Fair use of vehicle manufacture's trade mark

Copyright Law Blog reports a US case (in New York) concerning the use by a used parts supplier of a vehicle manufacturer's trade mark. It's the classic situation where someone in the independent aftermarket can hardly be expected to run a business without referring to car makers by name, but can easily go too far. In the UK and EC, we have had similar cases like Volvo v Heritage and BMW v Deenik where the tribunals have explored the extent to which traders must be free to use others' names even if that name is a registered trade mark. In the US, they have the helpful notion of "nominative fair use", not far removed from parts of section 11 of our Trade Marks Act but expressed, perhaps, in more helpful (and general) terms.

For a trader needing to refer to a car maker, or other business, in this way, the distinctions drawn in this American case are useful guidance - though not, of course, binding on English or European Community courts.

The defendant, Shokan Coachworks, had used "Shokan Audi Parts" in its email signature block - a usage which, the court thought, could create consumer confusion. The strength of the Audi trade mark was a factor in coming to this conclusion (but if the trade mark had been weak, there would have been little point in using it this way, perhaps).

As for nominative fair use, the test applied by the court (the 9th Circuit's test, preferred over that of the 3rd Circuit, if you're interested) was:

1) the product or service in question is not readily identifiable without use of the trademark;
2) only so much of the marks are used as is reasonably necessary to identify the product or service; and
3) the user does nothing that would suggest sponsorship or endorsement by the trademark holder.

In this case, the court held that Shokan had fallen at the third hurdle and their use of the name in their signature block, and also when answering the phone using their trading name "all Audi", which was the key part of the free telephone number that Audi had previously agreed to them using.

here was also another interesting aspect to the claim, namely that Audi alleged infringement by using an email address that incorporated the Audi name. however, they failed to produce suitably authenticated prinouts of web pages to satisfy the court - illustrating an important point about proviving trade mark infringement on the Internet.

"Can I write my own Da Vinci Code?"

I undertook to give a talk under this title to a topical supper meeting of Writers in Oxford some time ago. In the meantime it expanded rather, because (I assumed, anyway, probably correctly) that the audience would also be interested in the saga of "Coming Through The Rye", the unauthorised sequel to "Catcher". (In adding some material on that subject, I was assisted by my friend Lloyd Jassin in New York.)

So I duly turned up, and so did seven others to hear what I had to say. I promised a few people that I would post a recording of the talk on the web, and despite the fact that it turned out to be more like a conversation than a talk and we were interrupted from time to time by waitreses bearing plates of food, I have done that and here is the result.

No intellectual property in transport routes

From South Africa, a story about taxi drivers trying to claim rights in bus rapid transit route: The Citizen tells us, quoting Herman Blignaut, partner at Spoor & Fisher, that "transport routes do not constitute subject matter which can be termed intellectual property".  Quite.  That it was even necessary to say this speaks volumes about the vastly inflated expectations that some people have about intellectual property laws.

There are other legal rights in transport routes and other facilities, so why should anyone try to stuff them into the already-bursting pigeonhole with the "Intellectual Property" label?

The absolutists strike again

The Newspaper Licensing Agency, who must rank as copyright absolutists by any definition,are about to start trying to control the use of hyperlinks, according to the Press Gazette. What is this? Bad enough that, through the NLA, much of the press should be trying to gain a revenue stream from what by definition should be ephemeral, but on what basis do they think they have an exploitable interest in hyperlinks?

The NLA caught a cold when it first started licensing use of press cuttings, basing the exercise on copyright not in the literary works (because the newspapers didn't necessarily own the copyright in them) but in the typographical arrangement - a type of copyright that previously had seemed to be utterly unimportant. Thanks to Marks & Spencer, this approach was knocked on the head by the House of Lords and the NLA went back to the drawing board and put together a licensing scheme that was after all based the literary copyright. Are they on another hiding to nothing here?

One can understand the importance for the press of replacing the dwindling revenue stream that printed newspapers produce, whether through sales or through licensing schemes. I read much more in the press on-line than on paper these days, and to press-cutting agencies and other professional consumers of journalism using hyperlinks is wonderful substitute for cutting up (or photocopying) newspapers. But if there is no copyright in a hyperlink, how to make money from it? Only a copyright absolutist could answer that.

On-line reputation management

That last post was concerned with avoiding damage to a business's reputation caused by employees' ill-advised use of social networking sites. That's parrt of the reputation management equation, of course, but there is more to it than that. If you could identify when your business was being talked about on the Internet, and join in the discussion, how much better your marketingactivities might be. I just discovered buzzding.com which seems to offer precisely that, and am posting this link in case it's of interest to anyone else.

