addition, Ecuador is a member of the Andean
Community – other members include Bolivia, Chile,
legislation expressly excludes patentability in certain
cases, including:
Colombia and Peru. The Andean Community has
established some of the most effective IP legislation in
•
scientific discoveries;
the region, namely:
•
elements already found in nature; and
•
business methods.
•
Decision 486, which deals with trademarks, service
marks, slogans, patents, trade names, trade secrets,
•
With regard to copyrights (authors’ rights), Ecuador’s
trade dress and industrial designs; and
IP legislation does not provide for the granting of
Decision 351, which deals with authors’ rights and
obligatory or compulsory licences and corporations are
derivative rights.
not considered to be authors for legal purposes.
However, a corporation may own the economic IP rights
Finally, the Ecuadorian Institute of Intellectual
in a protected work, and Ecuador’s IP legislation offers
Property (IEPI) is one of the best public institutions in the
various advantages for the owner of these rights. There is
country. As always, there is still room for improvement
no doctrine of fair use and the law expressly sets out the
and the recently appointed IEPI administrator has
rare cases in which no licence or authorisation for use is
promised to focus on professionalism and ethics.
required. Any other use must be authorised by the owner
This chapter sets out a four-step strategy for IP
of the economic IP rights. Moral rights are highly
owners to follow in order to ensure that they have a
developed and are granted for all types of original work
legally sound IP portfolio in Ecuador.
– not only traditional art, but also software, music, films,
videos and books. In addition, there are as many
Step one: identify the validity and enforceability of IP
economic rights over protected works as there are
rights
commercial
In Ecuador, IP assets can acquire strong legal
advantage over more restrictive systems of protection in
enforceability and thus be of great value to their owners.
which the economic rights of IP owners are exhaustive.
uses,
something
that
represents
an
However, in order to achieve such status IP owners
In general, Ecuador’s legal framework can be used
should consult a local IP specialist to ensure that they are
effectively in order to establish a solid IP portfolio – all
aware of the various ‘red-flag’ issues involved. For
that IP rights owners need is the right advice in order
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Ecuador Arosemena Burbano & Asociados (AB&A)
Table 1
Type of intellectual property
Is registration necessary for protection?
Software
No
Musical works
No
Sound recordings
No
Books
No
Architectural designs
No
Photographs
No
Films/videos
No
Trade secrets
No
Trade names
No
Trade dress
No
Trademarks
Yes
Service marks
Yes
Slogans
Yes
Patents
Yes
Industrial designs
Yes
to take advantage of the benefits of the system and to
avoid the traps into which inexperienced IP owners may
Valuation methods for IP assets take account of
various factors, including:
fall.
•
development and protection costs;
Step two: register the IP rights at the IEPI
•
future revenue;
Ecuador’s system of IP protection does not require that
•
market share;
every IP right be registered at the IEPI. Copyrighted
•
goodwill;
works, which in Ecuador are protected as authors’ rights
•
fame; and
under Andean Community Decision 351, are legally
•
distinctiveness.
protected as soon as they come into existence, and no
formal registration (or even material fixation) is needed
It is important that the valuation report bears the
in order to enforce those rights. However, in such cases
name and signature of the firm that carried out the
registration is still useful as it constitutes proof of
valuation to prove its validity. It is also important that the
ownership, which may be of use to IP rights holders at a
IP rights owner obtains a local valuation, using local
later date. Nevertheless, as registration is not required in
parameters and local studies. Ecuador uses the US dollar
order to protect copyright, IP owners should concentrate
as its currency and thus valuation reports can have a rare
first on registering those assets that do require
longevity for the region. However, to ensure accuracy, IP
registration in order to be protected and enforced. Table
owners should obtain a new valuation of their main IP
1 sets out the registration requirements for the different
assets each year.
types of IP right in order to help IP rights holders to
prioritise the registration of their IP rights at the IEPI.
Step four: appoint a legal manager for the Ecuadorian
IP portfolio
Step three: obtain a local valuation of IP rights
IP rights are usually among the most valuable of a
At present, Ecuadorian Corporations Law allows IP
company’s assets. As a result, when dealing with an IP
rights to be included on the balance sheet of a company
portfolio – particularly in a foreign country – it is vital to
and in its general accounts, effectively making IP rights
appoint an IP attorney who will ensure that the
sources of economic value and revenue for companies. In
company’s IP rights are:
order to do this, the company must obtain a professional
valuation of the IP right that it wishes to include on its
•
protected effectively;
balance sheet and then submit the valuation to the
•
respected by third parties; and
shareholders for approval.
•
in compliance with local law.
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Arosemena Burbano & Asociados (AB&A) Ecuador
Appointing a local IP attorney to manage the IP
Comment
portfolio can also be of great help when granting licences
Although Ecuador is in the process of amending its
to third parties which are interested in using a protected
Constitution and the agenda of its new left-wing
IP right. Such licences can be a useful additional source
government is still unclear, there is little room for nasty
of revenue for IP owners. Typical IP assets that can
surprises in the IP field. The country not only has strong
be licensed include software, musical works and
national IP legislation, but is also a party to various
trade secrets (eg, know-how). In addition, licences need
multilateral and regional IP treaties. All these factors
to be registered at the IEPI in order to have full
combine to mean that investing in IP rights in Ecuador is
legal effect.
far less risky than some other forms of investment.
Flavio Arosemena Burbano graduated magna cum laude from the Catholic
University of Santiago of Guayaquil. He also holds an LLM from Georgetown
University, Washington DC. Mr Arosemena has worked in the legal department
of US newspaper The Washington Post and as an international legal specialist
at a major New York firm. He is president of the Association of IP Experts of
the Catholic University of Santiago of Guayaquil and a former regional director
of the IEPI. Mr Arosemena recently joined the faculty of the Catholic University
of Guayaquil as a professor of legislation and authors’ rights and franchises
and licences.
Flavio Arosemena Burbano
Managing partner
Tel +59 34 256 0255
Arosemena Burbano & Asociados
(AB&A)
Ecuador
Nadia Molina Camacho received her degree in law from the Catholic University
of Santiago of Guayaquil. She also holds a postgraduate degree in business
administration from the University of Belgrano, Buenos Aires. Ms Molina has
worked as a legal consultant for the organisation established by the municipality
of Guayaquil to manage the new international airport and in the IP department
of another major Ecuador law firm. Ms Molina recently joined the faculty of the
Catholic University of Guayaquil as a professor of commercial negotiation.
Nadia Molina Camacho
Partner
Tel +59 34 256 0255
Arosemena Burbano & Asociados
(AB&A)
Ecuador
29/11/07
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Page 96
Dianne Daley and Nicole Foga
Foga Daley & Co
Jamaica
Trademark owners draw the battle lines
Against a backdrop of increasing awareness of the value
‘decaf’ and over 1 million for ‘decaf coffee’.
of intellectual property and a modern framework for
In response to the opposition, the applicant claimed
protecting trademarks and service marks in Jamaica,
that DECAF was a trademark capable of distinguishing
local and foreign proprietors are drawing the battle lines
the applicant’s goods from those of other undertakings.
to preserve their key trademark assets.
It also claimed that it was not a word current in the
The past few months have witnessed an unprecedented
English language or a generic word. The applicant relied
number of trademark challenges and claims before the
on prior registrations of DECAF in other countries as
registrar of industrial property of the Jamaica Intellectual
grounds for its registrability in Jamaica. The applicant
Property Office (JIPO) and the Supreme Court of
also challenged the right of the opponents to oppose the
Judicature of Jamaica as the struggle between competitors
application based on the fact that none were the
to uphold their respective rights intensifies.
registered proprietors of any trademarks in Jamaica
containing the word ‘decaf’.
Row brews over decaf
Just over one year after JIPO’s first joint opposition
In 2004 an application by Société Des Produits Nestlé SA
hearing on July 12 2006, the registrar ruled in favour of
to register ‘decaf’ as a trademark in respect of coffee,
the opponents’ application to disqualify the mark from
coffee extracts, coffee substitutes and extracts of coffee
registration under the act.
substitutes was opposed by Jamaica’s Coffee Industry
Board and coffee retail giant Starbucks Corporation.
The registrar held that the evidence demonstrated
that the word ‘decaf’ is current and customary in the
The grounds for opposition were that the mark did
English language, and is a colloquial and industrial term
not satisfy the definition of a ‘trademark’ under the
used to describe decaffeinated coffee – even substantial
Trademarks Act 1999 since:
use of a common word such as ‘decaf’ cannot make that
word a trademark. Moreover, the registrar held that
•
‘decaf’ was a generic word for decaffeinated coffee;
evidence of registration of the mark DECAF in other
•
it was devoid of any distinctive character; and/or
countries was insufficient to prove that the mark was
•
it had become customary in the language and
distinctive, either in Jamaica or at all.
established practices of the trade as a reference to
decaffeinated coffee.
The registrar also held that the term ‘decaf’ was
incapable of distinguishing the goods of one undertaking
from those of another, as it is devoid of distinctive
The opponents relied on statutory declarations and
character, and that in the circumstances the word should
other evidence in support of their opposition.
be available for use by all producers of coffee and coffee
Declarations from coffee authorities in several countries
products.
attested to the fact that ‘decaf’ is a word used in the
In rejecting the applicant’s challenge of the standing
coffee trade to designate a type of coffee, while
of the opponents, the registrar ruled that the act
declarations from Jamaican consumers showed that the
expressly provides that any person may oppose the
word ‘decaf’ had become customary in the current
registration of a mark within the prescribed timeframe
language in Jamaica and in bona fide and established
and manner; thus, the registrar took a broad view with
trade practices as referring to decaffeinated coffee. In
respect to those who have standing to commence
addition to using dictionary entries defining the word
opposition proceedings.
‘decaf’ as decaffeinated coffee, the popular search engine
Google was relied on to find over 2 million results for
As the decision of the registrar can be appealed to the
courts, only time will tell who will have the last word.
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Foga Daley & Co Jamaica
It’s just plain counter flour
associated with, those of the opponent, causing
National Flour Mills was successful in its invalidation
confusion in the marketplace. The opponent sought to
proceedings against the trademark COUNTER which
rely on its use and registrations of the mark CALVERT
was registered in 1998 by Jamaica Flour Mills Limited in
internationally. In addition, it argued that the trademark
respect of flour and related goods.
would be viewed as a family name in Jamaica rather than
Asserting that ‘counter’ is a generic word for a type of
as a trademark.
flour and is therefore devoid of any distinctive character,
Focusing on the fact that the opponent had not used
National Flour Mills argued that the mark was incapable
or registered the mark in Jamaica, the applicant
of distinguishing the goods of the registered proprietor
successfully submitted that the opponent had acquired
from those of other undertakings.
no goodwill or reputation in Jamaica and that there could
Providing evidence of the word’s generic nature in
be no basis for confusion on account of the applicant’s
connection with flour, National Flour Mills also argued
use of the mark in the Jamaican marketplace. The
that ‘counter’ serves in the flour trade to designate a type
applicant also challenged the right of the opponent to
of flour and is a customary term in the Jamaican
oppose the application based on the fact that it was not
language, referring to flour that is inexpensive and
the registered proprietor of the trademark in Jamaica.
unbranded. An entry from the Dictionary of Jamaican
The registrar ruled in favour of the applicant on a
English which defined ‘counter flour’ as “a cheap grade
number of grounds, including the fact that the opponent
of flour sold in bulk over the counters of shops”, as well
had not established sufficient evidence that it had any
as a schedule of the Jamaican General Consumption Tax
goodwill or reputation in relation to the mark in Jamaica
Act listing counter flour as a non-taxable food item,
or that it had extensively used the mark in Jamaica, and
appeared to be enough to convince the registrar that the
thus could not support an action in passing off.
word ‘counter’ could not denote the source of origin to
Moreover, CALVERT was distinctive and was viewed as
Jamaican flour consumers.
an indicator of source rather than a mere family name in
The registrar, in ruling that the registration was
invalid, noted that Jamaica Flour Mills had tendered no
Jamaica, and therefore constituted a trademark.
The
applicant’s
registration
was
determined
evidence to show that the mark COUNTER had acquired
according to the former Trademarks Act 1957, as the
distinctiveness prior to applying for registration in 1998,
application was filed before the Trademarks Act 1999
and that the sources clearly established that the mark was
came into force. Consequently, the applicant’s challenge
being used as a customary term in connection with flour.
of the standing of the opponent to bring the opposition
Jamaica Flour Mills had argued that the definition
proceedings was upheld, as under the 1957 act a person
outlined in a 1980s edition of the Dictionary of Jamaican
without a registered trademark was barred from
English could not be relied on to establish the vernacular
bringing such an action.
in Jamaica at the time when it registered the trademark,
as it captured the Jamaican vernacular only at a certain
A lot of Hype over nothing?
point in time long before the application. However, in the
In June 2007 cable content provider Hype TV Jamaica Ltd
face of further evidence of the consistently descriptive
created a stir over an energy drink called Hype Energy
use of the term ‘counter’ in connection with flour, that
when it applied for search and seizure and freezing
argument fell flat.
orders to stop a local distributor from importing, selling
and distributing Hype Energy drinks in Jamaica.
Blowing smoke
Claiming against the distributor for passing off and
Cigarette manufacturer Compania Industrial De Tobacos
trademark infringement, Hype TV, which owns the
Monte Paz SA failed in its opposition of an application to
registered trademark HYPE ENERGY in Jamaica,
register the trademark CALVERT, despite its use and
succeeded in obtaining interim search and seizure and
registration of the trademark in a number of foreign
freezing orders, but the matter is far from over.
countries. Although the opponent did not hold a
Two years prior to the claim, Hype TV began
Jamaican trademark registration, it had sought to bar
distributing the drinks in Jamaica under an exclusive
British American (Tobacco) Brands Limited from
distribution agreement with foreign manufacturer HMM
registering the trademark in Jamaica.
International Limited. The principals of Hype TV applied
The application was opposed on the basis that the
to register the HYPE ENERGY trademark in Jamaica in
applicant’s use of the trademark constituted the tort of
their individual names in circumstances now disputed
passing off and was likely to deceive the public into
by HMM.
believing that the applicant’s goods were, or were
Problems arose when the manufacturing company
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Jamaica Foga Daley & Co
entered into a subsequent agreement with another local
popular Grace Thrillers group and were unduly profiting
distributor, which proceeded to distribute the HYPE
from its reputation and goodwill.
ENERGY drinks in Jamaica. The Hype TV principals
In their defence, the former members contended that
sought to have the imported drinks detained by the
they were the owners of the goodwill in the GRACE
Jamaican Customs Department, which triggered a claim
THRILLERS mark or, alternatively, that they collectively
by HMM against the principals alleging that they had
shared ownership of the goodwill with the management
registered the HYPE ENERGY trademark in bad faith.
company. One of the singers counterclaimed for an
HMM also sought to restrain them from any further use
injunction to restrain the management company from
of or dealings with the trademark, and requested that the
using the words ‘grace thrillers’ in relation to any singing
registered trademark be transferred to the company.
group that it promotes or manages. The former members
In addition to contesting HMM’s claim on the basis
also filed an application to strike out the management
that they jointly own a number of registered trademarks
company’s claim on the basis that it disclosed no
comprising the word ‘hype’, the principals fought back
substantive or reasonable cause of action.
with their own claim against the local distributor for
After hearing the interim applications from both
passing off, trademark infringement and the search and
sides, on June 30 2007 a judge sitting in chambers
seizure and freezing orders.
dismissed the applications and stated that the interest of
The substantive claim by the principals is also being
justice required that the status quo be maintained. The
contested by the local distributor and HMM; thus, until
judge stated that all parties should be entitled to use their
the matters are fully heard by the courts, it is not known
respective registered trademarks and should seek to
whether the hype will fizzle out.
identify and differentiate themselves clearly at all times.
On dismissing the management company’s application
Taming the Thrillers
for the injunction against the former members, costs were
In early 2007 the management company of popular
awarded to the former members and the management
Jamaican gospel group The Grace Thrillers brought an
company was granted leave to appeal.
action for passing off in relation to the group’s name
The judge’s ruling was influenced by the fact that
against some former members of the group. It also
shortly before the hearing of the application for the
applied for an interlocutory injunction to prevent them
injunction, the management company became the
from using the name ‘The Grace Thrillers’, ‘Thrillers’ or
registered
any close derivatives thereof until the determination of
THRILLERS, for which it had applied prior to initiating
the passing-off action.
the action.
proprietor
of
the
trademark
GRACE
The former members had formed their own gospel
The parties are awaiting a date for the hearing of the
group under the name ‘Thrillers United’ and became the
substantive action of passing off, which could turn on the
registered proprietors of the trademark THRILLERS
question of ownership of the goodwill.
UNITED before the claim was filed. However, they had
allegedly used the name ‘The Grace Thrillers’ in
Not over yet
association with some of their earlier shows. Subsequent
A number of the registrar’s rulings in trademark
to the singers leaving the group, the company continued
opposition and invalidation proceedings are still subject
to operate the original Grace Thrillers group.
to appeal to the courts. Further, the Supreme Court
In the action filed with the Supreme Court the
rulings referred to above relate to interim matters only,
management company claimed ownership of the then
with substantive issues still to be determined by the
unregistered mark GRACE THRILLERS and the
courts. Therefore, given the growing vigilance of some
goodwill therein. It also claimed that the former singers,
trademark proprietors, incited by the increasing value of
by performing under that name or any close derivatives,
their trademarks to their IP portfolios, the war may be far
were misleading the public to believe that they were the
from over.
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Foga Daley & Co Jamaica
Dianne Daley is the IP partner of Foga Daley & Co. She is a member of the
International Association for the Advancement of Teaching and Research in
Intellectual Property, acting chairperson of the Jamaica Intellectual Property
Office Advisory Board and secretary of the Jamaican Copyright Licensing
Agency. She lectures in IP law at the University of the West Indies (UWI) and
holds an LLM from McGill University and an LLB from the UWI.
Dianne Daley
Partner
Tel +876 927 4371
Foga Daley & Co
Jamaica
Nicole Foga is the managing partner of Foga Daley & Co. Her practice areas
include telecommunications, information technology and intellectual property.
She holds an LLM in commercial law from Aberdeen University and an LLB
and a BA from the University of the West Indies. She is deputy chairperson
of the Jamaica Copyright Tribunal, a member of the International Committee
of the Council of Foundations and former general counsel of the Office of
Utilities Regulation.
Nicole Foga
Partner
Tel +876 927 4371
Foga Daley & Co
Jamaica
29/11/07
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Page 100
Arturo Pérez-Arredondo and Héctor E Chagoya
Mexico
A balanced relationship? The interface
between IP law and competition law
This chapter looks at the possible conflicts that can arise
complements Article 28 of the Constitution in regard to
between intellectual property and the competition
economic competition, monopolies and free market
process and free market access in Mexico. It also analyses
access. Article 5 of that law reiterates that “privileges
the approach of the Federal Competition Commission to
granted to authors and artists for the production of their
this issue.
work, and those granted to inventors and individuals
perfecting improvements for the exclusive use of their
Applicable laws
inventions, do not constitute monopolies”, and adds that
Article 28 of the Constitution establishes that the state is
economic entities may be subject to the law with respect
responsible for planning and directing economic
to acts that are not specifically covered by the exemption
development. Therefore, since intellectual property in its
granted by Article 28. In other words, any IP rights
widest sense is necessarily linked to economic activity
holder that abuses the privilege it has been granted may
and the development of the country, the state also
be deemed to have harmed competition and free market
regulates the protection, exercise and defence of IP rights
access, both of which are regulated by the law.
through the Mexican Institute of Industrial Property.
According to Article 28, monopolies and monopolistic
Opposites attract
practices are prohibited in Mexico. However, exemptions
IP rights constitute monopolies in the strictest sense of
apply to certain activities reserved for the state and
the term, but are allowed by the constitutional
which the Constitution deems to be “strategic” (eg, the
exemption. Moreover, IP rights are a fundamental factor
petroleum industry); these are not monopolies. The same
in the economic growth of countries – and are recognised
article provides a further exception that: “temporary
as such in the Constitution – and must be protected by
privileges granted to authors and artists for the
the state for the benefit of society.
production of their work and those granted to inventors
Although IP rights, and the exercise of such rights, are
and individuals perfecting improvements for the
clearly necessary, they are also a factor in competition
exclusive use of their inventions do not constitute
and are allowable only insofar as they do not damage
monopolies.” This principle forms the constitutional base
competition and free market access by exceeding
for Mexican IP legislation.
specified limits. IP rights are limited in scope and use,
Taking the constitutional principle as its foundation, and
with the goal of achieving healthy competition to further
and cannot be extended beyond the protection originally
granted.
economic development, the Industrial Property Law:
•
In Mexico, an IP rights holder has the right to:
protects IP rights through different mechanisms (ie,
•
exercise the rights granted to it exclusively;
patents, utility models and industrial designs,
•
prevent others from using, selling or offering for sale
trademarks and advertising slogans, trade names,
appellations of origin and trade secrets);
•
promotes creative activity; and
•
defends the IP rights provided by the state.
any products using those rights; and
•
enforce its rights against possible infringements.
All these actions may generate substantial market
power for the IP rights holder. However, the IP right
The
Federal
Law
of
Economic
Competition
alone cannot be in breach of the regulations set out by the
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Becerril, Coca & Becerril SC Mexico
Federal Law of Economic Competition; rather, it is the
grant of patents of invention might lead to an abuse of
abusive manner in which such IP rights might be used
the obtained legal monopoly, which implies an exclusive
that can violate competition law.
right for the use and exploitation of the invention for a
Contrary to the opinion of critics of the IP rights
determined time – abuse that is reflected, in some cases,
system, who claim that the rights themselves confer
in the lack of exploitation of a patent in an indefinite
market power on the rights holder, the use of IP rights
period, thus allowing the contracting states for this very
falls into two categories:
reason to take the legislative measures providing for the
grant of compulsory licences for preventing such abuses,
•
fair use granted constitutionally to the inventor or
but recognizing that such a grant may not be sufficient to
creator of the intellectual property to allow it to
avoid them.”
exercise its lawful rights; and
•
The prevention of such abuse is precisely regulated
uses that may be considered to be an abuse of the
both in Mexico and internationally through competition
constitutional exemption by exerting an IP right with
legislation.
the intention of affecting competition and free market
access in relation to products that are not covered by
Commission trends
that right.
In relation to the interface between IP and competition
legislation, the commission has issued several decisions
Therefore, the issue of whether an IP right has been
used in an anti-competitive manner must be assessed on
a case-by-case basis.
indicating that the commission views the two laws as
complementary rather than contradictory.
The commission analysed this issue in its May 1998
This approach is further confirmed by international
decision in File RA-07-98. Three purified water
agreements to which Mexico is a signatory. The World
distributors had filed a complaint against an inventor
Trade Organisation Agreement on Trade-Related Aspects
who had granted an exclusive licence on a device that
of Intellectual Property Rights states in Part II, Section 8,
facilitated the flow of water in large containers.
Article 40(1) that: “members agree that some licensing
Consumers in a determined geographical region
practices or conditions pertaining to IP rights which
demanded the novel device and stopped buying
restrain competition may have adverse effects on trade
containers without it. In its final decision the commission
and may impede the transfer and dissemination of
held that the Industrial Property Law entitled patent
technology.” The whole of Section 8 deals with the
owners to “prevent others from manufacturing, selling,
interaction of competition and intellectual property, and
using, offering for sale or importing” the patented
implicitly recognises that activities relating to the
product; therefore, the inventor was free to limit the
transfer of IP rights must be carefully analysed as they
number of licences for its invention. The complaint
can have a substantial adverse effect on the market if
included a petition for a compulsory licence, which was
they are carried out in an abusive manner.
denied partly because the Mexican Institute of Industrial
The Supreme Court decision in Case 2183/99
Property is the authority responsible for considering
confirmed that the competition and IP laws are
such petitions, but mainly because the commission held
complementary rather than contradictory. In this decision
that the requirements for such a licence had not been
the court concluded that Article 213 of the Industrial
fulfilled because the public was already benefiting from
Property Law does not contravene Article 28 of the
the invention.
Constitution in relation to the right of a trademark owner
In its final conclusion the commission rejected the
to enforce its right: “Since several infringement actions
complaint, referring to the Industrial Property Law and
based on wrongful trademark use are contemplated in the
the Competition Law and holding that: “The complaint
aforementioned Article 213, free competition is not
lacks basis in virtue of the fact that there does not exist
limited in any way, nor is the monopoly of the trademark-
any conflict between the two cited laws, as both allow
protected product cemented. It is only that the trademark
and regulate the exclusive rights for the exploitation of
protection is limited to its use and not to the
an invention.”
commercialisation of the product or service.”
The commission has confirmed its position regarding
Similarly, in Case 744/93, dealing with recognising
the freedom of an inventor to exploit its patent at will in
the possibility of abuses of IP rights in international
other decisions, such as Rimsa v Roche (DE-54-2003) and
treaties, the Supreme Court interpreted the Paris
Landsteiner v Merck (DE-13-2004). In both cases the
Convention as follows: “Article 5 of the convention
complaints filed by the plaintiffs were based on the fact
foresees, among other issues, the possibility that the
that the patents held by the defendants were subject to
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Mexico Becerril, Coca & Becerril SC
cancellation actions and, in one case, a first-instance
the market and the exclusivity provided legally by those
decision nullifying the patent had already been issued.
rights. This is made clear by the questionnaire required
However, the commission held that until a decision on
to notify transactions to the commission – Section 7,
the validity of a patent becomes final, the patent owner
which deals with new competitors, states as follows:
can exercise its rights because they are still considered to
“Indicate the intellectual property, industrial property
be in force. Both cases, which dealt with government
(patents, trademarks) or other rights existing in the sector
purchases assigned directly to the patent holder, were
or industry involved, distinguishing those owned by the
decided in favour of the defendants as the purchases
societies involved in the transaction from those of non-
were carried out by the authorities in compliance with
related companies… Indicate which trademarks are
the fact that the patent rights were still in force.
already established in the industry or sector and indicate
Although this decision might suggest that the
which, in your best judgement, have a commercial
commission considers IP rights to be a shield against
prestige, distinguishing which ones are owned by the
antitrust complaints, other decisions demonstrate that
companies or entities involved in the transaction and
this is not so.
which ones by non-related companies.”
In several decisions related to notified concentrations
To date no decisions have been issued regarding direct
(eg, Grand Metropolitan and Guinness (CNT-19-98); P&G
technology transfer or licensing activities and no criteria
and Loreto (CNT-111-97); Duingras (Pepsi) and Emvasa
have been established for such activities, as regulatory
(CNT-103-2000)), the commission carefully analysed the
bodies in other countries or regions have done.
market and allowed the concentration. In others the
commission imposed conditions on the transaction
Conclusion
relating to the transfer or discontinuance of the use of
The Industrial Property Law and the Competition Law
certain trademarks. In such decisions, the commission
are analysed using a holistic approach that considers both
considered trademarks to be not only an exclusive right
the constitutional exemption granted to inventors under
that determines market power, but also an indicator of
Article 28 and the principle of protecting consumers
market coverage.
against monopolies by granting free market access.
In Pemex the commission initiated an investigation
IP rights are pro-competition. The incentives for
into the franchising contracts used by Pemex, a
innovation provided by IP rights are internationally
petroleum company, for gasoline stations, which
recognised and necessary for the development of new
prevented franchisees from offering for sale any
technology, as they provide a mechanism to protect the
lubricating oil products other than those manufactured
investment of IP rights holders for the benefit of society.
by MexLub under the PEMEX trademark. Although the
This is the rationale behind the monopolies exemption
clause would usually be considered valid in a franchising
granted by the Constitution.
contract in order to maintain quality, Pemex was found
However, the possibility of the abusive use of IP
guilty of anti-competitive behaviour because under the
rights cannot be overlooked and should be recognised
Constitution it is the only entity authorised to distribute
under the international treaties to which Mexico is a
gasoline in Mexico. Therefore, the public could not
signatory. Although IP rights confer exclusivity rights to
acquire any other brand of lubricating oil products in
their holders, this can also lead to anti-competitive
gasoline stations, thus affecting a market that was not
practices that can damage the market if these rights are
included in the constitutional exception granted to
used with the intention of disadvantaging consumers.
Pemex (ie, markets outside the permitted monopoly).
The effect of using an IP right cannot automatically be
This demonstrated that a lawfully granted IP right can be
qualified as anti-competitive; however, use should be
used abusively to affect other markets that are not
analysed on a case-by-case basis, considering the actual
covered by that right.
effects of that use in the specific market.
In contrast, some free trademark licences have been
Although the commission appears to be moving
authorised as part of transactions, such as in Molinera
towards a balanced interpretation of the IP and antitrust
Mexico and Gamesa (CNT-110-97), in which the
laws, specific criteria for transactions involving pure IP
commission authorised a concentration where an
rights, such as licensing agreements, are still pending.
exclusive trademark licence with an option to acquire the
However, Mexican law already has the elements
trademark was found to be legal.
necessary to develop such criteria, which are needed to
The commission analyses IP rights in the context of
deal with increasing activity in the IP field.
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Becerril, Coca & Becerril SC Mexico
Arturo Pérez-Arrendondo is an attorney at law and holds diplomas in corporate
law and commercial arbitration. He is fluent in Spanish and English. He leads
the trademark, copyright and litigation departments, and is head of the
enforcement and litigation team. Mr Pérez-Arrendondo handles all corporate
and related matters arising from clients’ IP rights, including filing, prosecution,
enforcement of IP rights, contracts, licences and legal opinions. He also
coordinates the work of the firm’s associates.
Arturo Pérez-Arrendondo
Legal director, Mexico City
Tel +52 55 5263 8730
Mexico
Héctor E Chagoya is the consulting manager on technology transfer issues
and business and technical aspects of patent litigation at Becerril, Coca &
Becerril SC. He deals with patent prosecution and litigation, and negotiates
domestic and international technology transfer contracts. Mr Chagoya’s areas
of practice include technology transfer and negotiation, technology protection
and enforcement, documentation and appropriation of trade secrets.
Héctor E Chagoya
Manager, technical analysis and
technology brokerage, Mexico City
Tel +52 55 5263 8730
Mexico
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José Gregorio Torrealba-Rodriguez
Venezuela
Tackling inactivity: legislative remedies
against the PTO
This chapter looks at the remedies available to trademark
PTO will notify the applicant, which has 30 days to
and patent owners when the Venezuelan Patent and
contest the opposition and produce supporting evidence.
Trademark Office (PTO) fails to issue a decision on a
The applicant may apply for a 30-day extension to
trademark or patent application within the timeframe
produce evidence in support of the application.
established by the law.
Decision
Registration procedures
If no opposition is filed within 30 days of publication of
In Venezuela, the registration of patents and trademarks
an application, the PTO will proceed with a substantive
is governed by Decision 486 of the Commission of the
examination of the requested trademark. If an opposition
Andean Community, which regulates industrial property
has been filed against the trademark application, the PTO
matters. The decision sets out the following procedures.
must render a decision once the period in which the
applicant can produce evidence against the opposition
Trademark registration
has lapsed. The result of the substantive examination or
The procedure for registering a trademark comprises the
the opposition decision will be either registration of the
following steps.
trademark or rejection of the application.
Application
Patent registration
According to Article 138 of Decision 486, a trademark
Application
application must be filed by providing the details set out
The
in Article 139.
requirements set out in Articles 25 to 37 of Decision 486.
Formal examination
Formal examination
Once a trademark application has been filed with the PTO,
The PTO has 30 days from filing of the application to
the PTO has 15 days to carry out a formal examination of
check that the formal requirements set out in Articles 26
the application. If the application does not pass the formal
and 27 have been fulfilled. If the PTO considers the
examination, the applicant will be given 60 days to comply
application to be incomplete, the applicant will be given
with the requirements set by the examiner.
two months to complete the formal requirements. An
patent
application
must
comply
with
the
extension of this period is available upon request and
Publication for opposition purposes
does not compromise the priority of the application.
Once the application passes the formal examination, the
PTO will order publication of the requested trademark in
Publication for opposition purposes
the Official Bulletin. Article 146 of Decision 486 provides
Once 18 months have elapsed from the application filing
that interested third parties have 30 days after publication
date or the indicated priority date, the application becomes
to oppose the application. An opposing party may request
public and is published in the Official Bulletin. The applicant
a 30-day extension to produce evidence for its opposition.
is entitled to request publication of the application before
this end of the 18-month term if the formal examination has
Opposition procedures
been completed. Once the application has been published,
If an opposition to a trademark application is filed, the
third parties have 60 days to file an opposition.
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Hoet Pelaez Castillo & Duque Venezuela
Opposition procedures
this right shall be punished in accordance with the law,
If an opposition is filed, the applicant has 60 days to
including the possibility of dismissal from office.”
respond
the
This article has been broadly interpreted by the courts
application. The term may be extended by a further 60
and
produce
evidence
supporting
and it appears clear that a ‘timely’ response means one
days if the applicant so requests.
given by the government body or agency within the
legally stated term. Any delay should be considered as a
Decision
violation of Article 51.
The applicant must ask the PTO to conduct a substantial
examination of the patent within six months of publication
Writ of mandamus
of the application; otherwise the application is deemed to
According to British authors Bradley and Ewin in
be abandoned. If the application complies with the legal
Constitutional and Administrative Law (12th edition,
requirements, the PTO will grant the patent certificate. If
Longman, London): “Mandamus is an order from the
the application fails to comply with the requirements, the
High Court commanding a public authority or official to
applicant will be notified and must respond within 60
perform a public duty in the performance of which the
days (extendable for a further 60-day term upon request).
applicant has sufficient legal interest… mandamus may
If the response filed by the applicant does not fulfil the
enforce performance of a duty imposed by statute upon
requirements, the application will be rejected.
a minister or on a department or on named civil servants,
provided that the duty is one which is owed to the
Current situation
applicant… Mandamus will not lie if the authority has
According to Decision 486, the trademark registration
complete discretion whether to act or not.”
procedure should last no longer than 45 working days if
The Venezuelan remedy against a lack of activity is
the trademark passes the formal examination and no
equivalent to the British writ of mandamus, although
opposition is filed, or 195 working days if an opposition
certain differences have emerged in recent years. At the
is filed. However, in practice, the PTO takes between six
first stage of evolution of actions against a lack of activity,
and 12 months to grant registration where no opposition
legal literature and case law established the separation
is filed, while applications involving an opposition can
between an action against a lack of activity and the
take between two and four years before the PTO issues a
special action for the protection of constitutional rights
decision. Even though the official timeframe for such
(the constitutional amparo). At that time, if the
decisions is usually greatly exceeded, the actual time
government body or agency had the discretion to decide
taken is generally in line with that in other Latin
a petition, the courts considered that there was a
American trademark offices.
violation of the right of petition and the appropriate
The situation is similar for patent applications. A
remedy was an amparo proceeding. Where there was no
patent application without opposition from third parties
discretion for the authority, but rather a specific duty
or observations from the PTO should take no longer than
vested with the authority, the appropriate remedy was an
21 months to complete, and no longer than 29 months if
action against a lack of activity.
the application is opposed by a third party or does not
However, on April 6 2004 the Constitutional Chamber
pass the formal examination. However, the PTO currently
of the Supreme Tribunal of Justice rendered a decision in
takes up to five years to grant a patent certificate.
the Ana Beatriz Madrid Agelvis Case which changed the
If an applicant challenges a decision of the PTO by
criteria for choosing either an amparo proceeding or an
means of a reconsideration petition, the PTO takes
action against a lack of activity. The Constitutional
between two and six years to issue a decision on the
Chamber considered that:
challenge. If the PTO’s decision is appealed to the
minister of light industries and commerce, the minister
•
may take up to 10 years to decide the case.
every legal duty is specific per se, regardless of the
manner of compliance (ie, formal or material);
•
the duty is specific to the citizen who filed the
petition; and
Legislative remedies against lack of government
•
activity
the right of petition involves the right to obtain a
Article 51 of the Constitution provides as follows:
timely and adequate answer; therefore, regardless of
“Everyone
whether the duty of the authority is specific, the
has
the
right
to
petition
or
make
representations before any authority or public official
answer must be timely and adequate.
concerning matters within their competence and to
obtain a timely and adequate response. Whoever violates
Since this decision, a citizen affected by the lack of
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Venezuela Hoet Pelaez Castillo & Duque
activity of government agencies or bodies can bring only
Act 2004, which allows judges to choose the proceeding
an action against a lack of activity. An amparo action for
that they consider most suitable for the action filed.
the protection of constitutional rights is available only in
Case law is clear on the proceedings that the courts
extremely specific circumstances where an action against
should choose for actions against a lack of activity.
a lack of activity would be ineffective.
Considering the special nature of such actions and the
goals of the parties in filing such actions, the courts have
Jurisdiction
used the proceedings for the judicial review of
According to Article 5.26 of the Supreme Tribunal of
administrative actions (known as nullity actions).
Justice Act 2004, the Political Administrative Chamber of
A judgment in favour of the party which filed the
the Supreme Tribunal of Justice is the competent court to
action will force the respondent authority to comply with
hear claims based on a lack of activity of the president of
the claimed duty. In the case of the PTO, the final
the republic, the vice president, the ministers, the heads
judgment will force it to issue a decision in the
of other autonomous public bodies with constitutional
proceeding and thus:
rank and the mayors of district capitals.
These public servants include the minister of light
•
industries and commerce, who is charged with ruling on
appeals filed against decisions of the PTO. However,
application;
•
given the legal fiction of administrative silence which
applies in Venezuela, in cases where the minister does
not rule on an appeal within the legal term, the interested
grant or refuse registration of a patent or trademark
rule on an opposition against a patent or trademark
application; or
•
decide on a challenge to a registered patent or
trademark.
party is entitled to file an application for judicial review
of the administrative silence.
In the case of the minister of light industries and
If an action against a lack of activity is filed against
commerce, the judgment will force the minister to render
the PTO, the two Courts for the Judicial Review of
a decision on an appeal that was not decided within the
Administrative Matters (located in Caracas but with
legal term.
national jurisdiction) have jurisdiction to hear the
corresponding claim.
The court will give the respondent authority a certain
timeframe within which to take action according to the
rendered judgment. If the authority does not take the
Legal proceedings
appropriate action within the specific timeframe, the
The proceedings to be followed in an action against a
court will take the place of the authority and will carry
lack of activity are not expressly set out by law. However,
out the required action judicially, which will then be
to date the competent courts have used the power vested
deemed as having been carried out by the competent
in them by Article 19 of the Supreme Tribunal of Justice
administrative authority.
José Gregorio Torrealba-Rodriguez is a member of the IP administrative action
and unfair competition groups of Hoet Pelaez Castillo & Duque. He focuses
on administrative proceedings before the Patent and Trademark Office and
the Free Competition Authority. Mr Torrealba-Rodriguez holds an LLB from
Universidad Santa Maria (1997), an LLM from Universidad Católica Andrés
Bello (2000) and an LLM from King’s College, University of London (2004).
José Gregorio Torrealba-Rodriguez
Associate
Tel +58 212 201 8578
Venezuela
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Law & litigation
Europe,
Middle East
& Africa
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Nola Bond
DM Kisch Inc
Cross-border: Africa
Countdown to kick-off: the 2010 FIFA
World Cup comes to Africa
Africa is a continent of extremes in regard to its climate,
face major challenges in order to fulfil expectations
landscape and wealth, yet its full potential remains
successfully.
Fédération
The South African government has provided
Internationale de Football Association (FIFA) World Cup by
extensive guarantees to FIFA to ensure that the 2010
South
untapped.
The
Africa
hosting
heralds
of
not
the
just
2010
sporting
World Cup is a successful world-class event in all
entertainment, but also fantastic business and economic
great
respects. One of the primary objectives of choosing an
opportunities. The rewards from these opportunities
African country to host the World Cup was to benefit the
depend on how the continent chooses to rise to the
continent by providing opportunities for economic
occasion.
growth and social advancement. Some of the key areas
Sport – in particular football – has the ability to unite
where the South African government has had to provide
nations, transcending different political and socio-
guarantees
economic backgrounds. Football is enjoyed across the
telecommunications, safety and security and the
continent, often played on dusty fields with makeshift
financial sector.
include
transport,
healthcare,
soccer balls, and removes many of the barriers between
rich and poor. It is against this backdrop of unity that
Legal considerations
South Africa will host the 2010 World Cup. The 2010
The South African government has declared the 2010
World Cup offers a unique opportunity for businesses,
World Cup a protected IP event. In effect, this declaration
communities and organisations to benefit from the
should prevent ambush marketing against FIFA and its
coming together of some of the world’s greatest
partners and sponsors. FIFA provides very clear
sportsmen and fans from across the globe.
guidelines as to what material, information and
As of September 14 2007 there were 1,000 days before
trademarks may and may not be used by other parties.
the start of the tournament. One thousand days may
These guidelines are available on the FIFA website
sound like a long time, but when the extent of the
(www.fifa.com).
commitment and the organisation needed to host such as
Department of Trade and Industry has issued a list of
event is considered, time is of the essence. If the
prohibited trademarks to prevent companies that are not
opportunities created by the tournament are to be
connected with the tournament from using the marks
maximised, preparations must be fast and efficient.
WORLD CUP, SOCCER, TWENTY-TEN or 2010 on their
own
or
in
In
addition,
combination.
the
These
South African
are
important
Business opportunities
considerations to be taken into account when branding
For growing economies, an event of the stature of the
and marketing products and services in the periods
FIFA World Cup provides a crucial boost to new or
before and after the 2010 World Cup. The restrictions are
young businesses. It has been estimated that the 2010
already in place and will remain in force for six months
World Cup will be the most commercially successful
after the event.
tournament since the first FIFA World Cup in Uruguay in
In addition, specific legislation has been passed for
1930. An estimated 2.7 million spectators will watch the
the 2010 World Cup in relation to revenue in order to
64 matches live, while the final is expected to be viewed
provide a supportive financial environment for FIFA and
by 2.8 billion people across the globe. However, behind
its affiliates. The new legislation provides for customs
the hype, host nation South Africa and its neighbours
and duty exclusions for FIFA and its products. In
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DM Kisch Inc Cross-border: Africa
addition, the import tax relief extends to certain media
own application in the country. Portuguese is the official
representatives, the host broadcasters and certain
language of Mozambique and legal proceedings often
licensees. It also allows FIFA to set up FIFA shops to sell
need to be translated before they can proceed. The
goods in a duty-free bubble. Such shops will not sell
conclusion to be drawn from these differing experiences
tobacco or cosmetics. This revenue support is clearly
is that enforcement based on registered rights is always
designated only for certain companies connected with
more clear-cut and certain than trying to establish a well-
the 2010 World Cup and will not be available to non-FIFA
known trademark or arguing that there is common law
affiliated entities.
protection, which usually arises if the trademark has
been used in the country in question. However, use of a
Securing intellectual property
trademark in South Africa is not generally enough to
The political and economic opportunities presented by
enforce a right in another country; therefore, it is
the 2010 World Cup have given rise to reviews of IP
essential to consider each jurisdiction separately. This
rights in the relevant jurisdictions. Given that it often
applies across Africa, with the exception of those
takes over two years to obtain necessary trademark and
countries that are members of the Organisation Africaine
other IP protection in many African jurisdictions, there
de la Propriété Intellectuelle.
may not be enough time to do so before the start of the
Ensuring a solid base of protection is essential for
2010 World Cup. Furthermore, South Africa’s economy is
dealing with counterfeiting, an ever-increasing problem.
closely linked with the economies of many of its sub-
The owner of a registered trademark or a well-known
Saharan neighbours and it shares borders with five
trademark can register its rights with the South African
states. As a result, companies which intend to capitalise
Department of Customs and Excise, thus allowing for the
on the build-up to the 2010 World Cup and the actual
seizure of counterfeit goods that are imported into South
tournament need to evaluate their existing IP protection
Africa. The South African Counterfeit Goods Act sets out
as soon as possible. Where possible, the registration of IP
effective criminal and civil remedies for the seizure and
rights is still the best way to protect and enforce rights,
destruction of counterfeit products. A proprietor can rely
and reliance on use alone is not recommended.
on registered trademark rights, a well-known trademark
Each country in sub-Saharan Africa (including South
or copyright as the basis for such an action. As South
Swaziland,
Africa is often the entry point for counterfeit products
Mozambique, Zimbabwe, Zambia and Malawi) has its
destined for other African countries, it is vital for that
own legal system governing IP rights. The protection and
country to enforce rights strictly and give Customs the
enforcement of these rights must be handled on a
ability to remove counterfeit products from circulation.
country-by-country basis. A number of these countries,
Of course, as goods do pass through South Africa into
such as Namibia, Botswana, Lesotho, Swaziland and
other jurisdictions, it is equally important for other
Mozambique, have acceded to the Madrid Protocol;
African countries to offer corresponding protection in
however, as these countries have not yet amended their
order to combat the scourge of counterfeiting. However,
national legislation, international registrations are
few other countries in sub-Saharan Africa have systems
generally not recognised and are unenforceable.
as efficient as that of South Africa to deal with counterfeit
Africa,
Namibia,
Botswana,
Lesotho,
A further consideration is that many of the
goods – instead, enforcement may need to be carried out
jurisdictions offer either limited or no protection to well-
through the conventional infringement remedies
known trademarks. South Africa does afford protection
provided by domestic legislation.
to well-known trademarks, but the evidentiary standard
required to prove that a trademark is well known in
The countdown begins
South Africa is quite high. In opposition cases, the
As South Africa prepares to make history by hosting the
Botswana and Swaziland Trademark Registries have
first FIFA World Cup on the African continent, a plethora
accepted proof of international registrations, spill-over
of opportunities and challenges are emerging for all the
advertising and online use in order to enforce the rights
countries involved. It is hoped that the commercial
of owners of well-known marks. In Mozambique, the
energy generated by the 2010 World Cup will allow
Trademark Registry will not consider an opposition to a
Africa to take further action in relation to education,
well-known trademark until the opposer has filed its
training and development.
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Cross-border: Africa DM Kisch Inc
Nola Bond is a senior director in the trademarks department and handles
trademark availability searching, filing and protection, oppositions and High
Court litigation. She also deals with trademark portfolio management,
copyrights and Advertising Standards Authority work. Ms Bond graduated
from the University of Kwa Zulu in 1990 and qualified as an attorney in 1994.
She is a fellow of the South African Institute for Intellectual Property.
Nola Bond
Senior director
Tel +27 11 324 3072
DM Kisch
South Africa
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JF Bretonnière and Cécile Cailac
Increasing flexibility and attractiveness:
the ratification of the London
Agreement
The European Patent Convention, signed in Munich on
cancelling the requirement to translate the whole
October 5 1973, provided a legal framework for the
European patent into the language of each member state
granting of European patents through a centralised
for which protection is requested. Instead, just the claims
delivery procedure to the European Patent Office. A
will need to be translated into one of the three official
single patent application in one language may be filed
languages of the EPO (ie, English, French or German).
with the European Patent Office, which then examines
the patentability of the invention.
France signed the London Agreement in June 2001. In
order to be enforceable, it must be ratified by eight
However, a European patent does not automatically
European countries and the three countries which
cover the 32 European states which are parties to the
represent the largest proportion of European patent
European Patent Convention and members of the
applicants in Europe: Germany, France and the United
European Patent Organisation (EPO). Applicants filing a
Kingdom.
European patent specify the countries in which they wish
On October 9 2007 the French Senate finally adopted
to seek protection. The European patent then becomes a
the law ratifying the London Agreement. In so doing,
national patent in those countries, to which different
France became the 12th country to ratify the London
national legislation applies. In other words, a European
Agreement through its Parliament. Fourteen European
patent is a bundle of national patents subject to various
countries have now ratified this agreement
national procedures.
For almost seven years, the shadow of the London
The European patent is composed of two parts: the
Agreement has hung over French patent law and has
description, which describes the invention and the
given rise to numerous controversies and economic, legal
context of its creation, and the claims, which determine
and political questions. The London Agreement has
the scope of protection.
many opponents, particularly in France. Such resistance
As the European patent is regarded as comprising
may come as a surprise, as the agreement was a French
separate national patents which are valid in the
initiative taken during the EPO’s intergovernmental
designated countries, at present both the description and
conference on patent reform in Europe, which took place
the claims of the European patent must be translated into
in Paris in June 1999.
the languages of those countries within three months of
the date of granting.
Although half the EPO member states have not yet
ratified the London Agreement and some southern
The current situation leads to major translation costs
member states have clearly signalled their opposition to
for patent holders, thereby reducing the incentives to
it (ie, Spain, Portugal and Greece), France’s ratification of
apply for a European patent, which may restrict
the
European competitiveness.
consequences for the entire system as it will make the
London
Agreement
will
have
important
In order to reduce post-grant translation costs under
agreement effective in states that have already ratified it.
the European Patent Convention, on October 17 2000 a
The London Agreement is applicable in the countries
number of member states in Europe signed the London
which have ratified it provided that it has been ratified
Agreement. The London Agreement amends and
by France, Germany, the United Kingdom and eight
simplifies the linguistic system for European patents by
other member states. Since Germany and the United
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Cross-border: Europe Baker & McKenzie SCP
Kingdom have already ratified the London Agreement,
the patent (description and claims) into their national
its enforceability depended on ratification by France.
language.
France’s ratification will be followed by that of
In this situation, the owner of the invention wishing
Belgium and Ireland, both of which were waiting for
to patent its invention in the 32 EPO member states will
France’s decision to ratify. According to the EPO, another
incur large translation expenses. For example, an average
10 European countries are expected to ratify the London
patent (about 22 pages in length) will amount to €30,800
Agreement within the next three years.
for 32 states if translated into 23 languages (the total
number of languages of the 32 member states). Most of
Modifications resulting from the London Agreement
the time, however, the European patent covers only five
The aim of the London Agreement is to simplify the
to seven member states and is translated into five
existing law by, among other things, reducing the
languages for about €7,000.
obligation to translate a European patent into several
languages.
New system
Article 1 of the London Agreement waives the translation
Existing system
requirements, which previously allowed all EPO states to
The existing European patent system is based on a
make the validity of a European patent in their territory
centralised delivery procedure through a single
contingent on the submission of a translation of the entire
application to the EPO. Contrary to the Community
patent application in their official language.
patent, which does not yet exist but which will
The applicant will now be required to provide a
automatically cover all the EU member states, the
translation of the claims only in English, French or
European patent is valid only in the European countries
German. The description part of the patent need no
specified in the application.
longer be translated. Statistics show that of the three
The European patent delivery procedure lasts
between three and five years and is divided into several
phases.
official languages, in the majority of cases the claims are
translated into English.
To date, no country that has signed the London
Agreement has chosen French or German as its official
Application
language because translation into English is necessary to
The applicant must specify the countries in which
extend patent applications to countries with English as
protection is requested. The application may involve a
their official language (eg, the United States). Therefore,
single country or any number of the 32 European
an applicant wishing to extend its patent to the United
countries that are party to the European Patent
States would deem it pointless to use French or German.
Convention.
The patent application must be filed in one of the
three official languages of the EPO (ie, English, French or
German). Thereafter, the claims are translated into the
other two official languages.
The translation of claims improves companies’
awareness of the innovations of their competitors or
third parties which may be potential licensors.
With 32 EPO member states, representing a market of
more than 540 million people and an exponential number
of filings, it is no surprise that the London Agreement has
Publication of application
adapted and simplified the translation system.
The European patent application will be published
within 18 months of the filing date or the priority date.
Simplifying the European patent: an indispensable
corollary to the system’s attractiveness
Delivery of the patent
There are a number of legal and economic issues in
Following a successful review of its patentability, the
favour of enhancing the attractiveness of the London
European patent is delivered.
Agreement.
National validation procedures
Legal stakes
A European patent is fully enforceable in the countries
Diplomatic stakes
specified in the patent application only if it is validated
Pressure from users of the European patent system to
in each country. This involves filing the patent with each
introduce a simplified linguistic system has continued to
national patent office.
increase. During the 1999 negotiations, the Netherlands,
At this stage, the member countries of the European
Sweden and Denmark suggested the abolition of all
Patent Convention may require the integral translation of
translation requirements or the introduction of a
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Baker & McKenzie SCP Cross-border: Europe
requirement to submit a translation in English only.
waive filing and fail to protect their inventions in their
At that time, France’s failure to ratify the London
primary market. Moreover, a high density of patents in
Agreement could have encouraged the other ratifying
Europe promotes EU development and competitiveness.
states to reach agreement on a new parallel system that
would provide a greater role for the English language.
A boost to the Community patent’s creative process
The drawback of this parallel system was that it would
The European Council’s consideration of a simplified
have applied only to a limited number of countries,
European treaty provides an opportunity to boost the
whereas the London Agreement applies throughout
European Union and further negotiations regarding the
Europe, thereby broadening the scope of a patent’s
Community patent.
enforceability in Europe.
The creation of a Community patent, which would
grant the holder the right to protect its invention
Coherent legislative whole
throughout the 27 EU member states through a single
In addition to simplifying the system, ratification of the
filing, is at a standstill.
agreement falls under the French government’s policy of
Contrary to the European patent, which is a bundle of
furthering research and innovation. The government has
national patents, the Community patent would be a
already taken measures specifically aimed at reducing
single, centrally enforceable EU-wide patent. Once the
the research tax credit and granting first patents for free.
patent is granted through a single procedure, it will
It would be illogical to reduce fees to encourage small
automatically cover the 27 EU member states without
and medium-sized companies to file patents while
having to designate the specific countries where
maintaining dissuasive financial charges (eg, translation
protection is required.
expenses).
Although this system could provide significant
advantages, negotiations have been blocked for almost
Economic stakes
30 years because of disagreements (principally between
The challenge of the European patent system is the
Spain and Germany) over the Community patent’s
innovation and competitiveness of European companies.
linguistic system. Spain wants the translation of claims to
have legal weight, whereas Germany rejects this
Developing a patent culture inside companies
principle for reasons of legal certainty.
The EPO estimates that filing and exploiting a patent
During a meeting of the Competitiveness Council on
result in an increase in the company’s turnover within
March 3 2003, a political agreement was reached to
five years.
provide for a linguistic system similar to that of the
The cost of European patents is also a real obstacle,
London Agreement. At present, according to this
since translation costs amount to about 40 per cent of the
political agreement, the applicant should provide the
patent’s total cost. The effectiveness of the London
translation of claims into all languages of the European
Agreement will increase the number of European patents
Union unless a member state waives the translation into
filed.
its own language. Similarly to the linguistic system
The decrease in patent costs will increase the
competitiveness of European and global industry:
resulting from the London Agreement, translation of the
patent description would not be required.
companies can reinvest the substantial savings generated
The linguistic system of the Community patent could
by the London Agreement in research and development.
be modified and brought into line with the London
Filing patents increases companies’ competitiveness
Agreement’s system for the European patent.
because filing results in a monopoly on a specific patent’s
claims.
A system under which a single IP title covers the
whole European Union already exists in the form of the
Community trademark and the Community design. The
Benefits for non-European applicants
Community trademark and the Community design give
The London Agreement will also benefit the major non-
holders a single and uniform right covering the 27 EU
European applicants (particularly US, Japanese and
member states based on a single application to the Office
Korean applicants), enabling them to extend their patent
for Harmonisation in the Internal Market (OHIM).
rights to Europe at a lower cost.
Confronted with the same problem of simplifying and
The simplified system favours holders of European
reducing translation costs and the corresponding high
patents, regardless of whether they are European –
levels of fees which may be involved by using a wider
particularly small and medium-sized companies which,
range of languages, the OHIM has deliberately restricted
because of the financial cost or legal complexities, often
the number of languages used for Community
29/11/07
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Cross-border: Europe Baker & McKenzie SCP
trademark proceedings. For example, an application for a
importance of the Community patent, this would be
Community trademark may be filed in one of the official
another important step in the European Union’s
languages of the European Union (ie, English, French,
construction.
German, Italian or Spanish), and the applicant must also
The Community patent is not designed to supplant
choose a second language. One of the languages chosen
the European patent, as both systems may co-exist: a
must be used as the language for all proceedings relating
Community regulation proposal of August 1 2000
to the Community trademark (ie, opposition, revocation
suggested that the EPO should operate the Community
or invalidity).
patent.
The 10th anniversary of the creation of the
In view of the continued stalemate, in a communiqué
Community trademark attests to its success and to the
of April 3 2007 the European Commission set out its
fact that the linguistic system operates smoothly and
vision for improving the European patent system, stating
effectively.
that the creation of a Community patent remains a key
The creation of a Community patent would present
objective for Europe. The recent ratification by France of
the advantage of granting a single patent enforceable
the London Agreement is probably a good step in that
throughout the European Union. Given the economic
direction.
Jean-François Bretonnière is a member of the Paris Bar and heads the IP
practice in the firm’s Paris office. He works on both contentious and noncontentious national and cross-border IP issues. Specific areas of his practice
include the acquisition, protection, enforcement and exploitation of IP rights
(trademarks, patents, designs and copyright). He has practised in Asia and
the European Union and works on projects in both the European Union and
the Asia-Pacific region concerning the protection and exploitation of IP assets.
