17 April 2014

Learn how the IP Bill will affect you

The Intellectual Property Bill has passed through the Commons and now awaits royal assent. Although much attention has focused on clause 13 of the Bill which will create a new offence of unauthorized copying of a registered or registered Community design in the course of business the legislation makes a number of useful changes to registered and unregistered designs and patents law.

I have written a number of articles on the Bill for this blog:

I also made written submissions on the Bill as it passed through committee in the House of Commons.

My colleague, Thomas Dillon, has also analysed the Bill though he has tended to welcome clause 13 (see Thomas Dillon "UK: Intellectual Property Bill" 28 May 2013 4-5 IP/Tech blog).

On the 19 May 2014 my colleague, Alexander Rozycki, and I will lead a seminar on the Bill. I will present an introduction and overview tracing the legislative history from the Hargreaves review and outlining the main provisions. Alex, who specializes in IP crime, will analyse clause 13, the probanda for criminal liability, defences and countermeasures and will compare this clause with similar provisions in the Copyright, Designs and Patents Act 1988 and the Trade Marks Act 1994. I will conclude by discussing the procedural reforms such as extending the IPO opinions service to designs and other patent issues, introducing the appointed person into design registration appeals and, of course, the Unified Patent Court.

We make no charge for attending this seminar but you must reserve your place in good time as we have already had our first booking.  You can book through the link above or call George on 020 7404 5252. The seminar will start at 16:00 and will last for 2 hours with a break for refreshments.  CPD points for the SRA and BSB will be available. nline Ticketing for The Intellectual Property Bill powered by Eventbrite

10 April 2014

Equitable Interests in Patents and Patent Applications

In Yeda Research and Development Company Ltd v. Rhone-Poulenc Rorer International Holdings Inc and Others [2007] Bus LR 1796, [2007] BusLR 1796, [2008] 1 All ER 425, [2007] UKHL 43 Lord Hoffmann described s.7 (2) and (3) of the Patents Act 1977 as "an exhaustive code for determining who is entitled to the grant of a patent." For determining entitlement to the grant maybe because s.32 (3) of the Act provides that
"Notwithstanding anything in subsection (2)(b) above, no notice of any trust, whether express, implied or constructive, shall be entered in the register and the comptroller shall not be affected by any such notice."
But not necessarily to ownership because s.30 (1) states that patents and patent applications are personal property and sub-section (3) adds that they may vest by operation of law in the same way as any other personal property.

Disputes over equitable interests in patents or patent applications are fairly rare but they can arose in circumstances that fall outside s.7 (2) or (3). One such instance arose in Foster’s Australia Limited v Cash’s (Australia) Pty Ltd [2013] FCA 527. Another was French v. Paul Julian Mason and another  [1998] EWHC Patents 290.  In Twentieth Century Fox Film Corp. and Others v Harris and Others [2013] EWHC 159 (Ch), [2013] 2 WLR 1454, [2014] 1 CH 41, [2013] WLR(D) 42, [2013] EMLR 16, a copyright case, it was argued unsuccessfully that the infringement of an intellectual property right creates a constructive trust in the fruits of such infringement. Of those three cases, the only one in which a constructive trust was actually found to have arisen was the first.  It has to be treated with some caution for, as Mr Justice Newey observed in Harris at paragraph [28 (ii)]:  "The Australian approach to constructive trusts is by no means the same as that in this jurisdiction."

In Forster's case Foster's Australia Limited ("FAL") the claimant (or "applicant" as it is called in Australia) was a member of a well-known group of companies in beer and other alcoholic beverages ("the Group"). FAL sued Cash's Australia Pty Ltd for patent and registered design infringements ("Cash"). Cash’s responded, in part, that the patents and designs in question were invalid and liable to be revoked because the original applications to IP Australia were not made in FAL’s name but in the name of another company in the Foster’s Group.  The Federal Court of Australia ordered the question of whether the patents and design registrations were invalid and liable to be revoked as preliminary issues.

