From March to September 2016 the team is joined by Guest Kats Emma Perot and Mike Mireles.

From April to September 2016 the team is also joined by InternKats Eleanor Wilson and Nick Smallwood.

Thursday, 5 May 2016

To boldly go where no copyright holder has gone before

This Kat would like to thank his colleague Tristan Sherliker, a solicitor at EIP Legal, for this interesting copyright mewsing. Tristan has been captivated, as indeed have many of us, by IP issues relating to the Klingon language - a language which, alas, the IPKat does not speak.


In 2014, two fan-led Kickstarter campaigns raised over US$700,000 to create an independent Star Trek movie. The end product would be called Star Trek: Axanar, and based on a backstory reference from an early episode of Star Trek’s Original Series, broadcast in 1969. Later in 2014, a short film Prelude to Axanar was published as a result of the first of those campaigns, to great fan acclaim.

Prelude begins with a familiar six-note musical theme, followed by some recognisably-styled logos and a close up of a distinctively pointy ear. Less than a minute from the start, a somewhat less familiar alphabet flashes up on-screen, labelling a star map for those that can read it.

The copyright complaint was filed in December 2015 by Paramount Pictures Corporation (‘Paramount’), in the Central District of California against Axanar Productions, Inc. (which can be found here).

A cling-on
“Use all measures available to destroy them”

Unsurprisingly, there is a wide range of copyright matter defined in Paramount’s complaint.  Faced with an enterprise seen to be profiting from its own famous franchise, they did not hold back: as amended, the brief claims more than 50 copyright infringements, pleaded in full Technicolor®. That’s one infringement for every 20 seconds that Prelude to Axanar runs.

What is surprising, though, is the scope and variety of the works. The term “Star Trek Copyrighted Works” is defined to include not just the episodes, films and novels that would be expected, but also: “the characters, themes, plots, dialogue, settings, sequences, situations and incidents therein” and “also the props, character makeup, costumes, sets, fictional language, events and fictional history”. Elsewhere in the brief, Paramount also folds in other matter such as faction emblems, the use of triangular medals, and the use of “beaming up”, “pointy ears” and “original technology”.

There are strong arguments both for and against and I do not comment on the merits of the suit itself. However, legal merits aside, the breadth of the complaint is itself laudably original and has considerable creative merit.  And that has given rise to an interesting plot point in the litigation: a motion to dismiss (translation: application to strike out) some of the more creative arguments.

Even better, last week a Brief of Amicus Curiae was filed on behalf of the Language Creation Society (‘LCS’), in partial support of the Defendant’s case. The legal question is raises: are languages capable of copyright protection – on any level?

The Klingon Language: the background

The “fictional language” element of the claim (highlighting added in the quote above) relates to the Klingon language, an exceptionally detailed artificial language originally created for the Star Trek universe.

Klingons first appeared on-screen in 1967, using generic guttural sounds for their (otherwise unscripted) non-English interactions. In the early 1980s, before the release of the third Star Trek movie, Professor Marc Okrand was commissioned by its producers to write the dialogue for the Klingons in their own language. Having laid the groundwork in the script, Prof. Okrand went on to develop this into a fully-functioning (though abbreviated) language, complete with rules of grammar and cultural peculiarities.  In 1985, an official Klingon Dictionary was published, allowing fans to follow dialogue and learn the language (followed by two further books in 1996 and 1997).

More than 250,000 copies of the original dictionary were sold. Many read it, and some fans learned the language – even fluently – and began to speak it to each other, pushing the boundaries and developing it further.  I notice it even has its own ISO-639 language identifier (“tlh”, apparently based on the Klingon word for their own language, “tlhIngan Hol”). LCS points out in its brief that this has even led to wordplay contests, certification examinations and even translations of Shakespeare into Klingon.

Issues never before tested?

Even if you’re not interested in copyright, the amicus brief makes interesting reading. Particular credit goes to Randazza Legal Group, LCS’s attorneys, for being brave enough to drive home their points with Klingon proverbs written in the Klingon language. It is clear that LCS abides by the old Klingon proverb “nItebQobqaDjup 'e' chaw'be' SuvwI'” (Translation: “A warrior does not let a friend face danger alone”).

Amusement aside, there is a serious question here: in principle, can a language – even an artificial language – be protected by copyright?  According to LCS, it has never before been raised before a court. The closest the US courts have come seems to be in respect of Loglan, a language intended to make logic pronounceable (and not intended for communication outside that field).

LCS raises several points in support of their motion that copyright does not extend to the language at all. The full brief should be on the Court’s online docket soon and is worth a read, but the key points are as follows.

