Wednesday 23 October 2019

Shanks v Unilever: Supremes identify outstanding benefit

The provisions of the Patents Act 1977 on compensation of employees for certain inventions (principally s.40) have no doubt been a disappointment to their proponents. The Trade Union Congress was influential in getting them included in the Act, and my friend Lord Lloyd of Kilgerran took a leading role in piloting them through Parliament, but they hardly ever deliver for the employee-inventor (Kelly and Chiu v GE Healthcare [2009] EWHC 181 (Pat) being the single swallow that could not make a summer). The problem is that the invention has to be of outstanding benefit to the employer, and the bigger the employer the harder it is to make that sort of impression on its business.

Shanks v Unilever [2017] EWCA Civ 2 was perhaps the paradigm case of an employee's invention not being of outstanding benefit to his employer because the company was too big to pay. £24 million is  not a lot to Unilever. Although the Court of Appeal recognised that the Hearing Officer who made the initial determination had to take many factors into account, it also recognised that the size of the employer eclipsed the others. "Too big to pay" is not the general rule, but it comes close. Or did, until today.

That case has now given us Shanks v Unilever Plc & Ors [2019] UKSC 45 (23 October 2019) in which Lord Kitchin (with whom the other Supremes, unsurprisingly given his background in IP law, agreed) warned that tribunals “should be very cautious before accepting a submission that a patent has not been of outstanding benefit to an employer simply because it has had no significant impact on its overall profitability or the value of all of its sales”.

A benefit, to be outstanding, has to stand out (the sort of statement of the obvious that judicial decisions are required from time to time to make). The consequence of this is perhaps rather less obvious: to stand out, the thing being considered has to be compared against something else. And what is the something else against which it has to be compared - the multinational ice-cream-to-deodorants behemoth, or Unilever UK Central Resources Ltd which actually employed him? The answer turns out to be a pragmatic one - although Professor Shanks OBE FRS FREng (as the judgment calls him) worked for a small cog in the Unilever machine, it was right to consider the benefit to Unilever rather than strictly to his employer. The Act contains what are designed to work as anti-avoidance provisions, so the employer cannot licence the patent at a peppercorn royalty so as to avoid liability for compensation, and this approach seems consistent with this.

The decision also confirms that the outstandingness (my word) of the benefit must be assessed before tax, and that the employee should be compensated for what his Lordship rather nicely called the affect of time on the value of money. The application had been made in 2006, and only came before a hearing officer in 2012 since when it has taken a further seven years to get to this stage, which was not something for which the court thought blame should be laid at the Professor's door.

So Prof Shanks's invention was of outstanding benefit to his employer, and he was entitled to a fair share of that benefit. The lower instances had done the heavy lifting on the calculations, which I guess are not for the Supremes to interfere with except to say that Arnold J had been wrong to reduce the Hearing Officer's 5 per cent to 3 on the interesting basis that Unilever were able to drive a harder bargain than others in licensing transactions on account of their very deep pockets which meant that they would be able to protect their patents vigorously. The percentage was applied to the £24 million that the Hearing Officer had identified as the benefit, and the Professor receives a nice £2 million in recognition of the significance of his invention.

Wednesday 16 October 2019

Case 371/18, Sky v Skykick: Advocate General on trade marks as a tool of monoplisation

The breadth of trade mark specfications, in part driven by the use of general, highly abstract, expressions, is a massive problem - not for trade mark owners, who often like to extend their monopolies, nor for registries which need fee income, but for new entrants who face problems with depletion of the stock of available trade marks and consequent foreclosure of the market. The issue was discussed critically in the otherwise rather smug and self-satisfied (and badly-translated, or perhaps written in the first place in bad English) Study on the overall functioning of the European Trade Mark System carried out by the Max Planck Institute for the Commission in 2013.

SkyKick is in the software business, and in particular migrating SMEs to cloud-based computing: its founders had worked at Microsoft on Office 365. When Microsoft lanuched a service under the name SKYDRIVE they ran into trouble with Sky, and unsurprisingly the same happened with SkyKick (despite clearance searches carried out by my old friends, Seattle's largest law firm, Perkins Coie, although I don't think any of my actual old friends are still there). Sky eventually sued SkyKick for trade mark infringement in the English High Court, and SkyKick counterclaimed for invalidity. The judge, Arnold J, who delivered a characteristic 358 page judgment ([2018] EWHC 155 (Ch)), sought guidance from the Court of Justice on two issues raised in the counterclaim.

The first concerned the requisite clarity and precision in the specification of goods. Sky's registration employed broad expressions such as "computer software". This the judge observed conferred a very wide monopoly on the owner, but it did not necessarily follow that it lacked clarity and precision: and it was not clear whether a lack of clarity and precision would be grounds for a declaration of invalidity, whether wholly or partly.