At the time of the applications for the patents and registered designs Foster's Group Ltd ("FGL") was the ultimate holding company of the Group and FAL was its wholly owned subsidiary. Most of the staff working for the Group were employed by another wholly owned subsidiary of FGL called Foster’s People Pty Ltd ("People"). The contract of employment under which People employed its staff including the Group's in-house legal advisers and patent attorneys contained the following clause:
"In your role for Foster’s People [FPPL] you may be required to undertake duties relating to the business of any company in the Foster’s group of companies (Foster’s Group). The Foster’s Group comprises all companies related to Foster’s Group Limited (Foster’s) within the meaning of the Corporations Act 2001.
You must:
(c) Use your best endeavours to promote and enhance the interests, profitability, growth and reputation of Fosters and the Foster’s Group companies;
(d) Act in the best interests of Foster’s and not intentionally do anything which is or may be harmful to Foster’s or any Foster’s Group company ..."
The Group and its member companies adopted a policy known as the IP Policy which stated:
"Intellectual property constitutes one of the most valuable assets of the Foster’s Group, underpinning its brands, business operations, commercial relationships and innovations developed within the businesses.
Foster’s is committed to “best practice” management of its intellectual property assets to ensure that they are fully secured, controlled and utilised to best effect to support and promote its business objectives.
Specifically, Foster’s policy is to implement a global management approach to its intellectual property assets through centralised management of registrable intellectual property and the provision of advisory services to the Group’s businesses on the control and use of intellectual property generally. This purpose of this policy is to both ensure appropriate security of intellectual property assets and to extract maximum value from utilisation of these assets in the competition market place."
At the time of the patent and design applications it was common for FAL to be the registered proprietor of much of the registered IP rights ("IPR") relating to the Group’s beer business, although other companies within the Group frequently used those IPR.

By a written agreement dated 23 Dec 2008 FAL commissioned Dot Design Pty Ltd ("Dot") a product design and development company to design, manufacturer and deliver a range of draught beer tapware and handles for the Group's bars and pubs. The agreement provided for all IPR to belong to and be owned by FAL immediately and absolutely for its own use and benefit in any manner it sees fit without any further fee payable to or consent required from Dot. It also required Dot to assign or transfer all relevant IPR to FAL and sign off all such documents and do all such things necessary in order to give effect to that clause. Pursuant to that agreement Dot designed and developed a mounting device and badge holder for which the FGL applied for patents and registered designs.

S.15 of the Australian Patents Act 1990 is very similar to s.7 (2) of the British Act:
"Subject to this Act, a patent for an invention may only be granted to a person who:
(a) is the inventor; or
(b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or
(c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or
(d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c)."
Similarly, s.13 (1) of the Australian Designs Act 2003 provides:
"A person mentioned in any of the following paragraphs is entitled to be entered on the Register as the registered owner of a design that has not yet been registered:
(a) the person who created the design (the designer);
(b) if the designer created the design in the course of employment, or under a contract, with another person – the other person, unless the designer and the other person have agreed to the contrary;
(c) a person who derives title to the design from a person mentioned in paragraph (a) or (b), or by devolution by will or by operation of law;
(d) a person who would, on registration of the design, be entitled to have the exclusive rights in the design assigned to the person;
(e) the legal personal representative of a deceased person mentioned in paragraph (a), (b), (c) or (d)."
Cash argued that both the patent and design registrations were invalid because FGL was neither the inventor nor the designer and it did not have a contract with the inventor or designer that fell within the provisions of either statute.

Mr. Justice Kenny decided both preliminary issues against Cash on other grounds. However, and this is the interesting bit, His Honour observed at paragraph [126]:
"There was an alternative analysis put forward by FAL at the hearing to the effect that FGL held the registration of the design as a constructive trustee for FAL. In this case, applications for registration of the designs were made by FGL, although FAL, not FGL, was entitled to registration of the designs. FAL had acquired its entitlement under a commercial agreement with Dot. As already noted, the agreed facts and the evidence made it likely that, save for Allen’s, no-one at FAL or FGL (or anyone else acting for them) knew that FGL, rather than FAL, was the applicant for registration. Save for Allen’s, the evidence justifies the conclusion that no representative of either company turned his or her mind to this fact until late on 13 January 2010, when Mr O’Keefe noticed what had occurred."
The judge continued in the next paragraph:
"In the circumstances of the case, I would find, if it were necessary to do so, that FGL held the applications for design registration and registration of the designs as constructive trustee for FAL. Both companies were, of course, members of the Foster’s Group; and, as the Policy of the Group stated, intellectual property of this kind was to be devoted to the interests of the Group, specifically by securing it and obtaining “maximum value from utilisation of these assets in the competition market place”. 
In support of that finding Mr Justice Kenny relied on Mr Justice Gordon's dicta in Figgins Holdings Pty Ltd v Registrar of Trade Marks (1995) 59 FCR 147 at 149:
"[W]here an application for registration is made by other than the true owner, the court may rectify the situation by imposing a constructive trust on the application and subsequent registration from the date on which the application was lodged and additionally or alternatively rectifying the register through substitution of the true owner’s name."
This rule derives from the High Court of Australia's decision in Chang v Registrar of Titles (Vic) [1976] HCA 1; (1976) 137 CLR 177 which was no doubt one of the authorities that Mr Justice Newey would have had in mind in Harris.