  1. This is not about specific dialogue. The claim does not relate to paragraphs, sentences, or even specific words themselves. Rather, this is a claim to the language as a whole – including grammar, vocabulary, and fictional traditions that underpin the language. 
  2. Building blocks. Even if the claim were to specificities, those are only linguistic building blocks used for further creative expression. Copyright claimed in those elements cannot be merged in infinite ways to protect an infinity of different creations that stem from them.
  3. Limited number of ways to express an idea. As a continuation of point 2 above, LCS points out that an idea can only be expressed in so many ways: “to claim copyright in a language is to claim ownership over all possible thoughts and artistic expression that might employ that language”. They draw a parallel with the French language, which has itself been governed by the Académie française for nearly four centuries, yet would not qualify for copyright protection. In significant part, therefore, French is artificially constructed to meet the demands of its stewards. Is Klingon a lesser language simply because it has no native speakers?
  4. Written issues. As well as the use of a spoken language, written language is also not copyright protected per se. The glyphs used in Klingon are functional, and analogous to typeface designs (which are said in US law to be protectable as industrial designs only, per Adobe Sys. v. Southern Software Inc, 1998 US Dist Lexis 1941 (1998) – other countries have similar limitations, for example in the UK typefaces in particular are afforded a reduced term of protection under s. 55 Copyright Designs and Patents Act 1988).
  5. Independent Creativity. The Klingon Language Institute (itself the survivor of a threatened copyright action) is officially licensed by Paramount, and encourages its members to engage in creative activities such as wordplay competitions, translating other works, and writing fiction and poetry. These are themselves creative, and to mark them as infringements would be chilling and stifle creation.
  6. State of Mind. It is clear from its history and development that Klingon is a language designed to reflect the warlike culture of its fictional speakers. That leads to a particular state of mind for its speaker, says LCS, and such a state of mind “cannot be constrained by copyright law”.

If that list seems fairly one-sided, that’s because the Plaintiff’s answer is not yet known: LCS’s brief is recent enough that Paramount has not yet been able to reply, but a hearing is scheduled for 9 May 2016 to hear LCS’s application.

Other questions

Whether or not the arguments are agreeable, there are some further questions of interest that will no doubt arise in the life of the claim.

The first looks at the smallest element of the question: what lies behind the typeface? It is not so clear to me that the questions of typeface are so directly applicable to the current case. A typeface is an aesthetic variant of an (already-established) alphabet, and is constrained at least to some degree by the criteria behind that alphabet. On the other hand, the Klingon letterforms were constructed free from such preconceptions – indeed, they seem to be deliberately otherworldly and as such, to provoke a reaction in the viewer. That suggests some creative merit, artistic merit in particular, and (by extension) copyright as an artistic work. It appears absurd to suggest that such a copyright work would suffer a reduction in protection simply because, as a separate matter, each artwork is said to represent a sound.

Moving from glyphs to words, the question arises as to how short a copyright work can be. It is not clear that single words, or even short phrases, can benefit from copyright protection, at least without particular circumstances. Can the words of a language qualify for protection?

Third, even if rights do exist prima facie, the actions of Star Trek’s owners must also be considered. Not only have they published a dictionary (and presumably authorised the two books that followed it) – but they have dropped their copyright complaint against the Klingon Language Institute, which has been active for 24 years (which is said to be a licensee of Paramount). Either of those activities must imply some sort of licence for the dictionary’s purchasers (or the KLI’s members), and must translate to some permission to use the language in some context.

It is quite possible that both are subject to terms excluding any such licence, but if claimed those facts would need to be shown by the Plaintiff. Indeed, commercial terms (for example, in software EULAs) can often bear heavily on the treatment of these rights.

This case does not only concern language – it relates to nearly every element of a creative franchise there could be, as well as bearing on the underlying question of treatment of rights relating to fan fiction.

While many rightsholders will distinguish between use of its rights by ‘friend’ and ‘foe’, the papers in this case do not suggest that Paramount makes such a distinction. LCS cites the Klingon proverb: “Pity the warrior who slays all his foes” – underscoring the point that Paramount’s litigation is brought against the interest of some of the most dedicated fans of its own franchise. The entertainment industry (and lawyers advising on entertainment) should keep a close eye on its developments for valuable lessons in their own future practice.

ITMA opens the lid on Trunki

The IPKat never likes to miss a gathering of IP experts, particularly when the experts are as renowned as the group who congregated together last week to talk about design law following the Supreme Court's decision in the Trunki case (reported here).

The event was a seminar held by ITMA (the Institute of Trade Mark Attorneys) on 27 April at the offices of Gowling WLG. The IPKat was delighted to receive the following report from Lydia Birch and John Coldham (who chaired the seminar), both of Gowlings, who write as follows.

*   *   *

A stellar cast of speakers was involved, including Michael Hicks and Mark Vanhegan QC (acting as counsel for and against Trunki respectively), Nathan Abraham, Head of UK Examination Practice for Trade Marks and Designs at the UKIPO, Martin Howe QC, Guy Tritton and His Honour Judge Hacon.

Trunki – a panel discussion on the practical implications
Absence of ornamentation was the first point of call, with Mark Vanhegan QC welcoming the result that lack of ornamentation was capable of protection as a positive feature, bringing more certainty for designers looking to protect minimalist designs. This was consistent with European law, he said, although it didn't go unnoticed that the decision actually dodged the issue of whether an absence of ornamentation was a feature in the Trunki design itself.  The same could be said for the 'Like for Like' test (where the accused product should be assessed on the same terms as the scope of the claimant's registration).  The Supreme Court only addressed this as obiter.  The UKIPO wanted a reference to the CJEU on these key points, but they remain to be argued out in future cases.

The panel then considered how you represent a design as "shape only" on the European register, where disclaimers are permitted, but cannot be used for interpretation (unlike in the UK).  It was agreed across the panel that it would be extremely difficult to be certain that you have protected just the shape in this context.  Mark Vanhegan's view was that there was "no harm" in putting some wording onto the European application – it may be used to aid interpretation, and he pointed to EUIPO decisions where such wording had been taken into account.