JF Bretonnière
Partner, Paris
Tel +33 1 44 17 53 03
France
Cécile Cailac handles a wide range of IP law, including IP litigation before the
French courts, IP litigation, trademark prosecution before the OHIM and the
French Trademark Office, international portfolio management and the drafting
and negotiation of various IP-related agreements. She holds a master’s
degree in business law from the University of Paris I – Panthéon Sorbonne
and a master’s degree in IP law from the University of Paris II – Panthéon
Assas. She was admitted to the Paris Bar in 2005.
Cécile Cailac
Lawyer, Paris
Tel +33 1 44 17 59 19
France
29/11/07
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Ian Craig
Field Fisher Waterhouse LLP
European patent system: the growing
need for reform
Even patent practitioners find it hard to rationalise the
present, it costs approximately £1,200 to have a patent
complexities of the European patent system. To start
translated into one language.
with, there is no one European system, but rather two
Although the need for reform is clear, little has been
distinct systems through which patents can be granted in
done to this end in recent years. Certain problems have
European countries. However, once granted, patent
become mired not just in the politics of the convention
rights are always enforced through the national courts of
states, but also as a result of the way in which the
those countries.
European Union has intervened in EPO matters.
The two basic systems are:
Computer-implemented inventions
•
the national systems in each country; and
When considering the EPO problems, one striking feature
•
the European Patent Office (EPO).
keeps recurring: the problem of bureaucratic inertia. An
example is the subject matter that is deemed by the EPO
The EPO was established by the contracting states to
as excluded from being treated as an invention.
the European Patent Convention. The major advantage
If an idea is deemed to be novel and involves an
of the convention system is that it allows for the
inventive step, the convention places a further hurdle in
submission of a single application to the EPO which, if
the way of the idea being treated as an invention. The
the relevant criteria are satisfied, will grant a patent. The
idea cannot fall within one of the excluded classes, which
patent holder then determines the geographical scope of
include software. Software ‘as such’ is incapable of being
protection that it requires by seeking to have the patent
patented. However, software is widely patented in the
validated in one or more of the states that are party to the
United States. Since so much modern equipment and so
convention. Once validated, the patent is treated as a
many aspects of daily life involve software, the fact that
national patent in each state in which it has been
it cannot be patented by the EPO has caused tension
validated. Thus, the laws of each member state govern
between the United States and the EPO. The result is that
infringements and any actions involving the validity of
the EPO has done everything possible to bend its own
that patent.
rules to allow it to patent software inventions. This has
This system has led to some strange outcomes. For
led to some tortuous interpretations of its own rules, but
example, if the validity of a patent granted by the EPO is
the effect is that the national courts often demonstrate
attacked in France and in the United Kingdom, the
different views on what constitutes a software patent.
French courts may conclude that it is valid, and the UK
The confusion surrounding software patents leaves
courts that it is invalid. This confusing situation has
patentees in a state of uncertainty. There is no good
caused problems since the inception of the EPO.
reason why, once an EPO examiner is satisfied that an
Another major drawback of the EPO system is that
invention is not in an excluded class, a national court
there are 22 official languages in the 31 signatory states to
should revoke the patent based on a different view of
the convention. To obtain a patent through the EPO, an
what is excluded. This simply replaces an EPO
application must be in either English, French or German.
examiner’s opinion with that of the national courts.
Thereafter, if a proprietor wishes to have its patent
Such uncertainty could easily be resolved by
validated in a signatory state, the patent must be
amending the convention. However, this will not happen,
translated into the official language of that state. At
not least because to do so would require the approval of
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Cross-border: Europe Field Fisher Waterhouse LLP
the European Commission and the European Parliament,
French or German as its official language in the EPO will
even though the EPO is not an EU organisation. At
agree to dispense with the requirement to have a patent
present, certain members of the European Parliament are
granted in one of these three official languages translated
opposed to the patentability of any software and think
into the language of that country. Hence, any patent
that the EPO has already gone too far.
granted in English will not need to be translated into
Even though the EPO is not an EU organ, the fact that
French or German. However, the claims of a patent will
the majority of the convention states are also EU member
always need to be translated into all three official
states means that those states cannot take action without
languages. The claims are a relatively small section of the
the agreement of the commission.
whole patent and in effect set out the extent of the
It seems that little will be done in the near future to
invention claimed in the patent.
clarify the position of software patents before the EPO.
In addition, the London Agreement provides that any
Business should use whatever channels it can to try to
country that does not have English, French or German as
clear up these anomalies and trade organisations should
its official language will dispense with the translation of
be lobbied to try to rectify this position.
the patent into its national language and will prescribe
one of the three official languages as the language in
Oppositions
which its patents will be granted. Such countries will
Under the EPO system an opposition can be filed against
continue to have the right to require a translation of the
a patent within nine months of that patent being granted.
claims into their own language, but this will reduce the
The opposition will claim that the patent has been
translation costs considerably.
incorrectly granted and will cite specific grounds (eg, lack
It will be optional for convention countries to sign up
of novelty or inventive step). The patent will then pass to
to the London Agreement. To date, 10 states (Germany,
the Opposition Division of the EPO. With appeals, an
Denmark,
opposition can last for many years. The problem is that
Switzerland, the Netherlands, Sweden and the United
while the opposition grinds on, the patent is in force and
Kingdom) have said that they wish to join the system,
its 20-year life is ticking away. National courts which are
with Sweden and Denmark stating that they will choose
asked to deal with infringers of an opposed patent may
English as the official language for their granted patents.
Iceland,
Latvia,
Monaco,
Slovenia,
seek to stay actions pending the outcome of the
This reform represents good progress towards
opposition, which could take years. The whole process is
making the system more user friendly for patentees and
unsatisfactory and could be solved, at least in part, by the
is a rare step forward.
EPO amending its procedures so that oppositions could
be dealt with in a more streamlined way.
Litigation
Patentees appear to be forgotten in the desire to keep
There are complex issues in relation to the enforcement
bureaucrats working as they prefer. Recently there has
of a patent granted through the EPO. If a patent has gone
been some reform of the opposition process, but where
national in the United Kingdom, Germany and France
possible industry should press for an overhaul of this
and a patentee wishes to enforce the patent against
process.
infringers in those countries, it must sue in the national
courts of each country. In so doing, the patentee exposes
Language
itself to three different judicial systems, each of which
If a patentee wishes its patent to apply in a number of
will move at a different pace, with different procedures
convention states, it faces high translation costs. In
and different costs. In addition, the outcome may be
October 2000 the London Agreement was concluded in
different in each country.
an attempt to try to dispense with some of the translation
To try to reform this system, the European
requirements. Initially the process was held up as the
Commission proposed the implementation of a pan-
French Parliament considered that the requirements of
European patent, to be known as the Community patent.
the
potentially
However, the proposal became mired in the EU decision-
unconstitutional. However, on August 24 2007 the French
making process and has not progressed. The problems
government adopted a bill authorising the ratification of
revolve around the nature of the judiciary in such a
the London Agreement and the French National
system, as well as the language(s) to be used, although
Assembly has approved the bill, so it will be adopted by
this issue may have been lessened by the London
the end of 2007. When this happens, the regime for EPO
Agreement. However, the major issues still remain and it
translations will change dramatically.
seems unlikely that the Community patent will be
London
Agreement
were
Under the agreement, any state that has English,
available in the medium term.
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Field Fisher Waterhouse LLP Cross-border: Europe
Without a Community patent, the problem of how to
more continental European approach to the court
reform the litigation of EPO patents in the national courts
procedure, so that more emphasis would be placed on
remains. One possible way forward exists in the draft
written testimony, with a reduction in oral testimony.
European Patent Litigation Agreement (EPLA).
UK judges constantly reiterate that the cost of
The EPLA has been written by practitioners, mainly
bringing patent infringement proceedings in the United
judges, from a number of convention member states with
Kingdom is high. Indeed, such costs can be high,
a view to streamlining the process for enforcement of
especially for complex pharmaceutical cases, but in
EPO patents. Under the EPLA there would be a judiciary
reality they are generally similar to the overall costs in
of European patent judges, whose job would be to settle
Germany, which is often regarded as being a low-cost
litigation concerning the infringement and validity of all
jurisdiction. They argue that patent litigation should be
patents granted through the EPO. There would be a court
made cheaper to allow small and medium-sized
of first instance and a court of appeal. The courts would
enterprises to avail themselves of the courts. The United
apply the patent law applicable to EPO patents, which
States is the biggest global economy and patent litigation
would be the same for all patents granted through the
there is common and much more expensive than in any
EPO. All convention states would be eligible to join the
European jurisdiction. Therefore, it seems strange that
EPLA, which would provide obvious advantages for
the European approach is to try to make court actions
patentees.
cheaper by interfering with procedural matters which
However, the EPLA has run into problems. The
affect the quality of the judicial product. In the case of
European Commission has not taken kindly to EU
England, if judges were to take on more direct
member states trying to establish a judicial process
responsibility for running cases, they could monitor and
outside the European Union to deal with EPO patents.
control costs as the case develops.
Indeed, the European Parliament asked its own lawyers
Patentees should be aware that if the EPLA is
to consider whether states that are members of both the
implemented (and it would be a good idea if it were),
convention and the European Union are entitled to
they should lobby through their advisers and
establish the EPLA. The conclusion was that an EU
professional bodies to obtain the best possible system for
member state may breach its obligations under the EC
the EPLA courts. They should consider whether the
Treaty by entering into the EPLA, and further that such
abolition or reduction of the cross-examination of
member states cannot, outside the framework of the EU
witnesses is a sensible option. In the English system,
institutions, assume obligations which might affect EU
cross-examination is an essential element to establish the
rules laid down for the attainment of the objectives of the
truth – if economy took precedence, the judge could
EC Treaty. In effect, this means that EU member states
simply flip a coin and save everybody a great deal of
cannot enter into international agreements unless the
time and money.
commission allows them to do so.
As the issue of the sovereignty of EU member states
Conclusion
and their relationship with the commission is not clear
The one positive step taken in the past year towards
cut, it is likely that, before the EPLA can be implemented,
reforming the European patent system is France’s
a definitive opinion from the European Court of Justice
adoption of the London Agreement. With the exception
would have to be obtained as to whether member states
of the London Agreement, there have been no major
can enter into the EPLA without the commission’s
changes to the system in the past year. However, many
permission. A referral to the European Court of Justice
issues still need to be addressed if the European system
could be made by the commission, Parliament or any
is to be streamlined to a point where money is not wasted
member state – however, this has not yet been done.
and where patentees are not treated as virtual
Momentum has now focused on the EPLA due to the
lack of success in establishing the Community patent. In
inconveniences,
and
certainly
as
secondary
to
bureaucrats and politicians.
addition, since the EPLA has been drafted by
Companies and their advisers should be aware of the
practitioners, it has enjoyed greater acceptance than if it
problems that exist in relation to patents in Europe and
had been drafted by politicians.
should ensure that, wherever possible, they apply
However, before the EPLA can be put in place, certain
pressure by all means possible to try to deal with these
provisions need to be considered and agreed. In relation
problems. Politicians in particular spend a great deal of
to the establishment of a European Patent Court, it is
time discussing the ideas-led society and how in the
vital that the system takes into account the wishes of the
future Europe will have to stay ahead of the rest of the
users of the court. There is a move towards adopting a
world by coming up with new solutions to problems.
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To this end, intellectual property is fundamental, but
understanding of intellectual property and how it should
politicians do not really understand the problems and
be utilised requires an interlocking knowledge of
often companies do not give sufficiently high priority to
corporate, finance and IP law, as well as common sense.
understanding the nature of their IP assets.
It is to be hoped that a chapter on the same issue
Those funding companies often overlook the need for
written in one year’s time will be able to report more
a company not only to obtain IP rights, but also to have
progress – but the author will not be holding his breath
the money to enforce them where necessary. The whole
that this will be the case.
Ian Craig joined Field Fisher Waterhouse LLP’s IP team in July 2006, having
practised in the IP field since 1984. He has acted for a number of major
companies in relation to a wide range of IP disputes, including patent disputes
over medical devices and biotech inventions, and major disputes concerning
the patentability of software. Mr Craig also deals with copyright and trademark
issues and teaches patent law at Cambridge University.
Ian Craig
Partner, London
Tel +44 20 7861 4000
United Kingdom
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Pierre-André Dubois and Shannon Yavorsky
The Microsoft decision: the
evolution of compulsory licensing
in the European Union
The smoke has cleared after the nearly decade-long battle
has been considered by the European Court of Justice
between Microsoft and the European Commission, and
(ECJ), and the evolution of the test which the courts have
competition practitioners and IP specialists alike are
developed to assist in determining this issue.
piecing through the decision to determine whether the
boundaries between competition law and intellectual
The Microsoft decision
property have moved. In September 2007 the European
Background
Court of First Instance (CFI) handed down its decision;
The beginnings of the Microsoft Case can be traced back to
as a result, Microsoft announced that it would not appeal
a letter of September 15 1998 in which a vice president of
and would take all necessary steps to comply with the
Sun Microsystems invited Microsoft to provide Sun with
interoperability obligations imposed in the European
the complete information required to allow Sun to
Commission’s 2004 decision. In short, after a complex
provide native support for component object model
and protracted fray with the European Commission,
(COM) objects and the complete set of Active Directory
Microsoft
interoperability
technologies on its operating system known as Solaris.
information available to open-source software engineers
Sun thought that it was in the best interest of the industry
and reduce the royalties which must be paid to it. Some
that applications written on Solaris be able to
see this decision as a victory for businesses seeking to
communicate via COM and Active Directory with
license intellectual property from large players in the
Windows
market and a boon to consumers, who will benefit from
Microsoft’s reply failed to provide the answers that Sun
a greater choice of software, while others lament what
was looking for, Sun lodged a complaint with the
they view as a dilution of the monopoly right that is the
European Commission. The European Commission also
IP right holder’s incentive to innovate.
launched an investigation into the interoperability
has
agreed
to
make
and
Windows-based
software.
When
Although the Microsoft decision gives colour to the
between work group servers and the integration of
European Union’s current position on when a court will
Windows Media Player in the Windows client personal
order a compulsory licence, the law in this area is
computer (PC) operating system. The investigation
malleable and, while the basic precepts of competition
resulted in the European Commission issuing a
and IP law undoubtedly remain intractable, the courts
statement of objection to Microsoft, in which it reiterated
have sought to highlight that each case will turn on its
the objection based on Sun’s complaint and added
facts. One principle that remains constant, and which has
questions in relation to its new findings on work group
been asserted confidently in case law, is that while
servers and Windows Media Player.
businesses are, as a rule, free to choose their business
partners, under “certain exceptional circumstances” a
European Commission decision of 2004
refusal to supply by a business in a dominant position
In March 2004 the European Commission adopted a
may constitute an abuse of a dominant position within
decision which found that Microsoft had infringed
the meaning of Article 82 of the Treaty of Rome. This
Article 82 by abusing its dominant position in two ways.
chapter reviews the Microsoft decision and some of the
The first type of abusive conduct was Microsoft’s refusal
earlier case law in which a refusal to supply an IP licence
to
supply
its
competitors
with
interoperability
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Cross-border: Europe Kirkland & Ellis International LLP
information and to authorise them to use such
risk that competition would be eliminated – it is not
information to allow competitors’ operating systems to
necessary to demonstrate that all competitors on the
interoperate with the Windows operating system
market would be eliminated. If competitors to a
between October 1998, when Sun Microsystems first
dominant undertaking retain a marginal presence in
complained, and 2004. To remedy this abuse, the
certain niche areas of the market, this will not suffice to
European Commission required Microsoft to make the
substantiate that competition exists or remains.
interoperability
any
Finally, the refusal must prevent the appearance of a
undertaking interested in developing and distributing
information
available
to
new product for which there is potential consumer
work group server operating system products and allow
demand. However, this is not limited to establishing only
the use of the interoperability information.
that a refusal to grant a licence is capable of causing
The second abusive conduct arose from the fact that
prejudice to consumers – such prejudice may arise where
from May 1999 until 2004, Microsoft had made the
there is a limitation on technological development or
availability of the Windows client PC operating system
when a conduct indirectly prejudices consumers by
conditional on the simultaneous acquisition of the
impairing an effective competition structure.
Windows Media Player software. To remedy this abuse,
If all these circumstances are satisfied, the refusal to
the European Commission required Microsoft to offer for
grant a licence may constitute an abuse of a dominant
sale a fully functioning version of the Windows client PC
position unless it is objectively justified. An attempt to
operating system which did not incorporate Windows
show that there is an objective justification based on a
Media Player.
bare defence that a compulsory licence will result in a
detriment to the incentive to innovate will not work
CFI decision
when other circumstances (eg, the benefits to the
Unsurprisingly, Microsoft was not pleased with the
industry generally or consumers) are clear.
decision and brought an action before the CFI for its
As such, the CFI concluded that the European
annulment. The CFI rejected outright Microsoft’s
Commission had made the right decision in holding that
argument that a refusal to supply interoperability
these conditions were satisfied and therefore upheld the
information cannot constitute an abuse of a dominant
part of the decision relating to interoperability.
position because this information is protected by IP rights
As to the bundling of the Windows client PC
or otherwise constitutes a trade secret. As to the refusal to
operating system and Windows Media Player, the CFI
supply interoperability information, the CFI noted that
also upheld the European Commission’s decision on this
although undertakings are permitted to choose their
issue. It observed that the four factors on which the
business partners, in certain exceptional circumstances a
European Commission based its conclusion were correct,
refusal to supply on the part of a dominant undertaking
namely:
may constitute an abuse of a dominant position. This
conclusion was in line with prior ECJ decisions. The CFI
•
went on to say that before a refusal by the holder of an IP
right can be held to be an abuse of a dominant position,
position (Microsoft could hardly argue this point);
•
three conditions must be satisfied.
the tying product and the tied product must be two
separate products (Windows is an operating system
First, the refusal must relate to a product or service
indispensable to the exercise of an activity on a
the undertaking concerned must have a dominant
and Media Player is an application);
•
consumers must not have the option to obtain the
neighbouring market. The fact that the indispensable
tying product without the tied product (it was clear
product or service is not marketed separately from the
that consumers were not offered the operating
product or service on which a dominant position is held
system
does not exclude the possibility of identifying a separate
disregarded Microsoft’s contention that consumers
market where a compulsory licence would be needed. A
potential or hypothetical market is sufficient. In
without
Media
Player
and
the
CFI
were not obliged to use Media Player); and
•
the practice must foreclose competition.
considering the issue of indispensability, the fact that
Microsoft was able to impose the Windows domain
In relation to the last point, the CFI found that the
architecture as the de facto standard for work group
European Commission had clearly demonstrated that the
computing was clearly of great relevance when assessing
fact
whether this first condition was satisfied.
manufacturers only the version of Windows with Media
that
Microsoft
offered
original
equipment
Second, the refusal must exclude any effective
Player affected relations on the market between
competition on the market. It is sufficient that there is a
Microsoft, original equipment manufacturers and
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Kirkland & Ellis International LLP Cross-border: Europe
suppliers of third-party media players by appreciably
publication of the guide by asserting their copyright in
altering the balance of competition in favour of
the weekly listings.
Microsoft, and to the detriment of other operators.
The ECJ held that copyright could not be relied on to
Further, the CFI found that Microsoft had not shown an
prevent competitors from publishing a television guide
objective justification for the bundling of Windows and
and failure to license the weekly television listings
Media Player, and that the remedy imposed by the
amounted to an abuse of a dominant position. However,
European Commission was therefore proportionate.
the ECJ confirmed the Volvo decision, holding that “a
refusal to grant a licence, even if it is the act of an
Previous refusals to license
undertaking in a dominant position, cannot in itself
Any discussion about the compulsory licensing of
constitute an abuse of a dominant position”. The ECJ also
intellectual property would be incomplete without
noted that it was clear from the Volvo judgment that the
reference to some of the cases that underpin the law in
exercise of an exclusive right by the proprietor may, in
this area, and which the CFI applied or considered in the
exceptional circumstances, involve abusive conduct. The
Microsoft Case. The case law is younger than might be
ECJ held that in this case there was abusive conduct since
thought and the first case that really highlighted the
the following exceptional circumstances were present:
issues was the Volvo Case in 1988.
•
There was no actual or potential substitute for a
Volvo
weekly television guide covering all programmes –
In Volvo the ECJ considered the refusal by Renault and
viewers had no choice but to buy each station’s
Volvo to license registered designs to competitors. The
weekly guide and the broadcasters’ refusal to license
ECJ held that the refusal by the owner of a registered
prevented the appearance of a new product (ie, a
design to grant a licence, even in return for reasonable
comprehensive
royalties, was not in general an abuse of a dominant
programmes), which the broadcasters did not offer
position, although it could be abusive in particular
circumstances. The ECJ stated that such a refusal would
to
television
There was no justification for such refusal in either
television broadcasting or publishing television
dominant position if:
magazines; and
•
•
guide
and for which there was potential consumer demand;
•
be considered abusive on the part of an undertaking in a
•
weekly
By their conduct, the broadcasters had reserved to
there was an arbitrary refusal to supply spare parts to
themselves the secondary market of weekly
independent repairers;
television guides by excluding all competition on
the prices for spare parts were fixed at an unfair level;
that market.
or
•
there was a decision to stop producing spare parts for
Bronner
a particular model even though cars of that model
In 1997 the ECJ considered a refusal by an undertaking in
were still in circulation, provided that such conduct
a dominant position to supply a rival undertaking with
was liable to affect trade between member states.
services indispensable to carrying on its business. This
case involved a dispute between Oscar Bronner, the
This decision was made in the early days of the
publisher of a newspaper, and Mediaprint, a large
competition-intellectual property tug of war and the
newspaper publisher and operator of a newspaper home
wider effect of the ruling remained unclear since it was a
delivery scheme. Bronner wanted to use Mediaprint’s
single
designs.
distribution scheme and Mediaprint refused. The ECJ
Nevertheless, the foundations were there and this
ruled in favour of Mediaprint on the grounds that the
decision has frequently been referenced by the courts.
distribution network was not an essential facility – that
decision
regarding
registered
is, it was not necessary for Bronner to utilise the home
Magill
delivery network in order to offer its product on the
In the Magill Case in 1995 the ECJ further explored the
market. The ECJ held that for there to have been a finding
circumstances in which the exercise of IP rights could be
of abuse, the following exceptional circumstances would
an abuse of a dominant position contrary to Article 82.
have had to have been met:
This case concerned weekly television listings in Ireland
and the United Kingdom. Magill tried to publish a
•
The refusal of the service would have to be likely to
comprehensive weekly guide covering all programmes,
eliminate all competition in the daily newspaper
but broadcasters obtained injunctions preventing
market on the part of the person requesting the service;
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Cross-border: Europe Kirkland & Ellis International LLP
•
•
Such refusal would have to be incapable of objective
A new vista?
justification; and
The CFI’s decision in the Microsoft Case leans on the
The service would have to be indispensable to
European
carrying on that person’s business for lack of any
establishing that the exceptional circumstances identified
actual or potential substitute for that home delivery
by the ECJ in Magill and IMS were present in the
scheme.
Microsoft Case, the European Commission considered
Commission’s
2004
decision.
After
whether, on the basis of the alleged impact on its
As the exceptional circumstances set out in the Magill
incentives to innovate, the justification put forward by
Case had not been met, there was no scope for finding
Microsoft
abuse. At this point, the Magill criteria were starting to
circumstances. The European Commission thought that
look like a good test to apply to enable a court to consider
Microsoft had not put forward any justification that
whether there was an abuse of a dominant position in the
would prevail over the exceptional circumstances. The
context of a failure to license.
CFI agreed with the European Commission and held that
might
prevail
over
the
exceptional
Microsoft had not demonstrated the existence of any
IMS
objective justification for its refusal to disclose the
In this case, IMS was collecting data on pharmaceutical
interoperability at issue and, since the exceptional
sales and, based on its copyright in the database it
circumstances identified by the ECJ in Magill and IMS
had developed, refused to grant a licence to allow
were present in this case, Microsoft was obliged to
a competitor to use its database. The ECJ held that three
disclose this information.
cumulative conditions had to be met in order for the
It is clear that the decisions in Magill, IMS and now
refusal by an undertaking in a dominant position to
Microsoft have gone a long way towards outlining the
grant a licence for copyright to constitute an abuse of
exceptional circumstances in which the European
a dominant position – namely, that such refusal:
Commission or the courts will grant a compulsory
licence to intellectual property. However, each case will
•
prevented the emergence of a new product or service
for which there was a potential demand;
nonetheless depend on its facts.
The last three years have shown that the European
•
was without objective justification; and
Commission has an appetite to review how IP rights
•
was capable of eliminating all competition on the
owners use (or may abuse) these rights. The European
relevant market.
Commission’s investigation in the Microsoft Case was only
the start. The conduct of a number of large technology and
Therefore, the IMS judgment confirmed that the
pharmaceutical companies is the subject of current
exceptional circumstances set out in Magill all had to be
investigations. Rights holders would be well advised to be
met, but left open the question of what constitutes a new
aware of the circumstances in which the courts may force
product or service – a question now clarified by the
them to grant licences and hold that they have abused a
Microsoft decision.
dominant position through the use of their IP rights.
Pierre-André Dubois heads the firm’s UK IP and competition group. He
obtained a first-class LLB (honours) from the University of Montreal in 1984.
His practice covers all aspects of IP and IT law, as well as UK and EU
competition law. PLC Which Lawyer? Global 50 named him as a leading
lawyer in 2005, 2006 and 2007, while he was named as a leading lawyer
by the Legal 500 (UK edition 2003) and Global Corporate Counsel (2002).
Pierre-André Dubois
Partner, London
Tel +44 20 7469 2020
United Kingdom
Shannon Yavorsky is an associate in the IP and IT group. Ms Yavorsky
obtained a BA in comparative literature from the American University in Paris
in 1997, an MPhil (honours) from Trinity College, Dublin in 1999 and her
legal practice qualification from BPP Law School in London in 2003. Her
practice covers all aspects of contentious and non-contentious IP and IT law.
Shannon Yavorsky
Associate, London
Tel +44 20 7469 2141
United Kingdom
29/11/07
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Jochen Bühling
Krieger Mes & Graf v der Groeben
The interface between patent
enforcement and technical standards
Technical standards have become important in many
to market conditions. De jure standards are designed to be
fields of technology. In certain areas, standards are
widespread and to be made public so that everybody can
considered so dominant that the technology cannot be
use them. Often, such a standard is established with the
used without also using a technical standard. Examples
cooperation and consensus of all interested parties. In
include
mobile
contrast, a de facto standard is frequently the property of
communications (eg, the Global System for Mobile
the company or companies which developed the
Communications and the General Packet Radio Service) or
technical specification. Such standards are much more
those in the field of data compression (eg, the standards
exclusive and may have a tendency to exclude
set up by the Joint Photographic Experts Group).
competition by forcing consumers to use their technology.
the
well-known
standards
for
However, numerous other technologies have also created
In practice, however, the focus is on de jure standards, and
technical standards which influence the development and
this chapter considers only de jure standards.
use of that technology and which may be less visible to the
At first glance, patents and technical standards
end user. This chapter considers how patent rights and
appear contradictory in the sense that the grant of a
their enforcement can be interlinked with technical
patent conveys exclusive rights to its owner, whereas a
standards, and the conditions to be met when patents are
technical standard is intended to be used by as many
enforced against third parties which use the patented
people as possible. Thus, the underlying philosophies of
technology in connection with the implementation of
patents on the one hand and standards on the other seem
technical standards. It is based on practical experience
to be irreconcilable. In particular, potential conflicts may
gained in such cases, which are generally litigated on a
arise when a patented technology is implemented in a
cross-border basis. It also shows the complexity of the
standard. Nevertheless, the mere fact that a patent may
issues involved and the constant need to focus on multiple
be necessary or even essential for a standard does not
aspects of a case at the same time.
automatically make the standard impractical or the
patent unenforceable. In practice, most standardisation
Background
bodies have set up rules to avoid such conflicts. These
Technical standards are designed to ensure compatibility
rules (also known as patent or IP policy) generally
and interoperability between the products of different
provide that patent rights may not be exercised in a way
(often competing) manufacturers or suppliers. In
that would exclude third parties from using the standard.
principle, this will lead to enhanced competition, since a
However, this does not give third parties carte blanche to
supplier’s access to the market is enabled provided that
ignore existing patent rights under the roof of a technical
it follows the relevant standard.
standard.
Two types of standard can be distinguished: ‘de jure’
standards and ‘de facto’ standards. Whereas the first
Infringement of patent rights
category can be defined as a technical specification
In principle, the basis for the assessment of patent
approved by a national or international recognised
infringement through a third party using a technical
standardisation body for repeated or continuous
standard does not differ from ordinary patent
application, the latter category comprises technical
infringement cases. This applies equally to the conditions
specifications which have been developed by one or
of an infringing act and to potential defences of the third
several companies and which have become prevalent due
party.
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The patented teaching, as laid out in the claims, forms
must also be provided. This evidence often comes from
the basis for the scope of protection. This scope of
advertising materials or other statements issued by the
protection is not influenced by an existing technical
infringer which indicate the compatibility of the product
standard that implements the patent. In particular, it
with the specific standard. Whether additional tests of
should not be assumed that patent protection might be
the product are necessary depends on the patent, the
narrower as a result of the standardisation process. It
standard and the relationship between the two.
could not be argued that the scope of protection is
If the patentee chooses to provide such evidence of
limited in that a use of the patent which complies with
the infringement, it will also need to map the patented
the standard would no longer be covered by the patent.
teaching in regard to the standard – that is, the patentee
Claim construction follows general rules. If a certain
will have to show how the standard has implemented the
technology offered by the third party falls within the
patented teaching and how this is reflected in the
scope of the patent, it must be considered as a potential
standard documents. It is crucial to show that the
infringement of that patent, irrespective of whether it is
standard requires the use of the patent and that it does
also covered by the standard. Unless the third party can
not provide other options to be used which are not
claim a right to use the patent, it must be treated as an
covered by the patent. If such options exist in the
infringer, in the same way as any other infringer.
standard, additional evidence will be required. However,
However, in some cases the technical standard may serve
if the patentee can show that the patented teaching is
as a means to interpret the meaning of the claim. It can be
mandatory for the use of the standard, the defendant will
read as what is known by “the man skilled in the art”.
have to specify what other options should be available
Obviously, the priority date of the patent must be
under the standard and how these would circumvent the
carefully
claim
patent. A general statement by the defendant or the mere
construction is based on that date. If the standard is
denial of the necessity of the patent in regard to the
published only at a later stage, it may not be considered.
standard will not be sufficient in litigation.
observed;
in
most
jurisdictions,
It can then be taken into account only if further technical
developments, which are protected by later patents, are
Other defences of the infringer
to be interpreted.
Following the Rambus investigations, which are being
The rules regarding the burden of proof in
carried out by the US Federal Trade Commission and the
infringement litigation are the same as in other patent
European Commission and are pending before various
cases. In general, the patentee has to show that the
judicial bodies, defendants in patent infringement cases
allegedly infringing product makes use of the patented
concerning standard essential patents have developed a
technology in a direct or indirect way (ie, contributory
strategy by which they claim not only that they are
infringement), either literally or under the doctrine of
entitled to a licence, but also that the exercise of any
equivalents, and that it is covered by the scope of
rights under a specific essential patent is unlawful and
protection conveyed by the patent. The third party bears
violates antitrust provisions, so that the patentee should
the burden of proving its defence, including prior user
be blocked from such activity. However, in most cases
rights, exhaustion of patent rights or invalidity. Often the
such arguments are unfounded and cannot lead to the
defendant raises a defence regarding the obligation of the
dismissal of infringement cases. The burden of proof and
patentee to grant a licence – this argument plays a major
substantiation for the defendant is significant and the
role in cases involving technical standards.
mere allegation that exercise of the patent rights violated
It is easier to prove infringement if the patent is
essential for implementing the standard. In such cases,
antitrust law cannot support such arguments without
further evidence.
the patentee can argue that infringement is shown by the
One type of objection, known as patent ambush,
mere fact that the third party’s allegedly infringing
concerns the behaviour of the patentee during the
product can use the standard and that the standard
standardisation process. ‘Patent ambush’ means that the
makes use of the patent which is therefore essential for
patentee actively takes part in the standardisation
the standard. Various criteria and circumstances must be
process and tries to implement the patented technology
observed, depending on whether the patent comprises
according to the standard, while at the same time
method claims, product claims or both. In most
concealing one or more patents that cover that
jurisdictions it is sufficient to show that an infringing
technology from the standardisation body. The purpose
product shares the features of the protected product. For
is to create a standard for which the patents are essential
indirect infringement of a method claim, evidence that
and to assert the patents at a later stage once the standard
the infringing product is intended to use the standard
has been adopted and the market is left without another
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Krieger Mes & Graf v der Groeben Cross-border: Europe
technology option. In such cases, the patentee may be
request has been rejected by the patentee without legal
able to charge higher royalties than it would otherwise
grounds, the use of the patent is unlawful and can be
have been able had it disclosed its patents earlier.
subject to patent infringement litigation. The third
Whether a patent must be disclosed depends first and
party’s offer must be an offer which meets all the FRAND
foremost on the policy of the standardisation body. A
conditions so that the patentee is required to accept it. In
body may specifically require the disclosure of relevant
this context, it must also be borne in mind that, in most
patents or patent applications. However, the policies of a
cases, the terms of a licence are not fixed and depend on
considerable number of standardisation bodies contain
the circumstances – there is no general rule as to when an
no provisions which would make it mandatory to
offer for a licence does or does not fulfil the FRAND
disclose such patents. The reasons for these different
conditions.
policies are manifold. They include both practical
Provided that the defendant has not submitted an
reasons and legal grounds. It may be disputed whether a
offer for a FRAND licence to the patentee that the
patent which has been declared as essential is actually
patentee cannot justifiably reject, the case cannot be
linked
dismissed.
to
the
(proposed)
standard.
Thus,
the
standardisation process might be unduly overburdened
if the body had to check whether a patent was essential
Recommendations
for a standard, to the extent that it would have to give a
A patentee which takes part in a standardisation process
binding opinion regarding that patent with the result
should familiarise itself thoroughly with the patent
that a patent could not be asserted if it had not received
policy of the respective standardisation body. It is crucial
the standardisation body’s opinion. Furthermore, each
to determine the responsibilities and requirements of that
body has a different legal set-up. There are national and
body. This does not necessarily lead to a decision simply
international bodies which comprise different members –
to disclose whatever patents exist. Although the risk of
for example, some bodies admit only national
non-compliance with a policy in cases where a disclosure
standardisation organisations, while others have mixed
has not happened should not be underestimated, the
members. Furthermore, there is no harmonisation of the
other side of the coin must also be considered – the
legal consequences of non-compliance with the bodies’
commitment to licensing the patents. As long as this
policies. The courts must take into consideration various
commitment is clear and unambiguous and includes
options for which, in most cases, the defendant will bear
every essential patent – whether disclosed or not – it may
the burden of proof and substantiation. One option could
be argued that an error in assessing whether a patent
be that the standard would not have incorporated the
should have been disclosed is not detrimental to the later
patented technology had the patentee disclosed the
enforcement of the patent. This includes a thorough
patent earlier. Another option – in many cases the more
evaluation as to the technical relevance of the patents and
realistic one – is that the standard would have remained
their essentiality for the standard, which can be done by
unchanged and the patentee would have had to
an external expert. A patentee may choose this option
undertake to grant a licence under terms in accordance
over using its in-house patent experts in order to
with the policy of the standardisation body. In practice, a
safeguard a privilege which may otherwise not be
patent ambush which leads to dismissal of the complaint
acknowledged for in-house lawyers.
is very difficult to prove.
With regard to licence terms, the policy of the
This leads to the second argument of infringers,
standardisation body must be carefully considered.
which is that they are entitled to receive a licence from
Whereas only a small number of patent pools have fixed
the patentee under at least fair, reasonable and non-
terms for all licensees that take a licence from the pool,
discriminatory conditions (FRAND). Even if the patentee
most bodies keep it open and leave it to the licensors to
has committed itself to such a licence under the
reach an agreement with the potential licensees. These
programme of a standardisation body, the infringer has
arrangements offer more flexibility to the parties of the
no right to use the patent freely without having asked for
licence agreement, but nevertheless require the licensor
such a licence. It is not the duty of the patentee to observe
to consider thoroughly the terms which have previously
the market and to look out for potential licensees. If a
been offered to other licensees in order to treat them
third party wants to market a product which is in
equally. However, the term ‘FRAND’ is not automatically
compliance with the standard and which makes use of a
synonymous with ‘equal’. Whether an offer is sufficient
patented technology, that party will have to request a
to meet the FRAND criteria will have to be assessed
licence under the programme, if available. Unless the
separately in each case.
party has requested and offered to take a licence, and this
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Jochen Bühling was admitted to the Bar in 1992. He specialises in all types
of intellectual property, focusing on patent and trademark law. Mr Bühling’s
practice involves national and cross-border litigation and counselling, including
strategic and licensing issues and mediation. His clients range from
multinational companies to small and medium-sized enterprises, and he has
been involved in a number of cross-border cases around the world, including
litigation concerning patents and technical standards. Mr Bühling is currently
the reporter general of AIPPI.
Jochen Bühling
Partner
Tel +49 211 440 3370
Germany
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JF Bretonnière and Cécile Cailac
France
Online trademark infringement: key
issues before the French courts
Cyberspace has no national borders and challenges the
decisions have taken a different position. A French
characteristic features of trademark rights.
trademark is now infringed only if the website targets the
Trademark rights are limited territorially and the
French public. Thus, the courts now focus on the public
applicable law depends on each national or regional
targeted by the website. The courts have also dealt with
regulation. As a result, the exclusive rights attached to a
a specific type of trademark infringement linked to the
registered trademark granted in a particular country
Internet: the use of keywords by search engines.
cannot be enforced beyond the borders of that country.
This is the principle of territoriality of trademark rights.
Previous criteria: accessibility of the website in France
For example, the owner of a French trademark cannot
A claimant can bring its case before the court where the
prevent the use and/or registration of its trademark by a
trademark infringement occurred.
third party outside France if it does not own foreign
In the case of online trademark infringement, at first
trademarks. Similarly, a company that does not own a
the French courts assumed jurisdiction in all cases where
trademark in France generally cannot prevent its use by
a website reproduced or imitated a French trademark,
third parties in France. A company should apply for a
even if the website was not directed towards the French
trademark in each country or group of countries (using the
public. This rule was based on the fact that the website at
Community trademark) in which it wishes to do business.
issue was accessible from French territory by the French
This chapter analyses the application of the principle
public and was first established in the Payline Case
of territoriality in light of the globalisation of the Internet.
(Nanterre High Court, October 13 1997), which dealt with
Trademarks which previously co-existed peacefully,
the online use of the mark PAYLINE. The German website
covering different territories, now conflict when they are
www.brokat.de offered an online payment service,
used online. The expansion of the Internet has led to
Payline. The term ‘Payline’ also corresponded to a
numerous trademark conflicts.
Community trademark (which has effect in France)
There is no set of codified rules in France dealing with
owned by another company covering identical services.
online trademark infringement. However, the French
The owner of the Community trademark PAYLINE sued
courts have considered this issue and have established
for infringement. The Nanterre High Court considered at
criteria to determine the circumstances in which use by a
that time that, the Internet being ‘essentially’ worldwide
company of a third party’s French trademark on the
and accessible in France, the damage took place in France.
Internet constitutes trademark infringement in France.
This position was reiterated by the Supreme Court in
The case law on this question has evolved. At first, the
Castellblanch v Sté Champagne Louis Roederer (December 9
French courts considered that the mere visibility in
2003). This case involved the use on a Spanish website by
French territory of a website reproducing or imitating a
Castellblanch of the trademark CRISTAL in relation to
French trademark gave jurisdiction to the French courts
sparkling wine. The trademark CRISTAL was also
and constituted trademark infringement, no matter
registered in France by Roederer to cover sparkling wine.
whether the website targeted the French public.
If Castellblanch had not used this trademark online, the
As this would lead to the conclusion that a French
litigation would not have occurred and both companies
trademark could potentially prevent any use of the same
would probably have continued to use the CRISTAL
or similar trademark on any website (including foreign
mark in separate countries.
websites not targeted at the French public), recent court
In this case, the court stated that the mere accessibility
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France Baker & McKenzie SCP
of the Spanish website in France was sufficient to
Language
substantiate the jurisdiction of the French courts, even
The language used on the infringing website is
though the Spanish sparkling wine bearing the
significant in deciding whether the site targets customers
trademark CRISTAL was not sold in France. The court
in France. The use of a foreign language would indicate
dismissed all Castellblanch’s claims relating to the fact
that the website owner did not intend to operate in
that the website was directed not at the French but rather
France. As a result, in such cases the courts would find
the Spanish public, since its products were not sold in
there to be no trademark infringement in France.
France.
This decision inferred that the visibility of the offer in
The need to take into account various criteria in
addition to the language of the website was confirmed in
Hugo
Boss
France caused actual prejudice to the French trademark
the
holder in France. In the same case, the Court of Appeal
reproductions of the trademarks HUGO BOSS, BOSS and
considered the mere reproduction of the French
BOSS HUGO BOSS were visible on a foreign website.
trademark CRISTAL on the Spanish website in order to
The Supreme Court held that the French public were not
promote the same products to constitute trademark
targeted by the foreign website since the website was in
infringement, even though the Spanish products were
German and no products were made available to the
not sold in France.
French public. In addition, a single use of the French
decision.
In
that
case,
several
These conclusions contradicted the principle of
word ‘Bienvenue’ was insufficient grounds to hold that
territoriality of trademarks, according to which
the website targeted the French public. As a result, the
trademark protection should be limited to the territory it
court held that the defendant had committed no
covers. Indeed, under this ruling a trademark owner
trademark infringement in France.
could request the French courts to order a defendant to
However, the language criteria may lead to some
cease all online use of an infringing trademark if its
contested decisions. For example, Adecco was held liable
website was accessible in France. Such case law would
for trademark infringement in France even though the
have a global impact on the Internet and would afford
infringing trademark was reproduced in French on a
French trademarks worldwide online protection.
Canadian website originating from Quebec (Synergie v
However, in light of the consequences of these
Adecco, Paris High Court, September 14 2004). According
decisions for the principle of territoriality of trademarks,
to the Quebec French Language Services Act, Quebec
in 2005 the Supreme Court overruled them, holding that
companies with more than 50 employees must use the
the mere visibility of a website in France should not
French language in their communications. However, in
automatically give the French courts jurisdiction to hear
this case it appeared that the website targeted not the
the case and should not lead them to qualify as
French public, but rather the Quebec public, as the
trademark infringement mere use of a similar trademark
phrase ‘Groupe Adecco Quebec’ was used on the website.
on the Internet.
More recently, the Supreme Court has changed its
Availability
jurisprudence concerning the criteria for online
The availability of products in France is now considered
infringement of French trademarks.
a decisive element. Trademark infringement occurs in
France if the website using the contested trademark
Recent evolution: a website targeting
offers products and/or services for sale within the
the French public
French territory.
Following the Supreme Court decision in Hugo Boss v
This was the case in the Marie Claire decision
Reemtsma (January 11 2005), the French courts now
(September 27 2006). Company Marie Claire Album
consider that the mere accessing of a website from France
instituted an action for trademark infringement against
is insufficient grounds to decide either that the French
two Spanish companies which used the trademark
courts have jurisdiction to hear the case or that
MARIE CLAIRE on their website; however, only one of
trademark infringement has been committed in France.
them was held liable for the infringement. Spanish
The French courts now require the claimant to prove that
company Aznar was using the trademark MARIE
the website targets the French public.
CLAIRE on its Spanish website www.aznar.es. The court
In determining whether the website targets the
considered that Aznar committed no trademark
French public, the courts will consider various criteria
infringement in France as no products were sold in
and, in particular, the language of the website and
France through the website. However, Marie Claire
whether the website offers products for sale in France
Album did successfully prove that such products were
using the infringing trademark.
sold in France by a second Spanish company, Almacenes
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Baker & McKenzie SCP France
Mariola, through its website www.almacenesmariola.com.
As a consequence of such recent decisions, the
X, Y and Z” – in order to create virtual borders on their
websites.
determination of online trademark infringement in
France is now more objective.
Infringement through sponsored links
The courts may use further criteria to determine
Referencing of websites in search engines and web
whether trademark infringement has been committed in
browsers is the best way to increase the visibility of
France, including:
companies. Thus, website operators frequently attempt
to use trademarks in order to be referenced as a
•
•
•
the use of the contested trademark on a website
sponsored link on search engines such as Google.
registered under the domain ‘.fr’ (although in itself
Along with its search engine activities, Google offers
this is insufficient to find that infringement occurred
a system of paid sponsored links, which allow
in France);
advertisers to display a commercial link pointing to their
the inclusion of prices in a particular national
websites in the top right-hand corner of the screen along
currency (eg, euros); and
with the search results.
the inclusion of a French address or telephone
In
order
to
improve
the
relevance
of
the
number for contacts or the option to order products
advertisements, Google has provided its clients with a
in or from France.
specific tool – a keyword generator called Google
Adwords. This system suggests relevant keywords and
The French courts have applied these principles to
various types of website.
International companies know how hard it is to find
allows the advertiser’s commercial links to be displayed
whenever internet users enter one of the keywords
bought by the advertiser.
and adopt a trademark that is available in most countries
French company Louis Vuitton Malletier noticed that,
of the world. If they identify a prior trademark in one
when one entered the words ‘Louis Vuitton’ or ‘LV’ into
country, they can decide to modify their trademark only
Google, under the sponsored links banner appeared
in that country in order to prevent the risk of
advertisements for websites offering counterfeit Louis
infringement in that country. However, it is difficult to
Vuitton products, meaning that the counterfeiters had
prevent the risk of infringement when they use
chosen the keywords ‘Louis Vuitton’ and ‘LV’ in Google
trademarks on websites which are visible in every
Adwords.
country. The French courts have admitted that companies
Louis Vuitton Malletier began legal proceedings
may virtually organise their websites in order to prevent
against Google Inc and Google France in the Paris courts,
the risk of infringement in a particular country.
and in 2006 the Paris Court of Appeal ordered Google to
In L’Oréal v Buttress (Supreme Court, July 10 2007)
pay Louis Vuitton Malletier €300,000 for trademark
Buttress, the owner of the French trademark NUTRI-
infringement, unfair competition and misleading
RICHE, brought an infringement action against L’Oréal
advertising.
for use of the same trademark on its website. The
Google France and Google Inc claimed that the use of
Supreme Court dismissed the action. L’Oréal had
the key words ‘Louis Vuitton’, ‘Vuitton’ and ‘LV’ did not
identified the existence of the prior French trademark
qualify as trademark infringement insofar as these
NUTRI-RICHE as owned by Buttress and had decided to
keywords, as used on Google Adwords, did not relate to
adopt the same trademark in all countries except France,
specific products and services. However, the court
where it had adopted the trademark NUTRI-INTENSE.
considered that the reproduction and use of these words
L’Oréal also used these trademarks on its website in a
by the keyword generator created by Google France and
manner designed to prevent any risk of infringement on its
Google Inc were directly related to the products
website. It separated the French part of the website from
designated by the trademarks and qualified as
the rest of its worldwide website: the French part of
trademark infringement.
L'Oréal's website referred to the trademark NUTRI-
In this context, the court ruled that Google France and
INTENSE and the rest of the website referred to the
Google Inc should have ensured, before offering their
trademark NUTRI-RICHE. Furthermore, no products
advertising services, that they had the relevant technical
under the trademark NUTRI-RICHE were sold to the
means to avoid unlawful use of registered trademarks.
French public. Therefore, the court held that L’Oréal did
The court considered that this was even more true given
not infringe Buttress’s NUTRI-RICHE trademark in France.
that the conception and keyword generator tool
Companies can also consider including disclaimers –
constituted a strong incitement towards trademark
for example, “This product is not available in countries
infringement.
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France Baker & McKenzie SCP
However, when Google, through its keyword
proposes a registered trademark as a keyword.
generator, suggests keywords including trademarks and
However, according to this last decision, Google is
sells these keywords, it uses them not in relation to the
still considered liable on the grounds of the general civil
products and services offered by the Google Adwords
tort liability. Furthermore, a company using Google’s
account owner, but in relation to an advertising service.
sponsored links service which decides to use the
The French High Court has recently diverged from
registered trademark of another company as a keyword
this ruling in similar cases, holding that Google cannot be
may be liable for trademark infringement and unfair
liable for trademark infringement if Google Adwords
competition.
Jean-François Bretonnière is a member of the Paris Bar and heads the IP
practice in the firm’s Paris office. He works on both contentious and noncontentious national and cross-border IP issues. Specific areas of his practice
include the acquisition, protection, enforcement and exploitation of IP rights
(trademarks, patents, designs and copyright). He has practised in Asia and
the European Union and works on projects in both the European Union and
the Asia-Pacific region concerning the protection and exploitation of IP assets.
JF Bretonnière
Partner, Paris
Tel +33 1 44 17 53 03
France
Cécile Cailac handles a wide range of IP law, including IP litigation before the
French courts, IP litigation, trademark prosecution before the OHIM and the
French Trademark Office, international portfolio management and the drafting
and negotiation of various IP-related agreements. She holds a master’s
degree in business law from the University of Paris I – Panthéon Sorbonne
and a master’s degree in IP law from the University of Paris II – Panthéon
Assas. She was admitted to the Paris Bar in 2005.
Cécile Cailac
Lawyer, Paris
Tel +33 1 44 17 59 19
France
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Axel Verhauwen
Germany
The MPEG-2 Case: Dusseldorf courts
lead the field in patent expertise
In July 2005 10 of the world’s leading companies in the
concluded that the offending data carriers constituted a
field of electronics and a US university filed 15 patent
direct product of a patent-protected video compression
litigation actions against a major German DVD replicator
method, and accordingly their manufacture/production
on the grounds that the German parts of 15 European
constituted patent infringement under the applicable
patents were essential to implement the MPEG-2
German law (Section 9(2)(3) of the Patent Act),
technology
harmonised with European law (Article 64 (2)).
standardised
by
the
International
Standardisation Organisation and the International
According to Section 9(2)(3) of the Patent Act,
Electrotechnical Commission. The plaintiffs had helped
products directly manufactured on the basis of a
to develop the leading worldwide video compression
patented process enjoy the same scope of protection as
technology used for the broadcast of almost all digital
products constituting the subject of a product patent
television signals and for the mass dissemination of
pursuant to Section 9(2)(1) of the act. The background to
digital television signals via DVDs. The plaintiffs and
this regulation is the legislature’s concept that the owner
others offer licences for the patents essential to
of a process patent is unable to exploit appropriately the
implement this technology in a fair and non-
economic value of the invention to which it is entitled if,
discriminatory manner to any entity making use of the
in addition to the offering and use of the process, it is not
MPEG-2 technology.
also exclusively assured of the business using the
The actions were filed with the Dusseldorf District
Court, which distributed the 15 cases between the two
products produced directly through the process (Patent
Act, Section 9(2)(2)).
patent litigation chambers of the court. Nullity actions
The court concluded that the process products under
corresponding to 10 of the 15 patent litigation actions
consideration were not video signals or data within the
were filed by the defendant with the Munich Federal
meaning of purely virtual ideas without any physical
Patent Court as the competent court for validity issues in
embodiment. Although the coded signals may be of a
Germany. Less than 18 months after filing, the Dusseldorf
transient, fleeting or ephemeral nature, to the extent that
District Court had dealt with all the questions of patent
they are deleted once the further coding steps have taken
infringement and antitrust law raised by the plaintiffs and
place, this does not mean that the result of the encoding
the implications of the corresponding nullity actions, and
steps would be lost and would not retain an enduring
issued verdicts which the plaintiffs enforced immediately.
materialisation. Rather, the opposite is the case: every
When assessing the questions of infringement, the
encoded picture is an external expression of the coding
judges compared the scope of protection of the patents
according to the inventions. Therefore, the coding
for the MPEG-2 video compression technology with the
method of the patents at issue acquired a tangible
standard documents specifying the corresponding
materialisation as a foundation for the further encoding
MPEG-2 technology (around 400 pages of technical
steps set out by the MPEG-2 standard. It was a recording
specifications).
structure with physical properties that improve the
optical exploitability of the data which it stored (see
Data carriers
Aufzeichnungsträger, Federal Supreme Court).
In the course of proceedings the court addressed
According to the invention, the data and/or recording
important legal questions pertaining to the protection of
structures are data units requiring storage capacity
inventions relating to information technology. It
which are physically retained on the relevant storage
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Germany Krieger Mes & Graf v der Groeben
medium by means of storage units and which exist only
the input data (the primary source data). In comparison
because of the storage space. The recording carrier media
to the latter, their volume and/or the required storage
present a spatial and physical structure caused by
space on a recording carrier medium is reduced by up to
different magnetisation states, in case of a magnetic
90 per cent.
storage medium, or by certain depressions and
Ultimately, the court confirmed that the data carriers
elevations in the track, so that the encoded and/or
at issue in the litigation were direct products of the
compressed data structure is physically present in the
process according to the invention.
recording carrier medium. The development of this
physical data and recording structure corresponds only
Immediacy
to the meaning and purpose of the encoding method as
When the product at issue relates to an object obtained by
set out by the inventions, which assumes decoding of the
the completion of the final step of the protected process,
data encoded according to the invention on the receiver
the court must confirm that there is an immediacy
side. In order to enable this decoding to take place
between the process and the product, as defined in
without errors, a materialisation and/or perpetuation of
Section 9(2)(3) of the Patent Act. Aside from this purely
the data encoded and compressed according to the
temporal chronological approach, immediacy also exists
amendment is required. In other words, the encoding
when the product at issue, although not the result of the
must not be of a merely intangible or transient, fleeting or
final process step, is rather an intermediate product that
ephemeral nature, since otherwise reproduction of the
has been subject to further processing measures both
video film on a given device would not be possible. How
during and subsequent to the patent protected process,
the data and recording structure and/or the magnetically
provided that:
active or inactive and/or optically active and/or inactive
areas are to be read ultimately depends on the technical
•
convention used.
The court also explained in its findings that a method
the patented process materially contributed to the
creation of that product; and
•
the created product did not lose its characteristic
according to the MPEG-2 standard is not only a work
properties and its independence as a result of those
method, but also a production method. The process or
further processing steps.
method according to the invention sets out how a
finished product that is different from a specified starting
Of decisive importance is the retention of the identity
product is derived therefrom by means of the process
conferred on the product by the manufacturing process
steps.
set out by the patent.
Therefore, it was not the motion picture stored on a
The MPEG-2 video data is permanently materialised
data carrier as such that had to be taken into
by means of a storage step following the end of the
consideration. It and/or its contents were not the subject
process sequence. Since neither the transformation into a
of the patents at issue, so it was irrelevant that
format for storage itself nor the storage on the recording
“according to the customary view, the product – both
carrier media led to further processing or modification of
before and after compression according to the patented
the data encoded by means of the process in accordance
method – is the stored motion picture”.
with the inventions, so that such data retained – without
Rather, the technical specifications of the patents at
limitation – its characteristic properties brought about by
issue referred to the encoding and/or compression of the
the process, this identity connected with the compression
stored video data. When using the patented process or
process is also preserved in the DVDs. The properties of
method, the data from the video film transferred onto the
the encoding and compression processes according to the
computer goes through various compression steps in
invention are not lost as no independent, autonomous
order to meet the MPEG-2 standard. The result of the
new product can be discerned.
compression is reduced data. It is therefore indisputable
Although the transfer and storage of data took place,
that the primary source data originating from an
the court confirmed that this happened without the
analogue or digital video film is encoded and
modification or processing of the picture data already
compressed in an encoding or encoder plug-in card
encoded under the MPEG-2 standard; in fact, only a
during the process according to the invention. This goes
simple change of storage medium occurred. The
hand in hand with the modification and processing of the
perpetuation and/or materialisation of the data and
initial data and recording structure, including the
recording structure obtained after performing the
reduction of the required storage capacities. The output
process took place on a plastic or polycarbonate disk
data available after the process is therefore different from
instead of on other carriers, but always preserved the
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Krieger Mes & Graf v der Groeben Germany
existing structures. The technically decisive data and
case pertained to a product stamper, whereas the MPEG-
recording structure was one and the same. The exchange
2 Case pertained to product information – although both
of the substrate should be seen only as different
demonstrated
packaging which does not destroy the connection
implementing invention methods.
the
properties
generated
when
between the process and the product (see Signalfolge,
Federal Supreme Court).