In French the claimant, one Christopher Simon French ("Mr French") had invented a sleeper earring which was marketed under the name "The Invincible". When he invented the sleeper the inventor was a director, shareholder and employee of a small close company called Acme Jewellery Ltd ("Acme") of which one Paul Julian Mason ("Mr Mason") was the other director and shareholder. Acme applied for and was granted patents for the invention.  Mr French and Mr Mason fell out big time as a result of which Mr French was excluded from the management of the company. Mr French sued for unfair dismissal, relief under s.459 of the Companies Act 1985 and a declaration that Acme held the patents on constructive trusts for Mr French. The unfair dismissal proceedings were compromised by a payment to Mr French from Acme. In the unfair prejudice proceedings Mr French also succeeded in obtaining an order for Mr Mason to purchase Mr French's shares at a valuation that allowed no discount for his minority share but on terms that Mr French would not apply for employee's compensation under s.40 of the Patents Ac 1977. The grounds upon which Mr French claimed an equitable interest in the patents was that Acme had been a quasi partnership and that the company and Mr Mason owed a fiduciary duty to Mr French to ensure that the objectives of the quasi partnership were carried out.  By applying for patents in the name of the company rather than that of Mr French the company and Mr Mason had breached that duty. In the words of the statement of clam:
"The lodging of the completed specification by [Mr Mason] in the name of [Acme] was unconscionable and a breach of the fiduciary duty owed by [Mr Mason] to [Mr French]. Once [Mr Mason] has, by procuring the dismissal of the Plaintiff, evinced an intention to repudiate the agreement between himself and [Mr French] as appears in Paragraph 9 herein, it was unconscionable to continue with the lodging of the specification in the name of [Acme] thereby appropriating [Mr French's] invention where [Mr Mason and Acme] have been unjustly enriched."
The company and Mr Mason applied for the claim to be struck out.

The application came on before Mr Justice Pumfrey.   The judge considered whether there had been an institutional constructive trust of a remedial constructive trust.

As to whether there had been an institutional constructive trust, His Lordship said at paragraph [13]:
"So far as the institutional constructive trust is concerned, the question is whether on the facts pleaded the plaintiff has the beneficial ownership of the patent. As I understand it, it is essential to consider the circumstances in which the disputed property (the invention) came into the alleged trustee's hands. Where it represents an advantage obtained by unconscionable dealing, or property obtained in breach of fiduciary obligations, or is obtained in consequence of a breach of trust, the position is no doubt clear. But the property subject to the alleged constructive trust must have come into the hands of the alleged trustee in consequence of such behaviour. In a case to which section 39 of the Patents Act 1977 applies, I am quite satisfied that there is no question of the employee retaining beneficial ownership as against the employer. Were this the case, the employer would require a licence to work the invention, a possibility of which there is no suggestion anywhere in the section. Where the section speaks of the invention being "taken to belong to his employer for the purposes of this Act and all other purposes" it is in my view plainly talking about ownership in a sense which is not technical, and which does not distinguish between legal and equitable ownership. It is talking of the ownership which permits the owner to deal with the patent and to work under it."
Mr French had relied on the quasi partnership under which he had  obtained relief under s.459. The judge observed that "the use of the term quasi partnership is merely use of a convenient shorthand to describe a relationship in which the just and equitable ground for winding up may be invoked" but it does not affect the status of any of the parties to such proceedings and in particular it does not make them into partners. In Mr Justice Pumfrey's judgment there was no basis upon which the invention in Acme's hands could be said to have been impressed with a constructive trust in favour of Mr French because of the circumstances in which the invention came to be held by Acme.