Given that no Registered Community Design case has succeeded in the Court of Appeal, should designers bother with them?  The unanimous view of the panel was that registered designs are extremely important – perhaps increasingly so, as the UKIPO reported a 32% year on year increase in design applications.   The panel simply cautioned that designers should review their existing portfolios, and consider multiple design applications, either via different forms of representation or via registering different parts of a product, when filing.  As this is an application for a monopoly, care should be given to the scope claimed.  The fact that the UKIPO is about to reduce the fees for filing UK designs dramatically later in 2016 was flagged as a major advantage of the UK system, whereby designers can get a bedrock of designs from which they can internationalise the more successful ones within the priority period.  Jon Parker, Gowling WLG's new man in Dubai, cautioned that designers should be wary of relying on the European grace period, as it invalidates design applications in many other parts of the world.

The UKIPO confirmed that it would be publishing some guidance shortly in the form of a new Designs Practice Note.

Martin Howe QC – don't rush out to buy your copycat retro tub chairs just yet …

Martin Howe QC of 8 New Square discussed the overlap between designs and copyright.  Howe considered the impending repeal of s.52 CDPA 1988 (currently limiting copyright to 25 years for industrially manufactured artistic works), confirming that the repeal is (currently…) due to take effect on 28 July 2016 (see IPKat update here).  However, he did not see this as opening the floodgates of litigation, as he reminded the audience how hard it might be to prove something is a "work of artistic craftsmanship".  He suggested that this is the only real category that will catch 3D works, as classifying industrially created designs as sculptures was no longer really an option post-Lucasfilm.  As a result, he suggested, the calls from the media (see here) to buy up replicas before it is too late might be a little hasty.

Guy Tritton – how to stop your 3D designs falling flat

Guy Tritton of Hogarth Chambers discussed the complexities of registering 3D objects as trade marks.  Aside from the duration of the protection, the main benefit (over design protection) is that prior art is not a concern.  Registering a 3D object as a trade mark, however, is not without its hurdles. The trouble is that no-one really markets a product without an associated word mark.

Evidence will be needed to establish association.  But what might work?  Looking at the KitKat case, with seemingly high quality survey evidence showing that 50% of people recognised the four bar shape as being a KitKat, this still wasn't enough to succeed.  So how do you prove the point?  Ideas include carrying out a survey using a different or unknown brand on the product to see if people think the product is a rip off or must be under licence of the original trade mark owner. If the latter, then this would show that the shape denotes trade mark origin.  Better still, brand owners should actually promote their products on the basis of shape alone, in order to create the evidence required.

HHJ Hacon – how to impress an IPEC Judge

Judge Hacon, in his effortlessly pragmatic manner, provided some useful pointers on how to stay on the right side of the judges in the IPEC:

  • When filing an unregistered design claim, submitting more than five "sub-designs" for consideration would get short shrift and the audience was advised to pick their best ones at the outset.  This might be 5, or maybe fewer.
  • Hacon cautioned that commonplace arguments were more difficult to prove than they seemed, and so such arguments rarely succeed. A party would need to identify all the features in that design that are reasonably striking to the eye, and then plead that there's an article within the prior art that has all those features and therefore renders those features commonplace.  If you don't think you're going to be able to prove it, don't plead it in the first place.
  • In relation to Registered Designs, Judge Hacon wanted to see similar limitations.  There is rarely a need for many items to evidence the design corpus, suggesting a possible maximum of 10.  Even then, he would only want the Defendant to be putting forward suggestions in that regard, as it is the Defendant which has the strongest incentive to find the works most similar to the claimed designs.
  • HHJ Hacon confirmed that IPEC was ably set up to deal with interim injunctions (although reminded the audience that they are not available on the small claims track), and if the matter is suitably urgent, contact his clerk to get it heard quickly.  Whenever the need has arisen, he has been able to hear urgent applications within a few days, if not quicker.
  • The audience seemed particularly interested in the issue of summary judgment.  Judge Hacon confirmed that it is available in the IPEC, and as it stands an application of this type would have a hearing within about 6 weeks.  
  • Asked about whether registered designs could be heard by the small claims track, Judge Hacon confirmed that this was being "actively reconsidered".
  • Judge Hacon was also asked about the new "competitor" alternative to the IPEC, the Shorter Trial Scheme.  He said that he did not see it as a competitor; he welcomed any option that allows parties access to the court system in the way that suits their needs.  In fact, he said, the Chancery Division has not seen a drop-off of cases since IPEC has launched – instead, more cases are being brought, showing that the IPEC is increasing access to justice.  The Shorter Trial Scheme was created partially off the back of the success of the IPEC, and Hacon saw the principal differences being the scale costs and damages cap.  For parties who dislike these aspects of the IPEC but like the rest, the Shorter Trial Scheme may be the best option.  
  • Finally, there was a question about court fees – if you do not know how much your claim is worth, can you guess low, and pay the difference in fee if you later find out the damages are likely to be higher than you thought?  The short answer was, provided it is done in good faith, there is no harm in paying a lower court fee at the outset and increasing it later as appropriate (as suggested in a previous post here).  If not in good faith, however (perhaps because you knew the damages were likely to be high but hoped for settlement), it could be an abuse of process.