Employers should have a social networking policy (on top of everything else!)

All prudent employers by now have policies on the use of email and the Internet at work. Some still haven’t dealt with the new problems posed by the growth of social networking. The problem, rather like email and the Internet, is that social networking is in many ways something a business needs to encourage.
While the initial response to the Internet was to stop everyone from using it at work, regarding it as a distraction, its value as a source of business information now makes it inconceivable that many employees should not be allowed to use it. And email is as essential a means of communication as the telephone, which people need to be able to use during working hours even for private purposes. Broadband access has now become regarded as a human right, and although this doesn’t automatically place social networking and access to communications technology at work in the same category, we do have to look at them in that light.
The information that many of us need to do our jobs is now often found on the Internet. Social networking sites are rapidly assuming the same degree of importance for marketing purposes. Blogs, Tweets and sites like Facebook, Plaxo and LinkedIn offer indispensable opportunities to tell people about the goods and services you provide. Look at the take-up of these media by lawyers, even if they haven’t yet worked out how Twitter will actually help them.
For years now, employees have been ambassadors for their employers out of the workplace as well as in it. If you see a supermarket employee in her uniform on the way to work dropping litter, your opinion of the supermarket is likely to be adversely affected. If you have the misfortune to travel in the same train carriage as a pair of drunken accountants whose computer cases display the name of the firm for which they work, you will form an impression of that firm. Facebook profiles can tell you where an individual works: with sites like LinkedIn and Plaxo communicating that information is the whole point of the exercise.
Whether people are allowed to use social networking sites at work is one matter. Trying to stop them might be like trying to hold back the tide, but there are certainly good reasons for doing so – if only to stop time wasting. What they say on these services, whether in their own time or at work, is probably more important.
Contracts of employment already deal with confidential information and the protection of the employer’s intellectual property – including copyright, which arises automatically and belongs to the employer when the employee creates something in the course of their employment. They also deal – usually – with saying unfavourable things about your employer, or perhaps even saying anything about him, her or it. Contracts (and associated policies) will also deal with matters like discrimination, so anyone posting racially offensive material on the Internet is likely to be in trouble with their employer as well as the criminal law. That ought to be quite enough to deal with what employees write on the Facebook walls, but it’s a good time to remind people of that and perhaps to tweak what the contract says.
Just like emails, the employer is also likely to want to monitor what is being said. If it comes from the office computer system, whether it's authorised by the employer is not the important thing - the employee posting offensive material on Facebook might have committed a discplinary offence, but that isn't going to prevent the damage to the employer's reputation. The same applies if the information posted infringes copyright or breaches a confidence. The employer probably needs to be proactive, and stop these things going out in the first place. Provided employees are told that postings will be monitored (as should already be the case with emails) they cannot complain of intrusions into their privacy.
A social networking policy isn’t likely to be needed to stop people breaching confidence, infringing copyright or libelling their employers. But it might well be necessary to get the most out of these new marketing tools. Just as employers will want employees to use the Internet in ways that fit with their duties, so too they should embrace the marketing possibilities offered by the new media.
How? That requires more expertise than a neophyte such as myself can offer, and clearly if the corporate hand of someone’s employer is detected in the content of what purports to be an independent blog it is unlikely to be taken seriously. That’s a problem for the marketing people: the problem for the lawyers is to devise an approach that creates the space for employees to work positively for the brand without losing hours of working time to Facebook and Twitter.

Conditional fee agreements and litigation costs insurance

Conditional fee agreements - CFAs - provide an alternative to the traditional way of funding litigation – writing a blank cheque to your lawyers - and if they are the way to go, as seems likely, in the future it might be useful to have this note as an introduction to the subject. CFAs are useful in all manner of commercial claims, as well as in areas like personal injury claims where they have already achieved notoriety, and given the expense of bringing (or defending) an intellectual property claim, they have a particular role to play in this area. A better solution in many ways would be to take out insurance before a claim is made: some general insurance policies cover legal expenses, including business policies, and perhaps the necessary cover is already there (or can be added on at modest cost).

A CFA is an agreement between a client and lawyer. The lawyer agrees to share the risk of litigation, coming to a financial arrangement on the fees payable according to how the case turns out.

In a “no win, no fee” arrangement, the client will pay a reduced fee to the lawyer if the case is lost. If it is won, though, the lawyer is entitled to their normal costs, calculated on the usual time basis. Some of the costs might well be payable by the other party. The lawyer can also charge a success fee.