Comment
In this unique patent litigation case the German courts
Comparison to UK case
confirmed their leading position in the field of patent
The findings of the Dusseldorf District Court echoed the
litigation: the case was considered by eight judges at the
findings of the UK Court of Appeals in the Compact Disk
Dusseldorf District Court as the first instance court. At
Case. In that case the claims asserted related to a method
first instance, between 600 and 800 patent cases are
for the production of a CD stamper. The Court of
handled each year, with each case playing a part in
Appeals confirmed the first instance decision of Judge
building up the courts’ unequalled knowledge of legal
Aldous that a CD did not constitute a direct product of
and technical questions in the field of patent litigation.
the patented method. The invention in the case related to
Many global players, particularly in the fields of
a method for the physical assembly of the master disk,
electronics and life sciences, use the Dusseldorf courts for
and not a method to generate the information to be
cases with multinational backgrounds.
stored on the master disk which, apart from physical
The courts’ qualifications in regard to patent litigation
assembly, had not lost its characteristic properties and its
mean that Germany is one of the most interesting venues
independence as a result of further processing steps such
for patent disputes in the world.
as the pressing of CDs or DVDs. In other words, the UK
Axel Verhauwen was admitted to the Bar in 1996 following studies in
Germany and abroad. He joined Krieger Mes & Graf v der Groeben in the
same year and his practice focuses on patent litigation.
Mr Verhauwen gratefully acknowledges the contributions of Gottfried Schüll
of Cohausz & Florack when jointly working on the MPEG-2 Case.
Axel Verhauwen
Partner
Tel +49 211 44 03 370
Germany
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Michael Lantos
DANUBIA Patent & Law Office LLC
Hungary
Trademark oppositions: extending
protection against bad-faith
registrations
This chapter considers two aspects of trademark
•
oppositions in Hungary. The first part deals with the
opposition process, which was introduced only upon
a mark which is identical to an earlier mark for
identical goods or services;
•
a mark which the public could confuse with an
Hungary’s accession to the European Union. The second
earlier mark due to the identity or similarity of the
part considers the problem that although filing a
mark and/or the identity or similarity of the goods or
trademark application in bad faith constitutes absolute
services;
grounds for cancellation, during normal examination
•
in the case of different goods or services, a mark
proceedings the Patent Office is rarely able to determine
which is identical or similar to an earlier mark that is
whether the application has been filed in bad faith.
well known in Hungary, provided that use of the
applied-for mark would damage or constitute unfair
use of the well-known mark;
Status of oppositions
•
Standing
An opposition may be filed by the owner or user of
earlier rights in the trademark. Article 61/B(1) of the
a mark which damages the rights of an earlier user of
the mark;
•
Trademark Law lists four categories of person who can
a mark which is identical or similar to a mark that
expired less than two years previously for identical
file an opposition:
or similar goods and services; and
•
an application for a mark which was made by the
representative or agent of the true owner.
•
the owner or registered user of the earlier mark;
•
under Article 5(1), owners of other rights where the
requested mark:
Burden of proof
•
injures the other party’s personal rights; or
If the opposition relates to an earlier identical or similar
•
collides with the other party’s mark;
mark, the registration and application documents of that
•
an earlier user under Article 5(2)(a); or
•
the
owner
of
representative
the
or
original
agent
filed
right
the
earlier mark must be included in the opposition. Proof of
its
use must be submitted (eg, Customs documents, bills,
trademark
inventories or advertisements), as well as any other
where
application (committing an injury under Article 6).
documents (eg, pictures or certificates) necessary to
establish the opposition.
The Patent Office cannot file an opposition of its own
accord.
The filer of an opposition must prove its standing
In cases of similarity or danger of confusion, the
parties are free to use any available evidence. An opposer
relying on earlier rights may be required to provide
under one of the above grounds.
evidence of use under Article 18 of the Trademark Law.
Opposition grounds
Decision
Oppositions can be based on one or more of the grounds of
If the opposition is upheld, the decision may prevent
rejection set out by Articles 4 to 6 of the Trademark Law.
either all use of the mark or only use in regard to certain
The law provides that the following marks can be opposed:
goods. However, in the majority of cases the opposition
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DANUBIA Patent & Law Office LLC Hungary
is either fully approved or completely rejected.
Procedures before the Patent Office are governed by
During the proceedings the parties may settle and the
the general rules of civil administration and the Civil
settlement cannot be overruled by the Patent Office. Such
Procedure Law governs oppositions procedures before
settlements often voluntarily limit the list of goods for
the courts. The decision of the Budapest Metropolitan
which registration is sought.
Court is not final and may be appealed to the
Metropolitan Appeal Court. At each instance, court
Opposition and cancellation procedures
proceedings can take up to two years.
Initiating procedures
Following publication of a trademark, there is a three-
International trademarks
month period in which an action for cancellation or
The opposition rules discussed here also apply to
opposition can be filed. To oppose a trademark, the
international applications under the Madrid Agreement
opposer must file a request for opposition at the Patent
and Protocol. The opposition period commences upon
Office within the prescribed time period.
national publication of the trademark.
Following the expiration of the opposition period, the
Patent Office sends a letter of opposition to the rights
Observation proceedings
owner and sets a time limit for its response. Parties can
As oppositions are based on relative grounds only, before
submit arguments and counter-arguments in regard to the
the registration of a mark any party can file observations
opposition. If several oppositions are filed, the Patent
against a pending trademark application stating that the
Office deals with all oppositions in a common proceeding.
application fulfils one or more of the absolute grounds
The Patent Office can decide on an opposition with or
for rejection. Such observations are not part of the official
without a hearing – although if any of the parties
proceedings; however, as files are publicly available,
requests a hearing, one must take place. A three-member
parties can file further comments on the applicant’s
Patent Office panel decides such cases.
response to the observations.
The three-month time limit for filing oppositions
The Patent Office must consider the observations and
cannot be extended. However, the respondent may apply
take them into account in its decision. Often the
for an extension of between one and three months of the
observations and the opposition run simultaneously.
time it has in which to respond to an opposition or
cancellation action. A maximum of three extensions can
Filing in bad faith
be granted.
It is a generally accepted principle that applications filed
During the opposition proceedings, the parties can
in bad faith do not merit registration and, if such an
choose how to substantiate their arguments. They may
application is registered, the trademark should be
question the other party’s arguments and/or submit
cancelled or invalidated.
counter-arguments.
Filing a trademark application in bad faith can be
divided into several groups of behaviour; however, there
Decisions
are no uniform criteria to establish such behaviour. This
The length of time needed for opposition proceedings
chapter does not intend to analyse the different types of
varies depending on how complex the case is. It usually
bad-faith filing or how to establish which cases fall
takes between one and two years for the Patent Office to
within which groups of behaviour.
reach a decision.
A three-member panel is formed for each proceeding
The following is a non-exhaustive list of types of filing
in bad faith:
and the decision is reached by majority vote of the panel.
Following the decision of the Patent Office, the parties
•
have 30 days to appeal. The appeal, known as a petition
to change a decision, should be addressed to the
The applicant filed a mark even though it knows that
other parties have a right to the mark;
•
The applicant filed a mark even though it knows or
Budapest Metropolitan Court, but filed at the Patent
should know that other parties have a right to use the
Office.
mark, and thus that no exclusivity can be claimed for
Opposition decisions are published on the Patent
Office website. Costs may be awarded as part of the
the mark;
•
The mark is well known in a country or a group of
decision. Such costs are determined according to the
countries in connection with certain goods and
Civil Procedure Rules. The parties may either ask the
services and the applicant has filed an application for
panel to determine the costs to be awarded or submit
an identical or similar mark in with the purpose of
evidence as to the costs incurred.
making it difficult for the real owner of the mark to
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Hungary DANUBIA Patent & Law Office LLC
•
•
•
obtain the right to the mark in Hungary;
relative grounds). However, there is no legal means to
The applicant’s attempt to obtain a licence for a mark
prevent registration of an application filed in bad faith;
or brand was rejected and it instead filed an
the public can invalidate a registration obtained through
application in its own name without the brand
filing in bad faith only by instigating cancellation
owner’s permission;
proceedings.
The applicant has filed marks that are well known in
other countries with the intention of selling them to
Hungarian system
the owners of those brands; or
The Hungarian Trademark Law differs slightly from the
The applicant intends to exploit the reputation and
CTM Regulation in that it includes filing in bad faith as
goodwill of a similar mark belonging to another
absolute grounds for rejection by listing this in Article
party.
3(1)(c).
Any one or a combination of these constitutes filing in
regulations governing observations and oppositions are
Under the Hungarian trademark system, the
bad faith.
nearly identical to those under the CTM system;
therefore, the public may file observations against filing
Preventive legislation
in bad faith. However, observations can be used only
In regard to preventive legislation, this chapter considers
once to tackle an allegedly infringing trademark, as the
two legal systems: the Community trademark (CTM)
filer of observations is not party to the proceeding.
system and the Hungarian system (both civil law
The Patent Office must examine all applications even
systems). As the CTM system is harmonised across the
if they have been filed in bad faith. However, in most
EU member states, it can be assumed that similar or
cases filing in bad faith is based on information that is not
identical regulations apply in other EU member states.
available to the public; therefore, the Patent Office is
rarely in a position to examine whether a particular
CTM system
application has been filed in bad faith. It is likely that the
Due to the dubious nature of filing in bad faith, the CTM
difficulties connected with the examination of the bad-
system excludes filing in bad faith from the absolute
faith nature of applications led to the exclusion of filing
grounds for rejection defined in Article 7 of the CTM
in bad faith from the absolute grounds for rejection set
Regulation. In addition, it is not listed in the relative
out by the CTM Regulation.
grounds for rejection in Article 8.
In Hungary, oppositions can be filed by the owners of
Filing in bad faith is not grounds for opposition and is
earlier rights and are limited to relative grounds;
not listed in Article 42 of the regulation. In addition, it
therefore, filing in bad faith does not constitute grounds
does not give rise to observations and is not included in
for opposition.
Article 41.
Apart from the option for the public to file
Only Article 51(1)(b) of the CTM Regulation mentions
observations, the situation in Hungary is similar to that
the concept of filing in bad faith. Under this provision,
under the CTM system – that is, it is not possible to
any party can initiate a cancellation action against a
prevent the granting of a trademark application by filing
registered mark if it can prove that the application was
an opposition even where the opponent knows that the
made in bad faith.
application was filed in bad faith.
This regulation has two key features:
The only way to invalidate a trademark filed in bad
faith is to initiate a cancellation action.
•
•
Filing in bad faith is neither absolute nor relative
grounds for rejection; and
Suggested solutions
The public cannot prevent the granting of
Of all the controversial issues surrounding trademark
applications filed in bad faith since such behaviour
applications filed in bad faith, the most problematic is the
does not give cause to either observations or
fact that the public (including interested parties) cannot
oppositions.
prevent the registration of a trademark even if there is
clear evidence that the application was filed in bad faith.
The second feature is of particular interest because the
Therefore, it would make sense to add filing in bad faith
public or interested owners of earlier rights can prevent
of an application to the existing grounds for opposition.
the granting of a CTM application by filing either
Filing in bad faith is neither absolute grounds nor
observations (due to non-compliance with absolute
relative grounds for rejection, but rather lies somewhere
grounds) or an opposition (due to non-compliance with
between the two. In certain cases only the interested
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DANUBIA Patent & Law Office LLC Hungary
parties know and can prove that a particular trademark
behaviour is closer to absolute grounds.
application was filed in bad faith (ie, where a contract has
The interest of the general public in preventing the
been broken or a request for a licence to use has been
registration of trademark applications filed in bad faith is
rejected, and the potential licensee has opted to file the
greater than the uncertainty that would arise from the
application itself). In such situations neither the Patent
dubious nature of such applications, as it cannot be
Office nor the general public can prove that a particular
clearly decided whether filing in bad faith constitutes
application was filed in bad faith. By adding filing in bad
more absolute grounds than relative grounds.
faith to the grounds for opposition, the party whose
If filing in bad faith is added as grounds for
rights have been damaged by the filing in bad faith
opposition, there would be no reason to restrict the
would be able to bring an opposition proceeding to
persons who may file an opposition. If this proposal is
prevent registration of the filed application.
too liberal, a reasonable compromise would be to allow
In other instances, a filing in bad faith is obvious only
to certain groups of consumers, and the bad-faith
Michael Lantos holds a BSc (1972) and an MSc (1967) from Budapest
University of Technology and Economics. He joined the firm in 1972 and is
a registered Hungarian and European patent attorney. Mr Lantos is the
author of numerous IP articles in both Hungarian and foreign periodicals,
and is the Hungarian editor of World Intellectual Property Report. He speaks
English and German.
oppositions by those whose interests are damaged by the
filing in bad faith of a trademark application.
Michael Lantos
Managing partner
Tel +36 1 411 8716
Hungary
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Gunnar Örn Harðarson
Arnason Faktor
Iceland
Fast-moving IP development shows no
sign of slowing down
Iceland is a relatively large country but has a small
the London Agreement – it should be noted that, as of
population – its 300,000-strong inhabitants are spread
January 1 2002, Iceland implemented the principles of
over an area of 103,000 square kilometres, although the
the London Agreement so that only patent claims must
vast majority (60 per cent) live in and around the capital,
be translated into Icelandic – the patent description is
Reykjavik. The last 10 years have been very fast moving
accepted in English. This applies to all European patents
for Iceland, with rapid changes in many key areas, and
validated in Iceland after the accession to the European
this development is continuing.
Patent Convention in November 2004.
The 1994 European Economic Area Agreement
In relation to trademarks, the most relevant change is
between the states of the European Free Trade
that as of January 1 1997 the Madrid Protocol is effective
Agreement and the European Union has heavily
in Iceland, allowing Icelandic nationals and companies to
influenced this development. The introduction of a stock
file international trademark applications, as well as
exchange and the extensive privatisation of government
allowing foreign nationals and companies to designate
activities
and
Iceland as a part of foreign-based international
telecommunications), as well as a system of assignable
(including
banks,
industry
trademark applications. Furthermore, as a result of
fishery quotas, have boosted the economy and fostered
Iceland becoming a member of the European Economic
development. This has influenced not only the business
Agreement, the Trademark Law has been amended in
environment through mergers and acquisitions and
accordance with the relevant EU directives in the field.
development in major technological areas, but also
In 2001 new laws on the protection of designs were
society as a whole. Banks, generic pharmaceutical
introduced. The new laws are partially based on EU
companies and high-tech companies have increased their
Directive 98/71/EC. In addition, on July 2 1999 Iceland
size by growth outside Iceland. Today, an equal number
ratified the Geneva Agreement, amending the Hague
of people are employed by Icelandic corporations abroad
Agreement on the International Registration of Industrial
and in Iceland.
Designs.
There have been major developments in the area of
patents, with the introduction of a new Patent Law in
Patent amendments
1990, membership of the Patent Cooperation Treaty in
In addition to the amendments mentioned above, the
1995 and accession to the European Patent Convention in
most recent patent law amendment took place in 2005,
2004. In addition, in 2004 and 2005 several amendments
allowing for compulsory licences in the case of national
to the Patents Act entered into force, one of which allows
emergencies or other circumstances of extreme urgency.
further research, tests and other arrangements deemed
It is now permissible to waive the general requirement
necessary for the preparation of market authorisation
for prior negotiation. This applies specifically to the
applications for medicine and medical improvements
export of medicines to developing countries and
under EU Directive 2004/27/EC (the Bolar provision).
countries struggling with severe public health problems
The relationship between inventors and their employees
according to the World Trade Organisation (WTO)
was further clarified in a bill which entered into force in
General Council decision of August 30 2003 and/or the
2005.
WTO
In light of the most recent European Patent
Convention development – the ratification by France of
Agreement
on
Trade-Related
Aspects
of
Intellectual Property Rights. A specific administrative
regulation was issued in November 2006 in this regard.
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Arnason Faktor Iceland
PTO developments
allowed the registration of the mark GOOD FOOD GOOD
Both trademark and patent applications filed at the
LIFE following a complete refusal to register by the PTO. A
Icelandic Patent and Trademark Office (PTO) have
further decision of refusal to register by the PTO, in this
increased significantly in number in the past few years.
case in relation to the international registration
In the period 1990 to 1995, there were between 1,000 and
MEDALLIST and on the grounds of descriptiveness, was
1,500 trademark applications annually – this rose to 4,000
also overturned by the board.
to 5,000 annually for the period 2001 to 2006. Although
Although these examples are few, there appears to be
Madrid Protocol applications constitute the majority of
a trend towards more relaxed registrability requirements
applications now filed, in 2006 directly filed national
for descriptive trademarks and applicants may expect
applications of foreign origin rose to the same level as
higher success rates for cases before the board, at least for
before Madrid Protocol membership. In addition,
the time being. In its practice the board has referred to
domestic applications have doubled in the past 10 years.
the Baby Dry and Doublemint decisions of the European
Patent applications filed in the same period have
Court of Justice, thus indicating Iceland’s close
followed
connection to EU developments.
similar
trends,
with
five
times
more
applications filed in 2004 and 2005 than the annual
average in the period 1990 to 1995. Membership of the
Supreme Court decisions
Patent Cooperation Treaty is the main reason for this,
In 2006 and early 2007 the Supreme Court ruled in six IP
although domestic origin filings have tripled in the same
cases: three relating to trademarks, one infringement case
period. The only area with limited activity is the filing of
relating to the scope of patent protection, one concerning a
design registrations.
licensing agreement and one case involving employment
Granted European patents designating Iceland are
confidentiality requirements relating to IP rights.
now starting to emerge and will largely replace directly
filed
national
phase
Patent
Cooperation
Treaty
Style ehf v 3X Stal ehf (57/2006)
applications. As Iceland has already implemented the
In the first patent case heard by the Supreme Court for
translation requirements of the London Agreement, it is
several years and decided by an extended five-judge
possible that a large number of European patents will be
panel, signifying the importance of the case, the court
validated in the coming years, thereby transforming the
discussed claim interpretation and the doctrine of
previously peaceful patent landscape in Iceland.
equivalents.
Patent and Trademark Board of Appeals decisions
it addressed the interpretation of equivalence and
As of November 2007 only four 2007 decisions of the Patent
discussed the rules for patent claim interpretation. Both
and Trademark Board of Appeals had been published,
the Reykjavik District Court, which has sole jurisdiction
which is surprisingly low compared to previous years,
in all patent cases, and the Supreme Court (the appeal
during which up to 30 decisions were published each year.
court in this case) ruled in favour of the defendant. Both
This is not due to fewer cases being referred to the board,
courts based their decisions on an opinion obtained from
but rather because some cases have been exceptionally
a court-appointed technical expert who had been
complex and time consuming for the board.
requested by the district court to answer certain
Although the court ruled in favour of the defendant,
However, recent decisions indicate one significant
questions from the plaintiff relating to the comparison of
development, which is that the board appears to be
the claim language and the allegedly infringing product.
reversing more decisions issued by the PTO than
In principle, the technical expert was asked:
previously. Further, in regard to trademarks the board
has shown a tendency to be more lenient towards the
•
registration of somewhat descriptive marks. This is in
the accused infringing equipment by literal
line with recent trends in the practice of the Office of
Harmonisation for the Internal Market
In one case, the registrability of the mark ONLY
whether each element of the claim could be found in
interpretation of the language; and
•
if not, whether by applying the doctrine of
equivalents that particular element could be found.
COSMETICS was contested. The PTO’s decision to refuse
registration in Class 3 for soaps, cosmetic products, hair
‘Equivalent embodiment’ was defined as having
and dental products was overturned by the board. The
principally the same function, working in principally the
board ordered the PTO to allow registration for the specific
same way and providing principally the same result as a
goods, although it explicitly excluded the word ‘cosmetics’
claimed invention.
from protection. In another case, the board partially
Although claim interpretation and the doctrine of
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Iceland Arnason Faktor
equivalents were addressed, it is rather unclear on which
that he had obtained trademark rights in the word mark
particular part of the expert opinion the courts based
LIFE EXTENSION. However, it held that the appearance
their decisions.
of the packaging as a whole was confusingly similar and
a trademark right existed in that regard; consequently,
Halendingarnir v Fjallafarar sf (406/2006)
the defendant was banned from use of the particular
This Supreme Court case pertained to trademark rights
package. The preliminary injunction was confirmed.
and particularly prior use against later trademark
registration. In this particular case, the plaintiff requested
NorðurBragd hf v Nordri ehf (143/2006)
that
trademark
The plaintiff asked the Supreme Court to confirm that the
HIGHLANDERS be deleted from the Trademark
defendant should be prevented from using a particular
Register. On the basis of an earlier non-registered right of
patented method. As early as 1999 the plaintiff
the plaintiff, which the court found to be established as
participated in the establishment of the defendant by
early as 1996, the defendant’s 2002 registration of the
providing know-how to the company receiving shares in
trademark HIGHLANDER was cancelled. In addition,
the company in return. In the same year the plaintiff filed
the defendant was banned from further use of that
a patent application for particular enzymatic methods
trademark in its business operations.
and a patent was granted in 2005. The court considered
the
defendant’s
registered
whether the plaintiff’s contribution was general
Braudgerd Kr Jonssonar & Co ehf v Islensk-ameriska
knowledge only or whether the licence to use the
verslunarfelaginu hf (153/2006)
patented method had been included. However, the
In this case the plaintiff requested confirmation that the
Supreme Court found that despite formal defects and the
defendant would be banned from using ‘Heimilisbraud’ as
contract being unclear, the contract provided a non-
a name or identity. In addition, the plaintiff requested
defined, irreversible licence to use the patent.
confirmation of a preliminary injunction which had
previously been granted by the Akureyri county sheriff.
Optimar Island ehf v Jonasi G Jonassyni og Thorsteini
In 1997 the parties had entered into a licence agreement
Inga Viglundssyni (323/2006)
under which the defendant was granted a licence to use
The plaintiff asked the court to prevent the former
the plaintiff’s recipes and production methods, as well as
managing director and marketing director of a previous
the trademark HEIMILISBRAUD. The defendant had
acquired company from using certain confidential
used the trademark for a period of 18 months prior to the
information obtained during their employment. The
agreement. The contract was in force until 2005. The
plaintiff based its request on the employment agreement
Supreme Court found that, based on the contractual
between the defendants and the acquired company. The
relationship between the parties, it was clear that the
district court had previously decided the case in favour
defendant considered the mark to be the plaintiff’s
of the two defendants; however, the Supreme Court
property and that through long use the plaintiff seemed
found that the district court should have obtained an
to have obtained trademark rights in the word
expert opinion with respect to certain technical issues.
HEIMILISBRAUD (which is a descriptive mark in
Icelandic) according to the Trademark Law 45/1997.
Comment
In general, there has been increased activity in almost all
Arnarvik heildverslun ehf v Celsius ehf (447/2005)
areas of intellectual property over the past year. This
The plaintiff requested the court to confirm a preliminary
reflects both general business developments and an
injunction granted by the Reykjavik county sheriff
increased IP focus. This is expected to continue, and
against the defendant’s use of LIFE EXTENSION for its
Iceland’s recent accession to the European Patent
product, particularly on the product’s packaging. The
Convention is likely to increase the number of patents in
Supreme Court found that the plaintiff had not shown
force in the country in the coming years.
Gunnar Örn Harðarson has a BSc in mechanical engineering and is a
European patent attorney. After 20 years in the IP field he has extensive
industry and private practice experience, and has served on various
governmental IP advisory committees. He focuses on drafting and prosecuting
mechanical patent applications, opinion work, appeals and litigation support.
He was secretary of the Association of Icelandic Patent Agents from 2000 to
2005, and is a council and board member of the EPI.
Gunnar Örn Harðarson
Managing director and partner
Tel +354 5 400 200
Arnason Faktor
Iceland
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Kobi Meir
Pearl Cohen Zedek Latzer
Israel
Court enforcement: the only option for
Israeli patentees
In Israel, there is only one possible avenue for patentees
greater weight than those of the parties’ experts. An
seeking to enforce their rights against infringers: a
expert appointed by one party may be cross-examined by
lawsuit for patent infringement. Under the Patent Law,
the other party and a court-appointed expert may be
the district courts have exclusive jurisdiction over patent
cross-examined by both parties.
infringement cases. However, in 1998 the Supreme Court
The average length of a patent trial, from filing the
held that in cases where an invention has not been
action until a final decision, may be several years. This
registered as a patent, there might be circumstances in
includes
which remedies could be granted under the Unjust
preliminary injunctions and hearings on the main subject
Enrichment Act.
matter of the action.
Trial format and timing
petition to the district court requesting a declaratory
Most patent infringement cases commence with a motion
judgment of non-infringement or invalidity. In the case of
for a preliminary injunction to stop the allegedly infringing
invalidity, an accused infringer may instead choose to file
action. Together with this motion, the patentee files its
a request with the registrar of patents for revocation of
main infringement claim for a permanent injunction,
the patent on that ground.
pre-trial
hearings,
hearings
regarding
An accused infringer (or any other person) may file a
monetary damages and the provision of the infringer’s
accounts (in order to calculate the monetary damages).
Under Israeli common practice, patent infringement
Infringement
trials first consider not the question of validity, but rather
Inducement/contributory infringement
the issue of infringement. If the court decides that
The concept of induced or contributory infringement is
infringement has occurred, it will proceed to examine
not included in the Patent Law. However, in a 2001 case
issues of validity to the extent that the defendant raised
involving an Israeli patent for a system for locking a car’s
such issues as a part of its defence – for example,
gearstick, the Supreme Court adopted the doctrine of
questions relating to novelty and non-obviousness.
contributory infringement in light of the criteria set out
The parties rely on testimony given by witnesses in
by the US Patent Act and the UK Patents Act – namely,
the form of affidavits and documents submitted to the
that the sale of a component of a patented machine or
court by the witnesses. During the oral hearings, each
process constitutes contributory infringement if:
party has the right to cross-examine the other party’s
witnesses.
•
There is no obligation on parties to provide testimony
from expert witnesses. However, due to the inherent
protected invention;
•
nature of most patent litigation, it is common to have
of affidavits. The court also has the authority to appoint
the seller knows or should know that the component
is specially made or specially adapted for use in the
expert witnesses in patent cases. Usually the parties
retain the experts who submit their opinions in the form
the component sold is a substantial component of the
infringement of such a patent; and
•
the component is not a staple article or commodity of
commerce suitable for substantial non-infringing use.
an expert on its own behalf for any expert matter in
dispute between the parties; if this happens, the court-
Infringement through foreign activities
appointed expert’s opinion will normally carry much
Under the Patent Law, a patent also extends to any
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Israel Pearl Cohen Zedek Latzer
product directly manufactured by the patented process,
•
the direct damage caused to the plaintiff;
whether this takes place inside or outside Israel.
•
the extent of the infringement; and
•
the profits derived by the infringer.
Infringement by equivalents
The Patent Law provides explicit protection against
The court may also consider the reasonable royalties that
infringement through use of most of the claimed subject
the infringer would have paid under normal commercial
matter. This protection is usually applied according to
transactions had the infringement not occurred.
the doctrine of equivalents under US and UK law.
Punitive damages are available if the court concludes
that the infringement continued after the infringer received
Non-infringing acts
a notice of infringement. The maximum amount of
Under the Patent Law, certain actions involving a
punitive damages in patent cases is the same as the
protected invention do not constitute infringement,
maximum award for actual damages (ie, double damages).
including experimental use:
Damages start to accrue from the date of publication
of the acceptance of the patent application, which occurs
•
in order to obtain a regulatory licence in Israel (or in
three months before the grant of the patent, if no
any country in which experimental action involving
opposition is filed.
a patented invention is permitted for the purpose of
•
obtaining such licence). A product manufactured
Discovery of evidence
under this exception must be used exclusively for the
Each party to a proceeding has the right to inspect and
purpose of obtaining of the regulatory licence; and
copy the documents held by the other party in respect of
in connection with an invention where the objective
the disputed matter, subject to their relevance and
is to improve the invention or to develop another
confidentiality provisions. Discovery is made by each
invention.
party producing, in the form of an affidavit, a list of all
relevant documents in its possession, as well as specific
Injunctions
documents which were previously in its possession. In
The court grants preliminary injunctions as a form of
case of a dispute (ie, as to the existence or relevance of
temporary relief. In Israel, it is common to apply for
documents), the court may grant an order for discovery.
temporary relief in any proceeding involving IP rights.
However, temporary relief is classified as an equitable
Litigation timetable
remedy. As such, it is subject to the court's discretion. If
A preliminary injunction may be obtained within one to
granted, the preliminary injunction remains in force until
two months from filing a motion for such an injunction.
the court issues a final ruling or sets aside the
In urgent cases and where there is solid evidence of
preliminary injunction. The most common temporary
infringement, an ex parte preliminary injunction may be
relief sought in infringement proceedings is a
granted.
preliminary injunction prohibiting the defendant from
continuing the allegedly infringing activity.
In complicated cases the court may decide to hold the
preliminary injunction hearing and the main hearing at
In general, the Israeli courts tend to be pro-patentee
the same time. In such cases, or after the motion for a
and, therefore, the courts are more willing to grant
preliminary injunction has been decided, it may take
preliminary injunctions. Injunctions are personal in
three to 12 months before the hearing on the main subject
nature. Therefore, in order to restrict the activities of
matter begins.
third parties, those parties must be specifically named in
the motion.
A full patent trial, from filing the action until a final
decision on liability, may take several years, on average.
The average length of an appeal process, from closure of
Monetary remedies
the trial at first instance until the appellate court decision,
The Israeli courts seldom calculate compensation in
is approximately two to three years.
patent cases because most patent proceedings end at the
preliminary injunction stage. In the few proceedings that
Alternative dispute resolution
continue beyond that stage, the courts award damages to
In recent years alternative dispute resolution techniques
the prevailing party by taking into account the infringing
(ie, arbitration and mediation) have become increasingly
acts and the plaintiff’s situation as a consequence of these
popular in Israel. Once approved by the court (which
acts. In considering the plaintiff's situation, the courts
usually happens), the arbitrator’s decision is final and
will examine:
binding. Mediation is often recommended by the courts
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Pearl Cohen Zedek Latzer Israel
where the parties have expressed a willingness to
Voluntary licensing
negotiate and settle but, unlike arbitration, mediation is
There are no particular restrictions under the Patent Law in
not binding on the parties. If mediation fails, the dispute
regard to the contractual terms of patent licences.
returns to the court and the mediation process and its
However, the restrictions of the general contract law apply.
content remain strictly confidential.
Compulsory licensing
Patents
If the registrar is convinced that a patent holder has
Under the Patent Law, an invention made by an
abused its monopoly, it may grant a non-exclusive
employee as a result of his or her employment and in the
compulsory licence to exploit the patented invention to
course of that employment belongs to the employer,
anyone applying for such a licence. An application for a
unless the parties have agreed otherwise. In the case of
compulsory licence may be submitted only after three
an independent contractor, the invention belongs to the
years from the date of grant or after four years from the
contractor, unless a written agreement states otherwise.
filing date of the patent application, whichever is later. A
The Patent Law recognises the concept of joint
compulsory licence will normally be granted if the
ownership. Each joint owner may transfer his or her
patentee does not meet local demand for the patented
share or otherwise exploit the invention.
product on reasonable terms. Furthermore, the registrar
The ownership of patents is officially recorded at the
may revoke a patent for which it has granted a
Patent Office. The transfer of rights in a patent may be
compulsory licence if it is convinced that the compulsory
done in writing and should be recorded in order to be
licence is insufficient to prevent abuse of the monopoly.
valid against third parties.
The terms of a compulsory licence are determined by the
registrar, by considering what is reasonable in view of
Invalidity
the particular circumstances of the case and the
A patent may be invalidated in two ways. The patent
legitimate interests of the patentee.
registrar may revoke a patent at the request of any
person based on one of the following grounds for
Oppositions
opposition:
Once an application has been granted, the application
documents are published. An opposition against the
There is a valid reason to reject the patent application
grant of the application may be filed within three months
(eg, lack of novelty or obviousness);
of the publication date. An opposition may be filed on
•
There is evidence of prior use; and/or
one of the following grounds:
•
The opponent is the true owner of the invention.
•
•
Alternatively, a district court may invalidate a patent
There is a reason for which the registrar was entitled
to reject the application (eg, lack of novelty and/or
based on any grounds for opposition. This path is usually
obviousness);
used in the course of an infringement claim, in which the
•
There is evidence of prior use; and/or
alleged infringer’s defence is based on the invalidity of
•
The opponent is the true owner of the invention.
the allegedly infringed patent.
A statement of defence or an application seeking to
In Israel, oppositions are dealt with before the patent
revoke or invalidate a patent is not subject to the statute
is granted. Therefore, the applicant may not file an
of limitations.
infringement lawsuit as long as the opposition is
pending.
Unenforceability
The Patent Law obliges the applicant to disclose any
Priority of invention
prior art relevant to the subject matter of the invention. In
Israel is a first-to-file country. Accordingly, priority
the event that the applicant provides misleading
disputes between applicants for the same invention are
information as part of the duty of disclosure, or
determined according to the filing date and not
knowingly withholds such information, the registrar or a
according to the invention date. The mechanisms of
court may:
opposition and patent revocation may also be used in
•
revoke a patent or reject an application;
case of a priority dispute.
•
grant a licence under the patent to any third party
•
and set the terms of such a licence; or
Section 17(c)
shorten the term of the patent.
Under Section 17(c) of the Patent Law, it is possible to
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Israel Pearl Cohen Zedek Latzer
request the grant of an Israeli patent based merely on the
Extension of patent term
grant of a corresponding patent in one of the following
The Patent Law provides an option to extend the term of
jurisdictions:
a patent where the owner was unable to enjoy the
exclusivity provided by the patent protection due to the
•
Austria;
need to obtain regulatory approval before marketing the
•
Australia;
invention. This amendment is especially significant in
•
Canada;
the pharmaceutical field, in which the development
•
Denmark;
period is particularly protracted due to the need to
•
Europe (under the European Patent Office);
perform extensive clinical trials and obtain regulatory
•
Germany;
approval (processes which take approximately five to
•
Japan;
seven years) before marketing the medical preparation.
•
Norway;
•
the Russian Federation;
apply for an extension of the patent term. However, the
•
Sweden;
registrar of patents will not grant an extension unless all
•
the United Kingdom; and
the following conditions have been met:
•
the United States.
The owner of a patent or an exclusive licensee may
•
The patent at issue is a patent that protects:
In order to take full advantage of this provision, the
•
a material;
claims in the Israeli application should be identical to, or
•
a process for the production or use of a material;
a subset of, the claims granted in the corresponding
•
a medical preparation that incorporates a
foreign patent. In such cases, the invention specified in
material; or
the application will be deemed to comply with the legal
•
medical equipment that requires a licence in Israel;
requirements of industrial application, novelty and
•
The patent at issue is still in effect; and
inventive step.
•
No extension has previously been granted in respect
The grant of an Israeli patent based on Section 17(c) is
of the patent at issue or the material it protects.
not automatic: the examiner has the discretion to decide
whether to allow the patent application based on its
An application for an extension should be filed in
counterpart. In practice, however, examiners rarely reject
writing and be supported by an affidavit stating that all
such applications.
the requirements have been met.
Kobi Meir is of counsel in the Israeli litigation group. He received his LLB
from Tel Aviv University. Mr Meir was previously an associate at another Israeli
firm, where he practised litigation relating to commercial law, administrative
law and IP law, and acted as personal assistant to Dr Yaacov Neeman, who
was a senior partner and the former Israeli minister of justice and of finance.
Kobi Meir
Of counsel, Herzlia
Tel +972 9 9728 084
Israel
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Paolo Perani
Perani Mezzanotte & Partners
Italy
A new challenge: the evolving
procedural rules for IP disputes
On September 19 2005 the new IP Code introduced new
the ordinary procedural rules. The local courts have
procedural rules for IP disputes. In particular, the new
solved the problem by ordering that the applicable
code provided that the existing rules for corporate
procedural rules be changed for all pending IP actions
disputes, set out in Law 5/2003, would also apply to IP
(ie, from the corporate rules to the ordinary procedural
disputes.
rules).
The corporate dispute rules split disputes into two
In fact, the legislature had already scheduled a
stages: a non-judicial stage, where the parties exchange
reversion to the ordinary procedural rules. In proposed
statements within a short timeframe, and a judicial stage
amendments to the IP Code, the main feature was the
before the courts, where a judge rules on the dispute.
abrogation of the corporate rules for IP disputes because
The corporate rules are designed to simplify and
their application had not been as successful as expected.
speed up proceedings by reducing the judicial phase of
Thus, the decision of the Constitutional Court was
the dispute.
favourably accepted by most judges and lawyers.
After an initial period during which they applied the
In light of the court’s decision and the consequent
corporate rules to IP disputes, some Italian courts raised
application of the rules set out in the Code of Civil
objections regarding the constitutional legitimacy of
Procedure, there is no longer a non-judicial stage of the
Article 134(1) of the IP Code, which introduced this new
proceedings and the defendant is instead summoned
regime.
directly before the court, as happened previously.
In
particular,
these
courts
alleged
that
the
The declaration of the unconstitutionality of Article
government, although charged by Parliament with the
134(1) did not affect the other specific procedural rules
task of reorganising the former IP laws into the new IP
set out in the IP Code. Thus, the procedures governing IP
Code, had no power to intervene in procedural matters.
actions are slightly different from those governing
In Decision 170 of March 17 2007 the Constitutional
ordinary proceedings and the procedural rules that
Court accepted this objection and declared Article 134(1)
apply to IP disputes are more commonly known as the
of the code unconstitutional. The court held that the
‘industrial procedure’.
parliamentary act empowering the government to issue
the new IP Code did not also authorise it to regulate
IP courts
procedural aspects of IP matters.
By means of Decree 168/2003 (June 17 2003), specialist IP
The decision, which came into force on May 23 2007
courts finally became effective in Italy. According to the
upon publication in the Official Gazette, has had a direct
decree, all actions commenced on or after July 1 2003
impact on pending and new actions, as Article 134(1) is
involving IP-related matters (ie, patent, design and
no longer applicable to IP disputes. No particular
trademark infringement/nullity actions, as well as unfair
problems have arisen with respect to new proceedings
competition disputes) are subject to the jurisdiction of
since the invalidation of the article as the ordinary
specialist courts in the following appeal court districts:
procedural rules now apply (ie, those set out by the Code
Bari, Bologna, Catania, Florence, Genoa, Milan, Naples,
of Civil Procedure).
Palermo, Rome, Turin, Trieste and Venice.
However, there have been some difficulties in
The new IP Code outlines the competence of the
relation to pending actions which were initiated under
specialist courts more precisely. This competence has
the corporate rules but which must be continued under
now been expanded to cover:
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Italy Perani Mezzanotte & Partners
•
geographical indications;
However, no order for the removal or destruction of
•
denominations of origin;
infringing items may be issued if these belong to persons
•
semiconductor topographies;
who use them in good faith for personal or domestic
•
reserved company information;
purposes only.
•
distinctive signs (eg, business and company names,
Infringement is also considered a criminal offence
domain names and signs used in trade); and
punishable by fine and/or imprisonment. At times, a
unfair competition cases involving such rights. It is
combined action before the criminal and civil courts may
not easy to define exactly what the legislature means
be worthwhile; however, in comparison to criminal
in this regard, but the courts’ competence is not
actions, civil proceedings afford rights owners a more
expected to change substantially.
flexible approach to the protection of their interests.
IP disputes are heard by a panel of three judges,
key in IP-related disputes. In civil proceedings, private
although none will have a technical background.
parties can now make use of investigations to obtain
Therefore, actions involving patents continue to require
information that may be useful or necessary for
the appointment of an expert (ie, a patent attorney).
prosecution of the court case.
•
The issue of how to collect evidence of infringement is
Certain distinctions must be made between the
Furthermore, if a party has provided serious evidence
infringement of patents and trademarks. Italy is not yet
of the grounds for its own claims, and has identified
an examination country and patents and trademarks are
documents, data or information in the possession of the
granted without any substantive examination of the
other party in support of that evidence, it may request
application.
the court to order that such evidence be produced or that
Italian patent law does not provide for any kind of
the information be obtained by questioning the other
substantive examination of patent applications to
party. It may also request that the court order such data
confirm that they meet the requirements of novelty and
to be provided as is necessary to identify the persons
inventive step. Therefore, in a patent infringement case
involved in the manufacture and distribution of the
there is not only a technical assessment to determine
infringing products or services. The court shall take all
whether the patent has been infringed, but also an
appropriate steps to ensure the protection of confidential
assessment of whether the patent is actually valid. So, in
information. These provisions also apply in cancellation
practice, when enforcing a patent against an alleged
proceedings.
infringer in Italy, the owner must be ready to have its
patent re-examined. The reason for examining the
Interlocutory relief
validity of a patent in the course of an infringement
The following provisional measures are available in cases
action stems from the right of the owner to sue the
of patent or trademark infringement.
infringer on the basis of a patent that has not yet been
granted. This is different from what happens in other
Inspection and seizure
major European jurisdictions, such as the United
The owner of the rights in a registered mark or a granted
Kingdom and Germany.
patent (or a mark or patent for which registration is
The same system applies to trademarks. In trademark
sought) may request that an inspection or seizure of
cases the assessment of infringement is consumer driven,
some or all of the infringing goods and any means used
with the aim of protecting prospective purchasers from
in their manufacture be ordered, as well as of the
possible confusion or the likelihood of association
evidence concerning the alleged infringement. In the
between the genuine trademark and its counterfeit.
latter case appropriate steps will be taken to guarantee
the protection of confidential information.
Remedies available to rights owners
Inspection and seizure may also cover goods
Available remedies in cases of infringement include:
belonging to parties other than the alleged infringer if
•
an injunction prohibiting the manufacture, sale or use
these goods are not for personal use and were
of anything that infringes the trademark, patent or
manufactured, imported or put on the market by the
copyright;
party against which the order has been issued.
Inspection, but not seizure, is possible in respect of
•
publication of the decision;
•
confiscation of the goods bearing the infringing mark
goods exhibited at an official or officially recognised
or manufactured in violation of a patent; and
exhibition in Italy (or which are in transit to or from such
destruction of infringing marks, goods and their
exhibition).
•
packaging.
Inspection and seizure are carried out by a court
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Perani Mezzanotte & Partners Italy
official, with the assistance of one or more experts, if
Implementation of the IP Rights Enforcement
necessary. The official may make use of any technical
Directive
means of verification, including photographic means.
Decree 140/2006, implementing the EU IP Rights
Enforcement Directive (2004/48/EC), amended both the
Injunction
Copyright Law (633/41) and the new IP Code.
An IP rights owner may apply to the court for an
Several key changes were introduced by the decree.
injunction forbidding the manufacture, marketing or use
The judiciary now has the power to require the following
of anything that infringes its rights. When issuing the
parties to provide the court with all requested
injunction the court may specify a sum payable for any
information regarding the origin and distribution of the
violation of, or non-compliance or late compliance with,
infringing goods and services:
the injunction.
Injunctions and/or seizure can be applied for as soon
•
the infringer;
as the owner discovers the infringement. However,
•
anyone found to be in possession of counterfeit
owners are barred from such actions if they were aware
goods or using or providing services infringing an IP
of the infringement, but failed to contest it. In such cases
owners must instead bring full and lengthy infringement
right; and
•
anyone indicated by the above individuals as being
proceedings. Therefore, to ensure quick and cost-
involved in the production or distribution of
effective protection of IP assets in Italy, it is advisable that
counterfeit goods or the provision of infringing
the market be constantly monitored and that any
services.
infringement be notified immediately.
Trademark owners must have a registered right in
order to benefit from the enforcement measures provided
Anyone refusing to provide the information as
requested shall be subject to criminal penalties.
by the law. Although trademark rights can be acquired
Moreover, the decree allows the court to request
through genuine use, registration and even application
access to the infringer’s banking, commercial and
certificates constitute strong prima facie evidence of the
financial documents in order to understand the full scope
owner’s rights in the mark.
of the infringement.
A petition for an interim injunction must be
The
decree
expressly
contains
precautionary
submitted to the court with territorial jurisdiction. In
measures, already available under Italian law, which
most cases a ruling is delivered within two to three
provide that if the recovery of damages is likely to
months.
become difficult in light of emerging circumstances, then
Patent proceedings may take a longer time to
the injured party may petition the court for a
complete, as such cases usually require a technical expert
precautionary seizure of the infringer’s movable and
to confirm that an infringement has occurred.
immovable property, including blocking his or her bank
account, up to the value of the damage suffered.
Damages
The repetition in the decree of a measure that already
The winning party in an IP-related dispute can be
exists in the Code of Civil Procedure could be interpreted
awarded compensation for damages. This amount is
as an encouragement to utilise this type of action in the
added to its attorneys’ fees, which are reimbursed.
IP arena.
Under Italian law, monetary compensation must
Another key change concerns refundable damages,
never lead to the enrichment of the winning party. This
which now include the moral prejudice caused to the
implies that the compensation should never exceed the
rights holder by the infringer.
damages that were actually suffered. The law does not
provide for punitive damages.
Alternatives to litigation
The new IP Code removed any doubt arising from the
Most agreements for the exploitation of IP assets, such as
extensive case law in this area by setting out the exact
licence and technology transfer agreements, provide for
criteria to be used in assessing damages. These cannot be
arbitration in case of dispute. The most commonly used
based only on lost profits; it is also necessary to take into
clause in multi-jurisdictional contracts is an international
account the profit earned from the infringement, as well
arbitration clause. Domestic contracts may provide for
as the royalties that would have been earned had a
domestic arbitration under either the Code of Civil
licence been granted.
Procedure
or
the
rules
on
equity
arbitration.
Infringement cases are still under the sole jurisdiction of
the ordinary courts.
29/11/07
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Italy Perani Mezzanotte & Partners
Paolo Perani is admitted to the Italian Bar and heads the firm’s litigation
group. He graduated from the University of Milan (Dr Jur). His areas of
particular expertise include appellations of origin and geographical indications,
e-commerce and internet advice, patent and trademark litigation, licence
agreements and technology transfer agreements, copyright actions, and
arbitration and alternative dispute resolution in context of IP disputes.
Paolo Perani
Partner, Milan
Tel +39 02 76 31 61 61
Italy
29/11/07
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Erikas Saukalas
METIDA law firm of Reda Žaboliené
Lithuania
Latest developments present
new challenges
Over the last 18 months major developments have taken
received had the infringer used the work lawfully (eg, the
place in Lithuanian IP law, resulting from both new
relevant licence fee). In cases where infringement was
legislation and court decisions.
committed intentionally or through gross negligence, the
court may order the infringer to pay up to double the
Legislative developments
payment that would have been due. Where the infringer
Copyright
was unaware or had no reasonable grounds to suspect that
In October 2006 amendments to the Law on Copyright
it was infringing protected IP rights, the rights holder may
and
recover the unfairly earned profits from the infringer.
Neighbouring
Rights
were
adopted.
The
amendments brought the national legislation into line
The law provides that the rights holder may choose
with the EU Resale Rights Directive (2001/84/EC) and
whether to claim compensation for damages or
the EU IP Rights Enforcement Directive (2004/48/EC).
compensation for lost copyright or licence fees.
The amendments introduced a number of key
changes. The amended law specifies who is obliged to
Patents
pay royalties to an author when an original work or
In May 2007 the Seimas (the Lithuanian Parliament)
manuscript is resold (ie, showrooms, art galleries,
introduced amendments to the Patents Law.
museums, antiquarians), and states that the related
The first amendment concerned the publication fees
royalties may vary from 0.25 per cent to 5 per cent,
for translated invention definitions. The Patents Law
depending on the resale price. Royalties must be paid if
stipulates that a published European patent application
the price after tax is at least €300, but may not exceed
enjoys temporary legal protection from the date on
€12,500 for a single original work or manuscript.
which the translation of the invention definition is
The law now includes a list of persons who, together
published in the Official Bulletin of the Lithuania State
with authors, hold neighbouring and sui generis rights
Patent Bureau. Previously, such fees had not been set out
and who are entitled to protect those rights by bringing
by the law.
actions before the courts. For example, exclusive licence
holders and collecting societies are included on this list.
The second amendment implements the provisions of
the EU Compulsory Patent Licensing Regulation
The amended law establishes the sufficient evidence
(816/2006), stating that the government will establish a
rule, which provides that the court has the right to
competent institution to issue compulsory licences in
consider selected copies of the IP work as sufficient and
accordance with the regulation.
reasonable evidence.
The regulation of compulsory licences for patented
A new measure designed to protect infringed IP rights
pharmaceutical products for export to countries with
– the publication of relevant court rulings – has also been
public health problems is relatively new to international
introduced. On the plaintiff’s request, the court may now
patent law; previously, the principles of patent rights
order an infringer to publish the court ruling, in full or in
restriction allowed for certain exceptions in order to
part, in the media or by other means at its own expense.
satisfy the needs of such countries. The Patents Law
The law sets a maximum amount for monetary
allowed for the use of a patented invention without the
damages and compensation of 1,000 times the minimum
owner’s consent provided that the user held a state
subsistence level. As an alternative to compensation, the
licence. Such licences were issued if necessary for the
applicant may request the payment that it would have
functioning of the internal market and, in certain cases, to
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Lithuania METIDA law firm of Reda Žaboliené
protect national security and public health. Furthermore,
while acknowledging that it had violated the plaintiff’s
the form of use of the patented invention was not limited
rights, contested the confiscation and destruction of the
– in contrast, the new regulation provides for a single
goods, asking that he be allowed to donate the
form of use (ie, production for export).
confiscated goods to charity after the removal of the
The regulation allows the competent national
infringing trademarks.
institutions to issue licences for the production and
export
of
patented
pharmaceutical
products
Taking into consideration the provisions of EU
to
Regulation 1383/2003, the Supreme Court refused to
developing countries, enabling those countries to obtain
mitigate the imposed penalty. Both EU law and
much-needed pharmaceutical products and reducing the
Lithuanian national law give the IP rights owner the
price of those products on the market, while having no
discretion to choose the method of protecting its infringed
impact on the EU market and providing no opportunity
rights. The IP rights owner’s choice may be rejected only
for the re-import of those products to the EU market. The
in exceptional circumstances. Furthermore, both EU law
compulsory licences are non-exclusive and non-
and Lithuanian national law require that when applying
transferable. They clearly identify the licensed product;
methods of protection to IP rights, the infringer may not
furthermore, the product packaging must clearly indicate
obtain any economic benefit – in this case, this
that the products are to be exported.
requirement would have been violated as legal persons
making a donation to charity are entitled to tax relief.
Infringements
On July 3 2007 the Seimas adopted an important
Copyright protection
amendment to the Administrative Offences Code
In a case involving copyright infringement, the Court of
providing for liability for infringements of industrial
Appeal issued an important resolution on the conditions
property rights. Previously, those who infringed the
for imposing liability on clients of information
rights of owners of trademarks, designs or patents faced
publications.
no administrative liability.
The court of first instance held that the client had
The amendment provides for the imposition of a fine
violated the author’s IP rights because it had distributed
on persons who seek a material benefit from unlawfully
a contour map published by a publishing house without
keeping or transporting:
a licence. However, the Court of Appeal held this
decision to be unreasonable.
•
•
The court stated that the client was provided with a
goods bearing a trademark owned by another
person; or
publication in which the publishing house was named as
goods that were unlawfully produced using designs
the author. The maps and the publication as a whole bore
or invention patents owned by another person.
the copyright protection sign. The court held that in such
circumstances the client, who was neither the author nor
Such goods, as well as the tools or equipment used to
produce those goods, must be confiscated. It is hoped
the publisher, was not subject to the same standards as
the author and the publisher.
Therefore, when accepting a publication published at
that this amendment will give the police the power to
fight counterfeiting effectively.
its own request, the client had no grounds to suspect a
violation of copyright. It did not violate the basic
Case law
requirements of carefulness, prudence and attention, and
Counterfeiting
thus could not be found guilty of infringing copyright
In a decision handed down at the end of 2006 the
and causing damage to the author’s intellectual property.
Supreme Court of Lithuania held that, in cases involving
Considering these arguments, the court concluded
counterfeit goods intercepted by the Customs Authority,
that the client was not subject to liability for the IP rights
only the IP rights holder is entitled to choose the method
damage caused to the author by the copyright
of enforcing its infringed IP rights.
infringement. However, as a publication that infringed
In a civil case the plaintiff asked the court to
copyright had been prepared and published, the client
acknowledge that the goods imported by the defendant
could be required to:
into Lithuania and seized by Customs officials bore
•
cease distribution of the infringing publication;
trademarks that were confusingly similar to those of the
•
publish details of the infringement; and/or
plaintiff and thus violated the plaintiff’s IP rights. The
•
transfer all copies of the infringing publication to the
plaintiff asked the court to confiscate the goods and to
destroy them at the defendant’s expense. The defendant,
plaintiff.
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METIDA law firm of Reda Žaboliené Lithuania
Therefore, the author’s work constituted a creative
Contour maps as copyright-protected works
In a 2007 civil case the Supreme Court stated that contour
work protected by law. However, the court held that an
maps may be categorised as copyright-protected works.
acknowledgement of copyright infringement would be
When evaluating contour maps, it must be borne in
mind that few opportunities exist for the author to
sufficient restoration to remedy the damage caused, in
light of:
express his or her creativity and individuality, as publicly
known data is used and existing features of the material
•
world are portrayed using scientific knowledge and
mathematical calculations.
of two small sections that were not highly original);
•
The originality of works within this category is
evaluated considering various factors, including:
•
•
the originality of the selection and presentation of the
the fact that the defendants’ work was published in a
limited number of copies;
•
the minor economic benefit obtained by the author;
•
the objective of the infringing use (study purposes);
and
the method and form of presenting the data (ie, facts
and information);
the minor nature of the copyright violation (the use
•
the fact that the violations resulted from insufficient
care by the defendants.
data; and
•
the selection of colours.
Liability of publisher
In the same case, the Supreme Court emphasised that
The requirements of originality and particularity
mean that:
when
establishing
who
is
liable
for
copyright
infringement, it is important to evaluate the actions of
both those directly committing the infringement and
•
the method and form of data presentation must not
be usual or characteristic of this type of work; and
•
those involved in the infringing actions.
The issue of the publishing house’s liability also arose.
the work must differ from other works of this kind
In its activities a publishing house deals directly with
thanks to the intellectual efforts of the author (ie,
works subject to copyright and is thus subject to stricter
certain characteristics must be established in order to
diligence, prudence and lawfulness requirements.
distinguish the work from other similar works).
Therefore, having agreed to publish a work, a publishing
house has a duty to ensure that the person providing the
The court concluded that the author, using databases
and his own creative skills, had:
work owns the copyright or publishing rights, as all
persons using third-party rights must be sure that it is
lawful to use those rights. The level of the publisher’s
•
created contour maps;
diligence when attempting to ensure that a work has
•
selected and applied information to a certain task;
been used lawfully will determine its liability in case of
and
copyright infringement.
•
harmonised the contents of the contour maps with
school curricula.
Erikas Saukalas is a legal counsel at METIDA. He holds a master’s degree
in law and is now doing his PhD. Mr Saukalas practises trademark, design
and patent law. He advises clients on various aspects of IP law and handles
a wide range of legal disputes. His professional specialisations also include
copyright law, anti-counterfeiting procedures and contractual drafting.
Erikas Saukalas
Legal counsel
Tel +370 5 2490 830
Lithuania
29/11/07
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Erik Nijs
Nederlandsch Octrooibureau
Netherlands
Amending the Patents Act: major
changes on the horizon
Until 1995, the Netherlands Patent Office (NPO) granted
In addition to the proposed amendments to the
patents only after substantive examination, in which a
Patents Act 1995, a new working agreement between the
technical examiner assessed whether the invention
EPO and the Netherlands entered into force in July 2006.
claimed in the application was new and involved an
As a result of the working agreement, the EPO continues
inventive step. However, the success of the European
to carry out prior art searches for Dutch patent
patent system affected the number of national patent
applications filed with the NPO. However, following the
applications filed in the Netherlands. This number
European and Patent Cooperation Treaty procedures, the
decreased from over 12,500 in 1978, when the European
search report is now accompanied by a written opinion
Patent Office (EPO) opened, to fewer than 3,000 in 1990.
on the question of whether the invention claimed in the
It was predicted that the workload of the NPO would
patent application is new and involves an inventive step
become insufficient to maintain a staff of technical
with respect to the prior art cited in the search report.
examiners skilled in all fields of technology. As the
Although the written opinion is not binding, it provides
quality of substantive examination depends to a large
a tool for assessing the validity of the patent, both for the
extent on the knowledge and experience of the technical
proprietor and for third parties. This increases legal
examiners, the Netherlands decided to switch to a
certainty.
registration system for patents. In 1995 the NPO began to
The most important changes in the Dutch patent
grant patents without substantive examination; the
system after the amended Patents Act has entered into
patent is granted according to the application drafted by
force will be as follows:
the applicant no matter whether the claimed invention is
patentable. After grant, it is up to the Dutch courts to
•
The six-year patent will be abolished;
decide on the validity of the patent.