Wednesday, 4 May 2016

Intellectual Property Challenges in the Bio-Pharmaceutical Field

There are two threats to using securitization to solve one of the primary problems in the bio-pharmaceutical field--funding research and development of new pharmaceuticals in the United States.  Securitization may include using intellectual property for collateral for financing, or pooling intellectual property assets and issuing securities based on those assets.  The first is the threat to bio-pharmaceutical patents through Inter Partes Review proceedings (IPRs) at the United States Patent and Trademark Office.  The second is the potential for increased price regulation on pharmaceuticals in the United States. 

The development of pharmaceuticals is hugely expensive.  A recent study published by the Tufts Center for the Study of Drug Development estimates that the costs of developing a new pharmaceutical is approaching $3 billion.  One way to raise capital for future research--including paying for translational research and clinical trials--is through the securitization of the intellectual property (or royalties) of a firm or university.  This method for royalties has achieved some success by DRI Capital and Royalty Pharma (One problem with royalty securitization is that it encourages "evergreening" or "life cycle management," depending on your perspective, as discussed in an excellent article by Grace Sweeney, here).

Coffee and Cats like
Funding and Innovation: A Perfect Pair
Securitization of intellectual property relies, in part, on the relative strength and stability of certain intellectual property rights.  An argument can be made that bio-pharmaceutical patent rights (with the notable exception of diagnostics), and particularly trade secret rights, have been carefully protected, as discussed here.

However, there are at least two issues which threaten the use of securitization of bio-pharmaceutical intellectual property to raise investment funds:

The first issue concerns the use of the America Invents Act Inter Partes Review proceedings (IPRs) against biotechnology and pharmaceutical patents.  IPRs are proceedings before the Patent Trial and Appeal Board (PTAB) used to challenge issued patents, for example for obviousness.  Notably, IPRs were likely not expected to be used substantially against biotechnology and pharmaceutical patents.  Indeed, the biotechnology and pharmaceutical industries have attempted to pass exemptions for those patents from review by IPRs (Notably, IPRs can be used to challenge so-called evergreening.).  IPRs were likely expected to primarily confront software patents.

Importantly, the PTAB standard used to review patents in IPRs is different from the standard used by District Courts and may result in more patents invalidated. The PTAB standard is the "broadest reasonable interpretation" of the claims, whereas the District Courts use a plain ordinary meaning standard.  In Couzzo Speed Technologies v. Lee, the U.S. Supreme Court will determine which standard the PTAB should apply.  Either the Supreme Court will decide that the PTAB should apply the same standard as the District Courts, the "plain ordinary meaning standard," or the Supreme Court will require application of the "broadest reasonable interpretation" standard. 

Professor Ronald Mann recently reviewed the oral arguments before the Supreme Court, here.  To provide some perspective as to the controversy concerning Congress' intent in creating IPRs, Professor Mann quotes Associate Justice Stephen Breyer:
"You could look at this new law as trying to build a little court proceeding.  If I thought it was just doing that, I would say you were right [that the PTAB standard should be the same as the district court's standard].  But there is another way to look at it.  And the other way to look at it ... is that there are these ... patent trolls, and that the Patent Office has been issuing billions of patents that shouldn't have been issued; I overstate, but only some.  And what happens is some person in business gets this piece of paper and looks at it and says, 'Oh my God, I can't go ahead with my invention."
Pharma Cat: Sitting Pretty
The second issue concerns the potential for increased price regulation in the United States for drugs to address the very high cost of health care and public pressure to lower the price of drugs.  Leading presidential candidates Hillary Clinton for the Democrats and Donald Trump for the Republicans have both set their sights on the pharmaceutical industry.  California has also qualified an initiative for public vote which may result in substantial price regulation of drugs in the United States' most populous state. 

Both of these issues undermine the potential use of widespread securitization of bio-pharmaceutical intellectual property to provide funding for further research and development.  In the United States, we are coming to a critical policy choice soon concerning whether to continue to further regulate the price of pharmaceuticals or continue to allow bio-pharmaceutical companies to control pricing for the most part.  The result of the upcoming presidential election may set the stage for substantial changes to the bio-pharmaceutical industry.

BREAKING NEWS: CJEU says Tobacco Products Directive is valid

The IPKat has been obsessively following the debate upon tobacco plain packaging and, as to the European Union, the tumultuous course of Directive 2014/40/EU (Tobacco Products Directive) on"the manufacture, presentation and sale of tobacco and related products". This directive was aimed at harmonising a number of aspects of tobacco manufacture and sale in the EU [see katposts hereherehere, here, and here]. From the IP angle, Chapter II of the Directive provides that packaging of tobacco products sold in the EU shall comply with a number of characteristics imagined to scare smokers and discourage people from even contemplating to start smoking. 

Among other things, Article 13 of the Directive provides that

"The labelling of unit packets and any outside packaging and the tobacco product itself shall not include any element or feature that … promotes a tobacco product or encourages its consumption by creating an erroneous impression about its characteristics"

and that

"The elements and features that ... are prohibited may include but are not limited to texts, symbols, names, trademarks, figurative or other signs".

Further, Article 24(2) of the Directive provides that

"This Directive shall not affect the right of a Member State to maintain or introduce further requirements, applicable to all products placed on its market, in relation to the standardisation of the packaging of tobacco products, where it is justified on grounds of public health, taking into account the high level of protection of human health achieved through this Directive".

