IP litigation costs

It is trite to say that IP litigation is horribly expensive. In Ungar v Sugg (1892) 9 RPC 113 at 116-117 Lord Esher MR famously said:

Well, then, the moment there is a patent case one can see it before the case is opened, or called in the list. How can we see it? We can see it by a pile of books as high as this [holding up the papers] invariably, one set for each Counsel, one set for each Judge, of course, and by the voluminous shorthand notes: we know ‘Here is a patent case.’

Now, what is the result of all this? Why, that a man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent. His patent is swallowed up, and he is ruined. Whose fault is it? It is really not the fault of the law; it is the fault of the mode of conducting the law in a patent case. That is what causes all this mischief.

Wouldn't it be great - for lawyers whose clients have such difficulty affording IP disputes as much as for the clients themselves - if insurance were available against IP litigation costs? There are providers, but the policies do not come cheap - but a new entrant might be changing that. Alpha Insurance Facilities offer cover that is not prohibitively costly. I remain to be convinced, and it's an area I ant to learn a great deal more about.

Res judicata in OHIM?

Thanks to the Inner Temple Library's current awareness blog, and the WLR Daily (the Daily Weekly?) whose website doesn't sem to be working at present (the whole ICLR site seems to be down), I learn of a recent CFI decision in Case T-140/08 Ferrero SpA v OHIM. The Court observed that the principle of res judicata does not apply in OHIM proceedings:

In proceedings concerning the alleged invalidity of a community trade mark, departments of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) are not bound by earlier final decisions in opposition proceedings, since no force of res judicata attaches to such decisions.

Is this surprising? I don't know, but I guess I had assumed that earlier decisions would provide some sort of precedent. I suppose the fact that they are first instance decisions explains why they are not binding. Interesting.

EBay fake seller faces jail under Trade Marks Act - good!

The Hayling Islander reports that a man who has flogged rather a lot of counterfeit golf clubs on eBay faces three years' jail if he doesnt comply with the terms of a seizure order. He pleaded guilty to eight offences under the 1994 Act, and then the Proceeds of Crime Act was brought to bear - he has to repay £105,000, and if he doesn't manage it he could be sent to prison (always assuming space can be found for him).

Probably enough rogues selling illegal items on eBay to fill a few more prisons - which would probably enable the government to hit some more targets, tick some more boxes.

Exclamation mark not a good trade mark

A few years ago, perhaps, it wouudn't even have needed saying, but seeing someone trying to register just an exclamation mark (and an exclamation mark in a box) as a trade mark is no longer a matter for astonishment. Thank goodness, the Court of First Instance has upheld the Office for Harmonisation in rejecting this nonsense.

The cases are Case T-75/08 and Case T-191/08, both Joop! GmbH v OHIM, available only in French and German. Never mind, there isn't much to read, and I find this stuff as good to read in French as in English ... I stay awake better, have to concentrate harder. The Court decided that the trade marks were non-distinctive under Article 7(1)(c) of the CTM regulation. I'm releived.

Not only were the applicants seeking to register a sign that must surely be allowed to remain part of commercial free speech, and I can't believe could ever, in a month of Sundays, come to distinguish their goods from those of others - but they were trying to do so for a vast array of goods. Why? Because they could, no doubt. And if it's possible, businesses have to try to secure what they can before someone else does.

This landgrab is an unedifying spectacle. It's leading people to register things that they aren't een using as trade marks - and never will. I have a client at present facing opposition from a big company with a formidable collection of trade marks. Their brand combines an adjective and a noun, and taken together it's a pretty good two-word trade mark. It's what they call the company, and it's what they call the product - and the adjective, alone, is neither, but they have registered it as a trade mark anywway.

Being charitable, I have to assume that Big Trade Mark Owner has grabbed the adjective registration to ensure it isn't available for anyone else to take, and create problems for them. but there are many, many others who would want to use that ordinary English word, perhaps with another noun or in some other way that's never going to cause confusion. maybe, I hope, we'll be hauling them to the Board of Appeal or the Court in due course, following the course taken with Joop!'s misguided-but-understandable effort.

Yesterday's courses on trade marks and designs

I spent yesterday presenting courses on trade marks and designs for CLT, in London. Some of the delegates suggested that copies of teh slides would be useful - I don't like people following my talk, or even worse getting ahead of it, with a printed copy of the slides, but after the event is a different matter, so here is a pdf of the trade marks slides and here are the designs ones.