In a shared risk arrangement,the client will pay a reduced fee to the lawyer if they lose but if they win the lawyer will be paid the normal fee, with some of it probably being paid by the loser. Again, the lawyer can also charge a success fee.

These arrangements are suitable for litigants without the means to fund litigation in the traditional way, provided they have a good case. If the case is weak, the lawyer is not likely to be prepared to assume any of the risk – though it is also true that if the case is weak it should be kept well away from the courts. The other side must be notified that there is a CFA, and this might well encourage them to settle: they will see that their exposure to costs is likely to increase, and they will also realise that the other party will not run out of money if the case goes to trial.

The success fee can be as much as 100 per cent of the normal fee. The lawyer will calculate it after a risk analysis, effectively weighing up the odds on success. This will require consideration of a number of factors, including:

• The merits and value of the claim;

• The likelihood of settlement;

• An estimate of the costs involved; and

• The likelihood of recovering normal costs plus the success fee from the other side.

The success fee can only be linked to the normal fee – it cannot be a proportion of the damages obtained in the case.

Responsibility for paying the success fee lies with the client, although it will often be recoverable from the other side. The party paying the success fee is entitled to have it assessed by the court, which will reduce it if it is not reasonable in light of the circumstances surrounding the case when the arrangement was made.

If the court does reduce the success fee payable by the loser, the lawyer cannot recover the shortfall from the client unless the court orders otherwise. However, if part of the success fee represents the costs to the lawyer of funding the litigation – for example, where the lawyer has paid court fees – this much is payable by the client in any event.

If the case is lost, the client will either pay nothing or a reduced bill to their lawyer, but the big drawback of a CFA is that the client remains liable for some of the winner’s costs depending on what the court orders. And if the winning party also has a CFA, the award of costs will include the success fee. The way to deal with this drawback is to buy an insurance policy, known as after-the-event (ATE) insurance, to cover an award of costs. The winning party will be able to include the premium in a claim for costs.

It is not only the existence of the CFA that has to be disclosed: the lawyer’s assessment of the risks has to be disclosed, too, which is an exception to the normal rules about legal professional privilege. Because the lawyer has a stake in the outcome of the litigation, they will take greater control of stratefy and resolution of the dispute too – the client might feel like a passenger.

ATE insurance gives the insurer a stake in the outcome of the litigation, too, and that might mean they are trying to control the case as well. These policies come in a wide variety, including policies to cover only an adverse award of costs and policies that cover both parties’ costs. Cover can be backdated to include costs already incurred, though it is naturally more economical to put the cover in place first. Cover is available for making and sometimes for defending claims, though it is usually taken out by claimants to cover the costs of bringing an action to defend their rights. The terms of the policy will tell you whether it will pay out if the case is settled before trial, and if so how much. The insured’s management time and expenses in fighting the case are not covered.

Cover can be put in place at any time before proceedings have been issued and afterwards too, though the later the policy is bought the more expensive it is likely to be.

The procedure is for the lawyers to submit a proposal form along with their risk assessment. This will deal with the merits of the case and the likely amount of costs. It will be supported by relevant documents such as pleadings and counsel’s advice. On the basis of this information, the insurer decides whether to go on risk and if so at what premium. The solicitor sometimes has delegated authority from the insurer to do the risk assessment themselves and agree cover up to a certain amount. There is sometimes an application fee to pay too, though this might be set against premiums.

Costs often escalate during litigation, so it might be necessary to buy additional cover. The policy should allow this to be done.

The premium will depend on the type and level of the cover. For ATE insurance, depending on the prospects of success, the premium is usually between 30 and 50 per cent of the costs to be insured – so, if the policy is to cover only the other side’s costs, it will be significantly cheaper than one that covers both parties’ costs.

The premium might have to be paid at the outset, or by instalments. Sometimes, it might not be payable until the end of the proceedings. If the case be won and costs awarded, the premium should be recoverable from the loser. However, the court will be concerned that the amount of the premium is reasonable and proportionate. It is even possible to insure the premium itself, in case you lose.

It might be that the winning party has to pay some of the other side’s costs. This could happen, for example, where an offer or a payment into court has been made and the winning party has rejected it. Then the insurer will only be liable to contribute to the extent that the costs exceed the damages recovered – in other words, the litigant meets the costs out of the compensation first.

This note is intended to give some general information about CFAs and litigation costs insurance. For more information and advice on suitable insurance policies, you should consult an insurance broker. Temple Legal Protection Ltd provide IP cover: their website cannot give much detail - I imagine they need to have a lot of information before they can commit themselves. There are other insurers and brokers too, just Temple are the ones I know best.