Does paternalism make you nervous?
Over the past months, the Court of Justice of the European Union (CJEU) has had to open three different files in this regard, with one glorious EU country (Poland), and a couple of UK judges seeking clarification as to the lawfulness of the Directive under different standpoints [Cases C-358/14, Poland v Parliament and Council; C-477/14, Pillbox 38(UK) Limited v Secretary of State for Health; and C-547/14, Philip Morris Brands SARL and Others v Secretary of State for Health]. The Polish case and that involving Pillbox38 challenged, respectively, the prohibition on menthol cigarettes and the new rules on electronic cigarettes.

Case C-547/14 specifically concerned plain packaging. Among other things, the referring court asked the CJEU whether

-       Articles 8, 9, 10, 11, 12, 13, 14, and 15 of the Directive, concerning tobacco labeling and packaging, comply with the principles of proportionality and subsidiarity;

-       Article 13 of the Directive complies with the principle of proportionality and/or with Article 11 of the Charter of Fundamental Rights. If so, the referral asked if Article 13, by prohibiting "any element or feature that … promotes a tobacco product or encourages its consumption by creating an erroneous impression about its characteristics", also prohibits true and non-misleading statements about tobacco products on the product packaging;

-       The extent to which Article 24(2) permits Member States to adopt more stringent rules in relation to matters relating to the 'standardisation' of the packaging of tobacco products.

With its decisions of today [Cases C-358/14, C-477/14, and C-547/14, still not available on the Curia website], the Court ruled that the Tobacco Products Directive is fully valid.

According to the press release, the CJEU ruled that Article 13, as well as the other provisions regarding "the integrity of health warnings after the packet has been opened, to the position and minimum dimensions of the health warnings and to the shape of unit packets of cigarettes, the minimum number of cigarettes per unit packet" and "health warnings covering 65% of the external front and back surface of each unit packet" are proportionate and well-compliant with the principle of subsidiarity, due to the overriding interest of public-health protection that the Directive intends to pursue.'d better quit smoking, anyway.
As to the "true and non-misleading statements about tobacco products on the product packaging", the CJEU ruled that Article 13 shall be interpreted as meaning that it prohibits

"any element or feature that is such as to promote a tobacco product or encourage its consumption, even if these are factually accurate",

once again as

"that prohibition is such as to protect consumers against the risks associated with tobacco use and does not go beyond what is necessary in order to achieve the objective pursued".

As to Article 24(2), the CJEU stressed that the in-search-search-of-inflexibilities principle applies to the tobacco field too, ruling that

"at the outset, that the Member States may maintain or introduce further requirements solely in relation to aspects of the packaging of tobacco products that are not harmonised by the directive".

More  patronising in depth analysis will follow once the decision is made available. 

[UPDATE -- there are three CJEU decisions, actually: Case 547/2014, on plain packaging; C-358/2014, on menthol-cigarettes; C-477/2014, on electronic cigarettes].

Tuesday, 3 May 2016

Universal Music secures summary judgment against IFP for copyright infringement

This Kat hates long-haul flights, but is grateful that airlines have improved entertainment packages in an effort to make the journey less dull. She recently learnt that this in-flight entertainment is not just a source of boredom relief, but also, copyright contention. A group of record companies and music publishers brought a claim for copyright infringement against IFP, a producer of these entertainment packages. The plaintiffs, which included UMG Recordings, Capitol Records and Universal Music Publishing Group, claimed that IFP infringed copyright in numerous works by failing to secure appropriate copyright licences. The court’s tentative ruling which granted the plaintiffs summary judgment was subsequently adopted as the final judgment.
Contemplating whether the in-flight
 entertainment infringes copyright

It is difficult to believe that a company supplying major airlines such as American Airlines and United Airlines with in-flight entertainment would not ensure it had obtained the necessary copyright licences, but this is exactly what occurred. IFP went about creating the entertainment packages by buying CDs and digital tracks and then copying them on to their internal hard drives. IFP then sent the copied files to an “integrator” to encode them according to an airline’s technical requirements. Following this, a copy of the encoded file was imported back into the United States for sale and distribution to US airlines. Based on these actions, the court found that IFP had infringed the plaintiffs’ exclusive right to reproduction and distribution under s.106 of the US Copyright Act 1976, (USCA) and their importation rights under s.602(a)(1) USCA 1976.

The Court did not consider whether IFP also infringed the performance right because “any works implicated in performance-related infringement are covered by IFP’s other infringements.”

IFP probably regrets not pursuing those licences with more vigilance 
Did IFP not think about copyright at all? They did in fact, and for many years at that. In 2008, IFP hired a licensing expert, Mark Isherwood, to assess IFP’s position with regard to licensing creative content. Isherwood advised that IFP had no US licences and it risked legal action. In the years that followed, Isherwood was tasked with securing licences from the respective copyright owners. Isherwood failed to secure any licences, despite piecemeal attempts at negotiation over a six year period. He nevertheless did advise IFP to collect royalties from the airlines because, “In such an, albeit unlikely, event that proceedings are taken, having royalties accrued would mitigate IFP's position before a court.” On receiving the plaintiff’s cease-and-desist letter in November 2013, IFP's relationship with Isherwood was terminated.