Securitisation of IP, or IP as security?

I spent Wednesday afternoon at a seminar – Jeremy’s seminar, I almost called it, though I suspect he would claim no proprietary rights in it – on IP rights and the UNCITRAL secured transactions project, documents about which are available here. To cut a long story short, UNCITRAL is working on a Legislative Guide on Secured Transactions, and has been for years. There’s a draft supplement to the Guide dealing with security rights in intellectual property, and work in that area is intended to deal with inconsistencies between the Guide and IP law.
If there are gaps in my understanding (and there certainly are), it’s my fault for going to a seminar without doing much background reading – a habit I fell into at university ... OK, let’s be more precise: I did no background reading, except for glancing at a four-page document put out in advance of the seminar on the tube to Holborn; and while I am confessing, I got round the problem at university by not going to the seminars for which I hadn’t done the reading, which is quite an elegant solution but probably wouldn’t get me very far in the modern world. There’s a lot to read on the subject on the IP Finance blog if you are more diligent than I was.
The note prepared for the seminar identified four areas of inconsistency: integrity of licence provisions, choice of law, the concept of “ordinary course of business” licences and continuous filing obligations. I formed the impression that some at least of the problems might stem from a lack of understanding in some quarters of what intellectual property is all about (and, mounting my favourite hobby-horse, the more fundamental problem that talking about IP can lead to an insufficiently nuanced approach to the individual rights to which the collective name applies), while there also seemed to be some confusion about the differences between secured transactions and securitisation. IP has been used as security for a long, long time with no particular difficulties – indeed, I have today been working on a deed of release of a debenture which charges, inter alia, “all letters patent, trademarks, service marks, designs, utility models, copyrights, design rights applications for registration of any of them and the right to apply for them in any part of the world, In addition [sic] moral rights, inventions, confidential information, know-how and rights of a similar nature arising or subsisting anywhere in the world in relation to all or any of the above (whether registered or unregistered) now or any any time afterwards belonging to the Company”. But that’s not the same as securitisation – a point made by the chairman of the seminar, Prof Graham Penn, who explained (and for this I for one was grateful) that it refers to bundling together a number of assets, vesting them in a special-purpose vehicle (an SPV: nothing to do with motorised variety of vehicles) and hawking the bundle around as security for bonds. Which is what a lot of allegedly clever people did with sub-prime mortgages a while ago, I think, and what David Bowie did earlier with his copyright, which is why he has been blamed by some for the state of the global economy.
I can see that there are problems to do with the rights of licensees when IP is used as security, or (even worse) when it is securitised. The problem is greater, indeed, in a securitisation transaction, because what is being charged is the royalty flow and the integrity of the licences becomes crucial to the ability of the pack of cards to remain standing. If the licensee could terminate, the security would be close to worthless. The secured creditor cannot obtain greater rights than those of the chargor - the basic principle of nemo dat should see to that. The terms of the licence must apply to the secured creditor in the same way that they apply to the chargor (or grantor), and can't be changed without the grantor's consent. But does the licensor retain the ability to terminate the licence (in the event, perhaps, of breach or insolvency of the licensee)? The right to assign intellectual property rights (which seem to include the rights of a licensee) are, according to the UNCITRAL documents, not affected by the law on secured transactions. Quite, right, I think - surely this is something that the covenants need to cover?
Can the licensor have priority over a licensee's secured creditor for the payment of royalties? This does seem, properly, a matter for secured transactions law. The UNCITRAL Working Group floats the idea of an "acquisition security right", but isn't it also something that can be dealt with adequately in the covenants?
The document that creates the charge should also be able to deal with choice of law problems - although, clearly, there needs to be something to prevent rules applying that cold thwart the parties' choice, and of course the weaker party might have no alternative but to accept the offer it cannot refuse. This is probably an area on which international agreement is needed.
The difficulty with having security rights over IP is that a licensee wil take the licence subject to the chargee's rights. It's often inconceivable that the licensee will carry out investigations - for example, the licence might be a software licence which the licensee isn't even likely to read. The Working Group suggests protecting purchasers (my choice of word, though I don't like to use it in this context) of standard-form licences by creating a class of "ordinary course of business" licences which would preserve the rights of the licensee. Provided it is strictly limited to these easy cases, such a development should deal with the problem.
What about registering intersts in IP rights? In the UK, it is possible to get something on the register - but of course this doesn't help with copyright or design right (or, now, Community unregistered design right), and it duplicates the content of registers of security interests. If such registration were compulsory, in which country's register should the interest appear? All of those where IP rights are charged? And how to deal with copyright and other unregistered rights?
I wondered at one stage whether this was just UNCITRAl doing what any bureaucracy is bound to do - find work for itself. Some of the points under discussion don't seem to me to contribute anything to the sum of human happiness. But wider ability to raise finance on the security of intellectual property (whatever that is), including royalty streams from licences and sublicences, is hugely important to the owners of such property - and if people are prepared to lend the money, should we be picky about whether the law should accommodate it or not? The attraction - or perhaps I should say the advertised attraction - of improving the acceptablity of IP as security is said to be the benefit that this will bring to developing nations. I would however hate to see them fall deeper into the debt trap as a result, like sub-prime borrowers enticed into taking out mortgages they could not afford. Is this really the right moment for the IP world to be entering the dodgy territory of secured lending - or, worse still, securitisation?