•
Patent applications in English will be accepted
During 2005 and 2006 the Patents Act 1995 was
reviewed (see Evaluatie 2006 Rijksoctrooiwet 1995, which
(although the claims must still be in Dutch);
•
can be downloaded in Dutch at www.minez.nl). The
general conclusion of the review was that the Dutch
instead of after four years;
•
registration system is a valuable supplement to the
European patent system and provides a good balance of
speed, reasonable costs and legal certainty. However, the
The first annual fee will be due after three years,
The NPO will be more active in advisory proceedings
regarding the nullification of patents; and
•
The partial or full surrender of a patent will have
retroactive effect.
review also revealed that there is a need for increased
legal certainty, reduced costs and improved patent
Abolition of the six-year patent
awareness.
Under the Patents Act 1995, an applicant can choose
In
July
2007
the
Tweede
Kamer
(House
of
between a six-year and a 20-year patent. The term of the
Representatives) of the Dutch Parliament approved a
patent is 20 years if the applicant requests a search of
proposal to amend the Patents Act. Before it can enter
prior art, and six years if such a search is not requested.
into force, the amended Patents Act requires the approval
The six-year patent has been referred to as a utility
of the Eerste Kamer (Senate) of the Dutch Parliament. The
model similar to the German Gebrauchsmuster. However,
amended act is expected to enter into force in the first
this is not strictly correct because no utility model system
half of 2008.
exists in the Netherlands. The substantive requirements
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Nederlandsch Octrooibureau Netherlands
(ie, novelty and inventive step), although not checked
application. Under the Patents Act 1995, Dutch patent
under the Dutch registration system, are identical for the
applications must be filed in Dutch. If a Dutch applicant
six-year and 20-year patents.
files a subsequent patent application abroad claiming
One key criticism which emerged from the review of
priority from the Dutch patent application, a translation
the Patents Act 1995 was that the six-year patent can lead
is necessary. The Dutch text is usually translated into
to unwanted legal uncertainty for both patent
English. The new, relaxed language requirement aims to
proprietors and third parties. As no search report by the
reduce these translation costs. The Dutch Parliament
NPO or the EPO is available for the six-year patent,
expects that small and medium-sized companies will
neither the patent proprietor nor third parties obtain
particularly benefit from the reduction in translation
information about novelty and inventive step in regard
costs. As the claims of the application must still be
to the six-year patent. As this is generally felt to cause too
submitted
much uncertainty, the six-year patent will be abolished.
safeguarded.
Thus, under the amended Patents Act, a search will be
in
Dutch,
legal
certainty
should
be
The Netherlands will be one of the first countries in
carried out for all patent applications. All patent
Europe
to
depart
from
the
national
language
applications will follow the existing procedure for
requirement for national patents. Although the impact of
obtaining a 20-year patent. If the patent application is a
this step remains to be seen, the change could have major
first filing, the search report should generally be
implications for the number of Dutch applications filed
available within nine months of filing the patent
by foreign companies. Both Dutch and foreign applicants
application. The search report is accompanied by a
will benefit from the reduction in translation costs. If a
written opinion, in which the European examiner
foreign company already has the English text of a patent
explains the relevance of the documents cited in the
application, a full translation is not required; the
search report. Approximately 18 months after the filing
translation of the claims into Dutch will suffice to obtain
date, the NPO will enter the application in the Patent
a Dutch patent. Thus, the number of Dutch patents
Register. The NPO will grant the 20-year patent as soon
claiming priority from foreign filings could increase
as the patent application has been entered in the register.
substantially.
If the patent application claims priority from another
At the same time, Dutch companies will no longer be
application, the search report may be received rather late.
able to read Dutch patents in the Dutch language when
In that case, the NPO grants the patent at least two
they are trying to avoid infringing competitors’ patents.
months after dispatch of the search report. This two-
Although the claims, which will be in Dutch, determine
month time limit relates to the applicant’s right to amend
the scope of protection, infringement must also be
the application after the search report and before grant.
assessed using the description to interpret the claims. If
the description is in English, a Dutch company which is
Filing applications in English
not proficient in the English language will need to
The amended Patents Act will allow for the filing of
translate the description into Dutch. The translation costs
patent applications (except for the claims) in English.
which the proprietor no longer has to pay for the
Thus, the NPO will accept Dutch patent applications in
description as it is filed in English will then fall to the
English, provided that the claims are written or
Dutch competitor to pay. Clearly, this will affect small
translated into Dutch.
and medium-sized companies rather than larger
The provision that the language requirement is
irrelevant for obtaining a filing date remains unchanged.
multinationals, which generally have better English
language skills.
If a Dutch patent application is filed in a language other
The liberalised language requirement in the amended
than Dutch or English, a filing date will be accorded, but
Patents Act is isolated from the London Agreement,
the applicant must file a translation in Dutch or English
which is expected to enter into force in the first half of
shortly after filing (except for the claims, which must be
2008. The parties to the London Agreement will largely
translated into Dutch).
waive the requirement for translations of granted
The motivation for this fundamental amendment can
European patents to be filed in their national language.
be found in the explanatory memorandum to the
For states having one of the three EPO languages (ie,
amended Patents Act: filing in English is allowed in
English, French or German) as an official language, a
order to reduce translation costs for Dutch applicants
translation of the claims into their national language is
when filing patent applications outside the Netherlands.
already a condition for grant of the European patent and
Dutch applicants often use the Dutch patent application
there will be no further translation provisions. For other
as the basis for an international or European patent
states, the claims must still be translated into the national
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Netherlands Nederlandsch Octrooibureau
language and the text of the patent needs to be provided
grounds for nullification apply to a particular registered
in a specific EPO language – for example, the
patent. Based on this advisory report, third parties may
Netherlands requires an English text. The London
gain an insight into the validity of the registered patent.
Agreement can be downloaded at www.epo.org.
A party instigating nullification proceedings before the
Thus, the London Agreement will also force many
Dutch courts will be admitted only if it has obtained such
European companies to read European patents in a
an advisory report. The Dutch courts usually confirm the
foreign
conclusions as to validity that are set out in the advisory
language
when
assessing
infringement.
However, the London Agreement will reduce the overall
report.
translation costs for proprietors of European patents and
The request for the advisory report should be
the reduction of these costs has been welcomed. As the
reasoned and indicate the objections to the patent.
acceptance of English as a language for national Dutch
According to the Patents Act 1995, the NPO is restricted
patent applications is unilateral, Dutch companies will
to the consideration of the grounds for nullification set
not yet benefit from reduced translation costs in most
out in the request. The NPO may not consider a ground
other countries when filing nationally. Therefore, there is
for nullification which is not included in the request for
concern that this may put Dutch companies at a
the advisory report.
The amended Patents Act will empower the NPO to
disadvantage in comparison to foreign companies.
supplement the advisory report with nullification
Annual fees
grounds which have not been raised in the request, but
Under the Patents Act 1995, the proprietor must pay an
which can be derived from the search report. Therefore,
annual fee in order to maintain the patent from the fifth
the NPO will become more active in advisory
year after the filing date. This means that for four years
proceedings. As a result, the quality of the advisory
from the filing date, no annual fees are payable. The
report is expected to rise so that third parties obtain a
annual fees increase progressively as the patent gets older.
more complete understanding of the validity of a patent.
The annual fees are meant to encourage patent
proprietors to consider whether they want to maintain
Surrendering a patent
their patents. The Netherlands belongs to a small group
During the life of a patent, the proprietor may surrender
of countries in Europe which charge annual fees from the
that patent wholly or in part. This could be desirable
fifth year only. However, under the amended Patents
where the proprietor expects that nullification of the
Act, the first annual fee will become due one year earlier.
patent or part of the patent is imminent. Under the
Shortening the no-fee period by one year will encourage
Patents Act 1995, the surrender of a patent has no
patent proprietors to assess at an earlier stage whether to
retroactive effect.
maintain their patents. Three years is considered to be
On December 13 2007 the revised European Patent
sufficient to allow proprietors to explore the commercial
Convention (EPC 2000) entered into force. The EPC 2000
possibilities of the patent.
incorporates a new limitation procedure before the EPO
to surrender a European patent, wholly or in part, which
Advisory proceedings for nullification
has retroactive effect. Therefore, the effect of surrender
The Patents Act 1995 introduced the new system for
for
registration of patents. In order to compensate for the
corresponding manner. Thus, under the amended
lack of substantive examination, any person can ask the
Patents Act, the surrender of a patent, wholly or in part,
NPO to provide an advisory report on whether the
will also have retroactive effect.
national
Erik Nijs is a Dutch and European patent attorney. He obtained an MSc
degree (cum laude) in aerospace engineering from Delft University of
Technology. Mr Nijs works in the field of mechanical engineering. He has
particular experience in offshore engineering, energy technology and
aerospace engineering. His clients range from international companies to
small and medium-sized enterprises.
Dutch
patents
is
amended
in
a
Erik Nijs
Dutch and European patent attorney,
The Hague
Tel +31 70 331 2549
Netherlands
29/11/07
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Amund Brede Svendsen and Ida Gjessing
Norway
All change for Norwegian patent
legislation, damages awards and
court procedures
During 2006 and 2007 a number of key IP issues were
years. The assessment of a patent application for the same
dealt with by the Norwegian legislature and the courts.
invention by the European Patent Office and the
Norwegian Patent Office would have had the same result.
New legislation
However, the 2003 implementation into Norwegian
Accession to European Patent Cooperation Treaty
law of the EU Patent Directive triggered a heated public
From January 1 2008 Norway will be a member of the
and
European Patent Cooperation Treaty. Although Norway
implementation bill was approved with the express
was among the founding countries when the treaty was
intention of aligning Norwegian patent granting practice
established in 1973, ratification has taken 34 years.
regarding the requirements of inventive step and scope
parliamentary
debate.
In
the
end,
the
Applicants filing a European patent after January 1
of protection with the most restrictive requirements of
2008 will be able to designate Norway, together with
the other EU member states regarding patents for
other countries. For patentees, it will become simpler and
biological material. In addition, the bill introduced an
cheaper to obtain patent protection in Norway if they
extended opposition term of three years for oppositions
apply for patent protection with the European Patent
based on a claim that the patent was granted in violation
Office. A separate application for a Norwegian national
of public order or morality.
patent will no longer be needed.
The bill also established a permanent expert
Norwegian businesses will enjoy a situation which is
committee on ethics; the law was amended to allow the
more in line with that enjoyed by their competitors in
Norwegian Patent Office to seek advice from that
other countries. Norwegian businesses wishing to file
committee when processing applications or oppositions
patents for both the domestic and foreign markets will no
giving rise to issues of public order or morality.
longer need a Norwegian and a European patent
However, in 2005 to 2006, when the bill was issued for
attorney. For Norwegian businesses that are not export-
public consultation, these issues resurfaced. Some felt
orientated, accession to the treaty will not be as
that it was necessary to ensure that similar safeguards
beneficial. Those wishing to file patents in Norway will
were imposed in respect of European patents with effect
be able to choose between filing a national application or
in Norway. Since none of these safeguards could be
filing an application with the European Patent Office.
imposed on the European Patent Office and its
However, Norwegian businesses operating mainly in the
processing of applications and oppositions, new
domestic market will be faced with an increased number
mechanisms were introduced by amendments to the
of valid patents to be aware of.
Patents Act. These will apply to both Norwegian and
The Norwegian Patent Office is expected to see a
European patents.
drastic decrease in the number of patent applications
received and a considerably reduced income from fees.
Three-year time limit for filing notice of opposition in
certain cases
Amendments to Patents Act
The extended three-year time limit for filing an
To a great extent, Norwegian patent laws have been
opposition based on a claim that a patent was granted in
harmonised with those of the European Union for many
violation of public order or morality will also apply to
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Norway Advokatfirmaet Grette DA
European patents (although the remedy of revocation
will be limited to the Norwegian part of the patent).
Foreign applicants should consider instructing a
Norwegian patent attorney or patent lawyer at an early
stage if it is expected that any of these proceedings may
Administrative re-examination throughout patent life
be instituted against the patent.
As an alternative to nullity proceedings before the courts,
Norwegian patent legislation differs from that of
it will be possible for third parties to challenge a
many other countries, particularly in the field of
Norwegian or European patent throughout its life
biotechnological inventions, which may be challenged
through administrative re-examination proceedings
for contravening morality. Thus, it may be useful to seek
before the Norwegian Patent Office. An administrative
local advice early on.
appeal to the appeal board of the Norwegian Patent
Office will be allowed. Any further appeal, which will be
New Civil Procedure Act: speeding up proceedings?
available only to the patentee, will be before the courts.
The new Civil Procedure Act will come into force on
The third party has no right of appeal to the courts, but
January 1 2008. The aim of the new code is to ensure that
may institute nullity proceedings in court if the
cases are processed in a reasonable timeframe, without
administrative route does not produce the desired
using more resources than necessary. The mantra of
outcome.
“justice delayed is justice denied” has been repeated
throughout the preparation of the new act.
Amendment of patent claims in court nullity
The act introduces a number of innovations,
proceedings
including the possibility of the court simultaneously
Through what the legislature referred to as the inclusion
returning a ruling on a request for a preliminary
of an existing rule in the Patents Act, it has in fact created
injunction and a decision on the merits of the case. In
a new provision: in a patent nullity case before the courts,
complicated patent matters this may turn out to be
if a patent is found to be partly invalid but capable of
impractical, but in simpler cases, such as certain
being upheld if the claim is amended in accordance with
trademark disputes, this may allow the rights holder to
a petition from the patentee, the patent is to be upheld as
enforce its rights more quickly and at a lower cost.
requested in the petition. Until recently, in practice it was
Cases will still be heard orally; however, the
impossible to have a patent upheld in part in nullity
preparation for cases will be undertaken in writing to a
proceedings, other than by upholding individual claims.
greater extent. To a certain degree, it will also become
It now appears that it will be possible to ask the court to
possible to present affidavits to the court, which are
approve amended patent claims.
inadmissible under the current Civil Procedure Act 1915
unless both parties agree otherwise.
Advice
There will still be no system of discovery; however,
For foreign patentees or applicants looking to Norway, it
the obligations on parties to provide information and
will become simpler to obtain patent protection there. An
produce documentary evidence will be stricter. Prior to
applicant can designate Norway as one of the countries
the hearing, each party is required to present a list of
in which it wishes the European patent to apply. It need
important evidence both for and against its case.
no longer deal with a Norwegian patent attorney.
It remains to be seen whether the objectives of the
However, applicants should be aware that there are
new act will be achieved. Ultimately, whether efforts
now several approaches that an attack on a European
made to reduce the length of proceedings succeed will
patent applying in Norway can take, as follows:
depend not only on the attitude of the parties and the
procedural rules, but also on the resources that will be
•
opposition before the European Patent Office;
allocated to the courts. Regardless of whether the reform
•
opposition before the Norwegian Patent Office
succeeds in speeding procedures up while keeping costs
(within nine months of grant, or three years if the
under control, in future the litigation of IP disputes in
challenge is based on a violation of morality or public
Norway will be less expensive than pursuing similar
order);
cases in other countries.
•
•
re-examination before the Norwegian Patent Office –
there is no time limit in this case, but only a lack of
Key court decisions
patentability (eg, lack of novelty or inventive step)
Damages award beyond the letter of the law
can be cited as grounds; and
The Norwegian courts have traditionally been quite
nullity proceedings before the courts – in such cases
conservative when it comes to awarding compensation for
the Oslo District Court has exclusive jurisdiction.
infringements of IP rights. However, in some recent
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Advokatfirmaet Grette DA Norway
decisions in which the courts appear to have tried to get
legislature. It remains to be seen whether the more liberal
round some of the inadequacies of the letter of the law, they
understanding of the rules and grounds for calculating
have been less restrictive when it comes to compensation
compensation for IP rights infringements will be upheld
for non-documented losses. They remain conservative
by the Supreme Court in similar matters, and whether
compared to other jurisdictions, since the concept of treble
the tendency to award higher levels of compensation will
or punitive damages is alien to Norwegian compensation
be confirmed over time.
laws, which are based on the principle that only
compensation for actual financial loss suffered can be
Use your trademarks
claimed, provided that it can be substantiated.
Since 1995 it has been possible for a third party to sue a
trademark owner for the removal of a registered
Surrender of profits from patent infringement
trademark from the Trademark Register if that mark has
In a patent infringement case decided by the Borgarting
not been used for a continuous period of five years from
Court
awarded
its registration. Trademark owners have tended to refile
compensation based on the profits made by the infringer.
their trademarks at certain intervals in order to maintain
No provision in the Patents Act justifies such a claim.
the registrations. Such filings may also be made in order
Under the provisions of the act, the patentee is entitled to
to bring the registration up to date with the actual mark
compensation only for the actual losses suffered or,
as it is used on international markets, or the trademark
alternatively, to a reasonable licence fee for the infringing
owner may simply want to enlarge or streamline the list
activity. In this particular case, which concerned fishing
of goods and services covered by the registration.
of
Appeal,
the
patentee
was
trawls, the appellant was ordered to pay more than
Following a recent decision of the Oslo District Court,
Nkr12 million by the appeal court, calculated on the basis
trademarks that deviate from each other in only minor
of the profits that he had reaped from fishing with an
ways may be handled together. A multinational company
infringing trawl. The court of first instance had found
engaged in the sale of functional food had filed
him liable for only just over Nkr1 million, as the patentee
successive trademark applications in Norway for a
could not show that he had suffered higher losses.
trademark used for the marketing and sales of a product
sold in other European markets, but not Norway. A
Compensation of reasonable licence fee for copyright
Norwegian industrial company filed suit and claimed
infringement
that a total of six different trademark registrations should
In a case dealing with infringement of the copyright in a
be removed from the register for non-use in Norway.
well-known statue of King Olav V at Holmenkollen, the
The court found that the five-year period had elapsed
international ski-jumping arena in Oslo, the infringer
with respect to only three of the six trademark
was found liable to pay compensation in the form of a
registrations. However, since the trademarks varied only
stipulated licence fee. In contrast to the Patents Act, the
in minor detail with respect to their appearance and/or
Copyright Act provides no guidelines for the calculation
the list of goods and services to which they applied, the
of such damages. Under the act, only compensation
court found that all six registrations could be identified
equal to the net profits of the infringer or compensation
with each other. Thus, two trademarks that had been in
for actual losses or, in special circumstances, other non-
force for only a few months were deleted.
economic losses may be awarded.
The court imposed very moderate requirements
regarding adequate use to prevent the application of the
Comment
non-use provision. Simply putting the products on the
There may be grounds to think that the Norwegian
shelves at certain outlets was deemed to be sufficient.
courts are prepared to go beyond the letter of the law in
In order to maintain trademarks in Norway, the
order to issue a fair decision in the particular
trademark owner should ensure that the trademarks are
circumstances of the case. Two leading academics in the
in use for the registered goods and services. Otherwise, it
IP field, Professors Are Stenvik and Ole-Andreas
may lose its rights to the registered trademark, even if the
Rognstad, had previously argued in favour of the results
registration has only recently been accepted by the
reached in the two cases considered here. However, it is
Norwegian Patent Office.
rare for the Norwegian courts to take on the role of the
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Norway Advokatfirmaet Grette DA
Amund Brede Svendsen is a partner at Grette. His work encompasses all
areas of IP law, particularly transactions and litigation in relation to patents
and trademarks. He also advises clients on competition law issues and
assists in IP and IT corporate transactions. He is chairman of the board of
the Norwegian Association for Industrial Property Rights and president of the
Norwegian national branch of the Association Internationale pour la Protection
de la Propriété Intellectuelle.
Amund Brede Svendsen
Partner
Tel +47 22 34 00 00
Norway
Ida Gjessing is a partner at Grette. Her work covers all areas of IP law,
including patents, trademarks and designs, as well as unfair competition
law. Her practice includes litigation and other non-contentious work such
as licensing and research and development agreements. Ms Gjessing is
a member of the Norwegian Association for Industrial Property Rights
and the Norwegian Copyright Association.
Ida Gjessing
Partner
Tel +47 22 34 00 00
Norway
29/11/07
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Bartosz Krakowiak
POLSERVICE Patent and Trademark Attorneys Office
Poland
Is Poland sufficiently armed for the
war on counterfeiting?
In April 2007 the Polish people welcomed the news that
viewed the new regulation as an effective weapon
Poland and Ukraine had been selected by the executive
against the counterfeit goods trade and the authorities
committee of the Union of European Football
employed Article 305 in this manner – at least until May
Associations (UEFA) as joint hosts of the UEFA EURO
2005.
2012
Championship
Finals.
However,
once
the
celebrations died down the question arose of whether
Troublesome Supreme Court resolution
Poland would be ready for 2012 in light of the need to
The situation was complicated on May 24 2005 when the
build the stadiums, highways and other infrastructure
Penal Chamber of the Supreme Court adopted a
required to host the tournament efficiently. Moreover, a
resolution on the interpretation of Article 305. In its
series of complex amendments to Polish legislation are
resolution the court defined the term ‘placing on the
also required in order to adapt domestic law to the
market’ strictly as the release by a producer or importer
organisational needs of such a big undertaking.
of goods bearing a counterfeit trademark into circulation
One legislative field that requires special attention,
for the first time. According to the court, once the goods
particularly in light of the guarantees given to UEFA by
were in circulation, their subsequent distribution fell
the Polish government, is the protection of IP rights, and
outside the scope of the provision and was therefore
in particular the sensitive issue of tackling trade in
permissible. This meant that no criminal liability could
counterfeit goods, which is still widespread in Poland
be imposed on anyone selling counterfeit goods
and poses serious problems for trademark owners.
purchased from a producer or importer – only the
Polish markets are full of counterfeit clothes, footwear
original sale by the producer or importer constituted the
and accessories, along with imitation perfumes, watches
criminal offence of ‘placing on the market’.
and handbags. Fake electronic equipment, spirits,
The logic which led the Supreme Court to reach this
cigarettes and pharmaceutical products are also
conclusion was quickly criticised by Polish IP specialists.
available. Illegal imports of such products, mainly from
Nearly all agreed that the position taken by the court was
Asia, are thriving and the Stadion X-lecia (the 10th
wrong and seriously weakened protection against
Anniversary Stadium) in Warsaw, which once hosted
counterfeit goods. The court failed to see that its position
great sporting events, has become one of the biggest
contradicted the basic principles of exclusive trademark
centres for trading in counterfeit goods in Europe.
rights, not to mention that it was mistaken in its
interpretation of the exhaustion doctrine, which it used
New law for the new century
as a starting point in its deliberations. At the same time,
When the new Industrial Property Law was adopted in
the court overlooked the fact that the intention of the
2000, the legislature intended to put an end to these
legislature was to impose criminal liability on the whole
criminal activities quickly by enhancing and tightening
counterfeit goods trade.
criminal measures against trademark infringement.
In spite of widespread criticism, the interpretation
Article 305 of the act, which provides a legal basis to
laid out in the resolution was regarded as binding and
tackle producers and sellers of counterfeit goods,
was thus applied by the prosecution authorities and the
originally stated that anyone marking goods with a
criminal courts. Consequently, the fight against
counterfeit trademark or placing such goods on the
counterfeit goods, particularly in various bazaars and
market would be liable to a penalty. Trademark owners
markets, was seriously hampered. The courts began to
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Poland POLSERVICE Patent and Trademark Attorneys Office
refuse to penalise dishonest sellers, while the police,
penalties by providing that the maximum penalty
anticipating the futility of their efforts, ceased to
imposed by national law must be at least:
confiscate suspected counterfeit goods. Once news of the
resolution spread, bazaar traders dealing in fake goods
•
€300,000 and/or four years’ imprisonment in cases of
enjoyed near-total impunity. Some even went so far as to
serious crimes committed under the aegis of a
keep a laminated copy of the resolution to hand in case
criminal organisation or carrying a health or safety
of a raid. To make matters worse, on October 12 2006 the
Supreme
Court
reaffirmed
its
controversial
risk; and
•
€100,000 for less serious infringements.
interpretation of the term ‘placing on the market’ in
another judgment exonerating a re-seller of counterfeit
garments.
Once the directive is adopted, Poland will be required
to introduce corresponding legal instruments into
national law. It is hoped that this will be done in a more
Glimmer of hope
appropriate manner than was the case for the
Even after the Supreme Court’s unfavourable rulings, the
implementation of the EU IP Rights Enforcement
war on counterfeit goods in Poland was not lost. The first
Directive (2004/48/EC).
glimmer of hope appeared when the prosecution
authorities realised that those engaging in secondary
Unfortunate implementation
trade of fake goods could be prosecuted under the Penal
The Amendment Act to implement the EU IP Rights
Code provisions on ‘fencing’ (ie, earning a profit from the
Enforcement Directive into Polish national law was
sale of goods resulting from criminal activities).
adopted on May 9 2007. It introduced substantial
At the same time, numerous non-governmental
organisations
trademark
representing
owners
IP
initiated
practitioners
a
crusade
and
amendments to the Copyright Law, the Industrial
Property Law and other laws on IP rights protection.
against
The primary aim of the directive was to increase the
counterfeiters, with some degree of support from the
efficiency of the protection offered by, and improve the
Ministry of Justice. The first step was to introduce
enforcement of, all IP rights. Unfortunately, several of the
amendments to the Industrial Property Law to make the
implementing act’s provisions offer diverging protection
definitions set out in the Supreme Court’s resolution
depending on the type of IP right involved – copyrights,
more precise. As a result of these efforts, the Polish Patent
database rights and plant variety rights on the one hand,
Office, encouraged by several non-governmental
with industrial property rights (ie, patents, trademarks
organisations, lodged a draft legislative amendment with
and design rights) on the other. This differentiation runs
Parliament. On June 29 2007 this draft was adopted as a
contrary to the directive, which provides no grounds for
new law. The new version of Article 305 clearly stipulates
such a substantial and disproportionate distinction with
that all persons engaged in the trade of counterfeit goods
regard to the means of protection and the punitive
are subject to criminal liability. Therefore, those who sell
measures for infringement.
fake goods, no matter when, can once again be fined or
even sentenced to imprisonment.
Furthermore, the implementation of the directive
allowed some lobbying groups to force through a
number of changes aimed at reducing the level of
The EU approach
industrial property rights protection by removing a
Further changes to Polish criminal law designed to
number of existing remedies. For example, in contrast to
enhance trademark protection against piracy are
copyright holders, trademark owners and patent and
expected as soon as the European Parliament and the
design right holders may now request the redress of the
Council adopt the proposed EU directive on criminal
effects of infringement only through the recall, removal
measures aimed at ensuring the enforcement of IP
and destruction of the infringing goods, and these
rights.
options apply only to those goods that are the property
If adopted, the directive will require EU member
of the infringer (previously, additional methods of
states to treat all intentional infringements of IP rights
redress were available to such rights holders). In
(with the exception of patents) carried out on a
addition, the previously existing right to demand that the
commercial scale (ie, to obtain a commercial advantage)
infringer issue an appropriate announcement in the press
as criminal offences. This will also apply to acts of aiding,
has been limited to merely making public the court
abetting or inciting others to infringe IP rights. Moreover,
ruling, either in full or in part, once it has been issued. As
the proposed directive aims to ensure that national
a result, some of the most basic claims in recent years
judicial authorities will impose sufficiently serious
have been eliminated for most IP rights holders, but are
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POLSERVICE Patent and Trademark Attorneys Office Poland
still allowed for copyright holders. According to the
the Polish market, the use of the Customs Law to prevent
majority of IP practitioners in Poland, this approach is
the importation of such goods into Poland has become
ineffective and is contrary to the intentions of the
vital. For a number of years Poland has had an effective
directive.
system of customs protection against the import and
Although the Amendment Act does adopt the rights
export of counterfeit and pirated goods. Today this
to disclose information provided under the directive,
system operates, as in other EU member states, on the
which
IP
basis of EU Regulation 1383/2003 on customs action
practitioners, they have been adopted, with respect to
against goods suspected of infringing certain IP rights
industrial property rights, in such a manner as to be
and the measures to be taken against goods found to
virtually useless. The courts may order the disclosure of
have infringed such rights. Successful cooperation
only strictly defined information that is vital to pursue
between trademark owners and Customs makes it
the main claim. Moreover, the act has made it mandatory
possible to limit considerably the influx of fake goods
to hold a court hearing to decide on claims to disclose
into Poland. The Polish government has implemented
information, despite the fact that the directive clearly
simplified procedures under Article 11 of EU Regulation
specifies that: “precautionary measures shall be taken, if
1383/2003 into national law, which, as of July 2006, can
necessary without the other party having been heard, in
be invoked by trademark owners. These procedures
particular where any delay is likely to cause irreparable
enable Customs to seize goods suspected of infringing
harm to the right holder or where there is a demonstrable
an IP right and to destroy them, without the need to
risk of evidence being destroyed.”
determine whether infringement has actually occurred.
were
The
Polish
eagerly
anticipated
legislature
has
by
also
Polish
ineffectively
implemented the directive with regard to the availability
Towards the finals
of efficient precautionary measures for IP rights
The recent changes to the Polish EU IP legislation in
infringements. Therefore, the general rules of the Code of
regard to anti-counterfeiting measures seem to be steps
Civil Procedure for securing all types of claim will
in the right direction – with the exception of the
continue to apply to such measures. Unfortunately, in
implementation of the EU IP Rights Enforcement
recent years this solution has proved ineffective, since the
Directive, which has been unqualified success. The broad
general rules are overly restrictive and inadequate for
changes needed may be symbolised by the impending
specific issues such as the protection and enforcement of
overhaul of the Stadion X-lecia in Warsaw, which will be
IP rights.
transformed from being the biggest bazaar in Europe
(and a centre of trade in counterfeit and pirated goods) to
Do not forget Customs
one of the main host venues for the UEFA EURO 2012
As the majority of problems discussed so far in this
Finals – a vastly different situation from the present one.
chapter concern internal trade in counterfeit goods on
Bartosz Krakowiak is a Polish patent and trademark attorney, a European
patent attorney and a European trademark and design attorney. He is deputy
manager of the POLSERVICE trademark department and specialises in
trademark registration and protection matters, as well as unfair competition
cases. Mr Krakowiak is an active member of the International Association for
the Protection of Intellectual Property and is vice president of the Appellate
Disciplinary Court of the Polish Chamber of Patent Attorneys.
Bartosz Krakowiak
Patent and trademark attorney
Tel +48 22 44 74 692
Email
[email protected]
POLSERVICE Patent and Trademark
Attorneys Office
Poland
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César Bessa Monteiro
ABBC – Azevedo Neves, Benjamim Mendes, Bessa Monteiro, Cardigos & Associados RL
Portugal
Implementing the EU IP Rights
Enforcement Directive: an ongoing
challenge
On April 29 2004 the European Parliament and the
than into the CDAC. Taking into account the directive’s
European Council adopted the EU IP Rights Enforcement
goals, it appears that the structure used to amend the IP
Directive (2004/48/EC). The directive is intended to
Code is clearer and more effective than the way in which
harmonise national legislation to prevent differences
the amendments are introduced into the CDAC, with the
between member states in the enforcement of IP rights,
IP Code amendments being more in line with the
thus avoiding the exploitation of such rights by pirates
intentions of the directive.
and counterfeiters, who currently target jurisdictions
where enforcement is less effective.
Collecting and preserving evidence
The directive essentially aims to combat infringements
In regard to evidence, the directive distinguishes the
carried out on a commercial scale and those which cause
collection of evidence from measures to preserve
substantial damage. However, it also targets infringements
evidence (Articles 6 and 7).
carried out by end consumers who act in bad faith.
According to Article 6(1), member states shall ensure
In principle, the directive should not affect substantive
that the competent judicial authorities may order that an
law as it establishes civil and administrative measures,
opposing party present evidence where the claimant’s
procedures and remedies. However, according to Article
application lists evidence held by the opposing party,
16 of the directive, member states may use other
provided that the claimant has presented sufficient
appropriate penalties in cases of IP rights infringement.
reasonably available evidence to support its claim. The
Member states had to implement the directive by
April 29 2006. However, Portugal failed to do so and on
same article provides that member states may define
what constitutes ‘reasonable evidence’.
June 27 2007 the European Commission ruled to refer
Article 6(2) provides that banking, financial or
Portugal to the European Court of Justice over its failure
commercial documents submitted as evidence will be
to implement the directive.
treated as protected confidential information only where
On July 19 2007 the Portuguese Parliament approved
the infringement was committed on a commercial scale.
Bill 141/X, which aims to enact the directive, although
Furthermore, according to Article 7(1), before the
this bill is still to be approved by a specially appointed
commencement of proceedings to decide on the merits of
commission, so its final format is not yet known.
the case, the court may order provisional measures to
Rather than creating a new law to deal with IP rights,
preserve evidence in respect of the alleged infringement,
the bill amends the Authorship and Neighbouring Rights
subject to the protection of confidential information. This
Code (CDAC) and the Industrial Property Code (IP
article also determines the measures that may be taken,
Code). As a result, the implementation of the directive
such as a detailed description of the infringing goods
takes a different format in each code. For example,
and, in certain circumstances, the option to take such
Article 7 of the directive uses the expression ‘reasonable
measures without hearing arguments from the other
evidence’. While the CDAC uses the same expression, the
party, in particular where a delay is likely to cause
IP Code uses the term ‘sufficient evidence’.
irreparable harm to the rights holder or there is
However, in other cases the bill incorporates the
substantial risk of the evidence being destroyed.
directive’s provisions more effectively into the IP Code
However, if such measures are adopted without hearing
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ABBC – Azevedo Neves, Benjamim Mendes, Bessa Monteiro, Cardigos & Associados RL Portugal
the other party, the affected party must be notified
measures to preserve evidence is less effective than that
immediately after the execution of the measures, if not
provided by the directive, as the directive allows such
before. At the affected party’s request, a review of the
measures to be taken without hearing the other party,
executed measures may be carried out.
provided that certain circumstances are fulfilled, while the
If the applicant does not initiate proceedings for a
Portuguese law provides that a defendant must be heard
decision on the merits of the case within a reasonable
before evidence is seized. Therefore, this may constitute a
period after measures to preserve evidence have been
denial of IP rights protection, particularly where a delay
taken, at the defendant’s request the measures may be
caused by the need to hear the other party is likely to cause
revoked or cease to have effect. The duration of this
irreparable harm to the rights holder or where there is a
‘reasonable period’ is to be determined by each member
provable risk of evidence being destroyed.
state; where member states fail to do so, the directive sets
In regard to the second point, the measures for
out a default period of 20 working days or 31 calendar
preserving evidence can be impracticable, particularly
days, whichever is longer.
under Article 387(2) of the Civil Procedure Code, which
In such cases, or where it is subsequently found that
states that “a precautionary measure can be refused by
there was no infringement or threat of infringement, at
the judge when the prejudice that would result from its
the defendant’s request the court may order the applicant
adoption exceeds considerably the damages that the
to provide the defendant with appropriate compensation
applicant is trying to avoid”.
for any injury caused by the requested measures. In
As stated above, the amendments to the IP Code
addition, in order for measures to preserve evidence to
constitute a better transposition of the directive since
be taken the applicant may need to provide security in
they provide a proper procedure regarding measures to
order to guarantee compensation for any damages
preserve evidence, establishing all the requirements set
suffered by the defendant.
forth by the directive for the effective protection of IP
The amendments made to the CDAC by the bill regulate
rights. In general, the IP Code amendments encompass
the collection of evidence (Article 210) and the early
the application, revocation and extinction of those
production of evidence (Article 210B) in two separate
measures, as well as the applicants’ responsibility, in the
articles. However, the measures to preserve evidence and
same terms as used in Article 7 of the directive.
the obligation to provide information are included in the
Another key difference between the codes is the
measures dealing with the collection of evidence. Moreover,
protection of confidential information, which is more
the obligation to provide information will be restricted to
accurately and adequately implemented in the IP Code
infringements of IP rights on a commercial scale.
than in the CDAC, where it is established for the seizure
Although Article 210A of the CDAC starts off by
of evidence only.
repeating Article 6 of the directive regarding the
collection of evidence, it goes on to refer to Article
Provisional and precautionary measures
210C(3) (in contrast to the directive, which goes on to set
According to Article 9 of the directive, at the applicant’s
out measures for the preservation of evidence).
request the competent judicial authorities may issue an
Article 210B provides for measures to request
evidence before the commencement of proceedings on
interlocutory injunction against the alleged infringer in
order to:
the merits of the case where an infringement or threat of
infringement has occurred. However, Article 210B(3)
•
prevent the imminent infringement of an IP right;
refers to the normal procedures set out by the Civil
•
forbid the continuation of alleged infringements of
Procedure Code which regulate the early production of
evidence and precautionary measures. As a result:
that right; or
•
ensure such continuation subject to providing
guarantees intended to compensate the rights holder.
•
•
the procedures established in Article 7 of the
directive have no autonomy under Portuguese law as
They also can order the seizure or delivery-up of
they are regulated by the Civil Procedure Code; and
goods suspected of infringing an IP right in order to
the reference to articles regulating precautionary
prevent those goods entering or being sold on the market.
measures may render impracticable a large number
of the measures provided by the directive.
An interlocutory injunction may be issued against
both an alleged infringer and, in the same circumstances,
an intermediary whose services are being used by a third
In regard to the first point, the rights protection
afforded to an applicant which requests provisional
party to infringe an IP right (as set out in the EU Infosoc
Directive (2001/29/EC)).
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Portugal ABBC – Azevedo Neves, Benjamim Mendes, Bessa Monteiro, Cardigos & Associados RL
In order for such measures to be ordered, the
•
a lump sum based on elements such as the amount of
applicant must provide reasonably available evidence in
royalties or fees which would have been due if the
order to demonstrate that it is the rights holder and that
infringer had asked permission to use the infringed
either its right is being infringed or such infringement is
IP right.
imminent.
For acts committed on a commercial scale, the court
The infringer must pay such compensation if it
can order the precautionary seizure of the infringer’s
engaged in an infringing activity knowingly or with
movable and immovable property if the injured party
reasonable grounds to know of the infringement.
can prove that there are circumstances likely to endanger
If the infringer did not know or had no reasonable
the recovery of damages. Therefore, the competent
grounds to know that it was engaged in an infringing
authorities may order the delivery-up of bank, financial
activity, the courts may order the recovery of profits or
or commercial documents or appropriate access to the
the payment of damages.
relevant information.
Article 9 also sets out measures relating to the
preservation of evidence, such as:
The CDAC echoes the negative economic measures
and the lump-sum provision set out in the directive and
establishes the principle of proportionality in regard to
moral prejudice. However, it does not refer to the
allowing the court to take action without hearing the
directive’s requirement that the infringer knew or had
defendant in certain cases;
reasonable grounds to know of the infringement and
setting down a reasonable period to institute
makes no mention of the infringer paying damages for
proceedings on the merits of the case; and
the recovery of profits where the infringer did not know
ordering compensation at the defendant’s request for
or had no reasonable grounds to know that it was
any injury caused by those measures.
engaging in an infringing activity.
In contrast, the IP Code amendments include a single
damages where the infringer did not know or had no
article dealing with provisional and precautionary
reasonable grounds to know of the infringement,
measures.
although it does provide for negative economic
•
•
•
In contrast, the IP Code provides no compensation for
It is surprising that the bill does not introduce new
measures.
procedures for such measures, with shorter deadlines
Comparing the damages provisions of the bill with
and a redistribution of competence in both jurisdictional
each other and the corresponding provisions of the
and territorial terms. As the bill currently stands,
directive, there are some major differences.
provisional and precautionary measures risk being only
The CDAC does not require the infringer to pay the
a procedural step to be used at the judge’s discretion,
costs incurred by the rights holder in the course of the
thus lacking the necessary speed for such procedures.
investigation, while such a requirement is included in the
As such, the measures are inadequate to tackle one of
IP Code. The compensation for damages should always
the directive’s top priorities, the fight against computer
involve a loss of benefits by the infringer, thus ensuring
piracy. Decree-Law 7/2004 provides for provisional and
that the infringer does not keep its illegal profits.
precautionary measures in regard to intermediate
In
addition,
the
IP Code
provides
for
the
services providers (ie, caching). However, the directive
accumulation of damages or certain damages where the
encompasses a much wider range of services and
infringer’s behaviour is continuous or particularly
violations. The correct implementation of the directive is
grievous. This is a useful provision as it allows the
vital in order to establish efficient procedures.
damages award both to compensate the injured party
and to punish the infringer. Moreover, the IP Code
Damages
provides for punitive damages in line with the directive,
Article 13 of the directive stipulates that the infringer
which acts as a deterrent for future infringement. It is
must pay compensation to the rights holder for the actual
unclear why the same measures are not provided in the
damage suffered by the rights holder as a result of the
CDAC.
infringement. To establish such compensation, the courts
may consider:
A further question relating to damages arises from the
implementation of the directive: is the award of damages
based on the unfair profits made by the infringer
•
negative economic damages, including lost profits,
unfair profits made by the infringer and, in
appropriate cases, moral prejudice; and/or
compatible with the Portuguese civil indemnity rules?
According to the Civil Code, the compensation due to
the injured party should be based on the damage caused
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to that party, which may include lost profits. However,
Comment
the Civil Code does not include illegal profits gained by
Certain measures introduced by the bill are not as
the infringer as an element to be used to calculate the
effective as intended by the directive, particularly those
compensation because compensation is due for damages
included in the CDAC. However, although the bill grants
caused to the injured party and is never calculated
less effective protection to IP rights than the directive, it
according to the benefits obtained by the infringer. Thus,
is undoubtedly a positive step in the enforcement of IP
only lost profits may be used to calculate compensation.
rights.
César Bessa Monteiro provides assistance in the area of industrial property
and IP law, as well as in the field of IT law. He is both a lawyer and an official
industrial property agent, with more than 25 years of experience in this field.
As a result of his involvement, Mr Bessa Monteiro was invited to be part of
the government commission created to study and review the Portuguese
Industrial Property Code, which was enforced in July 2003, and was elected
as the 2007 president of the Portuguese Association of IP Consultants.
César Bessa Monteiro
Partner
Tel +351 21 358 3620
ABBC – Azevedo Neves, Benjamim
Mendes, Bessa Monteiro,
Cardigos & Associados RL
Portugal
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Cristina Popa
Rominvent SA
Romania
Supplementary protection certificates:
extending protection for medicinal and
plant products
As a result of Romania’s accession to the European
in Romania is established by the following pieces of
Union on January 1 2007, new regulations on the
legislation:
protection of industrial property came into force. Article
19a of the Romanian Treaty of Accession states that: “any
•
medicinal product protected by a valid patent and whose
two EU regulations:
•
first authorisation for placing on the market was
EU Regulation 1768/92 on the creation of a
supplementary certificate for medicinal products;
obtained after January 1 2000 may be granted a certificate
and
in Romania. Where the period provided by Article 7(1)
•
EU Regulation 1610/96 on the creation of a
has expired, a certificate may be applied for within a
supplementary certificate for plant protection
term of six months starting from the date of accession.”
products;
The period referred to in Article 7(1) is six months from
•
the date on which the product received authorisation to
Trademark Office (ROPTO), which implements the
be placed on the market as a medicinal product.
Background
Regulation 146/2006 of the Romanian Patent and
two EU regulations in Romania;
•
Law 95/2006, Title XVII, on medicines; and
•
Order 1199/2006 on the withdrawal of suspension by
Supplementary protection certificates have their origins
the
in the thalidomide disaster in the 1960s. Following the
authorisations for placing medicines on the market
National
Medicines
Agency
of
certain
complications caused by the use of this drug, the
before Romania’s accession to European Union,
European authorities decided to establish rigorous
issued by the Ministry of Public Health.
controls for medicinal products before they were placed
on the market. The result was Directive 65/65/EEC,
The EU regulations are directly applicable in all EU
which was later amended by Directives 81/851/EEC and
member states. However, supplementary protection
2001/83/EC.
certificates are requested and granted at national level.
Supplementary protection certificates are titles of
protection designed to:
Definitions
The applicable legislation defines certain relevant terms.
•
improve the public health system;
A ‘medicinal product’ is defined as a substance or
•
protect innovation in the pharmaceutical industry;
combination of substances used to treat or prevent
•
provide a uniform solution across the European
disease in humans or animals with a view to making a
Union; and
medical diagnosis or to restoring, correcting or
achieve a balance between the rewards of expensive,
modifying physiological functions in humans or animals.
•
long-term pharmaceutical research and the needs
and budget of the public health system.
The term ‘product’ is defined as an active ingredient,
or a combination of active ingredients, of a medicinal
product – in this context, the term ‘active ingredient’
Legal basis
must be interpreted as including related derivatives
The legal basis for supplementary protection certificates
thereof (eg, a salt or an ester) which obtained
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Rominvent SA Romania
authorisation to be placed on the market and which are
market in Romania, issued in accordance with
protected by the basic patent. An exception is where the
Directive 2001/83/EC or Directive 2001/82/EC and
derivative itself is a new active substance.
The term ‘basic’ does not mean that the patent must
dated after January 1 2000, has been obtained; and
•
The authorisation is the first market authorisation for
be the first to protect that product. In Romania, a basic
the product in Romania, although it need not be the
patent may be:
first market authorisation for the product in the
European Union.
•
•
a patent in force and granted in Romania, in
accordance with the Patent Law (64/1991, as
Entitlement to certificate
amended and republished in 2002);
The certificate will be granted to the holder of the basic
an European patent validated or extended in or to
patent or to his or her successor in title.
A single certificate will be granted to the owner of
Romania, granted in accordance with Law 611/2002
or Law 32/1997; or
•
several patents for the same product.
a valid certificate for transitional protection, granted
If two or more applications for a certificate for the
under Law 93/1998 on the transitional protection of
same product from two or more patent holders are
patents.
considered at the same time, certificates for the product
may be granted separately to each patent owner.
Scope of protection
In Romania, a supplementary protection certificate may
Subject matter of application
protect:
A supplementary protection certificate confers on its
holder the same rights as a basic patent and is subject to
•
any product – as defined above, including its salts or
the same limitations and obligations.
The protection conferred by the certificate extends
esters, provided that these are also included in the
product – which:
•
is protected in Romania by a valid patent;
•
prior to commercialisation, was authorised as a
only:
•
medicine or a plant protection product; or
•
was authorised before the expiry of the patent;
basic patent;
•
and
•
any use of the product as a medicine or plant
to the product covered by the authorisation to place
it on the market; and
•
protection product.
A certificate may be granted in Romania for a product
within the limits of the protection conferred by the
to those uses of the medicine authorised before the
expiry of the certificate.
Application
that received initial authorisation for placing on the
An application for a supplementary protection certificate
market in Romania in accordance with Directive
should be lodged:
2001/83/EC or Directive 2001/82/EC after January 1
2000.
•
within six months of the date on which the first
A certificate may protect a single product – that is, a
authorisation to place the product on the market in
single active substance or a combination of active
Romania was granted, in accordance with Directive
substances.
2001/83/EC or Directive 2001/82/EC; or
•
within six months of the date on which the basic
Conditions
patent was granted if the market authorisation was
The following conditions must be fulfilled as of the date
granted before the basic patent; alternatively, if the
on which the application for a certificate is submitted to
basic patent is a European patent, the six-month term
the ROPTO:
starts to run from the date on which the Romanian
translation of the European patent is filed with the
•
ROPTO.
The basic patent protecting the product is in force in
Romania;
•
The ROPTO will consider the application as filed
The product has not already been the subject of
another supplementary protection certificate in
provided that it includes:
Romania;
•
A valid authorisation to place the product on the
•
the request for issuance of the certificate;
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Romania Rominvent SA
•
the applicant’s identification information;
Term of protection
•
the number of the basic patent and the title of the
The supplementary protection certificate takes effect on
invention;
the expiry of the legal term of protection of the basic
the number and date of the first authorisation to
patent, and remains valid for a period established in
place the product on the market in Romania; and
accordance with Article 13 of the EU regulations, taking
if the authorisation to place the patent on the market
into account the reasons for the expiry and invalidity of
in Romania is not the first in the European Union, the
the certificate, as set out in Articles 14 and 15 of the
number, date and country of the first authorisation in
regulations.
•
•
The duration of the certificate may not exceed five
the European Union.
years from the date on which it takes effect.
A first provisional marketing authorisation shall not
The application will be subject to both formal and
be taken into account when calculating duration of the
substantive examinations.
certificate, unless that authorisation was not directly
followed by a final authorisation for the same product.
Decision
The ROPTO will rule whether to grant or reject the
certificate application. If the application is successful, the
Defending certificate rights
certificate is granted to the owner of the basic patent or to
An interested party may petition the Bucharest Court for
his or her successor in rights.
the cancellation of a supplementary protection certificate if:
Within one month of a positive decision, the ROPTO
will publish in the “inventions section” of the Official
•
Gazette:
•
the certificate was granted in breach of the legal
requirements;
a notice that the certificate has been granted or
•
the validity of the basic patent has ceased; or
•
the basic patent has been cancelled, either in whole or
rejected;
in part, so the product is no longer protected by the
•
the certificate owner’s name and address;
claims of the basic patent.
•
the number of the basic patent;
•
the
number
and
date
of
the
first
market
authorisation, as well as the product identified
thereby;
•
•
A ROPTO decision to reject a certificate application
may be appealed by the owner within three months.
An interested party may petition the ROPTO to revoke
the number and date of the first market authorisation
the certificate within six months of the publication of the
in the European Union, if applicable; and
decision to grant the certificate in the Official Gazette, for
the duration of the certificate.
reasons set out in Article 15 of the regulations.
Cristina Popa graduated from Bucharest Polytechnic University with a diploma
in chemical engineering and holds a PhD in biology from the University of
Bucharest. She joined the firm in 2000 and is a member of the national
group of IP attorneys and European patent attorneys. In 2006 she was
appointed as a European Patent Institute tutor. She specialises in organic
chemistry technology, pharmaceuticals and biotechnology, and has written
IP articles for specialist periodicals.
Cristina Popa
European patent attorney
Tel +40 21 231 2515
Rominvent SA
Romania
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Ekaterina Tilling and Igor Motsnyi
Russia
Changes to IP legislation ring in the
new year
On December 18 2006 the president signed Federal Law
Copyright
230-FZ introducing Part IV of the Civil Code and Federal
Part IV incorporates the provisions of the Law on
Law 231-FZ enacting Part IV of the Civil Code. Part IV
Copyright and Related Rights and the Law on Legal
comes into force on January 1 2008.
Protection of Computer Software and Databases which
Part IV codifies the majority of the IP rules set out
are currently in effect, and sets out important new
by various Russian laws and introduces certain
provisions, including rules governing collective rights
new provisions. It represents the third attempt to codify
management organisations and copyright agreements.
IP legislation within the body of the Civil Code in
the past 10 years, and the first time that Russian IP
Copyright agreements
laws have been combined into a single piece of
Part IV divides all copyright agreements into two types:
legislation.
This chapter provides a brief overview of the new IP
•
legislation.
copyright
assignment
agreements,
which
are
agreements to transfer all the economic rights in the
copyrighted work for the duration of the copyright; and
Main features
Part IV repeals the following IP acts:
•
copyright licence agreements, which involve a
temporary grant of economic rights in a copyrighted
work pursuant to an exclusive or non-exclusive
•
the Patent Law;
licence. An exclusive licence does not permit the
•
the Law on Copyright and Related Rights;
licensor to grant licences to third parties during the
•
the Law on Trademarks, Service Marks and
term of the licence. Under a non-exclusive licence, the
Appellations of Origin of Goods;
licensor reserves the right to grant licences to parties
the Law on Legal Protection of Computer Software
other than the licensee. At present, there are no
and Databases;
provisions on the assignment of economic copyrights
the Law on Legal Protection of Integrated Circuit
and it is unclear whether copyright assignment is
Topographies; and
permitted under the existing copyright law.
•
•
•
the Law on Selective Achievements.
Software agreements
The main features of Part IV can be summarised as
Part IV introduces new rules on agreements for
follows:
commissioned software (ie, the creation of computer
software and/or databases). Under the new law, the party
•
•
•
•
It contains general provisions applicable to all areas
commissioning the software or database will automatically
of intellectual property;
hold the exclusive economic rights to the software or
All agreements on the transfer of IP rights are
database, unless the agreement stipulates otherwise. The
divided into assignment and licence agreements;
existing law does not allow for the automatic transfer of
It provides for liquidation of a legal entity or an
rights and states that any rights granted under any type of
individual entrepreneur guilty of repeated or gross
copyright agreement (including those for commissioned
breaches of IP rights; and
software) must be expressly specified in the agreement.
It allows for the pledge of IP rights.
In addition, Part IV introduces new provisions on
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Russia Pepeliaev Goltsblat & Partners
computer programs and databases created by contractors
management organisations may apply for state
or agreements on the performance of research, scientific
accreditation, including the management of economic
and technological work that do not expressly provide for
rights to music for both public performance and public
the creation of computer software or databases. The
communication via cable or air transmission.
economic rights to a computer program created during
Accredited
collective
rights
management
the performance of such contracts will belong to the
organisations will be overseen by an authorised
contractor, unless the contract stipulates otherwise.
government body.
Part IV also requires state registration of assignment
agreements for computer programs (or databases) that
Related rights
are registered with the Russian Intellectual Property
In addition to traditional related rights (eg, rights to
Office (Rospatent). Registration of a computer program
performances and phonograms), Part IV introduces two
or a database with Rospatent remains optional.
new types of right:
Works created during employment
•
According to Part IV, employers hold the copyright in
works created by employees in the course of performing
the right of a publisher to previously unpublished
works; and
•
the right of a database maker.
their duties, unless an employment or other contract
provides otherwise. At present, the employer holds the
Publishers’ rights
copyright in works created by employees performing not
Part IV introduces protection of the rights of the
only their employment duties, but also specific assignments
individual who is the first to publish lawfully or to
from the employer, unless a contract provides otherwise.
arrange for publication of a previously unpublished
The new law states that the exclusive rights in the work
copyrighted work that either has passed into the public
will be transferred to the employee if the employer fails to
domain or was in the public domain as a non-copyright
do the following within three years of creation of the work:
protected work (known as the publisher).
Publishers’ rights include:
•
use the work;
•
assign exclusive rights in the work to a third party; or
•
notify the employee of its decision to keep the work
confidential.
•
the same economic rights as the author or any other
right holder; and
•
the right to include the publisher's name on the work.
If the holder of copyright in an employee’s work is the
Economic rights come into effect when the work is
employer, the employee is entitled to remuneration. The
published and last for 25 years, starting from January 1 of
parties must agree on the amount of the remuneration; in
the year following the year of publication.
the event of a dispute, this is decided by the courts.
Rights of database makers
Part IV also protects the rights of a legal entity or
Collective rights management organisations
Collective
rights
management
organisations
are
individual that organises creation of a database and the
organisations that act on behalf of rights holders on a
collection, processing and arrangement of its contents. This
collective basis, according to agreements concluded with
is an attempt to bring Russian legislation in line with the
individual copyright holders or other collective rights
EU rules on protection of the sui generis rights of database
management organisations, including foreign organisations.
makers, namely the EU Database Directive (96/9/EC).
Such agreements grant licences to users and collect
remuneration for use of the works on behalf of the owners.
Economic rights (ie, the right to extract materials from
the database and use them in any form) belong to the
Part IV introduces voluntary state accreditation of
database maker if creation of the database involves
collective rights management organisations and states
substantial financial, economic, logistical or other
that only collective rights management organisations
expenses. In the absence of proof to the contrary, the
that have obtained state accreditation have the right to
creation of a database is considered to involve substantial
manage the rights of copyright holders without
expense if the database contains at least 10,000
concluding agreements with them. Under the existing
independent pieces of information. A database maker
law, any collective rights organisation can act on behalf
may license or assign its economic rights.
of a rights holder without a contract.
Part IV lists the areas in which collective rights
This new right applies irrespective of whether the
database itself or its components enjoy copyright protection.
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Pepeliaev Goltsblat & Partners Russia
The economic rights of a database maker take effect
once the creation of the database has been completed and
trademark registration. In particular, a sign cannot be
registered as a trademark if:
are protected for 15 years starting from January 1 of the
year following the year of creation.
•
it is identical or confusingly similar to an earlier trade
The term of protection is automatically renewed each
name for similar goods or services (at present,
time the database is updated. The law does not specify
registration may be refused only if the trademark is
how substantive the changes must be in order for the
identical to a trade name, but not if it is merely
protection to be renewed.
similar);
•
it is identical or confusingly similar to an earlier
Patents
commercial designation for similar goods or services
At present, patents are regulated by the Patent Law. The
(at present, this is not grounds for denial of
registration); or
main changes in the area of patents are as follows:
•
•
it is identical to an earlier registered domain name,
The periods of legal protection for utility models and
irrespective of the nature of the goods or services (at
industrial designs have been extended from five to 10
present, this is not grounds for denial of registration).
years and from 10 to 15 years, respectively.