In the face of the undeniable fact that IFP had known for a long time that they should have secured licenses, but failed to do so, IFP advanced a panoply of defences, including statute of limitation, estoppel, waiver, implied licence, and pre-emption. Perhaps the most plausible was its argument that infringements which occurred before November 2010 were time barred because by that point, the plaintiffs should have known that the infringements were occurring. Copyright claims are time barred three years after the claim accrues under s.507(b) USCA 1976. However, this defence ultimately failed because of the ‘discovery rule’.  According to this rule, the limitation period does not begin to run until “the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim.”  IFP argued that the plaintiffs were aware that IFP was using their copyright works without permission, based on communications between Isherwood and the plaintiffs. The court found, however, that Isherwood’s emails were vague to the extent that it was not apparent that IFP was already using works without authorisation.  

IFP also claimed that it had an implied oral licence with the plaintiffs, created during the communications with Isherwood. The court noted that implied licenses are found only in exceptional circumstances, such as when a work has been commissioned, but the commissioning party then fails to obtain an assignment of copyright. The court found that evidence regarding the communications showed that the parties had discussed various terms but no final agreement was reached.  There was no implied licence between the parties.

The plaintiffs were accordingly granted summary judgment against IFP for copyright infringement. Notable is the court's finding of willful infringement. Willful infringement occurs when the defendant “knew or should have known it infringed the plaintiff's copyright.” As discussed above, e-mail evidence had shown that IFP consciously continued to infringe copyright of the plaintiffs for several years. This may have an impact on the award of damages, scheduled for May 10th, as the court can increase damages up to $USD 150,000 for willfull infringements of any one work under s.504(c)(2) USCA 1976.  With 4500 works allegedly infringed, IFP may have a serious financial burden coming its way.

Monday, 2 May 2016

Never too late: if you missed the IPKat last week

Were you too busy for the IPKat last week? The 94th edition of Never Too Late is here to help out.

* Paint it Vantablack

Is it possible to have the exclusive rights over a colour - the "blackest black ever"? Alberto Bellan introduces Vantablack.

* World IP Day - Anne Frank and Geo-blocking special

Happy World IP Day from IPKat!
The original Dutch version of Anne Frank's Diary is to be published online and the inconsistencies of geo-blocking are in the spotlight.

* Magic Leap lampoons Google Glass

Mark Schweizer presents the best nerdy joke ever seen in a patent filing.

* Arnold J at appellate level - EPO news and a timely decision for World IP Day

Arnold J agrees with the Court of Appeal decision in Richter Gedeon Vegyeszeti Gyar RT v Generics, and a patent directed to a dosage regime for levonorgestrel as a method of emergency contraception remains obvious.

* House Passes Defend Trade Secrets Act

Amerikat Annsley reports on the new federal legal protection for Trade Secrets in the US.

* Publishing and the Machine

Neil Wilkof explores how 'the Machine' has helped and hindered publishing.

* DSM Communication on Platforms leaked!

While we wait for the official Communication later this month, it seems that ISP safe harbours are here to stay and new strategies are being developed for user generated content... watch this space...

* The end of the Google Books legal saga 

The US Supreme Court refuses to grant certiorari in the epic story that is The Authors' Guild v Google Books. Katfriend Shalini Bengani reports. 

* Freedom of Panorama in France

What is the future of the panorama exception -- for the reproduction and representation of architectural works and sculptures, permanently located on public roads, made by physical persons, with the exclusion of uses having direct or indirect commercial character?

* s52 comes into force July 28 2016

Artistic works which have been industrially manufactured are to receive the same duration as any other works from next year.

* Trade Mark infringement leads to 'poultry' profits

Eleonora explains the latest Jack Wills Limited v House of Fraser judgment and the perils of apportioning profit attributable to infringement and cost consequences.


Never too late 93 [week ending on Sunday 24 April] - No UK judges in the UPC? | Young EPLaw Congress | EU Commission SPC update | Technical teach-ins for judges | Patentability of user-interface designs | Trade Secrets and Copyright Pre-Emption | Austro-Mechana v Amazon C-572/14 | Lay-offs at Intel | Trade Marks and Cadbury | Shakespeare's Cultural Capital | Geo-blocking and competition law

Never too late 92 [week ending Sunday 17 April] - In memoriam of Kay Chapman - American Science's mobile X-ray patent valid - General Court decision on proving use of a trade mark - Life as an IP lawyers: Bratislava, Slovakia - Led Zep: you wouldn't steal a Carouselambra - Much Ado about patents - EU trade secrets directive approved - Royal Charter for Institute of Trade Mark Attorneys - The Rise of the Maintainers - The future of Supplementary Patent Certificates - Innovation & noncompete clauses - Are patent trolls a problem in the ITC? 

Never too late 91 [week ending on Sunday 10 April] The Future of second-medical-use patents, Fordham 2016|AG Opinion in United Video Properties, Inc v Telenet NV, C-57/15|Batman v Superman in commercial context| Trade Secrets and the Bio-Pharmaceutical industry| Panorama and the three step test in the Swedish Supreme Court| Public consultation on the Enforcement Directive| Hyperlinks in GS Media, C-160/15 | Life as an IP Lawyer in São Paulo | | The Internkats | Corn Thins: descriptive? | Tourism and Culture in the Age of Innovation | Lord Neuberger's most difficult case | US Senate passes Trade Secrets Act 

Never too late 90 [week ending on Sunday 3 April] – Book review: "IP and Other Things" by Sir Robin Jacob| Book review:  "Trade Marks Law" by Glen Gibbons| IPKat Post #10,00 | Taser International Inc. v SC Gate 4 Business SRL and Others |Two Book Reviews: European Law Design and The Changing European Patent | Fordham 2016 | Maestro Swiss Chocolate Sdn. Bhd. & 3 Ors v Chocosuisse Union Des Fabricants Suisses 

Sunday, 1 May 2016

Trade mark infringement leads to 'poultry' profits

Account of profits in trade mark infringement and passing off cases? The IPKat is delighted to host a guest contribution by Simon Chapman (Lewis Silkin) on this very topic and on a case (Jack Wills v House of Fraser) in which he and his team have acted for the defendant.