As to whether there had been a remedial constructive trust the judge started with the observation that Mr French has obtained compensation for his unfair dismissal, and has also obtained an order under s 459 for his shares to be purchased at a price which does not reflect the fact that they are a minority shareholding. Mr French had a claim for compensation in relation to the use of the patents by Acme under s 40 of the 1977 Act. He observed at paragraph [20]:
"Plainly a company owes no fiduciary duties to its directors, and the directors owe no fiduciary duties to the members. Unfair dismissal or dismissal in breach of the contract of employment is not a breach of a fiduciary duty by the employer. What gives rise to the claim in the present case is purely the personal relationship between Mr French and Mr Mason."
He concluded in the next paragraph:
"I am quite satisfied that the claim arising out of the dismissal of Mr French cannot give rise to an imposed proprietary remedy affecting the patent. There is no nexus between the alleged breach and the remedy sought. To stigmatise the dismissal as being in breach of a fiduciary duty is irrelevant. It cannot affect the remedy. So far as the claim in relation to the filing of the divisional in 1992 is concerned, I have already explained why, if Acme were entitled to the invention, the act of filing the divisional cannot be described as a breach of any duty at all. It follows that the claim for a remedial constructive trust must fail."
As I have noted above, one of the terms upon which Mr French was granted relief was that he would not claim  compensation under s.40. Referring to that provision, the judge struck out the claim on the ground that the action was also an abuse of the process of the court.

In Harris the claimants argued that, where a copyright is infringed, the copyright owner has a proprietary claim to the whole proceeds of the infringement. Those proceeds, it was submitted, are held on constructive trust for the copyright owner. In support of that contention the claimants argued that s. 96 (2) of the Copyright, Designs and Patents Act 1988 states that, in an action for infringement of copyright, "all such relief by way of damages, injunctions, accounts or otherwise is available to the plaintiff as is available in respect of the infringement of any other property right".  In their submission the words "or otherwise" could cover a proprietary remedy. Mr Justice Newey threw out the application on the grounds that it was unsupported by authority and wrong in principle though it was common ground that a copyright, like any other IPR could be held on constructive, implied and resulting trusts.

Although the comptroller has very extensive jurisdiction under s.8. s.12 and s.37 of the Patents Act 1977 which includes a power to revoke a patent under s.72 to allow a patent to be granted to the person entitled to it, it seems unlikely that he could determine the issues that arose in any of the cases that have been discussed above. Apart from every other consideration he is precluded by s.32 (3) from taking notice or being affected by any trust whether express, implied or constructive. That means that any consideration of such issues has to be by the Patents Court or the Intellectual Property Enterprise Court.

If anyone wants to discuss this article or any of the issues arising out of it he or she should call me on 020 7404 5252 or fill in my contact form. If he or she wants to discuss Foster's or any of other Australian case the best person to approach is Robert Griffiths QC who is also a member of the New South Wales Bar. Members of the public can also tweet me, write on my wall, or contact me through G+, Linkedin or Xing.

07 April 2014

Trade Marks and Internet Searches: Lush v Amazon

Jane Lambert

In Cosmetic Warriors Ltd and Another v amazon.co.uk Ltd and Another [2014] EWHC 181 Mr John Baldwin QC, sitting as a judge of the High Court, had to decide whether causing advertising  to appear on an an Internet user's screen for products that competed with those of the claimants whenever  the user entered the claimants' trade mark into a search box amounted to an infringement of the claimants' mark.

The Parties
The claimants ("Lush") manufacture and supply cosmetics under the Lush brand. They are well known for their colourful soaps and bath bombs.  The first named claimant is the registered proprietor, and the second its licensee, of Community trade mark number 01388313 ("the CTM") under which the word LUSH is registered for
"Perfumes; bath preparations; non-medicated toilet preparations; cosmetic preparations; lotions, powders and creams all for use on the skin; dentifrices; depilatory preparations; deodorants; toilet articles; preparations for care of the hair; shampoos; soaps; essential oils; massage creams and lotions"
in class 3 and
"Pharmaceutical preparations and substances; products and preparations for the care of skin, hair, teeth or nails"
in  class 5.

The defendants are members of the Amazon group which claims to be the largest on-line retailer in the world. Amazon has perfected software that analyses Internet users' behaviour and presents advertisements for products likely to be of interest to them either on Google through Google AdWords or on Amazon's own website whenever a user keys in a particular search term. It was that software that gave rise to this action.