•
For the first time, the new law deals with the issue of
Trademark licence and assignment
inventions, utility models or industrial designs that
Part IV obliges the licensee under a trademark licence
are created by an employee using financial, technical
agreement to ensure that the quality of the goods or
or other material resources of an employer but
services conforms to the licensor’s requirements and
outside his or her employment duties or not under a
states that the licensor is entitled to exercise control over
specific instruction by the employer. In such cases,
the licensee’s compliance with this obligation.
the employee has the right to obtain a patent as the IP
At present, the law does not require that the quality of
item is not considered to be created in the course of
the goods or services be specified, but rather states that
employment. However, the employer may ask either
the licensee must provide goods or services of a quality at
for a royalty-free non-exclusive licence to use the
least equal to that of the goods or services of the licensor.
results of the employee’s work for its own purposes
•
for the whole term of protection or for compensation
Trademark revocation
for the expenses incurred by the employer.
Part IV allows only an interested party to file an
Part IV introduces new provisions on inventions,
application for trademark revocation with the Rospatent
utility models and industrial designs created under
Chamber on Patent Disputes in cases where a trademark
contractors’
on
has not been used for three consecutive years. At present,
performance of research, scientific and technological
any party can file an application for a trademark to be
works that do not expressly provide for creation of
revoked if it has not been used for this period. Part IV
the inventions, utility models and industrial designs.
does not define the term ‘interested party’, so it is unclear
The right to obtain a patent to a product created in
how this provision will be interpreted.
agreements
and
agreements
fulfilment of such a contract will belong to the
•
Part IV states that a trademark cannot be revoked if it
contractor, unless the contract stipulates otherwise.
has been used by its owner, a licensee under a licence
Another important change relates to the validity of a
agreement or any other party using the trademark with
licence agreement when a patent is subsequently
the owner’s permission. The current law restricts the
ruled invalid. The new provision states that the
concept of proper trademark use in revocation
licence agreement remains valid to the extent to
proceedings to cases where the mark is used by the
which it was fulfilled at the time when the Chamber
trademark owner or a licensee under a registered licence
of Patent Disputes ruled that the patent was invalid.
agreement.
Thus, the new rules give trademark owners greater
Trademarks
opportunity to resist trademark revocation and recognise
Part IV preserves most of the rules of the Law on Trademarks,
trademark use under an unregistered licence agreement
Service Marks and Appellations of Origin of Goods.
as proper use.
However, it also sets out a number of important new rules.
Trademark invalidity
Trademark registration
Part IV introduces a new ground for invalidating a
Part IV introduces new grounds for refusal of a
trademark – namely, where an action for trademark
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Russia Pepeliaev Goltsblat & Partners
registration is recognised as an abuse of rights (eg, if the
The right holder may assign the right to use a
mark was registered to prevent the legitimate owner
commercial designation only in conjunction with the
from registering its trademark in Russia).
transfer of its business. A commercial designation may be
licensed under an agreement for lease of an enterprise or
Trade names
a franchise agreement.
Commercial
Part IV streamlines the rules on trade names that are
designations
are
not
subject
to
currently set out in the Civil Code and various other laws
mandatory registration. Legal protection is granted only
and introduces certain new provisions, as follows:
to those commercial designations that are used to
distinguish enterprises located in Russia. Legal
•
•
•
Only legal commercial entities may hold exclusive
protection of a commercial designation is cancelled if the
rights to trade names;
designation has not been used for one year. It is not yet
Names of not-for-profit organisations are not
clear how this provision will work – in particular, what
protected as trade names;
may constitute proper use of a commercial designation
Legal protection is granted only to trade names of
sufficient to prevent cancellation.
legal entities entered into the Unified State Register
•
of Russian Legal Entities; and
Conclusion
Any transactions relating to trade names (ie,
Implementation of Part IV will require the issue of new
assignment, licensing or pledge) are prohibited,
regulations to outline, for instance, the procedures for
whereas a trade name may currently be licensed
trademark applications and for that examination and
under a franchise agreement, according to Article
state registration of licensing or assignment agreements.
1027 of the Civil Code.
In addition, several important provisions remain unclear,
including those on:
Commercial designations
Part IV introduces legal protection of rights to
•
commercial designations.
Commercial designations distinguish commercial,
during employment;
•
industrial or other enterprises, provided that such
designations have distinctive features and their use is
known within a particular geographical area. It is unclear
the payment of remuneration for works created
the new grounds for denying trademark registration
and the rules on trademark revocation; and
•
the use and legal protection of commercial
designations.
how the terms ‘distinctive features’ and ‘particular
geographical area’ are to be defined.
These ambiguities may create difficulties for both IP
Any legal entity engaged in commercial activities –
owners and courts. All interested parties are advised to
including a not-for-profit organisation, to the extent that
pay close attention to the new rules, which come into
it undertakes commercial activities, or an individual
effect on January 1 2008.
entrepreneur – has the right to use a commercial
designation.
Ekaterina Tilling is an IP dispute resolution expert with substantial experience
of conducting judicial and administrative proceedings in the area. Ms Tilling
has contributed to the successful resolution of disputes involving the
protection of rights to inventions in the chemical, medical and automotive
industries, as well as trademark and copyright protection disputes. She has
taken part in a number of major projects to combat counterfeiting in Russia.
Ekaterina Tilling
Head of IP practice, Moscow
Tel +7 495 967 00 07
Russia
Igor Motsnyi is an expert in IP and IT law, including copyright, trademarks,
agreements for the transfer of IP rights and various issues related to online
business, including advising Russian and foreign internet companies.
Mr Motsnyi has substantial experience in trademark and copyright law, in
particular protection of computer software and in the drafting of various
IP/IT contracts. He has taken part in large projects in the areas of electronic
commerce and intellectual property.
Igor Motsnyi
Senior attorney, Moscow
Tel +7 495 967 00 07
Russia
29/11/07
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Ron Wheeldon
Ron Wheeldon Attorneys
South Africa
Bucking the trend: new developments
in the IP field
Since the publication of IP Value 2007 the South African
overruling Abbott. The result was that certain elements
IP field has been active and there have been numerous
still believed Abbott to be good law. However, this latest
new developments, regarding both legislation and case
decision specifically distances the law from Abbott. The
law. These include:
Supreme Court took the opportunity to make it plain that
a “trademark serves as a badge of origin”, a fact that the
an amendment to the Patent Act with far-reaching
court described as “trite”. The decision brings South
consequences;
Africa even closer to EU law by specifically adopting the
•
the specific regulation of grey-market goods;
European Court of Justice’s test for infringement –
•
a new bill aimed at recognising indigenous
namely, that the use creates “the impression that there is
knowledge as a genus of intellectual property; and
a material link in trade between the third party’s goods
some landmark judicial findings relating to
and the undertaking from which those goods originate”.
•
•
trademarks.
Quite how far this realisation will affect South African
law is still unclear. Although it seems logical to suppose
Designations of origin
that comparative advertising is now allowed in South
A good starting point is the Supreme Court of Appeal
Africa, since the key to brand comparative advertising is
judgment in Verimark (Pty) Ltd v BMW AG ([2007] SCA
linking the goods of the brand owner to the brand owner
53(RSA)), which was handed down on May 17 2007. It is
in order to make the comparison, the Supreme Court has
a remarkable judgment, particularly against the
indicated that it does not want to be seen to permit
background of what had appeared to be the trends in
comparative advertising, referring to the fact that a
South African trademark law.
provision in the act which would clearly have permitted
Over the last 10 years there have been indications that
comparisons was removed from the draft by a
South Africa might be taking its own unique course on
parliamentary committee. However, legislative history is
trademark law and that the designation of origin
not a primary basis of interpretation, although it can of
function of trademarks had fallen away. This was the
course be used where the language is ambivalent.
conclusion of the Cape Provincial Division in Abbott
It is difficult to understand how the Supreme Court
Laboratories v UAP Crop Care (Pty) Ltd in 1999, which
will reconcile a finding that comparative advertising
used that reasoning to conclude that brand comparative
constitutes infringement with its exposition of the law in
advertising (ie, where the competing party’s brand is
Verimark, since comparative advertising is clearly non-
used to identify its product) amounted to trademark
trademark use. This view is far more consistent with the
infringement. There was criticism of this judgment at the
pre-Verimark notion that any use of a registered mark
time as meaning that South Africa was out of step with
infringes, whether as a trademark or not. Regrettably,
EU law. According to the explanatory memorandum
only time will bring clarity, through either a further
which accompanied its publication as a bill, this was the
judgment or legislative change.
opposite of what the Trademarks Act 1993 had been
designed to achieve.
The impact on the spare parts trade is also still open
to conjecture. While Section 34(2)(c) of the act states that
The Supreme Court indicated that it did not agree and
the bona fide use of another’s trademark to indicate the
stated that the primary function of a trademark was still
purpose of goods, including spare parts, is not an
as a designator of origin without, however, specifically
infringement provided that it is consistent with fair
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South Africa Ron Wheeldon Attorneys
practice, the practical application of the section has been
necessary. The Supreme Court recently ruled in BMW AG
surprising. The tried-and-tested definition of ‘bona fide
v Commercial Auto Glass and confirmed the view of the
use’ in the sense of a trademark arose from the Gulf Oil
lower courts. The position in South Africa is thus
Case, although that judgment was concerned with use in
materially different to the US position on fair use and the
the context of preventing the expungement of a
defence for spare parts dealers is available only to those
trademark for non-use as provided in a different section
willing and able to hazard proving it in court.
of the preceeding act. It is to be expected, however, that
where the same term appears in different parts of the
New regulation on grey-market goods
same statute, it will be accorded the same meaning.
The South African position on the theory of exhaustion in
In Gulf Oil the term essentially mean use for the
trademark matters has been settled for many years, first
legitimate purposes of trade without an ulterior motive; in
through an appeal court decision in the PENTAX Case in
other words, truthful use in the ordinary course of the
the early 1980s and subsequently through specific
minimum amount of trademark information necessary to
legislation in the form of a provision in the Trademarks
communicate the purpose of the spare parts. In US
Act 1993, which states that a product to which a mark has
jurisprudence the guide is the New Kids on the Block Case
been affixed by or with the consent of the trademark
where the court, in considering whether it was legitimate
proprietor does not infringe the registered trademark.
for a newspaper to use the name of a pop group in a
Accordingly, it is legal to import grey-market goods and
competition which did not have the group’s blessing,
place them on the South African market, even in the face
concluded that use of that sort is not trademark use and
of exclusive distribution deals, provided that they are
should be allowed if it is fairly done. Other US case law
genuine goods. In practical terms, owners wishing to
provides that it would be unfair to adorn such references
maintain an exclusive source of supply to the market
with the brand owner’s logo so as to give the impression
have had to do so by carefully controlling trade channels
of sponsorship or some other active connection.
and, where effective, assigning copyright in South Africa
In contrast, South Africa’s lower courts have taken a
to the distributor. Although this sort of copyright
very strict approach and read into the term ‘bona fide use’
assignment is usually quite clearly a sham, it has been
a positive obligation on the part of the defendant to take
effective and is widely used. In the TDK Case (also in the
some action to make it unequivocally clear that the goods
1980s) the Supreme Court affirmed the validity of such
it is selling are not those of the trademark proprietor. This
an assignment and the question has not been back to that
was established in the unreported judgment of the
court since.
Transvaal Provincial Division in BMW AG v Autostyle
A curious contrast has emerged between the apparent
(Pty) Ltd in 2005, and was subsequently confirmed by
government policy decision not to interfere with the grey
another judge of the same court in the unreported case of
market and the practical problems that grey importers
BMW AG v Commercial Auto Glass (Pty) Ltd in 2006. Both
can have with copyright material (eg, packaging) being
cases concerned the provision of non-original spare parts
technically counterfeit, because the producer of the
for BMW cars where the defendants attempted to rely on
packaging, although owning the copyright in the country
Section 34(2)(c) of the act; it was common cause that they
of manufacture, does not own it in South Africa.
had such parts for sale and that there was no positive
In February 2007 the minister of trade and industry
representation that the parts were original BMW parts. In
brought into effect a regulation under the Trade Practices
both cases the court held that the defendants had failed
Act which regulates the manner in which grey goods can
to make it unequivocally clear that the parts were not
be sold. It appears to be aimed mainly at warranty issues.
original, so there was a risk of consumer confusion. In
In short, it requires people dealing in grey-market goods
other words, to be bona fide the user must eliminate any
to make it plain that the goods sold are not supported by
risk of confusion. On a literal reading of the section,
the official dealer network in South Africa and provides
confusion is irrelevant. The language of the section does
for seizure of those goods if the requirement is flouted.
not require that the use be non-confusing – indeed, as it
comes into play only if there is prima facie confusion, it
Arrangements for the 2010 FIFA World Cup
seems to imply that a certain degree of confusion is
Under Section 15 of the Merchandise Marks Act
permitted as long as the use is fair (ie, the user does
(17/1941) the minister of trade and industry is entitled,
nothing to increase the prospects of confusion). The
with good cause, to declare certain marks as prohibited
courts, however, have ignored this and the constitutional
marks. One of the requirements imposed on countries
guarantee of freedom of expression, and refuse the
wishing to host a Fédération Internationale de Football
defence in the only circumstances in which it is
Association (FIFA) World Cup event is a range of
29/11/07
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Ron Wheeldon Attorneys South Africa
guarantees, one of which guarantees the freedom of FIFA
principle, few would object to special protection for a
to use its trademarks and to be protected against ambush
mark such as FIFA, this is not all that FIFA wants. Given
marketing. One statutory remedy for ambush marketing
that any use of a prohibited mark in virtually any context
is provided by the Merchandise Marks Amendment Act
constitutes a criminal offence under the Merchandise
(61/2002), which amended the Merchandise Marks Act
Marks Act, and if a prohibited mark is applied to goods
by the insertion of provisions to prohibit the abuse of
without consent they become counterfeit under the
trademarks in relation to any event declared by the
Counterfeit Goods Act, prohibited mark status has
minister to be a protected event.
always been given very sparingly. By stark contrast, the
The guarantee to protect FIFA’s IP rights and prevent
lists in the notice are lengthy and include ‘2010’,
ambush marketing was partially fulfilled by designating
TWENTY-TEN, a list of city names with the date 2010
the World Cup as a protected event in terms of Section
and the mark WORLD CUP (there are many different
15A of the amended Merchandise Marks Act. This
world cups, so it is unclear why FIFA should have a
designation was carried out by a notice in the Government
monopoly), and this has rendered the subject highly
Gazette (Notice 683/2006). It is effective from May 25
controversial. Arguably, any company producing a
2006 until six calendar months after June 11 2010, the
calendar for the year 2010 will be committing an offence
start date of the event.
if 2010 is included on the final list. The initial period for
To perfect the fulfilment of the guarantee, the minister
objections ended on October 2 2007 and, although it is
will also declare a list of FIFA marks as prohibited marks
understood that numerous objections were lodged, the
and, under Section 13, public comment has been invited
final picture is yet to emerge.
through Government Notice 787/2007. Although, in
Ron Wheeldon manages international trademark portfolios for a number of
multinational companies and is responsible for the early identification of
potential threats to several global brands. He holds a BL (Hons) from the
University of Rhodesia. Mr Wheeldon serves on a number of committees
including the IP Standing Advisory Committee to the South African minister
of trade and industry. He is the 2006 to 2007 chair of the International
Trademark Association’s dilution subcommittee for Africa and the Middle East.
Ron Wheeldon
Attorney
Tel +27 11 646 6666
South Africa
29/11/07
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Miguel Vidal-Quadras Trías de Bes and Oriol Ramon Sauri
Amat I Vidal-Quadras Advocats
Spain
Modernisation of IP law continues
In recent years various changes have been made to
•
Spanish IP legislation, as outlined in previous chapters of
IP Value. Developments have concerned the laws on
improve
production,
marketing
and/or
the
distribution of goods and services; and
•
promote technical or economic progress.
patents (biotechnology and the Bolar clause in 2002 and
2006), industrial designs (a new act in 2003) and
In line with EU law, the novelty lies in eliminating the
trademarks (a new act in 2002), as well as IP rights in
requirement for prior authorisation from the relevant
general
Rights
authorities in order for the exemption to apply.
Enforcement Directive in 2006). The result is a set of
(implementation
of
the
EU
IP
Therefore, it is now for companies to decide whether
modern regulations that has brought Spanish law into
their agreements, decisions, recommendations and
line with the various EU directives and regulations
practices fall under the exemptions laid down in the act,
concerning intellectual property.
so that if an investigation is launched they can prove that
However, the antitrust regulations were still in need
their actions are exempt.
of modernisation, as these provisions had drifted away
As was the case with the EU regulations passed
from EU law and practice. Since the end of the 1990s the
between 1999 and 2004, this situation will affect the
EU system gradually had become more economy
assessment
focused, in line with the US system. However, in 2007 the
manufacturing, research and development, franchise and
Spanish legislature passed the new Antitrust Act, which
other agreements involving IP rights if these may have
brought Spanish antitrust law into line with the
an impact on the Spanish market or contain clauses that
corresponding EU regulations. The act and its
objectively contravene the principle of free enterprise.
implications for IP law are discussed below.
of
technology
transfer,
distribution,
Previously, the power to decide on antitrust matters
This chapter also highlights some recent Supreme Court
rested exclusively with the administrative authorities
judgments concerning intellectual property, particularly
expressly established for that purpose. A key feature of
dealing with utility models, supplementary protection
the new act is that the commercial courts now have the
certificates and the presumption of use of a patented process
power to hear cases arising from collusion and the abuse
in relation to new product patents (this is particularly
of a dominant position. Thus, the commercial courts may
important for the chemical and pharmaceutical industries).
now hear cases involving, for example:
The chapter further considers the controversy
regarding the patentability of pharmaceutical products
•
the signing of a prohibited agreement;
before 1992 and the possible effects of the World Trade
•
the abuse of a dominant position in a commercial
Intellectual Property Rights (TRIPs) on this issue.
New Antitrust Act
agreement; or
•
a claim for compensation due to prohibited conduct.
The move is designed to deal with such cases more
On September 1 2007 the new Antitrust Act came into
speedily and efficiently and speed up the workings of the
force, repealing the previous act of July 17 1989. The new
administrative courts. The number of court cases
act reflects the major changes that have taken place in EU
involving antitrust proceedings is also likely to increase,
antitrust law over the last decade.
as before the new act came into force such cases could be
With regard to actions that are prohibited under
antitrust law, the new act still sets out a system of
exemptions to:
reported only to the antitrust authorities.
The act envisages the involvement of EU and Spanish
competition authorities as amicus curiae in proceedings
29/11/07
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Amat I Vidal-Quadras Advocats Spain
brought before the commercial courts. The administrative
determining the validity of a utility model.
authorities may be involved (without being considered a
The nuance employed in the Patent Act to distinguish
party to the case) on their own initiative or at the court’s
between inventive step in utility models and that in
request by providing information or presenting written
patents, consisting of the addition of ‘very’ before the
observations concerning the application of Articles 81 and
word ‘evidently’, is difficult to understand from a
82 of the EC Treaty and Articles 1 and 2 of the Antitrust
technical point of view. What distinguishes something
Act. They may also submit verbal observations with the
that is ‘evident’ from something that is ‘very evident’? In
court’s permission.
the above-mentioned judgment the Supreme Court
The new act also creates a single national institution,
stated that the difference gives the inventive step
the National Competition Commission, which is
criterion a degree of flexibility, as it excludes only that
independent of the government and replaces the
which is ‘very evidently’ obvious from the state of the art
Antitrust Office and Court. The responsibilities of the
for a person skilled in the art, unlike the requirement for
office and court to preserve, guarantee and promote
patents, in which the adverb ‘very’ does not appear. This
effective competition in the national market and ensure
is a key distinction for the court, since it is not so closely
the application of the Antitrust Act will pass to the new
comparable with the state of the art for patents.
commission.
In the case at hand the Supreme Court found the
differences between two devices to be sufficient to
Key Supreme Court judgments
consider that the invention could be protected by a utility
Specific features of utility models
model. It overturned the judgments of the lower courts,
Common international standards exist for patents.
which had considered the differences to be irrelevant and
However, this is not the case for utility models, even in
concluded that there was no clear inventive step. This
the European Union. Each country has developed its
feature of the Spanish patent system may affect decisions
own provisions for this type of protection. In Spain,
on the use or development of technologies that can be
certain key features distinguish utility models from
protected by utility models.
patents and these should be taken into account when
investing in or assessing intellectual property in Spain:
Cases concerning a grant of supplementary
protection certificates
•
•
•
•
Only inventions that “give an object a configuration,
On July 4 2007 the Supreme Court ruled in a case
structure or constitution from which a practically
concerning the first grant of a supplementary protection
appreciable benefit arises for its use or manufacture”
certificate in Spain. AESEG, the Spanish generic drug
may be the subject matter of a utility model;
association, had sought judicial review of the grant of a
Unlike patents (where the state of the art by which
supplementary protection certificate by the Spanish
novelty and inventive step must be judged comprises
Office of Patents and Trademarks (OEPM). AESEG
everything that was accessible to the public before
argued that the decision had breached the EU
the filing date), the Patent Act stipulates that when
requirements for granting a supplementary protection
assessing the relevant precedents that may affect
certificate
utility models, only those that have been divulged
supplementary protection certificate was sought fell
must be considered;
outside the scope of the patent on which it was based.
Precedents will be considered part of the state of the
because
the
product
for
which
the
On judicial review, the Administrative High Court
art only if they have been divulged in Spain; and
found for AESEG. The pharmaceutical company affected
Insofar as inventive step is concerned, the Patent Act
by the revocation of the supplementary protection
stipulates that in view of the state of the art, utility
certificate appealed to the Supreme Court, claiming that
models are inventive if their subject matter “is not
supplementary protection certificates can be challenged
very evidently obvious from the state of the art for a
only in the civil courts and thus the administrative courts
person skilled in the art”.
have no jurisdiction to hear such an appeal.
The Supreme Court held that the OEPM has
In light of these features, various judgments have
jurisdiction to hear matters that affect the requirements
intepreted the difference between the specific terms used
for granting a supplementary protection certificate. It
for utility models in relation to patents and their limits.
regarded the procedure for granting supplementary
In a judgment of February 21 2007 the Supreme Court
protection certificates (as regulated by EU Regulation
emphasised that the difference between utility models
1768/92)
and patents relating to inventive step may be key when
procedure. In the court’s opinion, the EU rules require
as
comparable
to
the
patent-granting
29/11/07
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Spain Amat I Vidal-Quadras Advocats
the national authorities to analyse whether the
world have lifted the ban on patenting pharmaceutical
conditions for granting supplementary protection
products. In Europe, this took place in Greece, Norway
certificates have been met. Therefore, the scope of cases
and Eastern European countries between 1991 and 1993,
that the OEPM and the administrative courts can hear
and in Finland and Portugal in 1995. It would be a major
concerning the granting of supplementary protection
development for patentees of pharmaceutical products if
certificates extends to verifying whether administrative
the lifting of the prohibition had retroactive effect.
Claims that the lifting of the prohibition has
decisions to grant such certificates accord with the law.
retroactive effect are based on the TRIPs Agreement. In
Presumption of use of a patented process for a new
particular, it is argued that this would imply accepting
substance
the possibility of considering the protection of
Spanish law stipulates that if a patent concerns a process
pharmaceutical products valid even if the patents were
to manufacture new products or substances, there is a
filed before 1992. This proposal is not without its legal
rebuttable presumption that any product or substance
problems, as has been observed in various court
with the same characteristics has been obtained through
judgments. However, pharmaceutical companies have
the patented process. Since it came into force, there has
grasped at this chance and have put pressure on the
been debate as to whether this provision involves a
Spanish government to change the law in their interests.
reversal of the burden of proof or a legal presumption. In
So far, the government has resisted this pressure as it is
its judgment of February 2 2007 in the Enalapril Case, the
aware of the impact that a modification of this kind
Supreme Court ruled that the Patent Act refers to a legal
would have on pharmaceutical expenditure over the
presumption and not a reversal of the burden of proof.
coming years.
If the rule were considered to reverse the burden of
The legal arguments employed in the debate are
proof, the defendant would have to provide proof that the
complex and sophisticated. The matter has even gone as
process used to obtain the product did not infringe the
far as the European Patent Office, which in the first half
patented process. This interpretation would modify the
of
general legal principle that the burden of proof is on the
communications. The first, issued in March 2007, stated
party making the allegation – in this case, the patentee
that
alleging that its patent rights have been infringed.
pharmaceutical products was retroactive. However, a
2007
Spain
published
accepted
two
that
rather
the
contradictory
patentability
of
According to the Supreme Court’s interpretation,
second communication in June 2007 corrected the first,
patent law stipulates that the product is presumed to
since the office had taken into account only the
have been obtained using the patented process and the
interpretation of one court in a controversial action
defendant must prove that it has not used that process.
where judgments had gone both ways. In the second
Nevertheless, proof against these allegations is evidence
communication the office stressed that it is not possible
not that the processes are not equivalent, but merely that
to vary the contents of European patents that have
they are not identical.
already been granted in order to extend protection to
pharmaceutical products. This cut off the route by which
Pharmaceutical product patents filed before 1992
companies were attempting to modify patents that had
In recent years the issue of the patentability of
already been granted.
pharmaceutical products has arisen in Spain and other
The issue affects patents that were filed with the
countries around the world. Until October 7 1992 such
European Patent Office and granted protection in Spain
products could not be patented in Spain. Therefore,
prior to 1992. Several cases are ongoing in the Spanish
patents that are due to expire before October 7 2012 are
courts and it is likely that the main appeal courts in
affected by this prohibition.
Barcelona and Madrid will lay down a clear doctrine on
In the last two decades most countries around the
this issue in early 2008.
29/11/07
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Amat I Vidal-Quadras Advocats Spain
Miguel Vidal-Quadras Trías de Bes is head of the firm’s industrial property,
IP and pharmaceutical law department. He graduated in 1993 from the
University of Barcelona with a PhD in law and has been a member of the
Barcelona Bar Association since 1997. He is the author of various IP
publications and a professor of patent law at Universitat Ramon Llull and
Universidad de Barcelona. His areas of expertise include litigation, IP,
technology transfer and pharmaceutical law.
Miguel Vidal-Quadras Trías de Bes
Partner
Tel +34 93 321 10 53
Spain
Oriol Ramon Sauri graduated in law in 2002 from Universitat Autònoma de
Barcelona and holds an LLM in industrial property, IP and competition law
from ESADE, Universitat Ramon Llull. He joined the Barcelona Bar Association
in 2004 and joined the firm in the same year. He is a member of the AIPPI.
His main areas of expertise are litigation, intellectual property, competition,
advertising and pharmaceutical law. He speaks Spanish, Catalan and English.
Oriol Ramon Sauri
Associate
Tel +34 93 321 10 53
Spain
29/11/07
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Stefan Widmark, Per Josefson and Claudia Wallman
Sweden
IP law adapts to address new
challenges
The last 12 months have seen some interesting
requirements for international patent applications.
developments in Swedish IP law, including significant
Perhaps the most notable change is that the rules relating
changes to the patent legislation and a government
to priority claims have been relaxed and a request for
inquiry into copyright protection for music and film on
priority can now be made within 16 months of the date
the Internet, as well as a number of interesting judgments.
of the original patent application.
Amended laws and regulations
holder of Community plant breeder rights to obtain a
Patents Act
compulsory
On June 1 2007 Parliament approved Sweden’s accession
biotechnological inventions in certain circumstances.
to the Patent Law Treaty and the revised European
This provision has been enacted following developments
Patent Convention and passed a bill to implement the
at EU level in relation to the EU Community Plant
two treaties by amending the Patents Act. Most of the
Variety Rights Regulation (2100/94) and to complement
amendments, which also implement recent changes to
existing provisions in the Protection of Plant Breeders’
the Patent Cooperation Treaty (PCT), came into effect on
Rights Act (1997:306).
A further interesting amendment is allowing the
July 1 2007.
licence
in
respect
of
patented
These legislative changes have been supplemented by
The amendments introduce an administrative
amendments to the Patent Regulations which came into
procedure allowing patentees to apply to the Swedish
effect on July 2 2007 (PRVFS 2007:2 P 63). The new
Patent Office for the amendment of a Swedish or
regulations relate principally to the prescribed content of
European patent. The new procedure is designed to
applications under the new patent amendment procedure
enable a patent applicant to limit the scope of a granted
and provide that an application for limitation of a patent
patent to work around prior art without having to resort
must include details of the prior art as well as the
to expensive and lengthy court proceedings. Patent
differences between the reworded and existing claims.
amendments sought under the new procedure are not
Where the application seeks to add new attributes to the
subject to further scrutiny regarding novelty or inventive
claims, the applicant must also point out the justification
step and, if granted, apply retrospectively from the
for the amendment in the original specification.
original application date. The scope for a patentee to
apply for a patent amendment in the context of court
Secrecy and joint research projects
proceedings has also been increased.
New provisions relating to the secrecy of joint research
Another significant amendment enacted to comply
projects came into force on July 1 2007. Under the Secrecy
with the PCT is the introduction of a 31-month deadline
Act commissioned research was previously exempted
for national phase entry of PCT applications. The PCT-
from the general obligation to provide public access to
related amendments also do away with the requirement
official documents, but the amendments extend this
that a patent applicant which is not also the inventor
exemption to cover documents held by Swedish
must regularly demonstrate entitlement to the invention,
universities in connection with joint research projects.
provided that the grounds for such entitlement are stated
The amendments are significant in that they will help
in the initial application.
prevent novelty-destroying disclosures under patent law
The amendments enacted to implement the Patent
Law Treaty are essentially aimed at unifying the content
and are expected to help encourage joint collaboration
between
Swedish
universities
and
commercial
29/11/07
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Mannheimer Swartling Sweden
relevant
copyright material for private purposes was first made
documents will be subject to a secrecy period of 10 years.
illegal in Sweden in 2005 and the topic has since become
enterprise.
Under
the
new
provisions,
a hotly debated political issue. Perhaps the most notable
Resale rights
development occurred in May 2006, when the police
The EU Resale Rights Directive (2001/84/EC) has also
conducted a raid against popular file-sharing website
been implemented. Although the Copyright Act already
The Pirate Bay, prompting a strong public response and a
contained
call for the reform of Swedish copyright laws.
provisions
requiring
the
payment
of
compensation to copyright owners upon resale of their
In August 2006 the government established an
original artistic works, these provisions have now been
inquiry to examine the issue of copyright on the Internet
extended and the compensation rates have been
and to recommend measures for the promotion of
adjusted.
consumer-friendly and legal methods for online music
and film distribution. The resulting report, which was
Enforcement
published in September 2007, analysed copyright issues
At present, the only EU IP-related directive that has not
in light of Sweden’s obligations under the EU Infosoc
yet been implemented into Swedish law is the EU IP
Directive (2001/29/EC) and recommended that:
Rights Enforcement Directive (2004/48/EC). Although
most of the minimum enforcement standards set out in
•
the Copyright Act be amended so that ISPs are under
the directive are already met by existing laws, various
a positive statutory obligation to cancel customer
amendments are still required, including:
subscriptions which have been used for systematic
copyright infringement;
•
amendments to the provisions on civil search orders
•
to facilitate the protection of confidential information
to the blank media levy currently imposed under
and enable orders to be sought in respect of
anticipated IP infringements;
•
•
the proposal to introduce a broadband levy (similar
Swedish law) be rejected; and
•
Swedish consumer protection laws be amended to
a new right for IP rights owners to obtain information
deal specifically with trade in digital products in
regarding the origin and distribution networks of
order to counterbalance the allegedly biased and
infringing goods; and
unclear terms often imposed by ISPs.
a new power for the courts to order the recall of
The report also recommends various practical
infringing goods and the publication of judicial
decisions and corrective notices.
measures for strengthening online copyright protection,
including increased public education regarding the
The legislative proposal, which was released for
function of copyright. Somewhat controversially, the
public consultation on July 9 2007, also contains
report places strong pressure on the providers of lawful
provisions which will enable copyright holders to obtain
online services to alter their business methods to
details of the identity of infringers from internet service
encourage consumers to choose legal alternatives for
providers (ISPs). However, the advocate general of the
downloading (eg, by reconsidering the use of digital
European Court of Justice (ECJ) has raised concerns that
rights management to prevent interoperability and
such measures could be in breach of EU data protection
ensuring prompt online release of new music and films
laws (Case C-275/06). It remains to be seen whether the
in
ECJ will confirm this view or whether public
recommendations are likely to meet with much
consultation will result in the amendment of the
resistance from ISPs.
The failure to implement the EU IP Rights
to
meet
consumer
demand).
These
Another parliamentary review of the Copyright Act is
proposed provisions.
Enforcement Directive by the deadline of April 29 2006
order
due to begin by the end of 2007, dealing with questions
such as whether:
has been criticised by the ECJ (Case C-341/07) and the
European Commission has commenced an action against
•
Sweden for breach of its treaty obligations (Case C-
companies and other organisations should be
341/07). At present, the amendments are expected to
come into force on July 1 2008.
the compulsory licence for photocopying within
extended to cover digital copying; and
•
a compulsory licence should be introduced in respect
of works and sound recordings which form part of a
Music and film on the Internet
radio or television programme.
The downloading and file sharing of illegally distributed
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Sweden Mannheimer Swartling
Key cases
Stockholm courts consider temporary copy provisions
IKEA successfully appeals copyright claim
A recent action brought by Danish press association
The Skane and Blekinge Court of Appeal has recently
Danske Dagblades Forening against media watch
overturned a district court decision which found that
company Infopaq was the first to test the scope of the
IKEA had infringed copyright in the design for the Mini
temporary copy exception introduced into Swedish law
Maglite flashlight owned by Mag Instruments Inc (Case
by the EU Infosoc Directive. Danske sought to prohibit
T-916-05).
Infopaq from creating scanned copies of copyright
The issue was whether the design for the Mini
newspaper articles by converting them into tagged image
Maglite was sufficiently original to qualify for copyright
file format and then into text files which could be searched
protection as a work of applied art. At first instance, the
and used to generate reports for Infopaq employees.
district court held that the Mini Maglite design met the
Both the Stockholm District Court and the Stockholm
required standards to qualify for protection, rejecting
Court of Appeal found that the scanned copies did not fall
IKEA’s argument that the originality requirement should
within the scope of the exemption for temporary copies
be stricter in the case of industrial articles. The appeal
under the Copyright Act because the act of scanning was
court disagreed, finding that the Mini Maglite comprised
undertaken by a physical person and was thus not an
a relatively common design whose features were largely
“integral and essential part of a technical process” (as
functional and did not combine to create a work which
required under Article 11a of the act). Interim relief was
demonstrated sufficient creative effort. The appeal court
granted in favour of Danske (Case T-34209-05).
held that the threshold for originality should be higher in
the case of industrial designs as a separate means of
ECJ rules on relief in Community trademark
protection exists under the Designs Act.
infringement proceedings
This decision has been hotly debated in legal circles.
In 2002 Nokia commenced proceedings against Mr
The Supreme Court granted leave to appeal in May 2007,
Wärdell, claiming that the importation into the European
but at the time of writing the appeal has not yet been
Union of flash stickers bearing the word ‘Nokia’ amounted
heard.
to infringement of its Community trademark. Wärdell
argued that the NOKIA mark had been used without his
Supreme Court applies Brussels Regulation
consent and was the result of a defective delivery. The Svea
Swedish company Aredal, the registered owner of the
Court of Appeal held that there were no grounds to award
FIREDOS mark in several countries, commenced
an injunction or fine him in relation to the infringement.
proceedings against MSR Dosiertechnik for infringement
Nokia appealed to the Supreme Court, which referred
of its Swedish trademark. The relief sought covered both
the matter to the ECJ for guidance on the circumstances
Sweden and various other European countries in which
in which a court may find that special reasons exist under
the mark was registered. MSR opposed the application
Article 98(1) of the EU Community Trademark
on various grounds, including that the Swedish courts
Regulation (40/94).
had no jurisdiction to grant such relief. The main issue
The ECJ judgment (Case C-316/05) confirmed that the
for the court to consider was the application of Article 5.3
mere fact that the risk of further infringement of a
of the Brussels Regulation and, in particular, the
Community trademark is not obvious or is limited does not
identification of the “place where the harmful event
constitute a special reason for a court to refuse to issue an
occurred or may occur” under that article.
injunction. Further, the ECJ held that Article 98(1) requires
The court affirmed the approach adopted by the ECJ
a court that has issued an order prohibiting infringement to
(Case C-21/76) that Article 5.3 should be interpreted as
ensure that the recipient complies with the prohibition,
encompassing the places where a tortious act takes place
even if such measures would not be taken in a case
and where damage is suffered. It also noted that the ECJ
involving the similar infringement of a national trademark.
had not previously examined the issue of where initial
Therefore, the Supreme Court granted the requested
damage arises in a trademark infringement context,
injunctions and fines against Wärdell (Case T-1216-04).
although it has held that Article 5.3 does not cover the
Thus, EU member states will need to provide effective
place where consequential financial damage flowing
measures for protecting Community trademarks which
from initial damage is suffered (Case C-364/93). The
sometimes may even exceed the level of protection
court found that the place of the harmful event in this
afforded to national trademarks. This may act as an
case (ie, in relation to Aredal’s claim for infringement)
incentive for trademark owners to file Community
was Sweden only, and the claim for relief in relation to
trademark applications rather than seeking separate
other foreign trademarks was dismissed (Case Ö 210-07).
national registrations.
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Mannheimer Swartling Sweden
Supreme Court considers issue of pharmaceutical
deep linking did not constitute an unfair marketing
repackaging
practice. The court also held that use of the BLOCKET
The Supreme Court was recently called upon to examine
mark as a search engine keyword did not amount to a
the
breach of the Marketing Act, although it gave no reasons
issue
of
repackaging
of
parallel-imported
pharmaceutical products in the context of an application
for its decision on this issue (Case C-11/05).
for interim relief by Roche against Orifarm (Case Ö-56606). In that case, the court held that repackaging a
Trade agreements
pharmaceutical product and relabelling it with another
The international trade agreements with a significant
company’s registered mark may be regarded as
influence on Swedish intellectual property are incidental
“objectively necessary” in accordance with requirements
to Sweden’s membership in the European Union.
under EU law if such action is required in order to gain
However, at local level there has been a dispute between
effective access to the Swedish market (taking into account
the Swedish Journalists’ Union and the Swedish
both patient safety and the reluctance of consumers to
Newspaper Publishers’ Association in relation to the
accept a product marketed under a different name). The
renegotiation of the copyright provisions in the trade
matter has been remitted to the district court, which is due
union agreement between the two entities. Following the
to rule on various questions by the end of 2007 (including
announcement of a lock-out by the publishers’
whether the matter should be referred to the ECJ).
association, the parties eventually reached a resolution
and a new agreement was signed, which came into effect
Internet deep linking and Google AdWords
on September 1 2007. The agreement covers journalists
The operator of popular buy-and-sell website Blocket
employed in the print, internet, radio and television
sought to restrain competing website Metromarknad
industries and contains provisions on the transfer of
from deep-linking to its advertisements and using the
copyright to the employer as well as compensation for
BLOCKET mark as a keyword in Google’s AdWords
the use of such copyright. The provisions in the previous
program. Given its view that consumers were clearly
agreement which required employers to obtain consent
informed of the fact that Metromarknad linked to external
from employees for individual uses of copyright material
sites, the Swedish Market Court found that the practice of
in radio and television have now been removed.
Stefan Widmark is head of Mannheimer Swartling’s specialist practice for
intellectual property, marketing and media. He has been a partner of the firm
since 2005, having previously been a partner at another leading Swedish law
firm. He has extensive experience with a wide range of both contentious and
non-contentious IP-related matters.
Stefan Widmark
Partner, Stockholm
Tel +46 8 505 764 67
Sweden
Per Josefson is a partner in Mannheimer Swartling’s specialist practice for
intellectual property, marketing and media. He joined the firm as an associate
in 1996 and, after a spell working in-house at Electrolux from 2000 to 2001,
returned and became a partner in 2004. He sits on the editorial council of
the Nordic Intellectual Property Law Review and is a member of the IP Policy
Group of ICC Sweden. He has extensive experience of all types of IP-related
issues and his specialist areas are litigation and licensing.
Per Josefson
Partner, Stockholm
Tel +46 8 505 763 15
Sweden
Claudia Wallman is a senior associate in Mannheimer Swartling’s specialist
practice for intellectual property, marketing and media. She is a common-law
qualified lawyer who has experience in a broad range of IP-related matters,
including licensing and cross-border infringement disputes. She has previously
worked in major law firms in Sydney and London.
Claudia Wallman
Senior associate, Stockholm
Tel +46 8 505 763 56
Sweden
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Marco Bundi and Benedikt Schmidt
Meisser & Partners
Switzerland
IP protection comes to the fore
in Switzerland
In recent years there have been some significant changes
Stop Piracy campaign
to intellectual property in Switzerland.
On January 16 2007 the justice minister launched a
campaign to raise public awareness of the damage that
General changes
counterfeit products cause to the economy. The
Fees
campaign is supported by the Stop Piracy Anti-
In January and May 2007 the Federal Institute of
counterfeiting and Piracy Platform.
Intellectual Property (IIP) introduced two reductions of
Switzerland is seen as a hub for the transit of
the IP rights registration fees. The changes removed or
counterfeit and pirated goods, particularly for EU
reduced approximately 70 fees, including reducing:
member countries. Consequently, this campaign must be
backed by firmer action, such as introducing effective
•
the annual fee for the fifth and sixth years of patent
border measures.
registration from Sfr310 to Sfr100;
•
•
the fee to register a trademark in up to three classes
‘Swissness’
from Sfr600 to Sfr350 if filed electronically;
The Swiss cross and references to being ‘Swiss-made’ are
and
widely perceived as indications of high quality and thus
the fee for designating Switzerland under the Madrid
carry competitive advantages. Although use of these
System from Sfr600 to Sfr450.
indications is restricted by law, they are widely used in
business as the relevant laws are not strictly enforced.
New Federal Administrative Court
Therefore,
As of January 1 2007 the new Administrative Court
recommendation to introduce new legislation to clarify
the
government
has
approved
a
replaced the IP Board of Appeal. This court is competent
use and protection of the Swiss cross and the term ‘Swiss-
to hear appeals of IIP decisions.
made’, both in Switzerland and abroad.
The court fees are approximately Sfr2,500 for
a trademark application proceeding and between
Patents
approximately Sfr2,000 and Sfr4,000 for a trademark
Legislation
opposition proceeding. Compensation for the party’s
The patent legislation is undergoing revision to adapt to
costs is usually between Sfr2,000 and Sfr4,000.
technical progress and international developments. The
focus of the revision is to ensure adequate patent
IIP online database
protection for inventions in the field of biotechnology
The IIP’s free online database is now available in English
and to help to eliminate negative prejudice regarding
and allows a fast search of registered IP rights in
research and further development.
Switzerland.
To this end, Parliament has approved amendments in
An extended search is possible for patents and links to
the field of biotechnological inventions. According to
Espacenet are provided. With regard to trademarks, the
prevailing opinion, the law provides absolute substance
status of an application is specified (eg, opposition) and
protection, but only for disclosed industrial applications in
pending applications are also visible. However,
order to avoid speculative patent claims. Inventions will be
international trademarks designated to Switzerland are
considered unpatentable if their commercial exploitation
not available in the database.
would be contrary to public order, morality, human dignity
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Meisser & Partners Switzerland
Claiming surrender of profits has been popular as
or the dignity of creatures. The law explicitly provides for
permitted research and testing of the invention.
Parliament also:
neither damage nor fault need be proven. However, the
Supreme Court has required the rights owner to prove
the defendant’s bad faith. In Rohrschelle (Case
•
•
ratified the European Patent Convention and the
4C.290/2005) the Supreme Court paved the way for
London Agreement on June 12 2006;
obtaining surrender of profits from a good-faith infringer
agreed to ratify the World Trade Organisation (WTO)
if the unjustified enrichment of the defendant is proven.
The substantiation of a financial claim remains
Patent Law Treaty;
implemented the WTO compulsory export licences to
difficult. In Comcord (Case 4C.52/2007) the Supreme
facilitate access to drugs for developing countries;
Court denied damages for loss of profits and market
•
introduced measures to combat piracy; and
confusion; since the plaintiff did not use its trademark,
•
introduced revisions to the Swiss Code on
market entry was improbable and the trademark was
International Private Law.
unknown to the public.
•
In light of this, it remains difficult to claim for
The new law sets out new border measures in favour
financial compensation without a concrete catalogue of
of rights owners, namely:
decisive factors, similar to the US Panduit test.
•
the option to stop goods in import, export and
Cross-border litigation
transit;
In 2006 the Zurich Commercial Court rendered an
•
simplified destruction proceedings;
important decision in relation to jurisdiction for nullity
•
seizure of goods for private use; and
claims relating to IP rights and cross-border litigation
•
increased criminal penalties.
(Bioreaktoren, Case HG050410). Although the case dealt
with trademarks, the decision is significant for patent
The final step to revise the patent legislation will be
litigation. The decision went on from the European Court
the passing of laws regarding a patent court and patent
of Justice decision in GAT (Case C-4/03, July 13 2006).
attorneys. These laws are designed to improve legal
Accordingly,
protection and advisory services in patent matters in
infringement proceedings and granted a limited period
order to strengthen Switzerland’s reputation as a country
of time for the defendant to file a nullity action with the
of innovation. The Federal Council carried out a public
competent court in the place of the foreign registration.
the
court
suspended
the
pending
consultation on the two new laws, which ended on
March 30 2007.
The issues relating to the national, regional or
Trademarks
Legislation
international exhaustion of patent rights have been
Switzerland has implemented border measures in order
temporarily exempted from the revision. In Kodak (BGE
to fight counterfeiting and piracy more effectively. In
126 III 129, 1999) the Supreme Court decided in favour of
addition, on July 6 2007 it finalised its ratification of the
the national exhaustion of patent rights (with restrictions
Trademark Law Treaty. No new legislation is necessary
according to the patent and antitrust laws).
as national legislation already fulfils the treaty’s
requirements.
Case law
Financial compensation
Case law
In cases of IP rights infringement, the Swiss law offers
Three-dimensional marks
two options to obtain compensation: damages or
Several recent decisions have raised the bar for
surrender of profits.
registration of three-dimensional marks, due to a lack of
As it can be difficult to substantiate the amount of
distinctiveness or technical necessity. The courts have
damages, the courts have applied the licence analogy
taken their cue from the Supreme Court decisions in Lego
method to determine lost profits, even if the plaintiff had
III (BGE 129 III 514, 2003) and Smarties (BGE 131 III 121,
neither the intention nor the capacity to grant a licence.
2005). In general, a three-dimensional mark is registrable
However, in Milchschäumer (Case 4C.337/2005) the
if it:
Supreme Court held that the application of the licence
analogy requires evidence of lost profits. According to
•
is not functionally or aesthetically essential;
the court, this would be the case only where a licence
•
is not technically essential; and
agreement between the parties was highly likely.
•
does not belong to the public domain.
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Switzerland Meisser & Partners
The courts have applied the criterion that a threedimensional mark must diverge from “the expected and
Supreme Court’s verdict solely reflects the singular fact
pattern of a specific case.
the accustomed” and have gone on to state that its form
must clearly diverge from a “banal” form.
Designs
In Philips (Case 4P.200/2006) the Supreme Court
In Schmuckschatulle (Case 4C.344/2006) the Supreme
confirmed a decision to reject a petition for a preliminary
Court allowed the registration of the design of a
injunction to prevent the defendant from marketing a
jewellery casket. In doing so, it analysed two key issues:
Remington electric razor with three rotary blades in a
distinctiveness and the technical necessity of design
triangular pattern and upheld the lower court's
protection.
reasoning that the three-dimensional mark could not be
A design is not distinctive if it differs only
protected as it was technically necessary for third parties
immaterially from existing designs known to the relevant
to be able to use that shape in view of the small number
public. The court further held that the doctrine of
of possible shapes available for the type of product.
technical necessity applies only if:
However, in Silk Cut (Case B-7400/2006) the
Administrative Court stated that even if a shape lacks
•
there are no design alternatives;
distinctiveness, it can be registered as a three-
•
there are alternatives, but each design has its own
dimensional mark if two-dimensional elements evoke a
distinctive overall impression.
advantages; or
•
the available design alternatives require a more
complicated
Geographical indications
or
more
expensive
method
of
manufacturing.
In Colorado (Case 4A.13/2006) the Supreme Court
confirmed the IIP’s broad approach to geographical
The court argued that a variety of designs allow the
marks and requested a limitation to goods of US origin.
stacking of such caskets and that the shape was not
It stated that the mark should be accepted as a sign if the
dictated by technical necessity.
geographical name is of a symbolic character only.
Foreign trademark registrations are usually not binding
Copyright
or treated as precedent in Switzerland. The restrictive
Legislation
approach to geographical marks is consistent with the
Recently Parliament adopted revisions to the Copyright
earlier jurisprudence of the Swiss Federal Court
Act. The new law (at the time of writing, the term for the
(Fischmanufaktur Deutsche See, Case A4,3/2006).
referendum is pending) will introduce protection for
In a case concerning the trademark BELLAGIO, the
literary and artistic works and performances, as well as
IIP considered the trademark to be a geographical
ratifying the World Intellectual Property Organisation
indication that should be freely available. It stated that
(WIPO) Internet Treaties to handle the challenges posed
Bellagio is a popular tourist destination on Lake Como,
by digital technology. The main issues tackled by the
Italy, which is known by a significant segment of the
revisions are:
Swiss population. The Administrative Court overturned
the IIP’s decision, stating that the Bellagio Casino is even
•
more famous (Case B-7411/2006) and thus allowed the
effective legal remedies against the circumvention of
technological measures;
trademark for various fruits, vegetables and agricultural
•
the recognition of moral rights of performers;
products.
•
on-demand rights for parties protected under the
Forfeiture of trademark rights
•
related rights provisions; and
Previously, the Supreme Court generally assumed
retention of existing and implementation of new
exceptions (eg, the personal use exception).
forfeiture of trademark enforcement rights only if
infringement had been ongoing for at least four to eight
Case law
years. However, in a surprising decision in Brot (Case
In January 2006 the Federal Arbitration Commission on
4C.371/2005), the Supreme Court stated that the fact that
the exploitation of copyrights ruled that the Copyright
infringement had continued for two years without the
Act provides a blank recording media levy not only for
claimant challenging it had caused the infringer to
analogue data storage media, but also for digital data
believe in good faith that the claimant had permanently
storage media. The Supreme Court confirmed this
accepted the infringing activity. It remains to be seen
decision (Case 2A.53/200), but clarified that the blank
whether this view constitutes a new trend or whether the
recording media levy cannot be claimed for other digital
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Meisser & Partners Switzerland
data storage media such as hard disks in personal
NESTLE KIT KAT POP CHOC. Although different brand
computers, since these were not primarily designed to
names appeared on the packaging of the two products,
store copyright-protected works.
the court held that the intended distribution of the
In Enter the Matrix (BGE 133 III 273) the Supreme
defendant’s Kit Kat Pop Choc products created an
Court confirmed the international exhaustion of
indirect risk of confusion pursuant to the Unfair
copyrights (see Nintendo, BGE 124 III 321, 1998) and went
Competition Act. The court stated that the trade dress of
on to clarify that the exemption provision introduced in
Maltesers (ie, the red background colour, the overall
2004 regarding the national exploitation of audiovisual
design colour and the floating, seemingly random
works prohibiting parallel importation of videos and
arrangement of the chocolate balls) had acquired
DVDs during the first run of a new film in cinemas
secondary meaning in Switzerland. Although obtaining
applies only to films and not to computer and video
trademark protection in Switzerland for trade dress can
games.
be difficult, the unfair competition law may be a valuable
tool to obtain protection in certain cases.
Unfair competition and ambush marketing
Legislation
Online issues
No ambush marketing legislation
Jurisdiction
Mindful of the upcoming Union of European Football
In La Suisse (4C.341/2005) an individual had registered
Associations (UEFA) Euro 2008 tournament, which will
the domain names ‘swiss-life.ch’ and ‘la-suisse.com’.
be jointly hosted by Switzerland and Austria, in May
Subsequently, a Swiss insurance company that owned
2006 the Swiss government introduced draft legislation
the trademarks SWISS LIFE and LA SUISSE sued in
to regulate ambush marketing.
Switzerland for trademark infringement. The Supreme
The proposed regulation was widely criticised as the
Court was asked to decide whether the Swiss courts were
existing legal tools (eg, trademark law and unfair
competent to decide the case. The court concluded that
competition law) should be sufficient. Accordingly, the
the Swiss courts had jurisdiction since the domains
Swiss government did not pursue the proposed
incorporating the names ‘Suisse’ and ‘Swiss’ respectively
legislation. Organisers and sponsors of major events can
established that the websites were aimed at Switzerland,
still rely on trademarks and the instruments provided by
even though one domain concerned a ‘.com’ top-level
the Unfair Competition Act. UEFA has registered several
domain.
trademarks for various goods and services with the
Swiss Trademarks Register, including EURO 2008, EM
Domain dispute resolution
2008 and AUSTRIA/SWITZERLAND 2008. However,
As an alternative to relatively expensive court
the registrations are not necessarily binding if there is
proceedings, dispute resolution proceedings relating to
litigation as the civil courts may still invalidate them.
‘.ch’ domain names may be initiated with the WIPO
Arbitration and Mediation Centre. Unlike in similar
Spamming clause introduced
proceedings for ‘.com’ domain names, no bad faith is
On April 1 2007 a comprehensive provision prohibiting
required. In short, the request is granted if the
spamming was introduced. The provision aims to better
registration or use of the domain name constitutes a clear
protect consumers from unsolicited mailings. A mailing
infringement of a right in a distinctive sign which the
is unlawful if:
claimant owns under the law of Switzerland or
Liechtenstein. The fee for this proceeding is Sfr2,600 for
•
no prior consent has been given by the customer;
•
there is no accurate information about the sender in
•
up to five domain names.
In this context, the WIPO Arbitration and Mediation
the mailing; and
Centre issued an interesting decision in May 2006
it does not contain information as to how the
(DCH2006-0003). An individual had registered the domain
customer can opt out easily and free of charge.
names ‘schweiz.ch’, ‘suisse.ch’ and ‘svizzera.ch’ (all
translations of the word ‘Switzerland’). The WIPO panellist
Case law
agreed with the Swiss confederation that it held the rights
Trade dress
to the word ‘Switzerland’ and its translations. The case was
In Maltesers (Case 4P.222/2006/len) the Supreme Court
brought before the Zurich Commercial Court; however,
upheld a decision of the Aargau Commercial Court to
after initiating proceedings the parties reached an out-of-
grant a provisional injunction enjoining the defendant
court settlement, according to which Switzerland bought
from selling chocolate products under the trademark
the domain names from the individual.
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Switzerland Meisser & Partners
Marco Bundi studied law in Zurich. In 2005 he was admitted to the Swiss Bar
and subsequently became a member of the Swiss Bar Association. He
obtained his LLM from the University of Berne. Mr Bundi joined Meisser &
Partners in 2006. His practice includes IP rights enforcement, domain
disputes, protection against unfair competition, copyrights and managing
trademark proceedings before national authorities and the courts. He is a
member of INGRES.
Marco Bundi
Attorney at law
Tel +41 81 410 23 23
Meisser & Partners
Switzerland
Benedikt Schmidt studied law in Zurich and Paris and was admitted to the
Swiss Bar in 2004. He joined Meisser & Partners in 2005. His practice
includes advising on registrability and IP rights enforcement, anticounterfeiting, domain disputes, protection against unfair competition and
copyright. He is a lecturer at the Swiss Public Relations Institute and a
member of the Swiss Bar Association and INGRES.
Benedikt Schmidt
Attorney at law
Tel +41 81 410 23 23
Meisser & Partners
Switzerland
29/11/07
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Pierre-André Dubois and Nicola Russell
United Kingdom
Reviewing the scope of patent law:
key decisions from the UK courts
The past 12 months have seen a number of important
general knowledge and cited prior publications, and
decisions relating to UK patent law. These decisions span
requested that Nichia disclose a number of documents
a variety of issues, including:
relating to the making of the invention and certain
experiments conducted in relation to the invention.