Here's what Simon writes:

"Following Mr Justice Arnold’s finding (Jack Wills Limited v House of Fraser (Stores) Limited [2014] EWHC 110 (Ch)) that retailer House of Fraser was liable for trade mark infringement and passing off after adopting a pigeon logo that was confusing similar to Jack Wills pheasant trade mark, HHJ Pelling gave judgment (Jack Wills Limited v House of Fraser (Stores) Limited [2016] EWHC 626(Ch)) in the account of profits, with the final profit figure being identified in the form of order hearing last week.

Judgments in respect of accounts of profits are rare, primarily on consideration that the parties usually come to an agreement on the level of profit that the defendant has made from its infringement after preliminary disclosure because they wish to avoid the costs of further legal proceedings that can be very expensive. However, following the Court of Appeal’s decision in Hollister Inc v Medik Ostomy Supplies Limited [2012] EWCA Civ1419, some commentators believed that defendants would be unable to deduct general overheads (ie overheads that support the defendant’s business in general, such as rent, management and advertising) from their profits after direct costs (such as VAT and cost of purchasing or manufacturing the infringing items) had been deducted.

And so it was that Jack Wills, the British clothing brand particularly popular with well-heeled twenty-somethings, sought to recover over £650,000, that sum being the entirety of House of Fraser (HoF)’s sales revenues less VAT and cost of manufacture, and without any apportionment of the profits between the infringing use and other factors, such as the design of the garments. On the other hand, HoF claimed that the amount payable was in the region of £50,000 after the deductions of both direct costs, general  overheads and apportionment.

A few days before the hearing, the Court of Appeal handed down its judgment in Design & Display Limited v OOO Abbott and another [2016] EWCA Civ 95. In that case, the Court of Appeal overturned a judgment by HHJ Hacon, ordering that a defendant should be able to deduct general overheads from the profit figure if he has foregone an opportunity to sell non-infringing products. In that case, Lewison LJ agreed with Kitchin LJ’s reliance on an Australian case, Dart Industries Inc v Décor Corp Pty Limited [1994] FSR 567, in which the court had held that “… where a defendant has foregone the opportunity to manufacture and sell alternative products it will ordinarily be appropriate to attribute to the infringing product a proportion of the general overheads which would have sustained the opportunity. On the other hand if no opportunity is forgone and the overheads involved were costs which would have been incurred in any event, then it would not be appropriate to attribute the overheads to the infringing product. Otherwise the defendant would be in a better position than it would have been in if it had not infringed".

Jack Wills had pleaded that a defendant needed to show it was operating at full capacity, or else it could not show that it had foregone an opportunity to sell non-infringing products, i.e. that capacity was a threshold condition. However the Court of Appeal in Design and Display made it absolutely clear (to the extent there ever was any ambiguity) that capacity was not a threshold condition.  HHJ Pelling found that the true test was “whether HoF has demonstrated that (a) the same overheads would have been incurred even if the infringement had not occurred and (b) the sale of infringing products would have been replaced by sale of non-infringing products which would have been sustained by the overheads in fact used to sustain the infringement.

On the facts, HoF satisfied this burden: it showed that it had a consistent range of products year on year; it sold broadly the same number of products each season; and that the infringing products replaced non-infringing garments before subsequently being replaced by non-infringing garments. This was not a case where the defendant had added a new line of infringing items to its existing business.

Jack Wills argued that even if HoF could deduct some overheads it would need to show to the requisite evidential standard that the specific overhead had supported sales of the infringing products. HoF on the other hand argued that the whole business was supported by all of the costs.

With the exception of some small costs the court allowed HoF to deduct all of its general overheads. This had the effect of substantially reducing the amount payable and putting it much more in line with the profit levels of the whole business.

As a further point, there was significant argument over the basis of calculating the applicable percentage of overheads. HoF’s expert witness sought to deduct overheads by reference to sales turnover as HoF did in its management accounts. Jack Wills’ expert witness claimed this was not the best way and that a ‘square-footage’ basis was preferable. Essentially, the judge decided that, except where one particular method is clearly superior, it is a judgment call as to which of the imperfect measures is most appropriate for a particular category of overhead. He then applied each method to the particular category in dispute as he considered most appropriate.

Counting profits:
Benedict's favourite weekend activity
Having arrived at a net profit figure, the court then had to determine the further question of whether to award Jack Wills that or just those profits attributable to the infringement. Jack Wills argued that it was entitled to all of these, but HoF claimed that the garments themselves had value over and above the value of the pigeon logo that had been found to infringe, i.e. there was value in the design, fit, quality and other intangible qualities of the garments and value in the store environment itself. HoF claimed that to require it to pay over 100% of the profit it made, would be to give Jack Wills a windfall and punish it, which is not the purpose of an account of profits. Jack Wills had of course been entitled to elect for damages at the outset instead of profits, but had chosen not to. 