The Complaint
Lush complained had three sets of complaints.

The first was that the following advertisement would appear whenever the word LUSH in  upper or lower case was entered into Google:
"Lush Soap at Amazon.co.uk
amazon.co.uk is rated *****
Low prices on Lush Soap
Free UK Delivery on Amazon Orders."
The problem for Lush was that they do not sell their soap or indeed any of their other products through Amazon because they fear that it would be bad for their reputation in the UK if they did. Consequently, anyone clicking on the link would be taken to a page that showed only competing products.

The second complaint was that the following advertisement would appear whenever a user searched for "lush cosmetics bath bomb":
"Bomb Bath at Amazon.co.uk
amazon.co.uk is rated *****
Low prices on Bomb Bath
Free UK Delivery on Amazon Orders."
Again, the user would be led to a page advertising competing bath bomb products whenever he or she clicked the bath bomb link

Lush's third complaint was that the following page would appear whenever a user typed the word "LUSH" in upper or lower case into the search box on the Amazon website:

Lush argued that Amazon's method of advertising amounted to a straightforward infringement of CTM 01388313 under art 9 (1) (a) of the Community trade mark regulation (Council Regulation  (EC) No 207/2009 of 26 February 2009 on the Community trade mark OJ 24.2.2008 L 78/1) in that a sign identical to the CTM had been used in relation to goods that were identical to those for which the CTM had been registered.

The Judgment
Mr. Baldwin found that Lush's first and second complaints were well founded but not the second.

Ratio Decidendi
The judge's starting point at paragraph [29] was
"that, to establish infringement under Article 5(1)(a) of the Directive [the equivalent to art 9 (1) (a) of the Community trade mark regulation], six conditions must be satisfied: (i) there must be use of a sign by a third party within the relevant territory, (ii) the use must be in the course of trade, (iii) the use must be without the consent of the proprietor of the trade mark, (iv) the use must be of a sign which is identical to the trade mark, (v) the use must be in relation to goods or services which are identical to those for which the trade mark is registered, and (vi) the use must be such as to affect or be liable to affect the functions of the trade mark."
From paragraphs [75] and [98] of  the Court of Justice's judgment in Case C-236/08 Google France SARL and another v Louis Vuitton Malletier SA and others [2010] EUECJ C-236/08, 3 ALR Int'l 867, [2010] ECR I-2417, [2011] All ER (EC) 411, [2010] RPC 19, [2010] ETMR 30, [2011] Bus LR 1 Mr Baldwin discerned the following principles:
"1. where an advertiser purchasers from a search engine operator (such as Google) a keyword which is identical to a third party's trade mark in order to display a link to a site on which he offers his goods or services for sale, that advertiser uses the third party's trade mark in the course of trade.
2. where an advertiser, through use of a keyword, is seeking to offer its own goods or services as an alternative to those of the third party, the advertiser uses the sign comprising the keyword in relation to those goods or services
3. in the circumstances of the foregoing, it is for the national court to assess, on a case-by case basis, whether the use made by the advertiser affects the functions of the trade mark.
4. whether the function of a trade mark is adversely affected depends in particular on the manner in which the ad is presented,
5. the function of indicating origin will be adversely affected if the ad does not enable normally informed and reasonably attentive internet users or enables them only with difficulty, to ascertain whether the goods or services referred to in the ad originate from or are connected with the proprietor of the mark or, on the other hand, from a third party
6. ordinary keyword advertising is not liable to have an adverse effect on the advertising function of a trade mark."
 As to whether the use made by Amazon of the word "Lush" affected the functions of the CTM Mr Baldwin referred to the following paragraphs of the judgment in  Google France:
"84 The function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party (see, to that effect, Céline, para.27 and the case-law cited).
85 In such a situation, which is, moreover, characterised by the fact that the ad in question appears immediately after entry of the trade mark as a search term by the internet user concerned and is displayed at a point when the trade mark is, in its capacity as a search term, also displayed on the screen, the internet user may err as to the origin of the goods or services in question. In those circumstances, the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark (see, by way of analogy, Arsenal Football Club , para.56, and Case C-245/02 Anheuser-Busch Inc v Budejovicky Budvar NP [2004] E.C.R. I-10989, [2005] E.T.M.R. 27, para.60).
86 Still with regard to adverse effect on the function of indicating origin, it is worthwhile noting that the need for transparency in the display of advertisements on the internet is emphasised in the European Union legislation on electronic commerce. Having regard to the interests of fair trading and consumer protection, referred to in recital 29 in the preamble to Directive 2000/31, Art.6 of that Directive lays down the rule that the natural or legal person on whose behalf a commercial communication which is part of an information society service is made must be clearly identifiable.
87 Although it thus proves to be the case that advertisers on the internet can, as appropriate, be made liable under rules governing other areas of law, such as the rules on unfair competition, the fact nonetheless remains that the allegedly unlawful use on the internet of signs identical with, or similar to, trade marks lends itself to examination from the perspective of trade-mark law. Having regard to the essential function of a trade mark, which, in the area of electronic commerce, consists in particular in enabling internet users browsing the ads displayed in response to a search relating to a specific trade mark to distinguish the goods or services of the proprietor of that mark from those which have a different origin, that proprietor must be entitled to prohibit the display of third-party ads which internet users may erroneously perceive as emanating from that proprietor."
 On AdWords the deputy judge referred to the judgments of the Court of Appeal in Reed Executive Plc and Others v Reed Business Information Ltd and Others  [2004] RPC 40, [2004] ETMR 56, [2004] EWCA Civ 159, (2004) 27(6) IPD 27058, [2004] Info TLR 55, [2004] Masons CLR 29 and Mr Justice Henderson in 32Red Plc (A Gibraltar Company) v WHG (International) Ltd. and Others [2011] ETMR 21, [2011] EWHC 62 (Ch).