•
•
•
•
disclosure of an inventor’s records to assess
Nichia suggested that only limited or no disclosure was
obviousness;
required with respect to this type of investor record. At
the rules as to ownership of inventions made during
trial, the court refused disclosure, essentially proposing a
the course of employment;
blanket rule of non-disclosure with respect to investor
the ability of the comptroller of patents to order the
records. By a majority decision, the Court of Appeal
grant of a licence when two co-owners have come to
concluded that the search required in the context of
a deadlock over whether to license a patent; and
standard disclosure should be tailored depending on the
the relationship between proceedings for invalidity
likely value and significance of the resulting evidence. It
before the European Patent Office (EPO) and a claim
held that it would be preferable to explore a means of
for damages before the English courts.
addressing concerns about the costs of disclosure while
still applying the rationale of standard disclosure. In
Disclosure of an inventor’s records
doing so, it rejected Nichia’s position (and the trial
Obtaining access to an inventor’s records may be helpful
judge’s views) that what the inventor actually did was
in order to assess obviousness. Under the English Civil
completely irrelevant to the issue of obviousness.
Procedure Rules, the parties to an action must provide
standard disclosure of documents unless the court directs
Ownership of an employee’s invention
otherwise. A party must disclose, among other things, the
In 1955, in Pratchett v Sterling, Lord Simonds declared it
documents on which it relies, as well as any documents
“an implied term in the contract of service of any
which adversely affect its own case or another party’s
workman that what he produces by the strength of his
case, or which support another party’s case. In making
arm or the skill of his hand or the exercise of his inventive
such a disclosure, a party must carry out a reasonable
faculty shall become the property of his employer”.
search for documents. Various factors affect what
Although the law as such has not changed, the Patents
constitutes a reasonable effort in searching for documents,
Act 1977 and subsequent decisions have brought about a
including the number of documents involved, their nature
shift of opinion in favour of employees. Section 42(2) of
and complexity and the significance of the documents
the act invalidates any contractual term by which the
likely to be located in the search.
rights of an employee in inventions of any description
In Nichia Corporation v Argos Limited the Court of
are diminished. In addition, Section 40 introduced a
Appeal considered whether, in the context of an
statutory right to compensation for inventions made by
obviousness defence, standard disclosure should require
an employee but which, in accordance with Section 39,
disclosure of an inventor’s documents. Nichia owned
belong to the employer. Under Section 39 of the act, the
certain patents for white light-emitting diodes (LEDs),
employer will be deemed the owner of an invention:
while Argos had allegedly been selling infringing LEDs.
Argos counterclaimed that the patents were invalid on
the grounds of obviousness in light of the common
•
when the invention was made in the course of the
employee’s normal or specifically assigned duties,
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United Kingdom Kirkland & Ellis International LLP
provided that an invention might reasonably be
the employer, the invention need not:
expected from carrying out such duties; and
•
where the employee has a special obligation to
•
further the interests of the employer’s undertaking
be similar to what might have been expected to arise
from the activities of the employee;
because of the nature of his or her duties and the
•
provide a solution to a pre-identified problem; or
particular responsibilities arising from the nature of
•
achieve or contribute to the achievement of the aim
those duties.
or object of the employee’s duties.
In all other cases, the employee is deemed to be the
owner of the invention.
However, the test under Section 39 will be satisfied
only if the employee could be expected to innovate in the
Until the recent Court of Appeal decision in Liffe
particular circumstances of his or her employment
Administration & Management v Pavel Pinkava, there have
relationship. The court held that the words ‘an invention’
been few authoritative decisions on Section 39, the
in Section 39 do not mean ‘the invention’ (ie, the
majority of disputes being resolved in the Patent Office.
invention which is the subject of the dispute as to
In Liffe the court decided it should review the application
ownership between the employer and employee). The
of Section 39 by looking at the question in two parts:
circumstances must be such that an invention might be
reasonably expected to result from the carrying out of the
•
whether the invention was made during the course of
employee’s duties (whether usual or specifically
the employee’s normal or specifically assigned
assigned), even if the particular invention was not.
duties; and
•
whether
the
circumstances
surrounding
the
Co-ownership of patents
employment were such for there to be a reasonable
Under English law, unless there is agreement to the
expectation of invention.
contrary, each co-owner of a patent is entitled to an equal
undivided share in a co-owned patent and, under Section
Normal or specifically assigned duties
36(2) of the act, is entitled “by himself or his agents” to do
Although the source of the employee’s duties as they
for his or her own benefit, and without the consent of or
relate to the development of inventions will primarily be a
need to account to the other co-owner(s), any act which
written contract of employment, this may not be the end
would otherwise amount to an infringement of the patent
of the story. The court found that a contract of
concerned. However, one co-owner may not, without the
employment is bound to evolve over time and
consent of the other co-owner(s), grant a licence under the
acknowledged that it is unsafe to have regard only to the
patent or assign or mortgage a share in it.
terms contained in the contract of employment. Instead,
In Hughes v Paxman the Court of Appeal considered
the court should consider what the employee does day to
what can be done when two co-owners have come to a
day as well as to what the contract says he or she ought to
deadlock as to the grant of a licence on a patent and
do. Additional or different duties from those initially
where the failure to resolve this dispute could result in
documented in the contract of employment are not to be
the patented invention not being exploited. The case
regarded only as duties that are specifically assigned, since
clarifies whether the comptroller of patents has
it is quite possible for them to become normal over time.
jurisdiction on the application of one co-owner to order
that licences be granted under the patent. Section 37(1) of
Reasonable expectation of invention
the act provides that after a patent has been granted, a
The court concluded that the test enacted by Section 39 as
person who has a proprietary interest in a patent may
to whether there is a reasonable expectation of invention
apply to the comptroller for an order that rights in such a
is an objective one. It must be applied to the
patent be transferred or licensed to another.
circumstances of each particular case and in light of the
In Hughes v Paxman the two co-owners had originally
prior activities of the employee. It is not necessary to
formed a company for which they were the sole directors
imply any further condition or qualification in the test. In
and shareholders and had obtained a patent for trim
particular, it is irrelevant that the invention is particularly
coolers. They could not agree on the licensing of the
innovative or groundbreaking (the application of Section
patent.
39 is not determined by the quality of the invention), or
The Court of Appeal concluded that, provided that the
that the employee is particularly intelligent and therefore
comptroller acts rationally, fairly and proportionately and
more likely to come up with an invention. Further, in
having regard to all circumstances of the case, he has the
order to be an invention which is deemed to be owned by
jurisdiction to grant a third party a licence where one co-
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Kirkland & Ellis International LLP United Kingdom
owner has made a licence application despite the
on appeal and the House of Lords refused permission for
objection of the other. The court noted that it could not
a further appeal. Further to an application for directions
imagine for a moment that Parliament could have
for the damages enquiry or account of profits made by
intended that exploitation of an invention could be
Unilin Beheer, Berry Floor sought a stay of the
frustrated by a deadlock situation. The whole point of the
proceedings. It did so on the basis that the opposition to
patent system was and is to encourage innovation and the
the patent in the EPO was not yet over and the patent
exploitation of inventions. That is why there is provision
might yet be revoked or limited in such a way that the
for compulsory licences where patented inventions have
Berry Floor products would not be covered by it. If that
not been exploited, subject to certain conditions.
turned out to be the case, then Unilin Beheer’s
It would make no sense to find the powers of the
entitlement to financial relief would not be res judicata.
comptroller redundant in a deadlock situation and thus
The Court of Appeal held that there is nothing in the
allow a good invention to go unexploited because of the
act to suggest that the rules as to estoppel (which form
objections of an uncompromising or uncooperative co-
part of English procedural law) are somehow displaced
owner. However, the court held that the comptroller
by a revocation in an opposition before the EPO. A
should not have carte blanche over the type of licence
defendant will be estopped from denying validity in the
granted, stating that: “I doubt whether it would be
inquiry as to damages or account of profits irrespective
proper for the comptroller to grant one co-owner an
of the ongoing EPO proceedings and the ultimate
uncontrolled right to sublicence generally.” In doing so,
outcome of those proceedings. The estopped defendant
the court recognised that the decision of which licence to
has had a full and fair opportunity to attack the validity
grant should not be arbitrary, but should rather attempt
of the patent in the proceedings before the courts. Such
to produce a fair commercial solution in the interests of
an interpretation is in line with the European Patent
both parties and the exploitation of the patent.
Convention, although it could be argued that this is an
unsatisfactory result in the absence of a central patent
Res judicata, estoppel and the national courts versus
system in Europe. Indeed, the convention provides for a
the EPO
post-grant opposition process that can take many years,
Until the recent decisions in Unilin Beheer BV v Berry Floor
but at the same time leaves it to the national courts to
NV, the relationship between infringement proceedings
entertain an action for infringement concurrently. The
before the English courts and opposition proceedings
principle of res judicata will therefore apply to give
before the EPO, and whether the doctrine of res judicata
finality to the English courts’ determination on the issues
could be relied on, was unclear. The issue to be decided
of invalidity and infringement.
was whether, if a patentee has prevailed in infringement
The court noted that a purist might say that “it is
and validity proceedings and has been held entitled to
nonsense, and moreover, an unjust nonsense, for a man
financial compensation in the English courts, such
to have to pay for doing what, in hindsight, we know to
decisions should be set aside if the patent is later held
have been unlawful”. Arguably, though, such a purist
invalid as a result of opposition proceedings before the
view makes bad business sense and this was the court’s
EPO.
opinion. The court’s ruling on the application of the
Unilin Beheer brought proceedings in the UK Patents
doctrine of estoppel provides certainty to businesses
County Court against Berry Floor for infringement of its
facing or deciding to entertain a patent action in the
patent (a European patent with a UK designation) for
United Kingdom. If, in the end, the patent is revoked, the
hard floor coverings. In addition to defending the
defendant will no longer be injuncted, but the defendant
infringement claim, Berry Floor counterclaimed for an
cannot escape payment of damages granted after a
order for revocation of the patent before the EPO. The
complete and fair judicial process before the English
county court judge held that Unilin Beheer’s patent was
courts.
valid and had been infringed. That decision was affirmed
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United Kingdom Kirkland & Ellis International LLP
Pierre-André Dubois heads the firm’s UK IP and competition group. He
obtained a first-class LLB (honours) from the University of Montreal in 1984.
His practice covers all aspects of IP and IT law, as well as UK and EU
competition law. PLC Which Lawyer? Global 50 named him as a leading
lawyer in 2005, 2006 and 2007, while he was named as a leading lawyer
by the Legal 500 (UK edition 2003) and Global Corporate Counsel (2002).
Pierre-André Dubois
Partner, London
Tel +44 20 7469 2020
United Kingdom
Nicola Russell is an associate with the firm. She obtained her LLB from
Southampton University and her legal practice qualification from Guildford
Law School with distinction. Ms Russell’s practice covers all aspects of
contentious and non-contentious IP and IT law.
Nicola Russell
Associate, London
Tel +44 20 7469 2430
United Kingdom
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Law & litigation
Asia-Pacific
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Carolyn Harris, Amanda Jones, Peter Hallett and Robynne Sanders
Watermark
Australia
The impact of changing legislation
on IP owners
One thing is certain in the world of intellectual asset and IP
assignment recorded. However, following amendments
management – the ground is constantly shifting. As US IP
to the Trademarks Act 1995 which came into force on that
owners get to grips with significant legal changes, changes
date, where there are two unregistered assignments and
in the Australian marketplace are also having an impact –
both assignees have acted in good faith, the first
both positive and negative – on the rights of IP owners.
assignment to be recorded confers good title on the
assignee, regardless of which assignment document was
Buyers beware: traps for IP purchasers
signed first.
Consider the following scenario. Company A negotiates
the purchase of an international portfolio of IP rights,
Competing assignments and unregistered rights
including some Australian trademarks, from a small
Under current law, the result in this example is that the
company that is in financial difficulties. A thorough IP
assignment of both the trademarks and patents to
due diligence has been conducted and all relevant
Company B is valid, leaving Company A with the
searches have confirmed that the seller is the registered
unenviable prospect of taking action for fraud against the
owner of the intellectual property that the company is
seller company or its officers.
buying. The sale documentation is prepared and signed
The amendments to the trademark legislation bring
and Company A pays for the intellectual property.
trademark law into line with patent and design law. In
Copies of the sale documentation are given to Company
the case of patents, designs and trademarks, the position
A’s attorneys, who are instructed to record the
in Australia is that the registered proprietor may, “subject
assignment of the intellectual property to Company A.
only to any rights appearing in the register”, deal with
Company A celebrates the completion of a successful
the relevant trademark or patent as its absolute owner.
transaction.
However, a person who deals with the registered
However, unknown to Company A, the seller has also
proprietor other than as “a purchaser in good faith for
been negotiating with Company B and, despite signing
value” and “without notice of any fraud on the part of
sale documents with Company A, the following day
the owner” will not obtain the benefit of this protection.
signs further documents which purport to sell the same
Therefore, purchasers of Australian patents and
IP portfolio to Company B. Company B’s attorneys are
trademarks face the risk that a seller may fraudulently
more responsive than those of Company A and lodge the
deal with a subsequent purchaser in a manner that
sale documents to record the assignment of the
confers valid title upon the subsequent purchaser.
Australian trademarks before the Company A attorneys
On the one hand, a prospective purchaser may be
lodge their documents. When the Company A attorneys
confident that if a search shows that the seller is the
lodge their sale documents, they are shocked to discover
registered owner of the relevant patent or trademark,
that the relevant marks are registered in the name of
then the purchaser can obtain valid title free from the
Company B. By now the seller is insolvent and the sale
interests of any earlier unrecorded assignee. On the other
proceeds have been dissipated.
hand, the existing system provides considerable
Prior to October 23 2006 Company A, as a purchaser
incentives for purchasers to record assignments as
of Australian trademarks in good faith from the
quickly as possible to avoid the risk of the assignment
registered owner, would have been entitled to have the
being defeated by a subsequent assignment that is
assignment to Company B cancelled and its own
lodged earlier.
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Watermark Australia
In appropriate cases, it would be prudent for a
Recent initiatives
purchaser to insist that the payment is held in escrow so
Recent changes to both the Trademarks Act and the
that it is released to the seller only once the assignment is
Copyright Act were implemented to encourage use of the
recorded.
objection scheme. The most significant of these changes
In the case of copyright, an earlier assignment will
are as follows:
always defeat a subsequent purported assignment as
there is no copyright registration system in Australia. A
•
A notice of objection will be in force for a period of
purchaser of copyright should obtain appropriate
four years rather than two years. This change applies
warranties from the seller in relation to third-party rights.
to all trademark notices lodged from October 23 2006
and all copyright notices from January 1 2007.
•
Counterfeiting
A registered trademark owner or copyright holder
The trade in counterfeit and pirated goods is a global
can now provide a written undertaking as security,
concern and it is estimated that the total global trade in
rather than cash or documentary security, at the time
fake goods now exceeds US$500 billion. This illegal trade,
of filing a notice of objection.
which contravenes the IP rights of third parties, has a
direct cost of millions of dollars to the Australian economy
The burgeoning illegal trade in counterfeit and
annually and adversely affects companies and businesses,
pirated goods is placing increasing pressure on the
manufacturers,
and
Australian Customs Service and the federal police to
consumers. For a company that has invested significant
intercept counterfeit and pirated goods. In response, the
money and resources in developing and protecting its
government has committed to provide more than A$12.4
intellectual property and/or building a reputation and
million in funding over the next two years to enable the
brand, the infringement of these IP rights has serious
Australian federal police and the Commonwealth
implications for the company’s health and future.
director of public prosecutions to target trademark and
innovators/creators,
artists
copyright crime more effectively.
Customs and IP rights enforcement
IP owners in Australia can utilise the powers given to the
Action for IP owners
chief executive officer (CEO) of the Australian Customs
IP owners need to consider measures to deter
Service under the Trademarks Act to seize and deal with
counterfeiting, such as authentication strategies and
goods that are imported into Australia if the importation
technologies (ie, the addition of an identification mark
infringes, or appears to infringe, a registered trademark,
that is hard to copy).
provided that the registered trademark owner has
IP owners should be vigilant in monitoring for
notified Customs of its rights. Similarly, the Copyright
infringements of their rights and, as part of their
Act 1968 gives the Customs CEO the power to seize and
enforcement strategy, file a notice of objection with
deal with infringing copyright material, provided that
Customs. The recent legislative changes reduce the
the copyright holder has notified Customs of its rights.
administrative and cost burdens for owners and holders
Both acts include provisions that allow the registered
in using the Customs scheme.
trademark owner or the copyright holder and, in certain
circumstances, the authorised/licensed user of a right, to
The problem with distributors
lodge a notice of objection with Customs, objecting to the
When expanding into new export markets, commonly
importation of goods which infringe their rights.
brand owners overlook the registration of brands in the
Prior to recent amendments to the Trademarks Act
excitement and flurry of work involved in appointing a
and the Copyright Act, a notice of objection remained in
distributor and broadening the brand exposure. Failure
force for two years only and there was a requirement to
of the brand owner to control brand use and registration
provide cash or documentary security at the time of
in Australia can lead to a number of significant problems
filing the notice. This security – A$10,000 in the case of
which, despite recent changes to the Trademarks Act
trademarks and A$5,000 in the case of copyrights – was
1995, can be difficult or impossible for the brand owner
to cover any expenses incurred by Customs in seizing
to overcome.
and dealing with infringing goods. The requirement to
provide cash or documentary security represented a
Use of brands
significant cost burden to businesses, particularly small
From a marketing perspective, it is often preferable for
businesses, and is likely to have discouraged many
branding in Australia, both on products and in
Australian businesses from lodging Customs notices.
marketing materials, to be consistent with worldwide
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Australia Watermark
branding. If this is the case, from a legal perspective it is
March 2007, taking such action has become slightly
imperative that the brand owner retain control over the
easier as the act now specifically includes, as grounds for
way the brand is used in Australia.
opposition and revocation, the filing of a trademark
Distributors use brands with the permission of the
application in bad faith (Section 62A). Previously, the
brand owner. Under the Trademarks Act the distributor is
brand owner needed to rely on grounds such as Section
considered to be an authorised user, provided that the
58 (ie, the applicant is not the owner of the mark), which
distributor is using the brand under the control of the brand
may be difficult for the brand owner to prove if the
owner. Where the distributor is an authorised user, all
distributor has been applying the brand for some time,
reputation and goodwill accrued through use of the brand
especially where the brand owner has not been
flows to the brand owner. However, where the brand
controlling the branding. Even with the amendments,
owner does not exercise sufficient control, use of the brand
opposition and revocation proceedings remain costly
by the distributor is not considered use by the brand owner
and time consuming and should be avoided if possible.
and all reputation and goodwill accrues to the distributor.
In Australia, ensuring that the brand is registered and its
If a distributor uses a brand for some time without the
use controlled from the outset can prevent the brand from
brand owner exercising control, the distributor can
being misappropriated by a distributor, saving the brand
accrue sufficient reputation to obtain registration of the
owner from potentially losing its most important asset.
brand in its own right. Therefore, failure to control brand
use by a distributor can lead to the loss of a brand to the
Patent prosecution consultation
distributor in Australia. Brand owners should check that
The Australian federal government has commenced
distribution agreements contain provisions specifically
consultations with stakeholders in the patent system
stating that they retain control over the use of the brand
with a view to reducing the costs to and administrative
in Australia and ensure that they exercise that control.
burdens on patent applicants. In particular, IP Australia
(the Australian patent office) wants to abolish the
Registration of brands as trademarks
requirement for applicants to provide details of prior art
If a brand owner does not register a brand as a trademark
cited by patent offices in other countries. The
in Australia, it is not uncommon for the distributor to
consultation period for this issue is very short, indicating
register the brand in its own name. In many cases this is
that IP Australia is keen to implement this change
an attempt, albeit misguided, to protect the brand from
immediately.
infringement or misappropriation by third parties.
Since 2002 Australian patent applicants have had to
As the distributor is not the owner of the brand, the
provide IP Australia with prior art information during
trademark application is invalid (as only the owner can
the examination of their applications. This has placed a
register the brand). The application or registration can be
significant administrative burden on applicants and has
assigned
recent
increased the cost of pursuing an Australian patent. In
jurisprudence has raised the possibility that an assignment
addition, there are significant financial penalties if
may not validate an application that was invalidly filed.
applicants fail to meet the tight deadlines within which
Thus, even where the application or registration is
this information must be provided.
to
the
brand
owner.
However,
assigned to the brand owner, it is possible that it may not
The
proposed
change
to
the
administrative
leave the brand owner with a valid registration,
requirements arises from IP Australia’s newly adopted
potentially causing difficulties during enforcement.
philosophy of ‘one search, one examination’. IP Australia
now reviews the websites of the US Patent and
Misappropriation of brands by distributors
Trademark Office and the European Patent Office in
If a distributor has registered a brand as a trademark in
relation to equivalent applications when examining an
its own name, it may use the registration as leverage to
Australian application. It is therefore able to access
ensure the continuance of the distributorship or to
information about relevant prior art that is provided by
negotiate
distributorship
applicants in other jurisdictions or cited by other patent
arrangement with the brand owner. In the worst cases,
offices. This means that the information currently being
the distributor may refuse to assign the mark or the
provided by applicants to IP Australia under the existing
distributorship may end, leaving the ex-distributor as a
prior art disclosure requirements is, at least to some
potential competitor with ownership of the brand in
extent, being duplicated.
a
more
advantageous
Australia, forcing the brand owner to take action to
recover the brand.
Since the amendments to the Trademarks Act 1995 in
Furthermore, all communications relating to patent
examinations before the US Patent and Trademark Office
and the European Patent Office are publicly available on
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Watermark Australia
the Internet. IP Australia has increasingly utilised these
pre-grant opposition procedures and the proposed
in its own examination procedures, often cross-
changes are unlikely to be significant, although they do
referencing
or
reciting
verbatim
the
content
of
reflect the government’s intentions.
examination reports in its own official actions. This
IP Australia participates widely in international
enables a high turnover of applications at IP Australia
discussions on patent harmonisation and Australians
and, the government asserts, a high-quality and
hold senior positions in IP organisations around the
consistent level of examination compared to that which a
world. While it seems likely that it will be many years
patent
before there is true harmonisation between the
applicant
would
experience
in
another
jurisdiction.
substantive aspects of patent law in the major IP
IP Australia’s aim of achieving an ideal patent system
would negate the need for multiple examinations of a
jurisdictions, there is significant pressure at senior
bureaucratic levels to achieve procedural harmony.
patent application and would significantly simplify and
streamline patent protection around the world.
In addition, IP Australia also proposes extending the
time
period
during
which
third
parties
IP Australia is one of the more vocal participants in
these discussions and ultimately this is likely to lead to
may
greater streamlining of the patent examination process
for Australian patent applicants. This can only be good
anonymously bring relevant prior art in respect of a
for
patent application to its attention. These provisions are
administrative burden and the cost of seeking patent
not commonly used in Australia due to the existence of
protection in Australia.
prospective
patentees,
as
Carolyn Harris’s practice focuses on the chemical and biotechnology sectors.
Working with a wide range of Australian and overseas clients, she specialises
in the identification of intellectual assets and their strategic protection and
management to create competitive advantage and optimum value.
Carolyn Harris
Patent and trademark attorney and
principal, Melbourne
Tel +61 3 9819 1664
Watermark
Australia
Amanda Jones’s patent practice focuses on medical technology,
pharmaceuticals and biotechnology innovation, and she has an interest
in plant breeders’ rights, branding and trademark issues. Before joining
Watermark, Ms Jones was a consultant to the Western Australia state
government, assisting in the implementation of IP policy and providing
advice on the management and commercialisation of public sector
intellectual property.
Amanda Jones
Patent and trademark attorney and
principal, Melbourne
Tel +61 3 9819 1664
Watermark
Australia
Peter Hallett’s practice focuses on the negotiation and drafting of contracts
relating to intellectual property such as technology licences, collaborative
research and development agreements and secrecy agreements. He also
practices in all areas of trademark law, including clearance searches,
registration, oppositions and infringement. Before joining Watermark,
Mr Hallett’s roles included in-house IP adviser for global resources
company BHP.
Peter Hallett
Solicitor and trademark attorney,
Melbourne
Tel +61 3 9819 1664
Watermark
Australia
Robynne Sanders has worked on various patent and trademark oppositions
as well as Federal Court appeals and infringement proceedings, and has
considerable experience in drafting licensing, manufacturing and acquisition
agreements. Her patents practice has a particular focus on pharmaceuticals,
environmental chemistry patents and environmentally focused systems and
processes. Her trademark practice includes advising on trademarks and
branding strategies and undertaking infringement surveillance and
enforcement.
Robynne Sanders
Solicitor and trademark attorney,
Melbourne
Tel +61 3 9819 1664
Watermark
Australia
it
reduces
the
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Cedric Lam, Isabella Liu and Janet Wong
China & Hong Kong
Recent developments in intellectual
property
This chapter looks at the major IP developments in China
Enforcement statistics
and Hong Kong over the past year.
In the past year the Chinese government has continued
to crack down on IP violations and the focus has been on
China
counterfeit consumer products in retail markets. Both
China’s commitment to protecting intellectual property
administrative and criminal authorities have made
continues to take centre stage because of the upcoming 2008
headway in IP enforcement. In 2006 more than 7,300 of
Olympic Games in Beijing, as well as two high-profile
the 33,900 trademark infringement cases dealt with by
World Trade Organisation complaints filed by the United
the local offices of the State Administration for Industry
States in early 2007 concerning China’s alleged failure to
and Commerce concerned foreign marks.
deter counterfeiting of copyrighted works and undue
The number of IP cases subject to criminal
restrictions on the sale of foreign books and films in the
investigation and follow-up prosecution has increased
country. This section highlights some of the major IP-related
due to greater cooperation between the police and
legal developments in China over the past 12 months.
various administrative bodies. In 2006 252 suspected
trademark counterfeiting cases were referred to the
Filing statistics
police, a 7 per cent increase on 2005. Almost 60 million
The Chinese Trademark Office (TMO) continues to be the
pirated software and audiovisual works were destroyed
world’s busiest trademark registry. At the end of 2006 the
and more than 270 cases were transferred for criminal
number of registered trademarks in China exceeded 2.77
investigation during a campaign in late 2006. According
million and more than 700,000 applications were filed
to the Supreme People’s Court, in 2006 2,277 criminal IP
with the TMO in 2006 (in contrast, its US counterpart
cases were tried and 3,500 people were sentenced.
received only 354,000 applications). About 180 marks
The people’s courts were also busy adjudicating IP
were recognized as well known in China in 2006,
disputes as more rights holders opted for civil remedies.
including some foreign brands such as Porsche,
In 2006 14,056 civil IP trials were concluded (40 per cent
Panasonic, Nescafé and L’Oréal.
of which were copyright cases), a 5 per cent increase
The number of patent filings is also on the rise. The
since 2005.
State Intellectual Property Office received more than
300,000 applications in the first half of 2007, a 30 per cent
New legislation, directives and initiatives
increase since 2006. Foreign applicants continue to focus
Under the 2007 IP Protection Action Plan China will
on invention patents (86 per cent of foreign filings), while
continue its legal reform and policy initiatives to
the majority of domestic applications are for utility models
improve
and designs (39 per cent and 34 per cent respectively).
amendments to the trademark and patent laws in 2008
The number of ‘.cn’ domain names has now topped
IP
protection.
Plans
to
complete
the
are on track.
all other general top-level domain registrations
combined. By mid-2007 the number of ‘.cn’ domain
Trademarks
names reached 6.1 million, a 416.5 per cent increase on
The State Council has placed a third amendment of the
the previous year.
Trademark Law on the 2007 legislative agenda and the
These numbers confirm that IP filings in China are now
a must for protecting registrable intellectual property.
TMO is finalising the draft law, which will streamline
applications and opposition and cancellation actions to
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Dorsey & Whitney LLP China & Hong Kong
cut down the lengthy examination and review period.
Organisation Copyright Treaty and Performances and
Trademark piracy by Chinese individuals has
Phonograms Treaty came into force in China on June 9
plagued brand owners since the 2001 revision of the law,
2007. Among other things, the treaties provide that
which allowed Chinese individuals to submit trademark
copyrighted online works cannot be used without
applications. To deter filings by trademark squatters, the
authorisation from the author, performer or producer of
TMO issued a notice in February 2007 requiring
audiovisual works.
individuals to show that the goods or services covered by
The Supreme People’s Court revised another
their applications are within their permitted scope of
interpretation regarding online copyright protection in
business. Trademark assignees who are natural persons
December 2006. The revisions removed the statutory
must also comply with these requirements to discourage
licence for publishing online works that have previously
trading of pirated marks. The upcoming revisions are
been published in newspapers or periodicals or
expected to supplement this interim solution by
transmitted over a network. As a result, in addition to
introducing more specific measures (eg, a use
paying royalties, the express consent of the copyright
requirement) to address this problem.
owners must now be obtained prior to republishing such
Valuable marks: In September 2006 the Ministry of
Commerce issued a new law stipulating that any merger
materials online, except where the intended use amounts
to fair use or is covered by other licences.
or acquisition of a domestic entity entailing the transfer
of well-known trademarks or “China time-honoured
Patents and plant varieties
brands” designated by the ministry must be reported
The third revision of the Patent Law is well underway.
and will be subject to its approval. Non-compliance may
After the last round of consultation in late 2006, the
result in the termination of the transaction or transfer of
State Intellectual Property Office made significant
the mark.
amendments to the draft before submitting it to the State
Pharmaceutical marks: Major reforms have been
Council in January 2007. For example, it was reported
introduced regarding the use of trademarks on
that the original proposals regarding the doctrine of
drug labels and inserts and related advertisements.
equivalence have been dropped. However, major
Wordings such as “well-known mark” and “patented
reforms regarding the novelty standard for design
pharmaceutical” are now prohibited. Unregistered marks
patents are still expected in the third revision.
and other product names that have not been approved by
In addition, a new Supreme People’s Court
the authority can no longer be used on drug labels and
interpretation concerning the resolution of plant variety
product inserts. Since May 2007 unregistered marks
disputes came into force in February 2007.
cannot be used and registered trademarks must always be
used in conjunction with a product’s generic name in
Unfair competition
advertisements. In addition, registered trademarks
Another
cannot be used in place of drug product names, except
interpretation that came into effect in February 2007
where the approved product name is the same as the
relates to the Anti-unfair Competition Law. It clarifies the
registered word mark. Violations of these new rules may
application of various provisions of the law, including
lead to the suspension of sales of the product.
false advertising and the protection of famous
long-awaited
Supreme
People’s
Court
merchandise, company names and trade secrets. In
Copyright
particular, the interpretation stipulates that only
The thresholds for prosecuting copyright crimes were
notoriety within the Chinese market (and not overseas
lowered in April 2007 by an interpretation issued by the
reputation or fame) is relevant in determining whether
Supreme People’s Procuratorate and the Supreme
merchandise is famous. Therefore, a world-renowned
People’s Court. Unauthorised copying or distribution of
product that has not yet been sold in China will not be
more than 500 copies is punishable by a three-year prison
regarded as famous merchandise for the purpose of the
term and/or a fine of between one and five times the
law – a different position from that provided in the draft
illegal income or 50 per cent to 100 per cent of the illegal
interpretation released for consultation in 2005. Certain
turnover. If there are more than 2,500 infringing copies,
presumptions found in the draft alleviating the
the prison term may be extended up to seven years. The
evidentiary burden of plaintiffs in trade secret cases have
new interpretation also empowers rights holders to bring
also been omitted. Nonetheless, this interpretation is
private prosecutions against IP infringers.
generally accepted as a helpful tool in resolving the
Copyright protection in the online environment is
expected to improve as the World Intellectual Property
increasing number of civil unfair competition and trade
secret cases in China.
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China & Hong Kong Dorsey & Whitney LLP
Company name abuse
Viagra was also the subject of another key court case.
The number of companies formed using English or
In December 2006 the products of several manufacturers
Chinese names that are identical or confusingly similar to
and retailers were found to have infringed Pfizer’s
famous trademarks or business names of well-known
registered three-dimensional trademark depicting the
companies for the purpose of conducting illicit activities
blue, rhombus-shaped pills and the pharmaceutical
is increasing at an alarming rate. In September 2007 this
company was awarded Rmb600,000 ($80,000) in
problem finally caught the attention of the Chinese
damages. These cases are reportedly on appeal and
government and the State Administration for Industry
Pfizer’s three-dimensional mark is subject to ongoing
and Commerce initiated a four-month campaign,
cancellation proceedings.
directing its local offices to crack down aggressively on
such fraudulent company names, whether registered in
Copyright
China or abroad. This is a welcome move, since
The major Hollywood studios made headlines when
previously local offices of the administration were
they joined forces to take on a string of pirate DVD
reluctant to take action against such shadow companies
retailers last year. They were successful in both Beijing
due to the apparent legitimacy of their company name
and
registrations.
Rmb359,000 ($46,500) in total.
Border measures
results. In late 2006 NASDAQ-listed Baidu was found not
Following a notice issued in April 2007, the Customs
liable for providing MP3 search engine services that
Authority must now consult IP owners prior to
allowed downloads of infringing music through deep-
auctioning seized infringing goods.
linking. In April 2007 Yahoo! China successfully
Shanghai
and
were
awarded
damages
of
However, the big music labels have enjoyed mixed
defended a similar claim on the basis that it did not
Notable cases
provide the infringing content, but was ordered to pay
The apparent lack of effective enforcement has always
Rmb210,000 ($28,000) in damages for failing to delete all
been perceived as the weakest link in the Chinese IP
hyperlinks to such content after receiving the relevant
protection regime. However, the increasing number of
takedown notices. Many of these cases are on appeal.
successful court cases in recent years – many of them
decided in favour of foreign complainants – seems to
Outlook
suggest otherwise.
China has unequivocally demonstrated its strong
determination to protect IP rights on both the legislative
Patents
and enforcement fronts in the past year. Many notable
The Viagra Case has completed another round of appeal.
developments have taken place and, in particular, the
In September 2007 the Beijing High People’s Court
judicial activism signals that civil actions can now
upheld an earlier decision to overturn the Patent Re-
provide meaningful redress to protect intellectual
examination Board’s invalidation of Pfizer’s patent. The
property in China.
dispute is far from over as the patent has now been
returned to the board for further examination on other
Hong Kong
invalidation grounds and further challenges are likely.
As predicted in the China & Hong Kong chapter of IP
In another closely watched pharmaceutical case, in
Value 2007, abuse of the company names registration
December 2006 a Beijing court confirmed that a Bolar-
system has been and remains the most closely watched
type exemption is available in China – that is, the
IP issue in Hong Kong. That aside, Hong Kong continues
production of a drug for conducting clinical trials and
to show leadership in using criminal law to combat IP
obtaining market approval does not amount to
violations and in keeping its IP laws in line with the latest
commercial use and is therefore not an act of patent
international standards.
infringement.
Shadow companies
Trademarks
The Hong Kong Companies Registry, as constrained by
Starbucks’ final victories in its battles against local cafés
its statutory power, has been unable to offer any effective
using the name ‘Xingbake’ (a Mandarin transliteration of
solution over the past years to tackle companies formed
Starbucks’ English name and trademark) have been
in Hong Kong using names that are identical or
widely reported. The favourable trial decisions were
confusingly similar to famous marks or trade names of
upheld by the appeal courts.
others. No legislative solution is expected before 2010.
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Dorsey & Whitney LLP China & Hong Kong
Since January 2007 some rights holders have found
Although many of these changes have yet to become
success by following the procedures established in the
effective, companies with offices in Hong Kong should
Anheuser-Busch Case. In that case the court ordered the
start to implement policies and procedures to audit and
shadow companies to change their names and
monitor the use of copyrighted works in their businesses.
empowered the plaintiff’s representative to carry out the
change if the shadow companies proved unwilling or
Patents
unable to do so. It should thus now be easier to target
The Patents (Amendment) Bill, published in the Gazette
these shadow companies. This judicial quick-fix may
in March 2007, proposes to implement the Protocol
offer interim relief to frustrated brand owners, but it will
Amending the Agreement on Trade-Related Aspects of
carry an appreciable price tag.
Intellectual Property Rights (TRIPs) adopted by the
World Trade Organisation pursuant to the Doha
Copyright
Declaration on the TRIPs Agreement and Public Health.
In May 2007 Hong Kong’s highest court affirmed the
The proposed amendments to the compulsory licensing
three-month sentence imposed on the first person in the
provisions of the Patents Ordinance will facilitate access
world convicted for using the popular file-sharing
to generic versions of patented drugs in order to address
technology BitTorrent to disseminate films online. In
public health problems in emergencies.
April 2007 a seller of pirate DVDs on eBay was sentenced
to three-and-a-half years in prison upon conviction
Trademarks
under the Organized and Serious Crime Ordinance, the
Trademark owners that only ship their goods through
first case of its kind in Hong Kong.
Hong Kong and do not place them on the local market
The
controversial
Copyright
(Amendment)
are now at risk of having their registered trademarks
Ordinance was published in July 2007. The major
revoked for non-use. In a recent decision it was held that
changes include the following:
the mere shipment of trademarked goods through Hong
Kong does not constitute genuine use of the mark
•
•
•
•
Directors and partners may be criminally liable for
concerned. To enjoy the territorial protection provided
infringement committed by their organisations;
under the statute, a trademark must be used on goods
The unauthorised copying and distribution of
placed on the local market. Since many foreign brand
printed works may now attract business end-user
owners place orders with Hong Kong companies for
criminal liability;
goods to be made in China and have those goods
Dealing in circumvention tools or the provision of
shipped through Hong Kong, but do not market them in
circumvention services may now constitute an
the territory, it will be interesting to see what effect, if
offence;
any, this decision has on this long-established and widely
Restrictions on the parallel importation of certain
practised mode of trading.
copyrighted works have been relaxed; and
•
A new rental right for films and comic books has
been created.
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China & Hong Kong Dorsey & Whitney LLP
Cedric Lam leads the IP team in Dorsey’s offices in China and Hong Kong.
He has over a decade of experience in advising on IP transactions and
implementing IP protection strategies. Mr Lam is also experienced in anticounterfeiting and other enforcement matters, and has served as Asia-Pacific
regional counsel of an international IP collective.
Cedric Lam
Partner, Hong Kong
Tel +852 2105 0289
Hong Kong
Isabella Liu is a senior IP associate based in Hong Kong. Her practice
involves a broad range of IP issues in China. Ms Liu has a PhD in biosciences
and specialises in advising clients in the healthcare industry regarding various
regulatory issues covering a wide range of nutritional, medical and beauty
care products.
Isabella Liu
Senior associate
Tel +852 2105 0272
Hong Kong
Janet Wong is an IP associate based in Hong Kong. She is experienced in
anti- counterfeiting and other IP enforcement matters in Greater China,
including domain name dispute resolution proceedings. She has a second
degree in Chinese law from Tsinghua University and is admitted as a solicitor
in Hong Kong and England and Wales.
Janet Wong
Associate, Hong Kong
Tel +852 2105 0266
Hong Kong
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Pravin Anand and Sumeera Raheja
India
The changing face of intellectual
property
IP rights experts believe that intellectual property is the
safeguarding national interests. The primary functions of
key to India’s expanding knowledge economy. Having
the institute include training, education and research, in
grown in leaps and bounds, the Indian IP industry is fast
addition to acting as a government think tank on key IP
reaching new heights. From striking a balance between
policy matters.
IP rights protection and public policy to promoting IP
The government has already put forward plans to
rights education at school and college level, India has
expand and modernise further the IP offices in order to
made efforts to implement better IP rights enforcement
make them world class. It has lodged an application with
and protection. One key development in the past year
the World Intellectual Property Organisation (WIPO) for
has been the revamp of the administration and
the recognition of the Indian Patent Office as an
infrastructure of government IP bodies. On the
international search authority and an international
legislative
Customs
preliminary examining authority under the WIPO Patent
Notification has been a key step in curbing the
Cooperation Treaty. At present, there are 12 such offices.
movement of pirated and counterfeit goods across the
A significant development was the expansion of the
Indian border. The judiciary has not been far behind in
remit of the Intellectual Property Appellate Board in
contributing to the development of IP rights. Litigation
April 2007 to hear pending patent cases. Regarding
regarding trademarks, copyrights and patents has set
trademarks, a key future development will be the
new precedents, with the Indian courts adopting
implementation of the Madrid Protocol in India; the
international principles and rulings to protect IP rights in
country is already taking steps to become a signatory to
order to deter infringers. Overall, the progress over the
the protocol by conforming to the system of international
last year has set new milestones in IP rights for the
standards for trademarks.
front,
the
recently
passed
challenging times ahead.
Patent law comes of age
Modernisation of IP infrastructure
In recent years there have been commendable
The recently completed modernisation programme
developments regarding Indian patent legislation. The
carried out by the government saw the establishment of
Patents (Amendment) Act 2005 is finally in place,
state-of-the-art, integrated IP offices at five branch
introducing a product patent regime that affords
offices: Ahmedabad, Chennai, Delhi, Kolkata and
protection to pharmaceuticals and agrochemicals by
Mumbai. The IT-enabled trademark and patent offices
recognising the end result (ie, an actual product). A side-
now have updated database systems, which has led to
effect of the amendment has been an increase in the
the faster consideration and granting of patent and
number of pre and post-grant oppositions filed. Of 190
trademark applications.
such cases, at least 90 per cent come from the
Following the launch of an electronic filing facility for
pharmaceutical sector. The first product patent for a
patent and trademark applications by the union minister
combination was granted to Roche for the Pegasus
of commerce and industry on July 20 2007, on August 18
product. The Patent Amendment Rules 2006 introduced
2007 the minister laid the foundation stone for the
a substantial degree of accountability to the patent
National Institute of Intellectual Property Management
regime in terms of the administrative delays in
in Nagpur, which will be in charge of establishing an IP
prosecuting and proceeding with the grant of patents. To
regime that is line with global norms, while still
deal with this shortcoming, on April 2 2007 the
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India Anand And Anand Advocates
Intellectual Property Appellate Board was charged with
port of entry of the infringing goods, requesting the
handling pre and post-grant opposition proceedings. All
detainment or clearance of the infringing goods. Once
patent cases pending before the Delhi High Court as of
such a request has been made, Customs will notify the
that date were automatically transferred to the board.
rights holder of the rejection or acceptance of that request
Another significant change resulting from the act and
the rules has been the substantial increase in patent
within 30 working days of receipt, during which time
Customs will provide assistance to the rights holder.
litigation over the last two years. In a long-awaited patent
The new rules provide that if a rights holder alleges
decision, Novartis suffered a blow when the Madras High
that certain goods infringe its IP rights, it must execute a
Court dismissed its challenge of the patent law. Novartis
bond with Customs to cover any charges incurred for the
had argued that Section 3(d) of the Patents Act 1970 was
destruction, demurrage and/or detention of the
unconstitutional and did not comply with the World
infringing goods if it is later found that the goods are
non-infringing. In addition, Customs has the power to
of Intellectual Property Rights (TRIPs). The court went on
suspend the customs clearance of the goods if it has prima
to state that it lacked jurisdiction to rule on whether
facie evidence or reason to believe that the imported
Section 3(d) of the 2005 act contravened the TRIPs
goods are infringing IP rights. Sunglasses company Ray
Agreement, and that the appropriate body to adjudicate
Ban filed the first notice under the new rules in order to
this issue was the World Trade Organisation (WTO).
prevent the import of counterfeit sunglasses into India.
Novartis launched its challenge after its patent
The significant powers awarded to Customs allow it
application for Glivec was rejected under Section 3(d) of
to tackle the counterfeiting and piracy of goods at
the act, which restricts what can be patented. In
international level.
particular, Section 3(d) states that salts and other
derivatives of known substances “shall be considered to
Recent cases involving trademarks and copyrights
be the same substance, unless they differ significantly in
Having taken the lead in 2005 in awarding high punitive
properties with regard to efficacy”. As India is known to
and exemplary damages for IP infringements, India has
have a booming generic drugs industry, organisations
continued this trend, with robust judiciary and
campaigning for greater access to medicines claimed that,
legislative measures affording blanket protection to IP
if Novartis’s challenge to the act succeeded, the decision
rights owners in order to deter infringers. The Indian
would restrict access to affordable medicines in the
courts have taken a big step by recognising rights in
developing world. The court also stated that the question
shapes, film titles and characters, trade dress and colour
of TRIPs compliance should be dealt with by the WTO
marks, protecting trademarks, copyrights and other
using its dispute resolution mechanism. The decision was
moral rights from habitual infringers. The much-
historic not only for India, but also for the rest of the
discussed case of Sholay Media & Entertainment Pvt Ltd v
world, since India produces drugs worth $5 billion, 65 per
Parag M Sanghavi (unreported, CS (OS) 1892/2006),
cent of which are exported to underdeveloped countries.
which revolved around the proposed remake of well-
Indian patent legislation has come a long way from its
known Bollywood film Sholay by a reputed Indian
foundations to reach international standards, providing
director, set a precedent in Indian entertainment law. The
statutory relief and administrative efficiency for the public.
suit involved the issues of whether:
IP protection at Indian borders
•
issues for concern, the Indian government has recognised
the need for IP rights protection at its borders as a key
defence
against
infringement.
In
keeping
trademark protection could be granted to the title of
a film and the names of its characters; and
In an arena where counterfeiting and piracy have become
•
copyright protection could be afforded to the
construction of characters.
with
international practice and in order to harmonise IP
The Delhi High Court issued an ex parte injunction to
legislation with the Customs Act 1962, on May 8 2007 the
restrain the defendants from infringing the plaintiff’s
Ministry of Finance and the Department of Revenue
rights and recognised rights in the title of the film and the
implemented
Goods)
names and construction of its characters. The terms of the
Enforcement Rules 2007. The new rules give the Customs
the
IP
Rights
(Imported
order were confirmed after a series of hearings and the
Authority the power to adjudicate on issues involving
defendant gave an undertaking that it would not infringe
the import or export of infringing products. Under Rule
the plaintiff’s rights.
3, if a rights holder learns of the import of goods that
In Zippo v Anil Manchandani (unreported, CS (OS)
infringe its IP rights, it may notify a customs officer at the
1355/2006), a case that deviated from the norm regarding
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Anand And Anand Advocates India
the protection of shape marks under the Trademarks Act
Cartier Enterprises (CS (OS) 1208/2003), recognising the
1999, the Delhi High Court held that a shape mark may be
well-established rights of the trademark owner, the court
protected where it “enables the public to distinguish a
ordered the defendant to pay Rs1.78 million ($44,500)
product from others which have another commercial
plus 12 per cent interest in damages for infringing the
origin and to conclude that all the goods bearing it have
trademark rights of the plaintiff.
originated under the control of the proprietor of the shape
In order to crack down further on the influx of
mark to whom the responsibility for their quality can be
counterfeit goods, in a series of successful actions
attributed”. The court’s decision finally translated the
brought by Microsoft the courts awarded damages
statutory right to protect shape marks set out by the
ranging from $15,000 to $2 million. In Microsoft
Trademarks Act 1999 into reality. In Colgate-Palmolive
Corporation v K Mayuri (unreported, CS (OS) 1027/2005)
Company v AO Patel (2005 (31) PTC 583) the court
in April 2007 the court awarded exemplary and punitive
recognised the plaintiff’s trade dress and proprietary
damages and damages for loss of reputation and
rights in its toothpowder container and and restrained the
goodwill, amounting to Rs1 million ($25,000), following
defendant from using trade dress that was deceptively
the sale of pirated goods by the defendant under the
similar to the plaintiff’s red and white trade dress. In a
Microsoft name. In July 2007, in (unreported, CS (OS)
similar case, Colgate-Palmolive Company v Anchor Health
530/2003), the Delhi High Court, acknowledging the
and Beauty Care Pvt Ltd (2003 (27) PTC 478 (Delhi)), the
plaintiff’s rights in the trademark MICROSOFT and
court again protected the use of a party’s packaging by a
giving due consideration to the precedents placed on
competitor. In contrast, in Diageo North America Inc v Shiva
record by the plaintiff, awarded Microsoft Rs2 million
Distillaries Limited (IA 1717/2004 CS (OS) 255/2004) the
($50,000) in compensatory and punitive damages, as well
Delhi High Court dismissed The Smirnoff Company’s
as annual interest of six per cent a year from the date of
claim for an injunction against the use of the mark
the decree until payment.
BRISNOFF for vodka on the grounds that the defendant’s
The IP sector has unanimously supported the
trademark was deceptively similar to the plaintiff’s
paradigm shift in the judiciary’s approach towards
SMIRNOFF mark. However, the court recognised the
damages in IP rights matters, as it looks set to usher in a
similarity in trade dress and the close resemblance
more favourable legal environment for the creation,
between the defendant’s mark BRISNOFF and the
promotion and protection of IP rights in India.
eyebrow device label, as well as the combination of
colours used on its labels, and between the plaintiff’s
Conclusion
mark SMIRNOFF and the eyebrow device label. Thus, it
Since its inception, the Indian IP regime has taken great
asked the defendant to stop using the deceptively similar
strides
device and to change the colour combination used on its
enforcement of IP rights. Although recent substantive
label.
developments have reaped significant rewards for IP
towards
the
increased
protection
and
Taking the trend of awarding punitive damages
owners in India, there are still unchartered waters
further, in Hilton International Company v KV Kumar (Suit
waiting to be explored in the worldwide IP pool. With a
2015/2003), not only did the court permanently restrain
population of 1 billion, India promises to be an active
the defendant from using the trademark HILTEN in
player in the global marketplace, exhibiting its
respect of its hotel business, but it also granted damages
commitment to the proactive protection of IP rights for
of Rs2.359 million ($58,975) to the plaintiff. In Cartier v
those who seek to invest and reap benefits for the future.
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India Anand And Anand Advocates
Pravin Anand is head of the firm and deals with patent, trademark and
copyright litigation and prosecution. He is on the International Trademark
Association board for 2006 to 2008, and has served on several international
and national expert committees, including the Patent Law Drafting Committee.
Mr Anand is chairman of the government IP Rights Promotion Advisory
Committee. He serves on the editorial board of several international IP
journals. Mr Anand attended St Stephen’s College, Delhi and graduated in
law from Delhi University in 1976.
Pravin Anand
Managing partner, New Delhi
Tel +91 11 2435 1749
India
Sumeera Raheja is an associate in the trademarks department of Anand And
Anand Advocates. She graduated in 2007 with a BA LLB (Hons) degree from
Amity Law School. Ms Raheja is enrolled with the Bar Council of Delhi.
Ms Raheja’s main areas of practice include trademark prosecution and
opposition, IP licensing and generally advising on trademarks and copyrights.
Sumeera Raheja
Associate, New Delhi
Tel +91 11 2435 0360
India
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Zain Adnan and Brett McGuire
Indonesia
Progress in IP protection – but much
still to be done
In the past few years Indonesia has made some progress
pending before the State Secretariat. Further reviews and
in strengthening its IP protection regime by passing new
amendments are likely to take place before a draft law is
laws and regulations. Although trademark piracy and
put before the legislature for approval.
copyright and design infringement remain major issues
A discussion paper is being drafted in relation to
for IP owners, the improving legal environment offers a
traditional knowledge and folklore. Once the draft is
good opportunity for foreign IP owners with IP rights
finalised it will be sent to the State Secretariat and a draft
disputes in Indonesia to revisit these issues.
law will ultimately be proposed.
The Indonesian government feels that these issues are
Solid legal framework
important and is supported in this belief by the World
Indonesia has a comprehensive legal framework which
Intellectual Property Organisation Intergovernmental
has significantly improved over the last decade. The
Committee on Intellectual Property and Genetic
government regularly reviews trademark, copyright,
Resources, Traditional Knowledge and Folklore.
industrial designs and patent legislation, offering
interested parties such as the legal profession and the
Trademarks
Indonesian Intellectual Property Society the opportunity
There are several notable limitations in the Trademark
to comment and propose amendments. The most recent
Law, which have all recently been the subject of review
review began in 2007.
by the Indonesian government.
The following methods of IP rights protection are
available in Indonesia:
Well-known marks
The Trademark Law does not prohibit the use of well-
•
trademarks;
known but unregistered trademarks. At present, a
•
industrial designs;
trademark cannot be enforced in Indonesia unless it is
•
copyrights;
registered in Indonesia.
•
patents;
•
plant breeders’ rights (known as plant variety rights
ability to prevent others from registering well-known
in Indonesia); and
marks for dissimilar goods or services. Although the
trade secrets.
Trademarks Law prohibits the registration of well-
•
In addition, rights holders are restricted in their
known marks for dissimilar goods and services, the
Only registered rights are enforceable. In terms of
trademarks and designs, such rights can be enforced only
if they are registered in Indonesia.
necessary government regulation to implement this law
has not yet been passed.
This situation is under review and is likely to be
Steps have been taken to adopt legislation dealing with:
addressed in 2008.
•
genetic resources;
Trademark licences
•
traditional knowledge; and
Another limitation includes the inability to record trademark
•
expressions of folklore.
licensee interests against a registration (even though this
is required under the law). In addition, until recently no
A genetic resources law has been proposed and is
protection for geographical indications was available.
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Indonesia Rouse & Co International
Nevertheless, copyright piracy remains high. Despite
Delay
Despite these limitations, the number of trademark
numerous police raids, the courts have yet to convict a
applications filed in Indonesia continues to rise and has
software pirate in Indonesia. This will be an area to
increased from approximately 38,000 in 2001 to over
watch in future if Indonesia intends to stay off the
54,000 in 2006. This has caused significant delays in the
Priority Watch List.
prosecution of trademarks at the Trademarks Office – the
registration process can take up to three years.
The Trademarks Office has begun the process of
Issues similar to those relating to the enforcement of
trademarks and police facilitation payments also apply
to copyright enforcement.
computerising its systems, including the launch of the
Intellectual Property Digital Library. However, a fully
Patents
digitalised system is still a long way off.
Patent litigation remains rare in Indonesia, with few
cases making it to the Commercial Court. The year 2007
Piracy
saw Indonesia’s first patent revocation case, which was
Indonesia still faces persistent problems with the piracy
brought by national carrier Garuda Indonesia Airlines in
of well-known marks. Intel was recently defeated in the
respect of its online ticketing and payment system. The
Supreme Court by a local electronics manufacturer that
defendant claimed that Garuda’s use of automatic telling
was using the INTEL mark. In considering the
machines to take payment for tickets violated its patent
cancellation for non-use provisions of the Trademark
rights as that method of payment used an online banking
Law, the Commercial Court, and on appeal the Supreme
facility which was part of the defendant’s patented
Court, held that to succeed Intel had to prove the date on
invention.
which the defendant ceased to use the mark, even though
all the evidence indicated that the defendant had never
Garuda successfully revoked the patent on the
grounds that it:
used the mark. This decision set a dangerous precedent
for owners of well-known marks and is under appeal.
•
Registration of non-protectable subject matter
•
lacked novelty;
IP rights holders may be surprised to find that a large
•
did not contain an inventive step; and
number of marks have been registered even though they
•
was not industrially applicable to airline ticketing.
sought to protect a business method (which cannot
be protected under Indonesian law);
consist of non-protectable subject matter – for example,
descriptive marks. The Trademark Office does not have a
Designs
disclaimer system. This means that the only option for
Industrial design applications by local and foreign
some IP rights holders is to seek removal of the relevant
applicants continue to increase. Until 2005 there was no
mark by commencing cancellation proceedings in the
substantive examination process for design applications,
Commercial Court.
which led to the registration of many designs lacking
novelty. This was amended in 2005 so that all
Narrow approach adopted by Trademark Office
applications are now substantively examined. This has
IP rights holders also need to be aware that the
slowed down the registration process, which now takes
Trademark Office takes a narrow approach when
around 18 months.
assessing the similarity of marks and goods and services.
As with trademarks, there are a growing number of
This can lead to difficulties in securing registrations, even
design pirates who register designs owned by third
if the trademark has been registered in other
parties and obtain the exclusive right to use those
jurisdictions.
designs in Indonesia.
Copyright
examining design applications safeguards against this
In terms of enforcing IP rights, the Indonesian police
practice, although ultimately it is the responsibility of the
continue to focus their efforts on copyright infringement,
lawful rights holder to look out for such applications and
in particular optical disc piracy. In 2006 the police made
take action against pirates.
To some extent, the relatively recent practice of
a large number of high-profile raids. This has partly
The year 2007 also saw Honda win a design case
contributed to Indonesia’s removal from the Office of the
against the producers of the Garuda Kentjana motor
US Trade Representative’s Priority Watch List. The police
scooter. The motor scooter industrial design registered
continue to target large DVD factories and raid shopping
and owned by PT Anglo Sama Permata Motor, producer
malls selling pirated DVDs and software.
of the Garuda Kentjana scooter, included a rear lamp that
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Rouse & Co International Indonesia
was similar to Honda motorcycles. The court had to
laws are insignificant and do not deter infringers.
decide on the issues of novelty and whether the
A significant limitation in the judicial process is the
similarity between the designs was exact or substantial.
absence of interim relief, particularly interim injunctions.
The judge agreed that substantial similarity can
This limits the effectiveness of both criminal and civil
constitute grounds for cancellation of the design,
proceedings.
particularly when considered alongside the issue of
The year 2007 saw several high-profile raids,
novelty. The decision was significant as 143,000 units of
including what is believed to be the largest-ever seizure
the Honda motorcycle had been sold in July 2007 alone.
of counterfeit drugs. In July 2007 the police, with the
Overall, the Indonesian market sees sales of 5 million
assistance of the National Agency for Food and Drug
motorcycles a year.