HoF argued that there was no different test to be applied to trade mark cases than is the case in respect of other IP rights; there is value in the product aside from the value of the infringed IP. Further, the evidence was that there was no increase in sales or profitability following the adoption of the infringing logo.

HHJ Pelling was not persuaded that trade mark cases are by their nature different from other IP cases and accordingly, held that 41% of the net profits were attributable to the infringing mark. That figure was based on HoF’s expert witness evidence regarding typical royalties for the use of third party brands.

The amount of profits that HoF was ordered to pay to Jack Wills totaled £53,281, against the £650,000 that had been claimed.

For many IP owners, it is the costs consequences of the judgment that will be the cautionary tale. At the form of order hearing, the court heard that HoF had made several offers to settle the claim and that Jack Wills had failed to beat one made very early on in the account proceedings. The court therefore ordered that Jack Wills should pay HoF’s costs of the account from the expiry of that offer. As such, despite Jack Wills finding itself in the position of having won on liability it will be substantially out of pocket. Claimants will need to keep firmly in mind that the value of IP litigation is primarily in obtaining an injunction and consider very carefully indeed whether to elect for damages or profits after a successful decision on liability." 

Friday, 29 April 2016

s.52 repeal comes into force July 28 2016

Transition period of s.52 expedited
The repeal of s.52 of the Copyright, Designs and Patents Act 1988 (CDPA) has been expedited due to the outcome of a government consultation. s.52 stipulates the term for artistic works which have been industrially manufactured as 25 years from the year that they were first marketed. This repeal was originally meant to have a transitional period of 5 years, coming into effect in April 2020. The length of this transition period was challenged in May 2015, leading to a review of the proposed period. The government decided that the period was in fact excessive, and withdrew the Commencement Order, and conducted a new consultation which ran from 28 October 2015 – 23 December 2015. The government response to the consultation can be viewed here
Transition period expedited from 5 years to 6 months
The repeal will now occur on 28 July 2016, with the transition period ending on 28 January  2017.
From 29 July 2016, no new copies of affected artistic works may be made or imported unless:
  •         The works were contracted before the publication of the consultation document at 16.30 on 28 October 2015
  •          The rights holder has granted permission
  •         An exception to copyright applies under the CDPA 1988
From 28 January 2017, no works created in reliance on s.52 should be dealt with. By this date, unless the work falls within an exception to copyright under the CDPA 1988, the works must be:
  •        Sold or destroyed
  •         Authorised by the rights holder
Guidance is available for affected individuals, organisations and businesses.
What is s.52?
s.52 deals with artistic works which have been industrially manufactured. This section limits copyright protection for these types of artistic works, when more than 50 copies have been made, to 25 years. Under s.52(2) –
(2)After the end of the period of 25 years from the end of the calendar year in which such articles are first marketed, the work may be copied by making articles of any description, or doing anything for the purpose of making articles of any description, and anything may be done in relation to articles so made, without infringing copyright in the work.
The duration of protection is shorter than the term for other artistic works which is 70 years after the death of the creator. This section has been repealed to give industrially manufactured artistic works the same term of protection as other artistic works.
Why was s.52 repealed in the first place?
The decision to repeal s.52 was prompted by the outcome of Case C-169/08 Flos v Semeraro. Following this case, the government considered that s.52 was not compatible with the Copyright Term Directive.  The pertinence of the Copyright Term Directive is debatable in light of Article 17 of the Design Directive, which allows member states to determine the duration of copyright protection of designs protected by copyright. This was discussed on IPKat here.
Which artistic works are likely to be affected?
Under s.4 CDPA 1988, there are three types of artistic works. s.4(c) works of artistic craftsmanship are most likely to industrially manufactured, and affected by the repeal of s.52. There is no formal definition of works of artistic craftsmanship, but the published guidance has produced suggestions (pg 7) as to how the courts will approach this type of work based on the cases of Hensher (George) Ltd v Restawile Upholstery (Lancs) Ltd [1975] RPC 31, HL and Lucasfilm Limited and others v Ainsworth and another [2012] 1 AC 208:
• It is not enough for a work (such as a piece of furniture) to look attractive to qualify as a work of artistic craftsmanship.
 • The phrase “artistic craftsmanship” designates two requirements combined in the same work: artistic quality and craftsmanship.
 • “Craftsmanship” presupposes special training, skill and knowledge for production.
 • “Artistic” means it will have a real artistic or aesthetic quality and must be a work of art or fine art. • Whether an article is artistic must be determined in light of evidence.
 • This could include: evidence of the intentions of the maker, in particular whether or not he had the conscious purpose of creating a work of art; evidence from ordinary members of the public; expert evidence; whether the maker already has works to his name which are acknowledged to be artistic, and the level of aesthetic appeal.
• Determining whether a work is a work of artistic craftsmanship turns on assessing the extent to which the particular work’s artistic expression is unconstrained by functional considerations.
Previously expired works to resume term of protection
Works in which copyright has expired under s.52 will assume the new term of life of the creator plus 70 years. For example, if an industrially manufactured work was created in 2000, copyright protection would have expired in 2025 under s.52. Now, copyright protection will expire 70 years after the death of the creator. If the creator died in 2010, copyright will expire in 2080.
Effects on publications with 2D copies of affected works
Publishers will be required to secure licences when printing 2D copies of affected works of artistic craftsman ship. All existing publications containing such images must be sold before the end of the transition period on 28 January 2017.

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