The second issue was whether a lack of intention to use a trade mark on some of the goods for which it was registered amounted to bad faith: and would bad faith invalidate the trade mark, either in its entirety or for the excess goods or services?

Five questions were put to the Court, and on 16 October Advocate General Tanchev gave his opinion.

First, he said that the list of absolute grounds for refusal is exhaustive. A lack of clarity and precision cannot in itself be an additional absolute ground. However, there could be an argument that an unclear or imprecise specification is contrary to public policy or public order, which is an absolute ground for refusal and also grounds for a declaration of invalidity. The register has to be clear and uncluttered: over-broad and general specifications dissuade competitors from entering the market. The trade mark owner can make itself appear bigger in the market than it really is - a variant of the angora cat problem in patent law. Unclear or imprecise terms in the specification can therefore be declared invalid - but not the whole registration, provided of course that some elements of the specification are sufficiently clear and precise. That said, the term "computer software" does not meet the standard. It confers on the proprietor "a monopoly of immense breadth', and is contrary to the public interest. The term is too general, and the goods or services covered too variable. Laddie J reached much the same conclusion, back in 1995 in Mercury Communications v Mercury Interactive [1995] FSR 850.

If the Court follows the Advocate General this could make a lot of registrations vulnerable, and it would not be limited to computer software.

The next two questions concern bad faith. The Advocate General suggests that, "in certain circumstances", registering a trade mark with no intention to use it in connection with goods or services within the specification, could amount to bad faith, which would be an absolute ground for refusal. This could be the case, the AG said, where there is no commercial logic behind the inclusion of goods or services, or where it is filed simply to stop a third party.

In answer to the fifth question, the AG said that s.32(3) of the Trade Marks Act 1994 (which requires a declaration as part of the application process) is compatible with the Directive, but that a false declaration in itself does not amount to bad faith. That looks like a very nuanced distinction.

The AG seems to be grasping an opportunity to to shift the balance of trade mark practice in favour of new entrants to markets, who suffer the problems of depletion and foreclosure that arise from cluttering of the register. In the introduction to his opinion, he comments critically on the state of the
law. Trade mark owners will have to rethink their filing strategies or risk invalidity, and the commercial logic of their registrations will require careful thought. Have the Royal Marines Commando really got a commercial interest in bird tables (class 20)?

Thursday 3 October 2019

Contempt and failure to comply with court order

Price and others v Flitcraft Ltd and others [2019] EWHC 2476 (Pat) is a straightforward (though rare - at least until recently, because just a few months ago we had Juul Labs, Inc & Anor v Quickjuul Ltd & Ors [2019] EWHC 1281 (Ch) (21 May 2019)) case of a defendant failing to do what the court ordered to repair infringements of patent and copyright, and being held in contempt as a result. There seems to be no new or startling legal principles involved but its subject-matter demands attention.

Recorder Douglas Campbell QC found that the defendants had breached the injunction in several ways. They had distributed a brochure that showed the infringing product, which amounted to an offer to dispose of the product and was therefore a breach of the injunction even without any goods being supplied. It also contained matter that infringed the copyright, which was another breach. The defendants had also failed to give an affidavit of compliance with a destruction order, so there was another breach of the injunction.

It all added up to a deliberate decision to take a casual approach to complying with the injunctions, apparently unconcerned about how quickly they complied with the order, or indeed whether they complied at all. Although they argued that some acts were inadvertent, these flowed from the deliberate decision to take a casual approach. The corporate defendants' controlling mind, the fourth defendant, was in contempt and would be sentenced later.

Wednesday 2 October 2019

No implied duty of confidence in standards-setting body

A European Patents Office board of appeal has decided, on the face of it surprisingly, that there is no implied obligation of confidence on members of a standards-setting committee. Because there was no implied duty, the claimed invention was anticipated by documents available to the committee and therefore (within the broad definition in the Convention) available to the public. The invention therefore lacked novelty so could not be protected by a patent.

The consequences clearly follow the board's finding that there was no implied duty (and no express duty either, of course - one lesson from the decision must be that more use needs to be made of appropriate confidentiality or non-disclosure agreements). But why was there no implied duty?

The answer is that the process of devising standards is a collaborative one, involving extensive consultation among interested parties. At least, that's what the board said, and it sounds convincing. 'The evidence points to a system designed to guarantee a certain "privacy" of its data while at the same time being sufficiently pragmatic and flexible to allow consultation with other parties in order for it satisfactorily to fulfil its mission', it stated. Whether a document or other carrier of information be confidential or no is relative, to some extent, and 'a certain "privacy'" does not amount to confidentiality.

So the lesson is that if you are involved in standards-setting, you need to make use of appropriate agreements and undertakings. They might make the standards-setting harder work, but they will preserve the possibility of gaining patent protection. ALthough you could always file the application earlier.

T 2239/15T MPEG INPUT DOCUMENTS/Fraunhofer – Dolby 

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