A substantial part of the Community

There are some strange things in European Community trade mark law, both the Regulation and the Directive. That much became apparent to me this morning, reading the first few pages of the trade marks chapters in Llewellyn & Cornish. Then along came the Court of Justice's judgment in Case C-301/07 Pago, which in itself doesn't seem very weird but which certainly has some weirdness around it.

Pago involved the Austrian fruit drink maker - yes, the famous one, obviously. I'm sure I have seen this product somewhere. Faced with what it optimistically reckoned to be a trade mark infringement, in the sort of absolutist way trade mark owners seem to look at this sort of thing, it claimed that Tirolmilch - who had the temerity to sell a rather different drink in a bottle not unlike that depicted in one of Pago's registered trade marks, the exiguous similarity evidently not counteracted by the application of the name LATELLA to the bottle - was infringing under Article 9(1)(c) of the Community trade marks regulation.

That article is, of course, the one that establishes dilution s a form of infringement. A trade mark can only enjoy its protection if it has a reputation. Pago's trade mark had, they thought, a reputation, but not outside Austria, so was that enough? And (the referring court went on) if it wasn't, could the trade mark owner have a remedy in Austria but not elsewhere in the Community where the mark did not have a reputation?

Call me old-fashioned, but I am baffled by the idea which the law seems to allow for of a trade mark without a reputation. How can a trade mark function without one? The law doesn't ask for any particular amount of reputation - it's not as if it has to be a well-known trade mark, which of course would open up another can of worms. In fact, the French version of the Regulation says "jouit d'une renommée dans la Communauté", and une renommé means (my fat Collins-Robert dictionary tells me) means fame or renown, and although "reputation" is also given as an alternative it seems to me that the French version is asking for something a bit stronger. Especially as all trade marks have some degree of reputation, even if it is vanishingly small.

The words "in the Community" also arise in Article 50, which deals with grounds for revocation. If the mark has not been used in the Community for five years , it is vulnerable. But does it have to be used throughout the Community, or will use in part of it be enough? And if part, does it have to be a substantial part, and if so what is a substantial part? It seems to me that the question is, in effect, the same.

In Case C-375/97 General Motors the Court decided (in a case concerning the Directive and the harmonised Benelux law) that a reputation in the Benelux, or part of the Benelux, was going to be good enough, and in the nature of these things the Court didn't have to go further - it deals in matters of principle, which the national courts have to apply. In Pago, the Court decided - coming perilously close, I would have thought, to getting involved in the facts - that Austria was a substantial enough part of the Community, and if there was a reputation there that was sufficient for Article 9(1)(c) to be engaged. By extension, use in Benelux (or in just one Benelux country), or in Austria, would be sufficient to overcome a non-use challenge. I don't like it.

Community trade marks already tend to be too broad in their scope, because the Office has a liberal approach to specifications - basically, applicants can file for whatever they like and try to establish enough use before the five years is up (whereas in the UK there could be a "bad faith" challenge). In principle, one of these vast registrations can be secured by using it for goods or services within the specification in Luxembourg, or perhaps somewhere with a similar population (just under half a million): Cumbria, perhaps. Which makes me think that CTMs are grossly overpowered and offer far too much scope to absolutists to monopolise commercial signs over unjustifiably wide territories.

In the single market, the importance of national boundaries is greatly reduced - but Pago shows that national markets remain important, and why should the trade mark owner enjoy the powerful rights given under 9(1)(c) in places where his trade mark remains unknown?