Control, seized drugs with a market value of Rp25 billion
($2.6 million). The raid followed a comprehensive survey
Enforcement
of 600 stores. It is estimated that as much as 40 per cent
Indonesia has no specific unfair competition or trade
of drugs in Indonesia are counterfeit or are distributed
practices law. This means that in order to prevent the
without the proper permits.
misuse of IP rights or conduct that is otherwise
considered misleading and deceptive, IP rights holders
East Timor
must rely on the IP legislation.
As a result of the separation of East Timor from
IP infringement gives rise to both criminal and civil
Indonesia in 1999, Indonesian trademarks no longer have
liability. However, the vast majority of actions tend to be
effect there, although the Indonesian Trademark Laws
criminal. In terms of trademark infringement, a criminal
1992 and 1997 remain in effect. The East Timor Ministry
action is commenced by filing a complaint with the
of Justice has allowed the re-registration of Indonesian
police.
trademarks since 2006 and the Central Jakarta
The police are under funded and under resourced.
Budgets at regional level cover only 40 per cent of
Commercial Court continues to hear trademark disputes.
To date, approximately 70 cases have been heard.
operational requirements and are non-existent at
sectional level. Police operational units are required to
National IP Taskforce
allocate 70 per cent to 80 per cent of their time to
In 2006 the National IP Taskforce was established by
administrative functions, leaving only 20 per cent to 30
presidential decree to address IP enforcement in
per cent of their time to do police work.
Indonesia. The taskforce is a multi-disciplinary body,
Trademark infringement is a complaints-based crime:
comprising representatives from various ministries
once a trademark owner files a complaint, the police are
which deal with IP policy and enforcement. These
legally required to investigate it. If the complaint is
include the Ministry of Law and Human Rights, the
upheld, the police must prepare a full prosecution brief
police, the Customs Authority, the Attorney General's
and forward it to the Public Prosecutor’s Office. In
Office and the Ministry of Trade. The taskforce has its
practice, the police are reluctant to take action unless the
own budget to further its mandate. It held a large
trademark owner agrees to contribute to the police’s
meeting in 2006 to consider the issues to be examined
operational costs in the form of a facilitation payment.
and possible measures to be taken. However, at
This practice is permitted under Indonesia’s anti-
implementation level the rotation of government officials
corruption laws. Facilitation payments are specifically
makes it difficult to implement policy and new officials
excluded from the definition of ‘bribe’ in the US Foreign
are constantly being retrained on the key issues.
Corrupt Practices Act and permitted under the anticorruption provisions contained in the UK Anti-
Other developments
Terrorism Act, provided that certain criteria are met.
In 2007 the Indonesian government’s refusal and
However, the police often cannot provide receipts,
reluctance to share samples of the avian flu H5N1 virus
which creates a transparency issue and ultimately means
helped to highlight the concerns of countries which
that IP rights holders cannot enforce their rights without
provided samples to the World Health Organisation but
breaching both Indonesian and international anti-
were not guaranteed the vaccines derived from their
corruption laws.
samples. Through cooperation with other countries, a
The police have made considerable progress,
framework was agreed for the equitable and appropriate
particularly in regard to optical discs. However, most
distribution of effective pandemic influenza vaccines to
police action is confined to tackling copyright
be applied if a pandemic occurs.
infringement and the penalties prescribed in the various
The year 2007 also saw some uncertainty at the
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Indonesia Rouse & Co International
Directorate General of IP Rights, with significant changes
owners resort to defensive trademark registrations to
in personnel, most notably the director of trademarks
ensure that their brands remain protected and are not
and the director general.
diluted or infringed.
Strategies for Indonesia
balanced portfolio in terms of the various types of IP
Registered rights reign supreme in Indonesia. Best
protection available. In addition to securing trademark
practice necessitates a comprehensive Indonesia-
registrations, consideration should be given to industrial
registered IP portfolio. This means that from the outset
design and copyright registrations.
Rights holders should also ensure that they have a
companies must pay particular attention to trademark,
copyright and industrial design registrations.
A defensive strategy should be adopted in securing
registrations, having regard to the threat of trademark
In terms of tackling infringement, IP rights holders
should be prepared for frustration. IP enforcement in
Indonesia is possible, but a comprehensive strategy and
great patience is required.
pirates and trademark infringement. Many brand
Zain Adnan is a registered IP consultant and assistant manager at Rouse &
Co International in Indonesia. He holds a BA in economics and political
science from Carleton University, Canada, an MBA from Ateneo de Manila,
Philippines and an MIP from the Franklin Pierce Law Centre in the United
States. He was a World Intellectual Property Organisation long-term fellow
at Franklin Pierce in 2001.
Zain Adnan
IP consultant and assistant manager,
Jakarta
Tel +62 21 769 7333
Indonesia
Brett McGuire is the country manager (Indonesia) of Rouse & Co International. Brett McGuire
Country manager, Jakarta
He qualified as a barrister and solicitor in New Zealand and has practised
Tel +62 21 769 7333
there and in Australia.
Indonesia
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Yoshitaka Sonoda
Sonoda & Kobayashi
Japan
New examination practice: changes
under the new Patent Law
The new examination practice under the Patent Law,
•
which came into force on April 1 2007, has already had a
If Claim 1 is patentable:
•
other independent claims having the same
significant impact on procedures such as claim drafting,
patentable technical features as Claim 1 are
preparation of amendments and filing of divisional
deemed to have unity of invention; and
applications. This chapter reviews the new examination
•
claims
dependent
on
Claim
1
or
other
practice and considers the restrictions on amendments
independent claims having unity of invention
imposed by the amended Patent Law.
with Claim 1 are considered, in general, to have
unity of invention.
Restrictions on claim amendments under the Patent Law
•
The restrictions on amendments to claims imposed by
If Claim 1 is not patentable:
•
the revised Patent Law can be summarised as follows.
other independent claims do not have unity of
invention since there is no patentable technical
The restrictions imposed by the new law apply only
feature; and
to those amendments submitted in response to a first
•
claims
dependent
on
Claim
1
or
other
office action (and therefore not to voluntary amendments
independent claims do not have unity of
submitted before such an action). Claims altered by
invention since there is no patentable technical
amendments submitted in response to a first office action
feature.
must share unity of invention with the claims already
examined in the first office action (Article 17bis(4) of the
Claims examined in first office action
Patent Law). If some claims have been examined and
The examination standards provide that the examiner
rejected, and others were unexamined in the first office
shall examine Claim 1 and other claims with unity of
action as lacking unity of invention, the amendments
invention (having a common patentable feature) together
submitted in response to the first office action are limited
with Claim 1, and shall not examine claims with no unity
to the examined claims.
of invention. However, as an exception, even if Claim 1 is
Unity of invention is achieved when two or more
to be rejected, the claim with the lowest reference number
claims have a common patentable technical feature
among the claims directly dependent on Claim 1 shall be
(Article 25-8). Therefore, if an independent claim is
examined, and even if the dependent claim is also to be
deemed to be patentable, all the claims dependent on
rejected, the claim with the lowest reference number
that independent claim will satisfy the unity of invention
among the claims dependent thereon shall be examined,
criterion. However, if an independent claim does not
and so on. Claims to be examined in the first office action
have a patentable feature and is therefore rejected, the
are determined according to the following procedure:
claims dependent on that independent claim will lack
unity of invention. Unity of invention is satisfied by
•
inventions belonging to different categories if they satisfy
certain relationships (eg, a product and a method
suitable for making the product, or a product and an
If Claim 1 is patentable, all claims with unity of
invention are examined.
•
If Claim 1 is unpatentable:
•
Claim M (M being the lowest reference number
apparatus suitable for making the product). Whether
among those dependent on Claim 1), belonging
more than one claim has unity of invention is determined
to the same category and having a new feature
according to the following procedure:
(either an additional feature or a feature which
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Japan Sonoda & Kobayashi
narrows the cited feature) in addition to all
but belonging to different categories, are examined.
features recited in Claim 1, is examined;
•
•
If there are independent claims in the same category
if Claim M is patentable, all claims having the
as Claim 1, they will be examined only if Claim 1 and the
same patentable technical feature are examined;
other independent claims have a common patentable
and
technical feature. If there are independent claims in
if Claim M is unpatentable, Claim N (N being the
categories other than Claim 1, the independent claims
lowest reference number among those dependent
will be examined only if Claim 1 is patentable and the
on Claim M), belonging to the same category and
independent claims have a relationship specified in the
having a new feature (either an additional feature
examination standards (eg, a product and a method
or a feature which narrows the cited feature) in
suitable for making the product). If there are dependent
addition to all the features recited in Claim M, is
claims depending on the independent claim belonging to
examined.
a different category, the dependent claims are examined
even if the independent claims are not, as long as their
This procedure is repeated until a patentable claim is
found or a dependent claim on which no other claim is
counterpart dependent claims stemming from Claim 1
are found to have a patentable technical feature.
dependent is examined.
This examination procedure is illustrated by Figure 1
Exception to restrictions on amendments
No amendments will be allowed under the restrictions if
below.
Claim 1 is examined first. If Claim 1 lacks a patentable
all claims examined in the first office action lack a
technical feature, Claim 2, having additional features to
patentable technical feature. Even further narrowing of
those cited in Claim 1, is examined. Claim 6 is not
the narrowest examined claim is impossible, because
examined, even though it also has additional features to
there can be no common patentable technical feature as
those cited in Claim 1, because Claim 6 does not have the
the narrowest examined claim has no patentable
lowest reference number among those dependent on
technical feature. In order to avoid this deadlock, the
Claim 1 (Claim 2 has the lowest reference number). If
examination standards indicate that claims submitted in
Claim 2 lacks a patentable technical feature, Claim 3 is
response to the first office action will be examined as if
examined, while Claims 4 and 5 remain unexamined. If
they had been submitted before the first office action –
Claim 3 is found to have a patentable technical feature,
that is, claims which, if submitted earlier, would have
all claims dependent on Claim 3 (ie, Claims 7, 8 and 9) are
been examined in the first office action may be submitted
examined, since they have the same patentable technical
as amendments. In other words, the amendments in
feature as Claim 3. Furthermore, the claims with the
response to the first office action are limited to further
same patentable technical feature as Claims 3, 7, 8 and 9,
narrowing of the narrowest examined claims.
Figure 1: Claim construction and object of examination
Claim 1
Claim 2
Claim 3
Claim 6
Claim 7
Claim 9
Claim 8
Claim 4
Claim 5
Solid lines connecting the claims indicate the dependency of the claims.
Indicates the claims that are examined as to whether they have a patentable technical feature
after Claim 1 is found to be unpatentable.
Indicates the claims whose substantive patentability is examined.
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Sonoda & Kobayashi Japan
Violation of restrictions on amendments
however, Claim 1 does not have dependent claims and
In the scenario described in Figure 1, if Claim 4, 5 or 6 is
Claim 1 is unpatentable, no other claims will be examined.
submitted in response to the first office action as an
When two or more dependent claims separately
amendment, the amendment violates the requirements of
depend on a preceding claim (ie, dependent claims such
Article 17bis(4) and is therefore rejected. Furthermore, the
as Claims 2 and 6, Claims 3 and 4 or Claims 7 and 8 in
office action rejecting the amendments will automatically
Figure 1), the dependent claim having most claims
be a decision to reject even if patentable claims are
dependent thereon should have the smaller reference
included in the amended claim set, because the
number. Dependent claims with larger reference
amendments will be rejected as a whole; as a result, the
numbers are examined only if the preceding claim on
reasons for rejection communicated by the first office
which the dependent claims are dependent has a
action still stand.
patentable technical feature.
Influence on divisional applications
in the specification for the narrowest claim in sequence
In the scenario described in Figure 1, the only way to
from Claim 1. If all the claims are rejected, amendments
have Claims 4 to 6 examined is to file a divisional
can add technical features only to the narrowest claim in
application. However, if the reason for rejection already
sequence from Claim 1. In such cases, features cannot be
communicated in the office action issued on the parent
added to the unexamined claims or the claims other than
application is maintained in the divisional application,
the narrowest claim in sequence from Claim 1.
More detailed technical features should be described
the first office action issued on the divisional application
will be a final office action, thus limiting the amendments
Response to first office action
to the following actions:
Unexamined claims dependent on claims that have been
examined and rejected in the first office action cannot be
•
•
cancellation of the claim or claims referred to in
submitted in the amendments. In the example shown in
Section 36(5);
Figure 1, Claim 6 does not have unity of invention
amendments to ensure that all or some of the matters
because Claims 1 and 6 cannot have a patentable
necessary to define the invention claimed in the claim
technical feature as long as the patentable technical
or claims under Section 36(5), as well as the industrial
feature of Claim 1 is denied. The situation is the same for
applicability of and the problem to be solved by the
Claims 4 and 5. There is no way to submit claims
invention claimed in the amended claim or claims,
dependent on a rejected claim, unless the rejection of the
are the same as those of the invention claimed in the
claim is overcome by the remarks. The exceptions to
claim or claims prior to the amendment;
restrictions on amendments described above do not
•
the correction of errors in the description; and
apply to these claims because they are not dependent on
•
the clarification of an ambiguous description.
the narrowest examined claim.
If all the claims are rejected, only claims further
Dealing with restrictions
narrowing the narrowest examined claim are allowed.
In view of the narrower interpretation of unity of
Claims adding features to claims other than the
invention and the restrictions on amendments, claims
narrowest examined claim would not have been
and responses should be formulated more carefully.
examined in the first office action even if such claims had
existed
in
the
original
application.
Therefore,
Claim structure
amendments that add features to claims other than the
Claim 1 may be broad enough that an inventive step is
narrowest examined claim will be rejected as violating
not guaranteed as long as the dependent claims are in an
the restrictions on amendments.
appropriate sequence. As set out by the examination
A divisional application must be filed in order to have
procedure shown in Figure 1, all dependent claims
the unexamined claims examined. Filing a divisional
sequentially dependent on Claim 1 are examined in all
application is the only procedure by which to have
cases.
unexamined claims examined, unless the lack of
When submitting more than one independent claim,
patentability of the preceding claim on which an
the claim on which the largest number of claims depend
unexamined claim is dependent is overruled by the
should be Claim 1. Even if Claim 1 is unpatentable, if one
decision.
or more of the claims dependent on Claim 1 is patentable,
Voluntary amendments should be filed, where
the claims dependent on other independent claims with
necessary, before receipt of the first office action based on
the same patentable technical feature are also examined. If,
the examination in other countries. The restrictions on
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Japan Sonoda & Kobayashi
amendments apply only to amendments submitted in
examination in other countries, it is advisable to revise
response to a first office action. Therefore, if the lack of
the Japanese claims so as to ease the subsequent
patentability of broader claims is known from
examination procedure.
Yoshitaka Sonoda has a technical background in physics and electronics and
received his PhD from the University of Tokyo for his studies on transient
vibration of non-linear systems. He is fluent in both English and French, skills
that were acquired through his experience as a researcher at the Saclay
Nuclear Research Center of the French Atomic Energy Commission and his
frequent visits abroad. Mr Sonoda entered the IP field in 1987.
Yoshitaka Sonoda
Partner
Tel +81 3 5339 1093
Sonoda & Kobayashi
Japan
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Michael Soo, Olivia Khor and Kai Ling Gan
Malaysia
IP owners reap benefits of innovative
protection measures
This chapter looks at recent developments regarding IP
•
rights and protection, and analyses the ongoing battle
three copies of the completed Patent Cooperation
Treaty Request Form (PCT/RO/101) in English;
against piracy and some recent IP cases heard by the
•
the patent specifications; and
Malaysian courts.
•
the prescribed fees.
General developments
The international filing fee for the first 30 sheets is
IP Court
RM4,330 (approximately $1,275). A reduction applies if
In early 2007 Prime Minister Datuk Seri Abdullah
an international application is filed in electronic form.
Ahmad Badawi pledged to establish a RM5 billion
(approximately $1.47 billion) fund to protect Malaysian
Promoting intellectual property in Malaysia
intellectual property. The proposed action includes
MIMOS IP reward scheme
helping inventors to develop products and register their
The Malaysian Institute of Microelectronic Systems
creations. Part of the fund has been used to set up the
(MIMOS) is a government-owned research and
IP Court, which was officially opened on July 17 2007
development organisation specialising in information
and will allow IP disputes and infringements to be heard
and communications technology and microelectronics.
quickly.
By implementing an internal IP reward scheme, MIMOS
aims to encourage IP generation. The underlying
Trademarks Law
objective of the reward scheme is to establish a culture
The Trademarks (Amendment) Regulations 2007 (PU (A)
that fosters innovation, creativity and productivity.
460/1997) amended the Third Schedule on the
MIMOS’s collective target is for every MIMOS employee
Classification of Goods and Services. The regulations
to have at least one patent disclosure accepted by the
replaced the existing classification of goods and services
Patents Committee each year. For every patent
with the International Classification of Goods and
commercialised, the recipient receives a cash reward of
Services for the Purposes of the Registration of Marks
up to RM500,000 (approximately $147,000). Once a
under the ninth edition of the Nice Classification, which
researcher has filed five patents, he or she is eligible for a
entered into force on January 1 2007.
gold badge award.
The regulations also adopted the International
Classification of the Figurative Elements of Marks
Battle against piracy
established by the Vienna Agreement to facilitate
Dogs tackle IP crimes
trademark anticipation searches. This is a step towards
In March 2007 the Motion Picture Association of America
uniformity in trademark registrations in Malaysia. The
lent sniffer dogs Lucky and Flo to the Malaysian Ministry
regulations came into force on July 13 2007.
of Domestic Trade and Consumer Affairs to examine
packages and sniff out chemicals used in the
International applications under Patent Cooperation
manufacturing of optical discs. In their five months
Treaty
working in Malaysia, the labradors uncovered more than
Citizens or residents of Malaysia are entitled to file
1.3 million counterfeit DVDs and CDs worth around
international patent applications. The applicant must file
US$4.43 million. Lucky and Flo are the first dogs to be
with the Patent Registration Office:
used to detect contraband discs anywhere in the world
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Malaysia Shook Lin & Bok Kuala Lumpur
and Malaysian officials are considering training their
own canines to perform similar tasks.
In dismissing Yong’s counterclaim for slander to title
and goods, the court held that Syarikat’s statement to the
ministry was true since it had shown that it was the
Rewarding whistleblowers
rightful owner of the TAMIN trademark. Further, Yong
A software company in Malaysia is rewarding
failed to show any malice on Syarikat’s part in making
informants with payments of up to RM300,000 for
the complaints.
information on the use of unlicensed software. In the
event of a successful criminal prosecution for copyright
Trademarks
infringement, the offending company and/or its senior
An Indian curry house located in Kuala Lumpur, trading
management will face a fine of between RM2,000 and
under the mark MCCURRY, has lost a five-year legal
RM20,000 (approximately $588 to $5,880) for each pirated
tussle with US fast-food restaurant chain McDonald’s
copy, a prison term of up to five years or both. The
Corporation.
In McDonald’s Corporation v McCurry Restaurant (KL)
offenders may also face civil action by copyright owners.
Sdn Bhd (Kuala Lumpur High Court Civil Suit D6-22-989Recent cases
2001) the Kuala Lumpur High Court ordered McCurry
Passing off
Restaurant to stop using the prefix ‘Mc’, which it held to
In Syarikat Zamani Hj Tamin Sdn Bhd v Yong Sze Fun
be distinctive of McDonald’s Corporation, both on its
([2006] 5 MLJ 262) Syarikat manufactures and distributes
own and in conjunction with food items. Therefore,
foodstuffs bearing the TAMIN trademark, including
McDonald’s could claim the goodwill and reputation in
syrups and sauces. Syarikat brought a passing-off action
its business with reference to the prefix ‘Mc’. The court
against Yong Sze Fun for the use of an identical and/or
further ruled that the curry house, in using the signature
confusingly similar mark in relation to syrups and
colours distinctive of McDonald’s, could have confused
cordials. Syarikat also filed complaints with the
the public into thinking that its restuarant was associated
Enforcement Division of the Ministry of Domestic Trade
with McDonald’s.
The court stated that McCurry’s actions were a
and Consumer Affairs, resulting in the seizure of the
defendant’s products.
deliberate attempt to take unfair advantage of
Yong claimed that it had used the trademark TAMIN
McDonald’s reputation, causing damage to the goodwill
since 1991 and was the first to use it in relation to syrups
and reputation of McDonald’s and eroding the
and cordials. It counterclaimed for passing off by the
singularity which it enjoys in relation to the MC
plaintiffs and slander to title and goods.
trademark.
The High Court held that Yong had passed off its
In its claim McDonald’s stated that it had created the
goods as those of Syarikat by using the TAMIN
prefix ‘Mc’ as a source or badge of origin to enhance its
trademark for syrups and cordials. The court held that
business. It had applied for and secured numerous
misrepresentation depends not on whether the products
registrations for the mark MC and for MC with a suffix
traded under the marks are identical, but rather on
or suffixes in many countries around the world. The
whether confusion and/or deception might arise from
curry house denied it had used the prefix ‘Mc’ to enhance
the defendant’s subsequent use of the mark.
its business and insisted that the MCCURRY trademark,
Yong also argued that Syarikat did not own the
with its red and gold logo which features a chicken
goodwill in the TAMIN trademark, claiming that the
giving a thumbs-up sign, was an abbreviation for a
goodwill belonged to the registered proprietor of the
popular local dish, Malaysian chicken curry.
The court has yet to rule on the damages to be
TAMIN trademark, Sharifah Hj Tamin, the executive
chairman of Syarikat. The court held that there was clear
awarded. McCurry is to appeal the ruling.
In Acushnet Company v Metro Golf Manufacturing Sdn
evidence that Syarikat had taken over the business of its
predecessors, including all associated goodwill.
Yong adduced market survey evidence to show that it
was the first to use the TAMIN trademark and that the
Bhd ([2006] 7 CLJ 557) the plaintiff sought summary
judgment
against
the
defendant
for
trademark
infringement, seeking:
mark was distinctive of Yong through use. However, the
court was critical of the market survey as the evidence was
•
limited to a particular geographical area and the target
an order to stop the defendant from infringing the
plaintiff’s registered trademark permanently;
respondents were Yong’s customers; therefore, they did not
•
delivery up of the infringing goods;
represent a cross-section of the public. The court ultimately
•
disclosure of the parties involved; and
placed little, if any, weight on the market survey evidence.
•
monetary compensation.
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Shook Lin & Bok Kuala Lumpur Malaysia
The plaintiff manufactured clothing and golfing
held that the Kenwood audiovisual equipment sold by
equipment and was both the common law and registered
the defendants comprised genuine Kenwood products,
proprietor in Malaysia of the TITLEIST trademark. The
and the complaint of trademark infringement was
defendant was a company incorporated in Malaysia.
therefore unfounded. The court further held that the
Following a raid on the defendant’s premises by the
mere fact that the defendants’ activities caused the
Enforcement Division, counterfeit goods bearing the
plaintiffs to lose potential profits did not constitute a
TITLEIST trademark were seized. The defendant
cause of action.
contended that summary judgment was not an
In Walton International Ltd v Yong Teng Hing t/a Hong
appropriate order as there were several triable issues. Its
Kong Trading Co ([2007] 4 MLJ 133) Walton International
main contention was that it had purchased the
Limited was an associated company of Giordano
counterfeit goods from a third-party company, which it
Limited. The appellant was the registered proprietor of
claimed was an authorised manufacturer of the
the GIORDANO trademark for various goods in
plaintiff’s original products bearing the TITLEIST
Malaysia. The first respondent was the sole proprietor of
trademark. In granting the plaintiff’s application for
Hong Kong Trading Co and had also applied to register
summary judgment, the High Court held that the
the GIORDANO mark in Class 9 (glasses and
plaintiff’s trademark was valid and that the third-party
sunglasses). The registrar accepted the application.
company had no authority to sell the goods to the
Following the Official Gazette notification, the appellant
defendant. Therefore, in purchasing and reselling the
filed a notice of opposition. The registrar rejected the
goods for a profit the defendant infringed the plaintiff’s
opposition and accepted the first named respondent’s
trademark. The court further held that in order to avoid
application to register the GIORDANO mark in Class 9.
infringing the plaintiff’s trademark, the defendant
The appellant appealed to the High Court, arguing that it
should have carried out its own due diligence to ensure
was the originator of the GIORDANO trademark and
that the third-party company was authorised by the
that the first respondent had copied that mark, thereby
plaintiff. Innocence is not a defence to trademark
misappropriating
infringement.
commercial advantage inherent in the appellant’s mark.
the
reputation,
goodwill
and
In Kenwood Electronics (M) Sdn Bhd v Profile Spec (M)
The first named respondent argued that it was the first
Sdn Bhd ([2007] 2 CLJ 732) the first named plaintiff was a
user of the mark in respect of Class 9 goods in Malaysia
Malaysian company and the exclusive distributor of
as it had been selling glasses and sunglasses under the
Kenwood car and home audiovisual equipment in
GIORDANO mark since 1992. In dismissing the
Malaysia for the second named plaintiff, Kenwood
appellant’s appeal, the High Court held that the first
Corporation. The second plaintiff was the registered
named respondent was the first person to use the
proprietor of the KENWOOD trademark. The plaintiffs
GIORDANO mark in Class 9 in Malaysia and that there
alleged that the defendants had deceived the public by
was no evidence of use by the appellant of the mark on
passing off their products as the same Kenwood
Class 9 goods, either prior to or after the first named
products as were sold by the plaintiffs in Malaysia. The
respondent’s trademark application. Therefore, the
first plaintiff contended that it had widely advertised
appellant had no reputation or goodwill in the
and promoted its Kenwood audiovisual products and
GIORDANO mark in connection with goods in Class 9.
had therefore acquired valuable goodwill in Malaysia in
Consequently, the court held that there was no risk of
the name ‘Kenwood’ in connection with audiovisual
confusion as alleged by the appellant.
equipment. It also contended that by sourcing, selling
and importing audiovisual equipment from Kenwood’s
Copyright
distributors elsewhere, the defendants had damaged the
In August 2006 the Court of Appeal issued its decision in
first plaintiff’s goodwill. The second plaintiff contended
Columbia Pictures Industries Inc v ODVD Manufacturer Sdn
that the defendants had infringed its rights as the
Bhd (D8-22-319-2003). Columbia Pictures Industries Inc
registered proprietor of the KENWOOD trademark by
owns the copyright in the film Stuart Little 2 in Malaysia
selling equipment bearing the trade name ‘Kenwood’
and Media Max Com Sdn Bhd is its exclusive licensee for
contrary to the wishes of the second plaintiff. Therefore,
reproducing and distributing the film in VCD format in
the plaintiffs sought an order to stop the defendants from
Malaysia. Columbia alleged that ODVD Manufacturer
importing and selling audiovisual equipment bearing
Sdn Bhd had infringed its copyright by reproducing the
the Kenwood brand name in Malaysia without the
film and distributing copies in Malaysia without its
plaintiffs’ consent.
authority.
In dismissing the plaintiffs’ claims, the High Court
On September 4 2002 enforcement officers from the
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Malaysia Shook Lin & Bok Kuala Lumpur
Ministry of Domestic Trade and Consumer Affairs raided
vexatious, may prejudice, embarrass or delay the fair
ODVD’s premises and seized 550 discs containing the
trial of the action or is otherwise an abuse of process of
film. The premises were raided again on September 13
the court”. It contended that Columbia’s claim was
2002 and two exemplar discs were seized from ODVD’s
unsustainable since information gathered during
replication lines. The two exemplar discs were examined
criminal anti-piracy operations conducted by the
and found to have the same characteristics and defects as
ministry could not be disclosed to Columbia, as to do so
the 550 discs previously seized by the ministry.
would breach the Copyright Act 1987. Therefore,
Columbia
subsequently
commenced
civil
Columbia had no evidence to support its claim.
proceedings against ODVD, claiming for loss and
In dismissing the application the High Court held that
damage to its goodwill, reputation, trade and business,
there was reasonable cause of action as the statement of
and diminution in the value of its licensing activities. It
claim disclosed sufficient facts to show that the case
also sought an injunction against ODVD to prevent
merited a trial. The High Court also held that the mere
further copyright infringement.
fact that Columbia’s evidence may be weak and the claim
In its defence ODVD disputed Columbia’s copyright
in the film and alleged that it had the necessary licence to
might be unlikely to succeed at trial was not grounds to
strike out the action.
carry out its business, without stating that it had the right
The Court of Appeal dismissed ODVD’s appeal and
to reproduce and distribute the film. ODVD also
upheld the High Court decision, thus allowing copyright
counterclaimed for defamation and applied to strike out
owners to file civil actions based on information gathered
the suit on the grounds that the action “disclosed no
during criminal anti-piracy operations conducted by law
reasonable cause of action, is scandalous, frivolous and
enforcement agencies.
Michael Soo is head of the IP and IT department. He obtained his LLB (Hons)
from the University of London and is a barrister at law of Gray’s Inn, England
and an advocate and solicitor of Malaya and Singapore. He is a registered
trademark, patent and industrial designs agent. Mr Soo has practised IP law
for over 20 years and has appeared in a number of infringement and/or
passing-off actions before the High Court, the Court of Appeal and the
Federal Court.
Michael Soo
Senior partner
Tel +60 3 2031 1778
Malaysia
Olivia Khor holds a bachelor of jurisprudence degree from the University of
Malaya. Following her admission to the Malaysian Bar, she practises as an
advocate and solicitor in the IP field at Shook Lin & Bok Kuala Lumpur. She
handles trademark registrations as well as contentious matters.
Olivia Khor
Senior legal assistant
Tel +60 3 2031 1778
Malaysia
Kai Ling Gan holds an LLB from the University of London. She was admitted
to the Malaysian Bar in 2004 and commenced her career as an advocate and
solicitor with Shook Lin & Bok Kuala Lumpur, specialising in IP and IT law.
She handles both contentious and non-contentious matters.
Kai Ling Gan
Legal assistant
Tel +60 3 2031 1778
Malaysia
29/11/07
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Mark Gavin and Joe Edwards
Russell McVeagh
New Zealand
Confronting the impact of technology
The
The digital age continues to pose a considerable
decision
enabled
the
plaintiff
to
bring
challenge to IP rights in New Zealand. The primary
proceedings in New Zealand for infringements that took
pieces of legislation making up New Zealand’s IP
place in other jurisdictions. However, there are
landscape remain the Copyright Act 1994, the Patents Act
limitations on the High Court’s willingness to deal with
1953 and the Trademarks Act 2002. However, changes
foreign IP rights. For instance, it will not do so where the
have been proposed to ensure that New Zealand IP
validity of those rights is an issue; forum non conveniens
legislation remains relevant in light of the realities of
(inappropriate forum) issues will also be relevant. It will
changing technology.
be interesting to see the extent to which the New Zealand
This chapter covers the impending changes to the
courts will adopt this approach.
core IP legislation and discusses some recent decisions
and developments in the IP arena, as well as the Major
Commissioning rule
Events Management Bill.
The government is considering legal changes that could
benefit New Zealand’s technology sector. At present, the
Copyright
default position under the Copyright Act is that the
Global infringement
author or creator of a work is the owner of the first
In the recent case of Sony Computer Entertainment v van
copyright in that work. There are, however, two statutory
Veen the High Court of New Zealand held that Sony was
exceptions to this default position:
entitled to bring proceedings in the New Zealand courts
for breaches of the copyright legislation of England and
•
Hong Kong. This is notable for those seeking to enforce
her employment, the owner of first copyright is the
their rights against global infringers as it was held that
foreign copyright laws (and therefore foreign IP rights)
may be enforced in New Zealand in certain circumstances.
where a person creates a work in the course of his or
employer; and
•
where a person commissions and agrees to pay for a
work, that person is the owner of first copyright.
In the Sony Case the first defendant developed and
distributed a software program called HD Loader, which
This second exception is known as the commissioning
enabled users to circumvent the Sony embedded copy
rule. To apply, the commissioning of the work must pre-
protection code and copy Playstation 2 games onto CD or
date
DVD, thus infringing Sony’s IP rights. The first defendant
commissioning rule applies to most visual artistic works,
then sold or licensed the use of this program in other
it does not apply to literary works. Section 21 of the
countries, including the United Kingdom and Hong
Copyright Act further provides that the two statutory
Kong, through arrangements with the second defendant.
exceptions are subject to any agreement to the contrary.
the
creation
of
the
work. Although
the
The case involved the enforcement of the anticircumvention device provisions of the Copyright Act (ie,
Commissioning rule and computer software
those aimed at devices which can be used to circumvent
The commissioning rule applies to computer software –
copy protection measures on DVDs and CDs); however,
for example, if X commissions Y to create a computer
as the anti-circumvention device in question had been
program, the copyright in the computer program belongs
sold internationally on a commercial basis, Sony also
to X. Of particular relevance is the question of who
sought to find the defendants liable under the equivalent
should own first copyright in a computer program – its
provisions of the UK Copyrights, Designs and Patents
original creator or the person who has paid to have the
Act and the Hong Kong Copyright Ordinance.
program developed.
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New Zealand Russell McVeagh
New Zealand is considering whether to repeal the
commissioning rule to fall into line with other countries.
programme’ and replaces these with a broad category of
‘communication work’.
The Ministry of Economic Development has released a
discussion paper, “The Commissioning Rule, Contracts
Artists
and the Copyright Act 1994”, which, while reaching no
A new discussion paper on the proposed resale royalty
firm conclusions, highlights doubts over the rationale of
rights scheme for art works resold on the secondary
the commissioning rule, particularly as it applies to
market has sparked a lively debate in New Zealand, with
business products such as commissioned software.
artists and dealers lining up on both sides of the debate.
In other countries, the commissioning rule (to the
Sales across the six main art auction houses in New
extent it survives) is normally limited to photographs,
Zealand have doubled over the past decade; however,
portraits, sculptures and engravings, and sometimes to
most New Zealand visual artists still have to take on
films
the
other work to survive. It is proposed that a resale royalty
commissioning rule is not compulsory (ie, under the
right will provide visual artists with a five per cent share
third exception where there is a contract to the contrary).
of the amount of any secondary sale. This is designed to
It can be reversed or modified by contracts. This means
ensure artists get a fair share in terms of the economic
that ownership of new computer programs can be a
returns that they can derive from their work. The resale
contentious issue when negotiating technology contracts.
royalty right is, in effect, a variation of rights that already
Special contractual arrangements can be made, such as
exist for other creators under copyright legislation and
joint ownership of the new software or appointment of the
will recognise the unique nature of visual art, which does
software company as the customer’s licensed distributor.
not derive added value from the production of multiple
However, these arrangements raise a whole new set of
copies. Resale royalty rights are also part of international
issues, among them the sharing of future royalties.
copyright treaties such as the Berne Convention for the
The
and
sound
New
recordings.
Zealand
In
government
addition,
is
currently
considering introducing a set of statutory licences which
Protection of Literary and Artistic Works, to which New
Zealand is a party.
will authorise the reproduction of licensed software to
A discussion paper released through the Ministry for
allow for the retention of a back-up copy. This will be
Culture and Heritage takes into account local conditions
unable to be overridden by contract as is currently the
and sets out a range of options for how schemes might
case. Therefore, parties will not need to waste time in
work in New Zealand. The government proposes that
contract negotiations litigating ownership issues or
artists, and possibly their estates for up to 70 years after
extended licence terms.
death, will receive a five per cent cut each time a work is
Commentators are in general agreement that
resold. Similar arrangements exist in more than 50 other
introducing the proposed reforms, together with
countries. If the government’s plans are implemented, this
abandoning the commissioning rule, will go some way
will bring visual art into line with other arts such as film.
towards establishing a better balance between the interests
of the New Zealand technology sector in its drive to
Trademarks
commercialise new software products and the interests of
The Trademarks Act 2002 came into force on August 20
software end-users, whose self-help efforts should not be
2003. Further amendments to the act were introduced
thwarted by an overly restrictive copyright regime.
into Parliament in February 2005 as part of a Statutes
Amendment Bill and were discussed in the New Zealand
Copyright (New Technologies and Performers’ Rights)
Amendment Bill
chapter of IP Value 2007.
That chapter also discussed New Zealand’s intention to
The Copyright (New Technologies and Performers’
become a signatory to the Singapore Treaty on the Law of
Rights) Amendment Bill is before Parliament’s Select
Trademarks. New Zealand signed this treaty in September
Committee. The bill amends the Copyright Act and
2006. The government has also announced that New
reforms aspects of New Zealand’s IP regime. It is part of
Zealand will join the Madrid Protocol (despite the fact that
a wider reform process to ensure that the IP legislation is
New Zealand has adhered to the Nice Agreement for over
up to date and relevant, and takes account of
30 years). This will enable New Zealanders to extend their
international developments and new technology such as
trademark registrations by filing a request and paying
digital audio players and the Internet. The bill covers
separate country designation fees to the Intellectual
issues such as format shifting, time shifting and
Property Office of New Zealand. A key advantage for local
technological protection measures. It also repeals the
businesses will be the reduced compliance costs associated
previous categories of ‘television broadcast’ and ‘cable
with this move, as it acts as an alternative to registering
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Russell McVeagh New Zealand
trademarks separately in overseas countries by filing
2008. Under the new regime, an invention will be
applications directly in those countries.
patentable if it:
Preliminary
work
has
begun
on
preparing
amendments to the Trademarks Act 2002 to implement
•
obligations arising from joining the Madrid Protocol and
is a ‘manner of manufacture’ within the meaning of
Section 6 of the Statute of Monopolies 1623;
the Singapore Treaty. The amending legislation is
•
is novel;
expected to be introduced into Parliament in 2008.
•
is usual;
•
is not excluded from patentability; and
•
involves an inventive step.
Enforcement – trademarks and copyright
As with other jurisdictions, New Zealand is encountering
increasing quantities of counterfeit and pirated goods at
The retention of the term ‘manner of manufacture’ in
its border, in markets and in retail outlets. New Zealand
the new definition suggests that old case law will still
Customs estimates that the volume of counterfeits being
apply.
imported into the country has increased by over 400 per
cent in recent years. In such cases criminal enforcement is
often an essential weapon – particularly the ability to use
Experimental use
search warrants to obtain evidence. Although the police
The Patents Act 1953 does not contain a specific
have responsibility for enforcement of the criminal
exception for experimental use. The New Zealand courts
offence provisions, brand owners and copyright holders
have held that research of an experimental nature on a
have encountered a lack of consistent enforcement, if any,
patented invention would not infringe a patent, while
by the police. Following campaigns for increased
research carried out with a commercial advantage in
penalties and enforcement against counterfeiters, the
mind would infringe a patent. Clearly, there is
Ministry of Economic Development has published a
uncertainty in relation to what amounts to ‘a commercial
paper proposing an alternative enforcement agency, the
advantage’ (Monsantoco v Stauffer Chemical Co (No 1)
National Enforcement Unit (NEU).
(1984) 1 NZIPR 518).
The NEU is the business unit of the ministry and is
Parliament has now decided that an experimental use
responsible for investigating and prosecuting various
exception will be incorporated into the Patents Act. It is
forms of regulatory crime, including offences under a
understood that acts carried out for experimental
number of pieces of legislation. The paper proposes a
purposes relating to the subject matter of the patent will
targeted role for the NEU in the enforcement of copyright
include:
and trademark offence provisions, and sets out the
resources and powers that would be required for it to
•
determining how the invention works;
take on these additional functions and responsibilities.
•
determining the scope of the invention;
The music, clothing and film industries, hit
•
determining the validity of the claims; and
particularly hard by increasing counterfeiting activity,
•
seeking an improvement to the invention.
have welcomed the initiative and want it introduced
immediately. However, further work is required to
While it is unclear what the definition of ‘acts done for
establish exactly what powers, processes and resources
experimental purposes’ will be, this still represents a
are required by the NEU to take on the intended
considerable improvement on the current situation.
additional functions and responsibilities.
Parliament also proposes that the right of a patentee
should not be infringed by acts carried out for
Patents
experimental purposes relating to the subject matter of
The New Zealand government has continued its
the invention that are not unreasonably in conflict with
overhaul of patent law as it strives to boost growth and
the normal exploitation of the patent. It is similarly
innovation in the patent area. Three areas have been
unclear what ‘normal exploitation of the patent’ will
identified for specific development:
mean.
•
biotechnology;
law on use of patented inventions in research and
•
information and communications technology; and
experimental work is far from certain, frequently
•
the creative industries.
deterring research in areas where patent infringement
The government has acknowledged that the current
may be an issue. To ensure that springboarding activities
The draft Patents Bill is expected to come into force in
continue to be permitted in New Zealand, the
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New Zealand Russell McVeagh
government has recommended that the regulatory
Unlike in other jurisdictions, the bill is intended to
review exception be retained in current patent
provide a generic type of legislation against ambush
legislation, regardless of whether an experimental use
marketing, as opposed to event-specific legislation such
exception is adopted.
as that enacted for the Fédération Internationale de Football
Association World Cup 2006 in Germany and the Cricket
Major Events Management Bill
World Cup 2007 in the Caribbean.
New Zealand will host the Rugby World Cup 2011 and,
with this in mind, Parliament is considering the Major
Concluding remarks
Events Management Bill, which is intended to minimise
There is clearly concern – whether from the perspective
ambush marketing at major events held in New Zealand.
of the general public, the commercial sector, research
The bill seeks to address two main types of ambush
institutes or enforcement authorities – as to the impact of
marketing:
the digital age and the ability of the law to deal with this.
The government has identified the need to reform the
•
•
ambush marketing by association, which is activity
core IP pieces of legislation and this is reflected in the
that improperly seeks to create an association with
number of proposed changes in the area, including
the major event; and
dealing with the issue of ambush marketing. The IP
ambush marketing by intrusion, which unfairly takes
landscape in New Zealand continues to be characterised
advantage of the attention of a captive audience that
by change and expansion.
has gathered solely for the purposes of the event.
Mark Gavin is a partner in the Auckland office of Russell McVeagh and heads
the firm’s IP practice group. He is a member of the International Trademark
Association and the Intellectual Property Society of Australia and New
Zealand. Mr Gavin advises and litigates on all aspects of intellectual property,
including copyright and trademark law and their application to publishing,
television and multimedia, computer software, the Internet, industrial design
and infringement.
Mark Gavin
Partner, Auckland
Tel +64 9 367 8226
Russell McVeagh
New Zealand
Joe Edwards is a solicitor in the IP practice group at Russell McVeagh. His
practice involves advising on a broad range of IP law, including trademarks,
copyright and brand protection, as well as media and advertising law, food law
and related legislation. Mr Edwards also advises on branding and compliance
issues concerning packaging and promotional campaigns.
Joe Edwards
Solicitor, Auckland
Tel + 64 9 367 8172
Email
[email protected]
Russell McVeagh
New Zealand
29/11/07
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Hasan Irfan Khan
United Trademark & Patent Services
Pakistan
Recent trends in patent enforcement
Pakistan has a large, growing pharmaceutical industry
it. Rehman alleged that the Pakistani patent was an exact
and generic manufacturing is on the rise. As a result, there
copy of a UK patent and therefore lacked novelty, and
have been a number of major infringements of patented
that Khawaja held no rights in the patent.
processes for pharmaceuticals, as well as patented
compounds
and
compositions
by
local
generic
High Court decision
manufacturers, which import the generic drugs or their
Justice Hamid Ali Shah of the Lahore High Court held
active ingredients from China, Brazil and India and then
that Khawaja’s patent was correctly granted and
formulate and/or repackage the drugs for sale in Pakistan.
conferred on Khawaja the exclusive right to make, sell
In some cases such pharmaceutical products may also be
and use the invention throughout Pakistan; therefore,
exported. Patent infringements in other industrial sectors
any violation of this right would give rise to an
such as engineering rarely end up in court and patent
injunction. The judge also held that any infringement of
litigation in these areas of technology is rare.
the rights granted to Khawaja must be not only redressed
However, the Pakistan legal system provides
but also suppressed, and that interim relief must be
adequate protection for patent owners, and owners that
granted according to the relevant statute. He held that
pursue the available legal remedies aggressively and
when a right or liability is created by a statute that also
proactively can significantly lessen the threat of
provides special enforcement remedies, those statutory
infringement by due process of the law.
remedies must be followed.
After reviewing various cases and the principles of
Enforcement of patent rights
novelty, the judge held that, under the Patents and
The Pakistan courts continue to act aggressively in
Designs Act 1911, the meaning of the words ‘invention’,
protecting granted patent rights and discouraging
‘publicly used’ or ‘publicly known’ is restricted to
infringement. In recent years there has been extensive
Pakistan. He observed that Pakistan is not a signatory to
litigation relating to patent infringement, particularly in
any international patent convention and that the rights
regard to pharmaceutical patents, as a result of which the
granted by a Pakistani patent are valid only in Pakistan.
courts have issued some landmark decisions protecting
Similarly, patent rights granted in another jurisdiction do
process patents and preventing the sale of generic
not automatically extend to Pakistan. The judge observed
versions of products.
that Khawaja’s patent was granted in 1993 and remained
unchallenged until Rehman filed the counterclaim. In
Khawaja Tahir Jamal v AR Rehman Glass
addition, the patent was granted only after Khawaja had
In Khawaja Tahir Jamal v AR Rehman Glass (2005 CLD
complied with all the correct procedures and it had been
1768) Khawaja Tahir Jamal claimed to be the patentee of
published in the Official Gazette inviting public
a novel process for manufacturing sheet glass through
objections. No such objections had been filed.
float glass technology. Khawaja complained that AR
The judge also held that the damages claim filed by
Rehman Glass intended to infringe or had already
Khawaja did not constitute valid grounds to refuse the
infringed Khawaja’s patent by establishing a float glass
temporary injunction. He observed that Rehman had not
manufacturing unit, and sought an injunction to restrain
disclosed its manufacturing process for float glass in its
Rehman from the infringing acts. Rehman contested the
written statement and there was no evidence to show
suit by alleging that Khawaja had obtained the patent
that, at the time of the grant of the patent, float glass
through misrepresentation and fraud, as float glass
technology was publicly known in Pakistan. The judge
technology was not new and Khawaja had not invented
confirmed the earlier decision in Telephonic Soap v Lever
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Pakistan United Trademark & Patent Services
Brothers, in which the court had held that the balance of
will be presumed that the defendant’s product is
convenience and irreparable loss in IP rights cases cannot
prepared through the patented process.
In the Merck Case the Sindh High Court further held
be measured in monetary terms.
The judge found that Rehman, instead of first seeking
that:
the revocation of the patent, took a risk and opted to
establish its own project. He held that the law should
•
the defendant bears the burden of proving the use of
take its own course instead of coming to the rescue of
a particular (different) process since the defendant
such a party. Consequently, the judge granted an interim
knows the specific process it uses to manufacture the
injunction and restrained Rehman from manufacturing,
importing, launching or offering for sale its disputed
drug;
•
sheet glass product.
if the defendant does not disclose its (different)
process of manufacturing a drug, it will be presumed
to use the process patented in Pakistan by the
Divisional Bench decision
Rehman filed an intra-court appeal before the Divisional
innovator company;
•
Bench of the Lahore High Court. The Divisional Bench,
validity of a patent will not normally be questioned;
comprising Justice Muhammad Akhtar Shabbir and
Justice Shabbar Raza Rizvi, discussed the earlier
at the time an interlocutory injunction is issued, the
and
•
on the balance of convenience and likelihood of
judgment as well as the arguments of both parties, and
irreparable loss, it is possible to issue a temporary
endorsed all the points made by the single judge in favour
injunction
of Khawaja. However, in light of Rehman’s argument that
manufacturing and selling the disputed drug.
restraining
the
defendant
from
it had spent a large sum of money establishing the sheet
glass processing unit and that the furnace, once lit, must
In Lilly v Werrick the Islamabad Additional District
remain so, the Divisional Bench, while maintaining the
Court held that patent infringement had occurred based
earlier court order, modified that order to state that
on the defendant’s statement, without a full trial hearing.
Rehman may continue to produce sheet glass but may not
The court held that by launching and selling the disputed
market it until the final decision in the case. Therefore,
pharmaceutical product the infringer had violated a
Rehman’s appeal was dismissed with this amendment.
decree of the trial court. The patent holder then initiated
proceedings against the infringer for enforcement and
Merck v Hilton Pharma
execution of the decree.
The case of Merck & Co Inc v Hilton Pharma (Private)
On the basis of material available on record, the trial
Limited (SBLR 2002 Sindh 1194) was decided by a senior
court held that the infringers had violated the decree and
and experienced single judge of the Sindh High Court. In
that the decree could be executed against the infringers
this case, during the duration of a process patent in
by adopting the measures set out by the law – namely:
relation to a pharmaceutical product, the defendant
obtained marketing approval to launch and sell the
•
product covered by the patent. The defendant put
forward various defences – most importantly, that:
seizure of the infringing product by the relevant
authorities;
•
arrest and detention of the directors, partners or
principal officers of the defendant company; and
•
•
the suit was premature as the defendant had not
•
seizure and sale of properties owned by the
launched its product; and
defendant company or by its directors, partners or
the defendant’s process to produce the disputed
principal officers.
product would be different from that covered by the
patents.
The matter went to appeal before the High Court,
which set aside the order of the additional district judge
After conducting a detailed hearing on the injunction
and directed the recordal of oral evidence on one of the
application, the single judge, while rejecting all defences,
issues involved before determining whether the decree
held that it is not necessary that a suit should be filed
had been violated. However, the patent holder has taken
only upon actual infringement of the patent; rather, it is
the matter before the Supreme Court of Pakistan on the
also permissible to file on the basis of threatened
grounds that the recordal of oral evidence is unnecessary
infringement action. The onus is on the defendant to
under a decree for patent infringement when prima facie
establish that its process to produce the pharmaceutical
documentary evidence of violation of the decree is
product will be different; unless the contrary is proved, it
already available on record. The appeal is pending.
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United Trademark & Patent Services Pakistan
Shire Biochem v Biocare
•
Biocare
could
supply
generic
drugs
to
the
GSK, the second named plaintiff in this case, objected to
government against the tender but, in order to secure
the sale of lamivudine by generic drug companies. At
GSK’s interest, it first had to provide a bank
first instance the additional district judge granted an ex
parte interim injunction preventing the manufacture and
guarantee for the amount of the tender.
•
sale of lamivudine by the generic companies. The generic
companies argued that their manufacturing process for
Biocare would be restrained from supplying
lamivudine to the market for all other purposes.
•
Biocare’s product was to be sent to reputable
lamivudine was different and submitted details of that
laboratories for analysis and to determine whether it
process. They also argued that the basic patent had
was manufactured by the allegedly different process
expired and subsequent patents were alleged to be
that Biocare claimed to use to manufacture its
patents of addition, which expired at the same time as
lamivudine product.
the basic patent. They also took the stance that an
injunction would operate against the public interest as
GSK was satisfied with the order. However, Biocare
they had won a tender to supply bulk quantities of
appealed to the Supreme Court against the order of the
lamivudine to the government programme to prevent
High Court requiring it to submit a bank guarantee for
hepatitis B. According to the documents submitted, the
over PRs8 million (approximately $135,000), and against
manufacture of the generic products began before the
the order that its product be analysed.
expiry of the base patent.
After hearing full arguments, the Supreme Court
After a full hearing, the application for an injunction
was dismissed.
dismissed Biocare’s appeal and held that the order of the
High Court was just and proper.
GSK appealed to the High Court and Justice Umar
Ata Bandial issued interim orders restraining Biocare
Conclusion
from
Pakistan has an adequate and effective set of laws to
manufacturing,
selling
or
supplying
any
lamivudine products.
protect the rights of patent owners. In addition, in order
During the arguments before the High Court, Biocare
to honour its commitments under the World Trade
claimed that it should be allowed to supply generic
drugs to the government under its tender as the supply
Intellectual Property Rights, Pakistan has carried out a
deadline was due to expire – if the drugs were not
comprehensive overhaul of its IP legislation. The
supplied before that date, the tender would expire and a
majority of the statutory changes are now in place, so it
new tender would take place. This would result in public
is up to IP rights holders to assert their rights through
suffering due to an absence of drugs to treat hepatitis B.
well-planned and pursued legal proceedings.
The High Court held as follows:
The decisions issued by the judiciary over the years,
which in general uphold IP owners’ rights, constitute a
•
•
Whether GSK’s valid patents were patents of
positive sign which should encourage IP owners to
addition could only be decided by a full trial.
prosecute
The statutory presumption of infringement of
determination and diligence, rather than overlooking
process favoured GSK, at least to the extent of its
and eventually losing valuable rights.
infringements
of
their
rights
with
valid patents.
Hasan Irfan Khan’s primary areas of practice include trademarks, copyright,
patents and unfair competition/passing-off. He has wide experience in
anti-counterfeiting and enforcement litigation and has conducted various
landmark IP cases before the high courts in Pakistan. He lectures in IP law
at the National Institute of Public Administration and Punjab University Law
College. He has also sat on government committees to make and enforce
changes to IP legislation in light of the WTO TRIPs Agreement.
Hasan Irfan Khan
Partner
Tel +92 42 724 9638
United Trademark & Patent
Services
Pakistan
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Sudath Perera and Shanika Gunawardena
Sri Lanka
A right to original expression: the role
of copyright law in modern industry
Copyright law has a significant role to play in industry
Subject to limitations, the act permits the private
today, having developed from a legal concept to one
reproduction of a published work in a single copy
which affects nearly every area of business. Justice Sandra
without the authorisation of the copyright owner where
Day O’Connor summed up this progression in the US
the reproduction is made by a physical person
case of Feist Publications Inc v Rural Telephone Service Co:
exclusively for his or her personal purposes from a
“Copyright assures authors the right to their original
lawful copy of such work.
expression, but encourages others to build freely upon the
ideas and information conveyed by a work. This result is
However, the fair use exception does not extend to
cover the reproduction of:
neither unfair nor unfortunate. It is the means by which
copyright advances the progress of science and art.”
•
New IP Act
•
a work of architecture in the form of a building or
other construction;
the whole or a substantial part of a book or a musical
work in the form of notations;
The IP Act (36/2003) brought about several changes to
the Sri Lankan copyright legislation. The changes were
•
the whole or a substantial part of a database;
principally based on the World Trade Organisation
•
a computer program, except as provided in
Agreement on Trade-Related Aspects of Intellectual
Property Rights.
Subsection 7; and
•
any work if the reproduction would conflict with the
Under the act, a copyright lasts for the lifetime of the
normal exploitation of the work or would otherwise
author plus 70 years from the date of the author’s death.
unreasonably prejudice the legitimate interests of the
The previous legislation – the IP Code Act (52/1979) – set
copyright owner.
the duration of a copyright as the lifetime of the author
plus 50 years. Therefore, the new act has further
strengthened the rights of copyright owners.
The IP Act protects the following as copyrighted
works:
The act broadly examines the area of fair use. It
permits the fair use of a work for the purpose of criticism,
•
comment, news reporting, teaching (including multiple
copies for classroom use), scholarship or research.
other writing;
•
The act provides that to determine whether use of a work
is fair use, the following factors should be considered:
books, pamphlets, articles, computer programs and
speeches, lectures, addresses, sermons and other oral
works;
•
dramatic
works,
dramatic
musical
works,
pantomimes, choreographic works and other works
•
created for stage productions;
the purpose and character of the use, including
whether such use is of a commercial nature or is for
•
non-profit educational purposes;
stage productions of works specified in Paragraph (c)
and expressions of folklore that are apt for such
productions;
•
the nature of the copyrighted work;
•
the amount and substantiality of the part used in
•
musical works, with or without accompanying words;
relation to the copyrighted work as a whole; and
•
audiovisual works;
the effect of the use on the potential market for or the
•
works of architecture;
value of the copyrighted work.
•
works of drawing, painting, sculpture, engraving,
•
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Sudath Perera Associates Sri Lanka
lithography and tapestry and other works of fine art;
•
photographic works;
•
works of applied art; and
•
illustrations, maps, plans, sketches and three-
•
grant a licence to a physical person or legal entity to
carry out all or any acts relating to the economic
rights; and
•
assign or transfer all or part of the economic rights.
dimensional works related to geography, topography,
architecture or science.
The act states that the owner of copyright in a work shall
have the exclusive right to carry out or authorise another
A salient feature of the new act is the introduction of
party to carry out the following acts in relation to the work:
a section on enforcement and dispute resolution. The
director general of intellectual property is now
•
reproduction of the work;
empowered to conduct an infringement inquiry upon
•
translation of the work;
application by an aggrieved party. A decision given by
•
adaptation, arrangement or other transformation of
the director general will be binding on the parties and a
person aggrieved by such a decision may make an appeal
the work;
•
to the courts. This provision is a favourable option for
many as it provides an alternative to litigation, which can
the public distribution of the original and copies of
the work by sale, rental, export or otherwise; and
•
rental of the original or a copy of an audiovisual
take a considerable period of time to reach a conclusion.
work, a work embodied in a sound recording, a
The key aspect of this provision is the opportunity for
computer program, a database or a musical work in
an aggrieved party to appeal to the courts against a
the form of notation, irrespective of the ownership of
decision of the director general.
the original or copy concerned.
Case law
The act sets out in detail the rights of a broadcasting
Assignment of rights
organisation. The relevant section enumerates that a
In a recent copyright case before the Commercial High
broadcasting organisation shall have the exclusive right
Court, the plaintiff claimed damages from the defendant
to carry out or to authorise another party to carry out the
alleging that a film which had been televised by the
following acts:
defendant’s television channel had violated the
plaintiff’s copyright in respect of the film. Denying the
•
allegation, the defendant stated that the film was
broadcast and/or exhibited under the copyright which
part thereof;
•
had been legally obtained by the defendant from the
owner of the film; therefore, it did not violate any rights
the communication to the public of a broadcast or a
substantial part thereof;
•
belonging to the plaintiff.
In terms of an agreement between the owner of the
the re-broadcasting of a broadcast or a substantial
the fixation of a broadcast or a substantial part
thereof; and
•
copyright and the plaintiff, the plaintiff had been
the reproduction of a fixation of a broadcast or a
substantial part thereof.
assigned only the theatrical and video rights by the
owners of the film. Therefore, the plaintiff had no right to
Accordingly, in this case it was decided that the
exercise any other economic rights, such as televising the
respective parties had obtained completely different
film. Under the circumstances it was clear that the
copyrights from the bundle of copyrights relating to the
plaintiff could claim only the rights specifically assigned
film. Thus, the defendant had not violated the plaintiff’s
to it by the agreement. On the other hand, the defendant
copyright as only specific rights had been given to the
had televised the film according to the rights assigned to
plaintiff. In these circumstances, the judge dismissed the
it by the agreement with the owner. This action did not
action in favour of the defendant.
violate the plaintiff’s copyright as the rights assigned to
In regard to moral rights, the act provides that the
the defendant by virtue of the agreement between the
author of a work shall, independently of his or her
defendant and the owner of the copyright did not fall into
economic rights and even where he or she is no longer
the categories of video recording or theatrical screening.
the owner of those economic rights, have the right to:
The Commercial High Court held that the defendant
had not violated the plaintiff’s copyright and that the
•
parties were exercising the rights which they each held.
copies and in connection with any public use of the
In regard to the assignment or licensing of authors’
rights, the act provides that the copyright owner may:
have his or her name indicated prominently on the
work, as far as practicable;
•
use a pseudonym and not have his or her name
29/11/07
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Sri Lanka Sudath Perera Associates
•
indicated on the copies and in connection with any
plaintiff instituted an action against the defendant for
public use of the work; and
acts of unfair competition and infringement and to
object to any distortion, mutilation or other
obtain a declaration of nullity.
modification of, or other derogatory action in relation
The dispute arose in respect of the ownership of a
to, the work which would be prejudicial to his or her
trademark. The defendant had registered the trademark
honour or reputation.
he had created while he was an employee of the plaintiff.
The plaintiff argued that the trademark had been created
These rights are not transmissible during the lifetime
by the defendant while he was an employee of the
of the author; however, upon the author’s death the
plaintiff and was privy to sensitive information in respect
rights shall be transmissible by testamentary disposition
of the company’s future activities. However, the
or by operation of law.
defendant claimed that he had created the word itself
and thus the property rights in the trademark belonged
Rights of film producer
to him.
In another matter which is pending before the courts, the
Although the plaintiff was using the trademark for
plaintiff filed an action on the grounds that the broadcast
commercial purposes, the defendant had not used the
of a particular film by the defendant had violated the
trademark at any stage.
In these circumstances, the court held that the
copyright which belonged to the plaintiff as the producer
of the film.
The defendant argued that it had broadcast the film
defendant had committed several violations and issued a
restraining order against the defendant.
under the ownership rights which had been transferred to
it from a third party. Under the act a copyright owner may
Rights in published work
assign or transfer economic rights in whole or in part.
A settlement was reached in a recent case involving
The plaintiff disagreed on the grounds that, as the
copyright law. The plaintiff instituted an action against
author and owner of economic and moral rights in the
the defendant for violating her economic and moral
audiovisual work, it was entitled to the protection
rights by publishing a book similar to a work created by
guaranteed by the law. At the time of writing a decision
her late husband. She argued that upon the death of her
is awaited.
husband, his rights devolved to her and the publication
of the new book violated the property rights of her late
Rights in work created in the course of employment
husband, who was a prominent writer and dramatist.
Under the new act the property rights in a work created
The defendant argued that its book was designed for
by an employee belong to the employer. The rules
students for academic purposes. However, on reaching
governing copyright in such cases were analysed in an
an out-of-court settlement, the defendant undertook to
interesting case which was instituted under the
refrain from further publication of the book and agreed
provisions of the previous act. However, the provisions
to
of the new act are also applicable to this action. The
compensation.
pay
the
plaintiff
approximately
$7,500
in
Sudath Perera founded the law firm in 2002. He is also chairman of SPA
Global IP Solutions (Pvt) Ltd, which handles matters related to trademarks,
patents, industrial designs and copyrights, and SPA Recovery Services (Pvt)
Ltd and SPA Tax Consultancy Services (Pvt) Ltd, which handle debt recovery
and taxation respectively. Among other areas, Mr Perera specialises in
administrative and IP law, with an emphasis on brand protection and anticounterfeiting work.
Sudath Perera
Chairman, SPA Global IP Solutions
(Pvt) Ltd
Tel +94 112 559 949
Sri Lanka
Shanika Gunawardena is an associate of the law firm and specialises in
brand protection and anti-counterfeiting work. She also advises both local
and foreign clients on brand protection strategies. Her other areas of practice
include IP law, commercial litigation, family law, customs law, insurance law
and commercial arbitration and dispute resolution. Ms Gunawardena holds
a BA from the University of Kelaniya. She is fluent in English and French
and is a member of the Bar Association of Sri Lanka.
Shanika Gunawardena
Associate
Tel +94 112 559 944 7
Email
[email protected]
Sri Lanka
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Yu-Lan Kuo and Charles Chen
Formosa Transnational
Taiwan
Developing special procedures for
patent prosecution
Taiwan has had specific patent law since 1944. It was one
was still not enough. As Taiwanese industry began to
of the first countries to adopt patent legislation. Since
play a more important role in the global manufacturing
then, Taiwan’s industrial focus has shifted from
chain, the ability to claim priority in only 11 countries
agriculture and small manufacturing to high-tech
was insufficient to satisfy the needs of the global patent
industrial production. The Patent Act 1944 has been
prosecution business.
amended many times to follow international trends and
In 2002 Taiwan joined the WTO and agreed to comply
remain consistent with global patent practice. As a result
with the terms of the Agreement on Trade-Related
of the political issues relating to Taiwan’s identity,
Aspects of Intellectual Property Rights. An applicant can
Taiwan is not a signatory to many global patent treaties.
now file a patent application in Taiwan within 12 months
Instead, various patent practices specific to Taiwan have
of the earliest date on which any corresponding
been established. This chapter considers these special
application has been filed in another WTO member
provisions and discusses some major developments
country. As Taiwan joined the WTO on January 1 2002,
relating to patent prosecution in Taiwan.
the priority date cannot be earlier than that date.
Claiming priority
applicant that files an initial patent application in a WTO
The right of priority is one of the most important rights
member state may claim priority for a Taiwan
to be considered in international patent applications
application within 12 months. If the foreign applicant is a
because it gives a patent applicant the right to track its
citizen of a country that is not a WTO member, but has a
filing date back to the date of filing the first application.
place of business or residence in a WTO member country,
Although the Patent Act provides for a right of priority in
he or she may also claim priority for an application in
Taiwan, these rules are inconsistent with general global
Taiwan. In this regard, the Taiwanese application will be
practice.
treated as if it had been filed on the same date as the first
Article 27 of the Patent Act provides that a patent
application filed in the WTO member country.
As the political relationship between Taiwan and
Changes following WTO membership
Before Taiwan became a member of the World Trade
China remains unresolved, foreign patent attorneys and
Organisation (WTO), Taiwanese patent applicants could
agents do not always know whether it is necessary to file
not claim priority if they subsequently filed patent
a separate patent application in Taiwan after filing a
applications in most countries in the world. As Taiwan is
patent application in China. In fact, the Taiwan and
not a member of the Paris Convention, a key document
Chinese
for priority claims, it was unable to enjoy the cooperative
applications filed in their own territory. A patent
benefits of international patent prosecution. In the mid-
application granted in China cannot be enforced in
1990s Taiwan focused on forming bilateral patent
Taiwan. In addition, China and Taiwan do not admit
recognition agreements with its major trading partners
priority rights for each other’s patent applications (even
(Australia,
Japan,
though both are WTO members). Thus, an applicant that
Zealand,
files a patent application in Taiwan is unable to claim
Switzerland, the United Kingdom and the United States)
priority based on his or her Taiwan patent application
and gained reciprocal recognition with those countries.
when subsequently filing a corresponding application in
Although this facilitated international patent filings, it
China, and vice versa. In order to maintain the benefit of
Austria,
Liechtenstein,
the
France,
Germany,
Netherlands,
New
governments
control
only
the
patent
29/11/07
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Taiwan Formosa Transnational
the earliest filing date, it is necessary to file patent
impossible because Taiwan is not a member of the Paris
applications in both Taiwan and China, especially when
Convention (Article 87(1) of the EPC), the EPC states that
an applicant chooses one of these countries as the first
as most EPC contracting states are also members of the
filing country for a global patent prosecution.
WTO, it should be possible to obtain protection in
Europe through the national route under Article 87(5) of
Relationship with PCT countries
the EPC. Thus, the November 2000 revision of the EPC
Most countries are signatories to the Patent Cooperation
allows an EPC application to claim priority on the basis
Treaty (PCT), including all major industrialised
of a first filing in Taiwan. This will come into effect on
countries. Taiwan, however, is still not a party to the PCT.
December 13 2007.
When filing under the PCT procedure, an applicant may
submit a request to enter a specific national phase within
Foreign provisional application
30 months of the international filing date. Since Taiwan is
Some countries, such as Australia and the United States,
not a PCT country, however, the applicant cannot file an
provide for a provisional application filing procedure. A
application in Taiwan through PCT procedures and the
provisional application allows an applicant to obtain a
30-month grace period does not apply. Some foreign
filing date in advance of filing the regular (non-
applicants have lost their right to claim priority by
provisional) application. After filing a provisional
mistakenly assuming that Taiwan is a party to the PCT.
application, the non-provisional application must be
The Paris Convention states that any filing that is
filed or the provisional application must be converted
equivalent to a regular national filing under the domestic
into a non-provisional application within a specific
legislation of a country that is a party to the convention,
timeframe (eg, 12 months in Australia and the United
or under bilateral or multilateral treaties concluded
States). Thus, a provisional application is deemed to be
between countries that are party to the convention, shall
the first filing in Taiwan when claiming a priority right
be recognised as giving rise to the right of priority. As a
for the corresponding Taiwan application.
result, on November 27 2002 the Taiwan Intellectual
In general, the provisional application will be
Property Office (TIPO) announced that an applicant from
updated to form the non-provisional application, with
a WTO member country that files a patent application in
the addition of new material as necessary. However, only
Taiwan based on a PCT application may claim a right of
the foreign application for the same invention can be
priority if the application is allowed provided that the
used to claim priority. If an application filed in Taiwan is
PCT application designates one or more WTO member
based on a non-provisional application with a different
countries as the designated countries.
claim scope or for different technology from that
Although an applicant may file an application in
disclosed in the provisional application, the non-
Taiwan claiming a right of priority based on a PCT
provisional application shall form the base application
application if it accords with these criteria, the 30-month
for that part of the claim. Therefore, if amendments are
grace period does not apply. When filing a PCT
made between a foreign provisional application and a
application an applicant must file the Taiwanese
foreign non-provisional application, the foreign non-
application within 12 months for an invention patent or
provisional application should be claimed as the basic
utility model application and within six months for a
application and the relevant certified application
design application.
documents should be submitted to TIPO at the same time
Since Taiwan is not a party to the PCT, a Taiwanese
to ensure the applicant’s right of priority.
patent application cannot form the basis to claim a right
of priority for a PCT application.
Novelty grace period
An invention must be kept secret until a patent
Relationship with EPC countries
The guidelines issued by TIPO on November 27 2002 also
application is filed. In some countries, such as the United
included
(EPC)
States, a grace period allows an inventor to publish
applications. An applicant from a WTO member country
anywhere, make available for public use or put on sale in
that files a patent application in Taiwan based on an EPC
the United States his or her invention for one year prior
application may claim a right of priority where that
to the filing date. The Taiwanese Patent Act is more
application designates one or more WTO member
restrictive, providing only a six-month grace period. In
countries.
addition, the grace period can be claimed only if:
European
Patent
Convention
In addition, even though the recognition of priority
rights under the EPC from a first filing in Taiwan is
•
publication is a result of research or experimentation;
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Formosa Transnational Taiwan
•
publication is a result of the invention being shown at
that claims drafted in the following formats are
an exhibition sponsored or approved by the
considered to be therapeutic methods:
government; or
•
the invention has been disclosed on an occasion not
•
“a method for treating disease X, using…”; or
intended by the patent applicant.
•
“use of substance Y in the treatment of disease X”.
Similar regulations also apply to designs, but designs
Although the Patent Act restricts therapeutic
do not involve research and experimentation, and
methods, this does not mean that a therapeutic medicine
therefore that condition does not apply. Furthermore,
or substance cannot be protected by a patent in Taiwan.
these criteria also apply if publication occurs in a foreign
If an inventor wants patent protection for a therapeutic
country. Many foreign applicants are unaware of
invention, he or she can draft a patent application setting
Taiwan’s grace period regulations and lose the
out claims in the following manner:
opportunity to obtain a Taiwan patent.
Patent ineligibility
•
“a composition for treating disease X, comprising…”;
•
“a method for producing a substance for treating
disease X, comprising…”; or
Compared to the United States and some European
countries, Taiwan is more conservative in granting
•
patents related to biological material. For example, under
“using substance Y in producing medication for
treating disease X”.
Article 24 of the Patent Act, the following items cannot be
patented in Taiwan:
Patent claims drafted in such a way are not
considered to be therapeutic methods and are patentable
•
animals, plants and essentially biological processes
under the Patent Examination Standards.
for the production of animals or plants, except
•
•
processes for producing micro-organisms;
Limitation contrary to public order, morality
diagnostic, therapeutic or surgical methods for the
or public health
treatment of humans or animals; and
As the most controversial technology in the biotech field,
inventions that are contrary to public order, morality
the patentability of human cloning is one of the hottest
or public health.
discussion topics in the patent field. According to the
prohibition clauses, human cloning is considered
Limitations on animal, plant and essentially
contrary to public order, morality or public health and
biological processes
related inventions are not regarded as patentable subject
Unlike some other countries, Taiwan does not provide
matter. As human cloning is a very broad concept and
plant patent protection. It also rejects patent applications
there are some ambiguities, patentable and non-
regarding animals and essentially biological processes of
patentable matters can be distinguished. TIPO is drafting
animals or plants, with the exception of processes for
guidelines to provide more detailed guidance and to
producing micro-organisms. However, this does not
define ‘human cloning’. It is hoped that these guidelines
mean that biological materials cannot be patented in
will balance the interests of developing medical science
Taiwan. In fact, if a patent application merely combines
against the public interest.
natural or biological methods to create a new variety, this
is acceptable under the Patent Act. For example, if the
Depositing biological material for patent applications
breeding method for a new animal or plant variety
Under Article 30(1) of the Patent Act, when applying for
comprises natural processes such as cross-breeding or
an invention patent involving biological material or the
selection, it is deemed to be a biological method. A good
use of biological material, the applicant shall, no later
example is the selective breeding of horses – as it
than the filing date:
involves only the selection of breeding horses and the
confinement of horses with specific characteristics, it is a
•
patentable biological method.
deposit the biological material at a deposit institute
designated by the Patent Authority; and
•
indicate in the application the name of the deposit
Limitations on diagnostic, therapeutic or surgical
institute and the date and serial number of the
operation methods
deposit.
Therapeutic methods are not patentable in Taiwan. The
Patent Examination Standards issued by TIPO stipulate
This deposit is not required, however, if the biological
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Taiwan Formosa Transnational
material can be easily obtained by an ordinary person
Comment
skilled in the relevant field. At present, the Bioresource
The processes for international patent prosecution
Collection and Research Centre is the deposit institute
develop very quickly. Foreign attorneys practising
appointed by the authority and the only institute
international patent prosecution need at least a general
authorised by the Taiwanese government for the deposit
understanding of some of the peculiarities of Taiwanese
of patented microbial materials.
practice, as this may influence their application and
Since Taiwan is not a signatory to the Budapest Treaty,
prosecution strategies in Taiwan. Many further
a patent applicant cannot complete the deposit process
developments have been discussed in recent months and
for his or her biological material at a deposit institute
are expected to be implemented in 2008, including:
recognised by the Budapest Treaty when filing a patent
application for biological materials.
•
the establishment of specialist IP courts;
However, in the event that the biological material has
•
new dispute resolution procedures for IP cases; and
been deposited at a foreign deposit institution recognised
•
new guidelines for biotechnology and computer
by TIPO before filing the patent application, there is a
software.
three-month grace period to allow the applicant to
complete the deposit process in Taiwan if he or she
requests this in the application. Within this three-month
Taiwanese IP practice is expected to continue to enjoy
fast and active development over the coming year.
period the applicant must submit the deposit certificates
issued by both the Bioresource Collection and Research
Centre and the foreign deposit institution to complete the
deposit process for the patent application.
Yu-Lan Kuo is director of the IP and technology law division at Formosa
Transnational and former chairman of the Trademark Law and Patent Law
Committee of the Taipei Bar Association. He is also counsel for setting up
special IP courts for the Judicial Yuan. He specialises in intellectual property,
international trade and litigation. He holds an LLM from the Law School of
the University of Minnesota (1998) and an LLB from the Department of Law
of the National Taiwan University (1983).
Yu-Lan Kuo
Partner
Tel +886 2 2755 7366
Taiwan
Charles Chen is a patent attorney in the IP and technology law division at
Formosa Transnational. He specialises in intellectual property, international
patent prosecution (mechanical engineering) and patent litigation. He holds
an MCL from the Indiana University Law School (2000) and an LLB from the
National Taiwan University Department of Law (1994).
Charles Chen
Patent attorney
Tel +886 2 2755 7366
Taiwan
29/11/07
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James Evans
Thailand
Inclusion on Priority Watch List sets IP
enforcement alarm bells ringing
Thailand is well known as a country where counterfeit
recovering hijacked trademarks can be a lengthy and
products can be bought easily from street vendors. A
difficult process.
single visit to Bangkok usually presents shoppers with
In Hackett Limited v Sommai ( 201/2548 (2005)) a Thai
endless opportunities to buy goods such as fake
individual had registered the trademark HACKETT.
handbags, CDs and DVDs. On April 30 2007 the Office of
Hackett Limited, the genuine rights holder, barely used
the US Trade Representative put Thailand on its Priority
the mark in Thailand and held no corresponding
Watch List, confirming that many of the world’s
trademark registrations. Under these circumstances it is
counterfeit products originate in Thailand.
usually very time consuming to recover the relevant
Thailand faces some exciting challenges in the IP field
registrations from the unauthorised third party.
over the next few years. In addition to combating the
However, in this case the Thai registrant was also
counterfeiting problems which continue to hamper
producing and marketing counterfeit copies of Hackett’s
business growth, the country must also develop its own
goods. The Supreme Court held that because of this
strategy for innovation and IP protection. It is leading the
counterfeiting, the Thai registrant was likely to have
way among the member states of the Association for
known the identity of the genuine owner of the
Southeast Asian Nations and the future is bright for Thai
HACKETT trademark and to have been aware of its
businesses that seek to rely on local intellectual property.
goods when it registered the mark. Therefore, the act of
The establishment of the Central Intellectual Property
registration in bad faith meant that Hackett had prior
and International Trade Court (CIPITC) in 1997 has put
rights to the trademark. Given this, combined with the
Thailand ahead of many of its neighbours regarding the
fact that the mark at issue was also the rights holder’s
use of technical IP expertise in judicial IP rights
company name, the court ordered the transfer of the
enforcement. Thanks to this, combined with Thailand’s
trademark to Hackett.
involvement in the World Trade Organisation and
increased police enforcement activity in IP matters, IP
Registering trademarks with Customs
holders in Thailand are seeing positive results, even
For several years Royal Thai Customs has had the
though lenient sentencing practices have rendered
authority to seize suspicious goods being imported into
enforcement measures somewhat ineffective in the fight
or exported from Thailand on an ex officio basis. Rights
against piracy.
holders must record a trademark or copyright notice
with Customs to enable officers to seize and prosecute
Establishing a good IP position
infringers. Such prosecution is carried out under the
Companies which do not hold registered rights in
Customs Act 1926 (BE2469), as amended by the Customs
Thailand are automatically on the back foot when it
Act 2005 (BE2548). Registration is a simple, one-off
comes to the exploitation and protection of their
process and enables Customs officers to identify the
trademark, patent and design rights. Registration is not
owner of the trademark or copyright and the agents on
compulsory for copyrights, but it is recommended.
record (who will then be alerted for verification
A major problem in Thailand is that a rights holder
purposes).
cannot file a trademark where a prior registration exists
for an identical or similar mark. It is therefore extremely
Well-known trademarks
important to file a trademark as soon as possible because
In 2005 the Trademark Office introduced a system to
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Thailand Rouse & Co International
register well-known trademarks under the Regulations
with effective provisions for the registrability of
on Notification of Well-Known Marks 2005 (effective as
trademarks, appeals, oppositions and other contentious
of August 1 2005). Since the inception of the new system,
issues.
various trademarks have been registered as well known
The
Department
of
Intellectual
Property
is
(by both Thai and foreign companies), although other
considering amendments to the act which would allow
applications have been rejected. For example, the
for the filing of a trademark in multiple classes and
Trademark Office has accepted registration of the well-
redefine what constitutes a trademark, as well as other
known trademarks GOOGLE and THE RITZ, but several
procedural changes. Such amendments are likely to be
companies with well-known marks have experienced
introduced within two years.
problems.
Although Thailand is not a member of the Paris
GI registration
Convention, the Department of Intellectual Property
Thailand is generally TRIPs Agreement compliant, but
claims that Thailand’s law complies with the World
there are some areas of the law where the Department of
Intellectual Property has felt it necessary to strengthen
of Intellectual Property Rights (TRIPs). Certainly,
the existing legislation. The law on geographical
protection of well-known marks is recognised by the
indications (GIs) is one such area. As well as being a
courts and the Trademark Office. Thus, the registration
substantial marketplace for GI products, Thailand also
system provides an easy way to obtain recognition of a
has abundant local products, many of which could
trademark as well known in Thailand.
qualify for GI status.
Such recognition provides several benefits. If a
The Department of Intellectual Property has
trademark is registered as well known, this assures the
introduced new provisions under the Geographical
owner that it will be able to prevent the registration of
Indications Act 2003 (which came into force on April 28
identical or similar trademarks in all other classes. If an
2004) that provide for a system of registration and
examiner receives an application for a trademark that is
substantive examination for GIs. The registration
too close to a well-known mark, when examining the
requirements are similar to those set out in the TRIPs
mark the well-known status of the existing mark will be
Agreement and EU law. The application to register a GI
flagged up. Therefore, while registration does not confer
must detail the characteristics of the product and its
automatic cross-class protection to the trademark owner,
history. Most importantly, the geographical and human
it does assist in preventing unrelated parties from taking
interaction must be set out clearly in order to show how
advantage of the fame of a well-known mark in a class in
these impact on the characteristics and quality of the
which the owner holds no registrations.
goods. The application must be made in Thai, although
The registration also helps to enforce the trademark
supporting documents may be provided in English
owner’s rights. Where a trademark owner does not have
accompanied by a Thai translation. For a foreign GI to be
strong trademark rights (eg, in other classes or even in
protected, it must also be protected in its country of
the same class but for unprotected goods), registration
origin.
helps the court to determine whether the registered mark
has been infringed where the goods or services are
Examples of GIs registered in Thailand include
Plateau de Phurua (wine) and Champagne.
unrelated.
The application process is straightforward; however,
Litigation
care must be taken when choosing exactly which
Thailand is under pressure from foreign countries to
trademark to register and what evidence to submit to
crack down on counterfeiting. Its inclusion on the Office
support the fame of the trademark. The trademark
of the US Trade Representative’s Priority Watch List is
should be the mark that has been registered and used for
proof that the United States believes Thailand poses a
the longest period of time in Thailand. Evidence of use
serious risk to IP rights holders.
should be provided for that exact mark and should
As a result, the government has developed various
constitute evidence of use in Thailand. The guidelines
memoranda of understanding to improve IP rights
state that evidence of use in Thailand is not mandatory,
enforcement in Thailand. Inevitably, visitors to Thailand
but this theory has not yet been tested before the
see counterfeit goods for sale as soon as they arrive and
Trademark Office.
it must appear to IP rights holders that the authorities are
doing little to combat such infringement. Counterfeits
Proposed changes to Trademark Act 2000
are generally sold through small market stalls or shops.
The current act is a reasonably robust piece of legislation
This issue was the subject of the most recent
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Rouse & Co International Thailand
memorandum of understanding, which was issued on
‘timewalker’ might convey the meaning of a person
August 16 2006.
walking through time, that meaning had no direct
The 2006 memorandum highlighted the most
reference to the goods applied for (ie, watches).
notorious areas where counterfeits are sold and
Therefore, the word ‘timewalker’ described neither the
empowered the Department of Intellectual Property to
goods themselves nor the character or quality of the
carry out raids on retailers in these areas. Signatories to
goods, and thus was distinctive and could be registered.
the memorandum include the Department of Intellectual
The CIPITC also heard an appeal with regard to the
Property, enforcement agencies such as the police,
trademark AQUAFEED, which was registered for food
Customs, some private rights holders, law firms and
for shrimps (Decision TorPor29/2550 2007). Following
investigation firms, as well as major department stores
registration of the mark, a competitor filed a cancellation
and
the
petition with the board on the grounds that the word
memorandum is that if a specific retailer is raided twice,
shopping
centres.
Another
feature
of
‘aquafeed’ was directly descriptive of the character of the
the landlord must evict that tenant from the premises.
goods because it conveyed the meaning of food for
This rule has yet to be implemented, but in theory it
aquatic animals. The board ruled in favour of the
should act as a deterrent. However, there have been
competitor. However, on appeal the CIPITC reversed the
concerns that these raids are not as frequent as they could
board’s decision, stating that although the word
be and that there are ways to avoid eviction.
‘aquafeed’ suggested providing foods for aquatic
The Department of Intellectual Property and the Food
animals, this meaning was broad as it did not specify the
and Drug Administration are discussing issuing a
particular type of aquatic animal. Therefore, the word
memorandum
with
‘aquafeed’ described neither the goods themselves nor
pharmaceutical counterfeits. This news is encouraging
the character or quality of the goods, and thus was
for pharmaceutical companies, which have experienced
distinctive and could be registered.
of
understanding
to
deal
mixed fortunes recently with regard to compulsory
licensing.
These decisions show that the CIPITC may be
prepared to take a more liberal approach than the
Trademarks Appeal Board in such cases, so brand
Appealing Trademark Office decisions before the
owners should considering appealing unfavourable
courts
board decisions to the CIPITC.
If an applicant is still not satisfied after appealing a
Trademark Office decision through the office, it may
Patents and compulsory licensing
appeal to the CIPITC and then finally to the Supreme
Thailand recently issued compulsory licences allowing
Court.
generic drug production of two patented anti-retroviral
The Trademark Office operates a strict interpretation
drugs and a patented medicine for heart disease. At the
of distinctiveness and often finds that marks are
same time, Ernst & Young published its 2006 Global
descriptive of the goods or services. This results in either
Biotechnology Report, which revealed that most deals in
the application being rejected entirely or a disclaimer
the Asia-Pacific region are driven by the need to increase
being ordered against certain elements of the mark that
access to growing drug markets and to reduce the costs
the Trademark Office believes to be descriptive. It is
of drug research and development. Generic drug
unclear why this situation has occurred, although the
companies see major demand from countries such as
requirement to itemise clearly every good or service in
Thailand, Malaysia, Indonesia and the Philippines – this
each specification does partially explain why an
demand is driven not only by cost, but also by the
examiner might find it easy to link the mark to the goods
prevalence of diseases such as HIV/AIDS and tropical
or services or their characteristics.
diseases.
mark
Issuing three compulsory licences in 2007, the Thai
TIMEWALKER for watches (Decision TorPor67/2549
An
applicant
applied
to
register
the
Ministry of Public Health claimed that “public health
2006). The trademarks registrar found that that the word
interest and the life of the people must come before
‘timewalker’ was directly descriptive of the goods, as the
commercial interests”, and that it “believes in a moderate
mark conveyed the image of a person walking through
and public interest-oriented approach to implement IP
time. The applicant appealed the registrar’s decision to
rights”.
the Trademarks Appeal Board, which upheld the
Is compulsory licensing the right option for
registrar’s finding. The applicant appealed to the
developing countries? The outcome of this major step
CIPITC, which found in its favour. The CIPITC reversed
will affect the ability of drug companies to develop new
the board's decision, stating that although the word
medicines and make them available in developing
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Thailand Rouse & Co International
countries. Without patentability, companies may no
Trade secrets, traditional knowledge and petty patents
longer have incentives to invest in new drugs that would
Since the introduction of the Trade Secrets Act 2002,
help the developing world. For this reason, Thailand
figures from the Department of Intellectual Property
should examine the potential negative impact of
(correct to 2006) show that of the 4,000 trade secrets
compulsory licensing on a longer-term basis. One
registered with the department, approximately 3,000 of
possible consequence might be to discourage the transfer
these were from the provinces. Of approximately 3,800
of technology, foreign investment and research,
traditional knowledge applications under the Traditional
including research into local diseases.
Knowledge Act 2002, around 3,700 applications were
The conditions for the application of compulsory
provincial and of approximately 2,400 petty patent
licences are of particular importance and should be
applications, around 2,200 applications were from Thai
improved as recommended in the 2007 report on
nationals. There was also an increase in the number of
Thailand issued by the Office of the US Trade
Thai companies obtaining patent registrations. This sort
Representative: “In addition to these longstanding
of innovation is encouraging for Thailand’s growing
concerns with deficient IPR protection in Thailand, in
economy.
late 2006 and early 2007, there were further indications of
a weakening of respect for patents, as the Thai
Membership of international agreements
government announced decisions to issue compulsory
At present, Thailand is a signatory to neither the Patent
licenses for several patented pharmaceutical products.
Cooperation Treaty nor the Madrid Agreement. Patent
While the United States acknowledges a country’s ability
and trademark applicants may still claim priority from
to issue such licenses in accordance with WTO rules, the
overseas filings, but such claims are subject to slightly
lack of transparency and due process exhibited in
different deadlines. However, the Department of
Thailand represents a serious concern. These actions
Intellectual Property is considering joining these
have compounded previously expressed concerns such
agreements and it is expected that within three years
as delay in the granting of patents and weak protection
Thailand will ratify its membership to both the Patent
against unfair commercial use for data generated to
Cooperation Treaty and the Madrid Agreement.
obtain marketing approval.”
A qualified solicitor in England and Wales, James Evans has been working
in Rouse’s Bangkok office since 2004. Prior to that he spent two years in
Rouse’s London office. He now manages the trademark filing department
in Bangkok, prosecuting applications in Thailand, Myanmar, Laos and
Malaysia. Mr Evans also deals with civil and criminal enforcement in
regard to trademark and copyright infringement. He has particular
experience in anti-counterfeiting and in lookalike litigation and passing off.
James Evans
Foreign legal consultant, Bangkok
Tel +66 2 653 2730
Thailand
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Chris Vale and Han Le
Rouse Legal
Vietnam
International integration triggers IP
development
During a visit to Vietnam in August 2007 Robert Zoellick,
The BTA has helped Vietnam to attract US investment.
chairman of the World Bank, remarked that “Vietnam is
By the end of 2006, the United States was ranked as the
the success story of development”. Since Bill Clinton’s visit
sixth-biggest investor in the country, with registered
in November 2000, which for many heralded the opening-
capital of approximately $4.5 billion, although in fact the
up of Vietnam to business after decades of post-war
United States is the biggest overall investor when US
isolation, this has been the country’s aim. Today Vietnam
investment made through third countries is included.
is regarded as a tiger economy in Asia, with significant
Just eight months after joining the WTO, foreign
successes in economic reform and the reduction of poverty.
investment in Vietnam increased by 40 per cent and is
Many believe that but for the Vietnam War, Vietnam could
now valued at approximately $8 billion. Exports are also
have been at the top of the business world alongside Japan,
up by 28 per cent.
South Korea and Taiwan, and now feel that it has to make
up for lost time. As a part of its efforts to integrate into the
IP development
world market, in 2000 Vietnam entered into a bilateral
These changes have had a positive impact on Vietnamese
trade agreement (BTA) with the United States which
IP legislation, although Vietnam is faced with the
paved the way for its entry into the World Trade
common problem of how to protect foreign investors’
Organisation (WTO) in November 2006.
intellectual property while encouraging and stimulating
This chapter looks at IP development in light of this
creativity.
international integration.
New IP Law
Integration
In the last five years the most notable changes have been
It took five years for Vietnam to conclude the BTA and 12
the amendments to the Civil Code, which reaffirmed the
years for it to accede to the WTO. Vietnam’s status as the
basic civil principles of IP rights and led to the
150th member state of the WTO also signifies that the
promulgation of a brand-new IP Law in 2005. A series of
country is ready to be a fully fledged member of the
implementing decrees and circulars have subsequently
international community. Such integration brings with it
been promulgated to clarify the principles of the IP Law.
both challenges and opportunities for Vietnam.
At present, the biggest challenge is how to implement
Trademarks
its WTO commitments, as well as how to bring the IP
Vietnam has adopted the first-to-file system so that a
system into line with the WTO Agreement on Trade-
trademark is protected in Vietnam upon registration
Related Aspects of Intellectual Property Rights (TRIPs)
(with the exception of well-known trademarks). This
and other international conventions. Notwithstanding
means that businesses have no rights in a mark if they do
the challenges, the opportunities for Vietnam are
not register it in Vietnam. As trademarks are an essential
significant. Its goods will enjoy fair treatment on the
asset of any modern business, entrepreneurs should
international market, which will help Vietnam to boost
register their trademarks prior to entering the
exports, expand economically and attract investment and
Vietnamese market.
technology from WTO members. This has already started
Vietnam has also increased trademark protection.
with a $1 billion investment by Intel in a microchip
Three-dimensional figures are now covered by the new IP
assembly and testing plant.
Law, in addition to words, letters, pictures, figures and
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Vietnam Rouse Legal
combinations of such elements (in one or more colours). In
IP owners can enforce their IP rights in Vietnam, including:
addition, the co-ownership of trademarks is now allowed.
Well-known trademarks are protected under the new
•
direct negotiations with the infringer;
IP Law without registration and on the basis of use. This
•
administrative procedures;
is consistent with the TRIPs Agreement and the Paris
•
civil procedures;
Convention. Well-known status must be obtained
•
criminal charges; and
through litigation or a dispute resolution process; once
•
Customs seizures.
the trademark is recognised as well known, it is recorded
as such at the National Office of Industrial Property for
Where appropriate, IP owners may consider
future reference.
combining these measures for greatest effect.
Patents
effective way to achieve quick, low-cost enforcement. The
Patents are another area in which the new IP Law has made
main administrative measures are warnings and monetary
significant improvements. The law now comprehensively
fines, which can be between one and five times the value
sets out the test for patentability, stating that an invention
of the infringing goods. The concern here is that the
involving worldwide novelty, an inventive step and
method of calculating fines based on the price of the
industrial applicability is protected by a patent.
infringing goods rather than the price of the genuine
In practice, administrative procedures are still the most
Most patents registered by foreign parties in Vietnam
are held by US and Japanese investors. By the end of
goods may limit the deterrent effect of the fines and make
them a mere cost of doing business for the infringer.
2005, the National Office of Intellectual Property had
Although it can be used in a wide range of disputes,
granted 5,342 invention patents, of which 523 were held
from IP infringement to contractual disputes involving
by US parties and 376 by Japanese parties.
compensation for damages, civil action is still rare in IP
Of course, life is much easier for investors if they have
enforcement. A lack of experienced judges, delays in the
a clear perspective of the patent regime. Investors should
process and the uncertainty of the outcome are the main
secure their advanced technologies or products by patent
reasons for not settling IP disputes through the courts.
registration. However, if the invention does not involve
However, the new IP Law encourages rights holders to use
an inventive step, they may apply for a utility
civil action rather than administrative action, so it is hoped
registration if the invention has worldwide novelty and
that an improvement in the court system will be seen.
industrial applicability.
Border measures are an effective weapon against
In certain circumstances set out by the IP Law (eg,
trademark and copyright infringement, as significant
public interest) compulsory licensing may apply. The
volumes of counterfeit and infringing goods originate
licensee will be required to pay adequate remuneration
from or transit Vietnam’s neighbours (ie, China, Laos and
to the owner, taking into account the economic value of
Cambodia) together with ports in Hai Phong and Ho Chi
the authorisation. The patent owner is entitled to request
Minh City. The Customs Authority has the power to
the termination of a compulsory licence if the
detain imported or exported goods temporarily at the
circumstances which led to its grant have ceased and are
request of the rights holder.
unlikely to recur, provided that such termination will not
Criminal proceedings are the strongest measure
damage the holder of the compulsory licence.
against IP infringement involving counterfeit goods that:
Effective enforcement of IP rights
•
relate to food or medicine;
Naturally, IP owners aim to commercialise their IP rights
•
are produced in large quantities; or
rather than incur enforcement and litigation costs.
•
are part of an organised network.
However, as Vietnam is a developing country and the
level of IP awareness among the Vietnamese people is
relatively low compared to those in more developed
In addition, criminal proceedings are highly effective
against parties that repeatedly infringe IP rights.
countries, IP infringement is inevitable. It is therefore
wise to make use of statutory measures to deter IP
Commercial benefits of IP rights
infringement,
Licensing
rather
than
endlessly
fighting
IP
infringement fires.
A successful IP licensing strategy in Vietnam requires a
In theory, the new IP Law provides IP owners with
greater understanding of local market conditions and
more effective tools to protect their IP rights in Vietnam
legislation than in most other markets. Market
than its predecessor. There are a number of ways in which
knowledge is particularly important for companies that
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Rouse Legal Vietnam
are new to business in Vietnam, due to Vietnam’s recent
it remarkably similar to a franchising agreement. It is
WTO entry. The easiest and quickest way to understand
therefore
the local market is through a licensee, which can provide
agreements
knowledge of the market, monitor the local market for
arrangements and would thus be subject to the
infringements and support enforcement actions. Finding
obligations under the franchising legislation. Although it
the right licensing partner is essential and due diligence
would be unusual for the competent authorities to
in regard to potential licensees is crucial.
conclude that a trademark licence is a franchise without
possible
could
that
be
such
deemed
trademark
to
be
licence
franchise
Regulatory awareness of licensing is also critical. The
an agreement to this effect, it is better to structure a
IP Law requires that all licence agreements be executed
transaction and draft the licence agreement to ensure that
in
classification as a franchise is avoided. Ignorance of the
writing
and
contain
essential
information.
Unreasonable restraints in licence agreements are
franchising laws may lead to unintended consequences.
prohibited and shall be considered invalid. Although
registration is no longer mandatory for a licence
Distribution
agreement to be valid, the parties may choose to register
Distribution is a hot topic in Vietnam as many foreign
the agreement with the National Office of Intellectual
companies are keen to invest, but may not participate in
Property so that it will be effective against third parties.
distribution. There have been some exceptional cases, but
these occurred under special agreements. In all other
Franchising
cases, a foreign company must use a local company to
Franchising is a relatively new business concept in
distribute its products.
Vietnam. Although franchising has been possible since
However, the situation is changing as Vietnam now has
the early 1990s, it was slow to take off. Most franchising
new WTO obligations to open up certain sectors to allow
operations were carried out by domestic companies in
foreign participation in distribution. As a WTO member,
the fast-food industry. Today, franchising is becoming
Vietnam must allow foreign investors from WTO member
more popular, although it is yet to enjoy the level of
states to establish joint ventures with Vietnamese
popularity it has in more developed countries.
companies to provide distribution services. A foreign
Vietnam is wary of franchising as it is a new business
investor cannot invest more than 49 per cent of the capital in
model and often concerns distribution services over
the joint venture. The participation of foreign parties in joint
which the country is reluctant to give up its monopoly.
ventures will be increased in accordance with the phase-out
Under WTO commitments, franchising is subject to
period, so that by January 2008 such limitations will be
phase-out periods and will not open up for wholly
abolished and by January 1 2009 foreign investors may
foreign-owned companies until early 2009, by which
establish wholly foreign-owned distribution companies.
time a boom is expected. As there is only one more year
In order to be involved in distribution activities, an
to wait, foreign investors and potential franchisors need
existing foreign-invested company must obtain a
to prepare themselves.
separate business licence in addition to the investment
The Commercial Law defines a ‘commercial franchise’
licence. A newly foreign-invested company will be
as “a commercial activity whereby franchisors permit and
granted an investment licence subject to approval from
require franchisees to undertake by themselves to
the Ministry of Trade. The new investment licence serves
purchase and/or sell goods or provide services in
concurrently as the business licence. Once licensed, the
accordance with methods of business organisation
company is permitted to open one retail outlet.
prescribed by franchisors and associated with the
Additional retail outlets will be subject to separate
franchisors’ trademarks, trade names, business know-
licences in accordance with economic requirements.
how,
business
slogans,
business
logos
and
advertisements”. Franchisors are entitled to supervise and
Conclusion
assist franchisees in conducting their business activities. A
The Vietnamese economy is expanding rapidly. With its
franchisor is permitted to franchise a business in Vietnam
stable political environment and young, well-educated
only if the business has been operating for at least one year
population (50 per cent of the country’s 85 million citizens
and the franchisor has registered its franchise activities
are under 30), together with its desire to make up for lost
with the Ministry of Trade, which is responsible for the
time, Vietnam is seen as a good location for business and
registration of foreign franchise activities.
a potential rival to China in terms of manufacturing and
In
normal
commercial
practice,
a
long-term
outsourcing. However, care is still required, as the laws
trademark licence agreement may include quality control
and regulations have changed so rapidly that the
mechanisms, royalties due and other elements that make
authorities are still coming to terms with them.
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Vietnam Rouse Legal
Chris Vale joined the London office of Rouse & Co International in January
1998. From 2001 he worked for Rouse & Co International in Indonesia,
Vietnam, China and Thailand, before settling in Hong Kong. He now manages
Rouse’s Vietnam offices. Mr Vale has extensive contentious and noncontentious IP experience. He advises on global IP strategy and brand
management for a number of leading brand owners in a variety of sectors.
Chris Vale
Partner, Hong Kong
Tel +852 2302 0860
Rouse Legal
Vietnam
Han Le works for Rouse Legal in Ho Chi Minh City as a commercial attorney.
She advises clients on all aspects of IP law, specialising in commercial work.
Ms Le holds an LLB and a BA in English, and attended a specialised IP
course organised by the National Office of Intellectual Property and the Law
University of Ho Chi Minh City. Prior to joining Rouse Legal, Ms Le worked
for a major international practice in Ho Chi Minh City for eight years.
Han Le
Lawyer, Ho Chi Minh City
Tel + 84 8 823 6770
Rouse Legal
Vietnam
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ABBC – Azevedo Neves, Benjamim Mendes, Bessa
Monteiro, Cardigos & Associados RL
Largo São Carlos Number 1-7, 1200-410 Lisbon,
Portugal
Tel +351 21 358 36 20
Fax +351 21 315 94 34
Web www.abbc.pt
Hieronymus Heyerdahlsgate 1, PO Box 1397 Vika,
N-0114 Oslo, Norway
Tel +47 22 34 0000
Fax +47 22 34 0001
Web www.grette.no
Pau Casals 14, 5th floor, 08021 Barcelona, Spain
Tel +34 93 321 10 53
Fax +34 93 419 31 47
Web www.avqadvocats.com
B-41 Nizamuddin East, New Delhi, 110 013, India
Tel +91 11 2435 0360
Fax +91 11 2435 4243
Web www.anandandanand.com
Other offices Mumbai, Chennai
Arnason Faktor
Gudridarstig 2-4, 113 Reykjavik, Iceland
Tel +354 5400 200
Fax +354 5400 201
Web www.arnasonfaktor.is
Avenue 9 of 406 October and Cordova, Building M-U,
floor 5 office 3, Guayaquil, Ecuador
Tel +59 34 25 60 255
Web www.aba-pi.com
1 rue Paul Baudry, Paris 75008, France
Tel +33 1 44 17 53 00
Fax +33 1 44 17 45 75
Web www.bakernet.com
Baker & McKenzie has offices in 39 countries
worldwide, including Argentina, Australia, Canada, Chile,
China, Egypt, Japan, Mexico, Russia, Saudi Arabia,
Spain, Thailand, the United Kingdom and the United
States
Thiers 251, Floors 9 to 14, Col Anzures, 11590
Mexico City, Mexico
Tel +52 55 5263 8730
Fax +52 55 5263 8731
Web www.bcb.com.mx
Other offices Guadalajara
Cohausz & Florack
Bleichstrasse 14, 40211 Dusseldorf, Germany
Tel +49 211 90 49 00
Fax +49 211 90 49 049
Web www.cohausz-florack.com
PO Box 198, Bajcsy-Zsilinszky ut 16, 1368 Budapest,
Hungary
Tel +36 1 411 8800
Fax +36 1 266 5770
Web www.danubia.hu
Deloitte
1 Stonecutter Street, London, EC4A 4TR,
United Kingdom
Tel +44 20 7936 3000
Fax +44 20 7583 1198
Web www.deloitte.co.uk
Deloitte has offices in over 100 countries worldwide,
including Argentina, Australia, Brazil, Canada, China,
Denmark, Egypt, Finland, France, Germany, Greece,
Hong Kong, Iceland, India, Italy, Japan, Jordan, Korea,
Kuwait, Lithuania, Malaysia, Mexico, Netherlands, New
Zealand, Oman, Panama, Poland, Russia, Singapore,
South Africa, Spain, Taiwan, Turkey, the United Arab
Emirates and the United States
29/11/07
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DM Kisch Inc
Building 5, Inanda Greens Business Park, Sandton
Johannesburg 2146, South Africa
Tel +27 11 324 3000
Fax +27 11 884 8873
Web www.dmkisch.com
Other offices Pretoria
Suite 3008, One Pacific Place, 88 Queensway,
Hong Kong, China
Tel +852 2526 5000
Fax +852 2524 3000
Web www.dorsey.com
Other offices Anchorage, Delaware, Denver, Des
Moines, Fargo, Great Falls, London, Minneapolis,
Missoula, New York, Palo Alto, Salt Lake City, San
Francisco, Seattle, Shanghai, Tokyo, Toronto, Vancouver,
Washington DC
35 Vine Street, London, EC3N 2AA, United Kingdom
Tel +44 20 7861 4000
Fax +44 20 7488 0084
Web www.ffw.com
Other offices Brussels, Hamburg, Manchester, Paris
30 Rockefeller Plaza, New York, NY 10112-3800,
United States
Tel +1 212 218 2100
Fax +1 212 218 2200
Web www.fitzpatrickcella.com
Other offices Costa Mesa, Washington DC
Foga Daley & Co
7 Stanton Terrace, Kingston 6, Jamaica
Tel +876 927 4371 3
Fax +876 927 5081
Web www.fogadaley.com
15th Floor, Lotus Building, 136 Jen-Ai Road,
Section 3, Taipei 106, Taiwan
Tel +886 2 2755 7366
Fax +886 2 2755 6486
Web www.taiwanlaw.com
Other offices Kaohsiung
Grünecker, Kinkeldey, Stockmair & Schwanhäusser
Maximilianstrasse 58, 80538 Munich, Germany
Tel +49 89 21 23 50
Fax +49 89 22 02 87
Web www.grunecker.com
Other offices Berlin, Cologne
Centro San Ignacio, Av Blandin Torre Kepler Av Blandin
La Castellana, Caracas 1060, Venezuela
Tel +58 212 201 8611
Fax +58 212 263 7744
Web www.hpcd.com
706 Cowper, Suite 200, Palo Alto, CA 94301,
United States
Tel +1 650 327 6400
Fax +1 650 745 1170
Web www.ip-strategy.com
26055 SW Canyon Creek Road, Suite 200, Wilsonville,
OR 97070, United States
Tel + 1 503 783 2370
Fax + 1 503 783 2371
Web www.innovation-asset.com/iam
Email: [email protected]
IP Management Services, a Thomson business
(formerly MDC)
300 Franklin Centre, 29100 Northwestern Highway,
Southfield, Michigan 48034-1095, United States
Tel +1 248 352 5810
Fax +1 248 352 0754
Web www.thomsonipmanagement.com
Other offices Freiburg, London, Tokyo
Kenyon & Kenyon LLP
One Broadway, New York, NY 10004-1007, United
States
Tel +1 212 425 7200
Fax +1 212 425 5288
Web www.kenyon.com
Other offices San Jose, Washington DC
King & Spalding LLP
1185 Avenue of the Americas, New York,
NY 10036-4003, United States
Tel +1 212 556 2100
Fax +1 212 556 2222
Web www.kslaw.com
Other offices Atlanta, Charlotte, Dubai, Frankfurt,
Houston, London, Riyadh, Washington DC
29/11/07
16:30
Page 244
30 St Mary Axe, London, EC3A 8AF, United Kingdom
Tel +44 20 7469 2000
Fax +44 20 7469 2001
Web www.kirkland.com
Other offices Chicago, Hong Kong, Los Angeles, Munich,
New York, San Francisco, Washington DC
Georg Glock Strasse 3, 40474 Dusseldorf, Germany
Tel +49 211 440 33 70
Fax +49 211 437 07 07
Web www.krieger-mes.de
Box 1711, Stockholm 111 87, Sweden
Tel +46 8 505 765 00
Fax +46 8 505 765 01
Web www.mannheimerswartling.se
Other offices Berlin, Brussels, Frankfurt, Gothenburg,
Helsingborg, Hong Kong, Malmo, Moscow, New York,
Shanghai, St Petersburg
Meisser & Partners
Bahnhofstrasse 8, 7250 Klosters, Switzerland
Tel +41 81 410 2323
Fax +41 81 410 2324
Web www.swisstm.com
Business Centre VERTAS, Gynējų Street 16,
Vilnius LT-01109, Lithuania
Tel +370 5 2490 830
Fax +370 5 2490 833
Web www.metida.lt
7 World Trade Centre at 250 Greenwich Street,
New York, NY 10007, United States
Tel +1 212 553 1658
Fax +1 212 553 0882
Web www.moodys.com
Other offices Beijing, Boston, Buenos Aires, Chicago,
Dallas, Frankfurt, Gurgaon, Hong Kong, Johannesburg,
Limassol, London, Madrid, Mexico City, Milan, Moscow,
Mumbai, New Jersey, Paris, Prague, San Francisco,
Santiago, Sao Paulo, Seoul, Singapore, Sofia, Sydney,
Taipei, Tel Aviv, Tokyo, Toronto
Morgan Stanley
20 Bank Street, Canary Wharf, London E14 4AD,
United Kingdom
Tel +44 20 7425 5000
Fax +44 20 7425 5300
Web www.morganstanley.com
Morgan Stanley has offices in 32 countries worldwide,
including Argentina, Australia, Canada, China, Japan,
Russia, South Africa, Thailand and the United States
JW Frisolaan 13, 2517 JS The Hague, Netherlands
Tel +31 70 33 12 500
Fax +31 70 35 27 528
Web www.octrooibureau.nl
Other offices Ede, Eindhoven
5 Shenkar Street, PO Box 12704, Herzlia 46733,
Israel
Tel +972 9 972 8000
Fax +972 9 972 8001
Web www.pczlaw.com
Other offices New York
1500 Broadway, 12th Floor, New York, NY 10036,
United States
Tel +1 646 878 0800
Fax +1 646 878 0801
Web www.pczlaw.com
Other offices Herzlia
Krasnopresnenskaya nab 12, Entrance 7 15th floor
World Trade Centre II, Moscow 123610, Russia
Tel +7 495 967 00 07
Fax +7 495 967 00 08
Web www.pgplaw.ru
Other offices St Petersburg
Piazza San Babila 5, Milan 20122, Italy
Tel +39 02 76 31 61 61
Fax +39 02 76 31 76 19
Web www.perani.com
POLSERVICE Patent and Trademark Attorneys Office
73 Bluszczań ska, 00-712 Warsaw, Poland
Tel +48 22 44 74 600
Fax +48 22 44 74 646
Web www.polservice.com.pl
29/11/07
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Richelet & Richelet
Reconquista 672, Buenos Aires C1003ABN, Argentina
Tel +54 11 4313 0184
Fax +54 11 4313 2863
Web www.richelet.com.ar
Rominvent SA
Ermil Pangratti Street No 35, Sector 1, Bucharest
011882, Romania
Tel +40 21 231 2515
Fax +40 21 231 2550
Web www.rominvent.ro
1st Floor, RB House, 141 Greenway Road, Greenside,
Johannesburg 2193, South Africa
Tel +27 11 646 6666
Fax +27 11 646 8895
Web www.brands-man.com
Suite 701, Wisma Pondok Indah 2, Jalan Sultan
Iskandar Muda Blok V-TA, Pondok Indah, Jakarta,
Indonesia
Tel +62 21 769 7333
Fax +62 21 769 7505
Web www.iprights.com
Other offices Bangkok, Beijing, Chennai, Dubai,
Guangzhou, Hanoi, Ho Chi Minh City, Hong Kong,
London, New Delhi, Manila, Mumbai, Oxford, Shanghai
Suite 1002, 10th Floor, Pacific Place, Tower 1,
140 Sukhumvit Road, Klongtoey, Bangkok 1011,
Thailand
Tel +66 2 653 2730
Fax +66 2 653 2734
Other offices Beijing, Chennai, Dubai, Guangzhou,
Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, London,
New Delhi, Manila, Mumbai, Oxford, Shanghai
Rouse Legal
Level 5, Maison Pasteur, 180 Pasteur, District 1, Ho
Chi Minh City, Vietnam
Tel +84 8 823 6770
Fax +84 8 823 6771
Other offices Bangkok, Beijing, Chennai, Dubai,
Guangzhou, Hanoi, Hong Kong, Jakarta, London, New
Delhi, Manila, Mumbai, Oxford, Shanghai
Russell McVeagh
Vero Centre, 48 Shortland Street, PO Box 8, Auckland
1140, New Zealand
Tel +64 9 367 8000
Fax +64 9 367 8163
Web www.russellmcveagh.com
Other offices Wellington
20th Floor AmBank Group Building, 55 Jalan Raja
Chulan, 50200 Kuala Lumpur, Malaysia
Tel +60 3 2031 1788
Fax +60 3 2031 1775
Web www.shooklin.com.my
Sonoda & Kobayashi
Shinjuku Mitsui Building Suite 5303, 2-1-1
Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0453, Japan
Tel +81 3 5339 1093
Fax +81 3 5339 1094
Web www.patents.jp
1100 New York Avenue NW, Washington DC 20005,
United States
Tel +1 202 371 2600
Fax +1 202 371 2540
Web www.skgf.com
51 Kassapa Road, Colombo 5, Sri Lanka
Tel +94 112 559 944 7
Fax +94 112 559 948
Web www.sudathpereraassociates.com
1275 Pennsylvania Avenue NW, Washington DC
20004-2415, United States
Tel +1 202 383 0100
Fax +1 202 637 3593
Web www.sablaw.com
Other offices Atlanta, Austin, Houston, New York,
Tallahassee
Marktstrasse 65, 68789 St Leon-Rot, Germany
Tel +49 6251 800 830
Fax +49 6251 800 839
Web www.triangle-venture.com
29/11/07
16:30
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United Trademark & Patent Services
61 The Mall Road, West End Building, Lahore 54000,
Pakistan
Tel +92 42 723 6124 5
Fax +92 42 7323 501
Web www.utmps.com
Watermark
Level 2, 302 Burwood Road, Hawthorn, VIC 3122,
Australia
Tel +61 39 819 1664
Fax +61 39 819 6010
Web www.watermark.com.au
Other offices Perth, Sydney
29/11/07
16:30
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29/11/07
16:30
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IP Value 2008

Transcription

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