As to Lush's first complaint, there was no doubt in the light of Google France that Amazon had used a sign identical to the CTM in relation to identical. The only issue seriously in dispute was whether such use affected or was likely to affect the functions of the trade mark. On that point Amazon had argued that no Internet user was likely to be misled by ads such as the one complained of as he or she would be very familiar with them and was likely to ignore them but if a user did click the link in the ad he would quickly see that Amazon did not offer Lush products. Mr Baldwin rejected that argument at paragraph [42]:
"In my judgment, Lush establishes infringement with respect to this class of case. I consider that the average consumer seeing the ad in paragraph 8 above would expect to find Lush soap available on the Amazon site and would expect to find it at a competitive price. Moreover, I consider that it is likely that if he were looking for Lush soap and did not find it immediately on the Amazon site, then he would persevere somewhat before giving up. My reason is that the consumer is likely to think that Amazon is a reliable supplier of a very wide range of goods and he would not expect Amazon to be advertising Lush soap for purchase if it were not in fact available for purchase. Thus, on the facts of this case, I reject Mr Carr's argument to the effect that the average consumer would, without difficulty, ascertain that the goods referred to by the ad were not the goods of or connected with Lush, the Claimants."
The same point arose with regard to Lush's second complaint. Lush had argued "that it was clear that the average consumer would expect the sponsored link to be of goods which were identified from the search term entered by the consumer." Mr. Baldwin rejected that argument on the ground that it failed "to recognize that consumers are familiar with sponsored ads and are used to seeing such ads from competing suppliers." Lush are brand conscious and had made great efforts to build up a reputation for the Lush mark. The average consumer would not expect to find Lush products on a sponsored search particularly if the same search sparked off all sorts of similar sponsored ads from retailers other than Amazon.

According to Amazon the third complaint went to the heart of Amazon's business model. Amazon contended that the generation of the page shown above did not amount to "use" of the CTM or, if it did, it ought to be allowed because
"Amazon's search facilities are of benefit to the consumer since they enable easy navigation of the Amazon catalogue and enable consumers to locate information and decide for themselves whether that information is relevant. He submitted that the search engine places the consumer in control of the search process and that Lush are seeking by this action to remove that control from consumers and thereby restrict or hinder competition. He urged that intellectual property rights should not be exercised in a way which unduly interferes with the basic right of the public to access technological development, relying onGoogle France and the observations of Lord Sumption in Public Relations Consultants Association Ltd v Newspaper Licensing Agency [2013] UKSC 18."
Mr Baldwin rejected that argument shortly at paragraph [53]:
"In my judgment, however this right of the public to access technological development does not go so far as to allow a trader such as Amazon to ride rough shod over intellectual property rights, to treat trade marks such as Lush as no more than a generic indication of a class of goods in which the consumer might have an interest."
The reason why Amazon argued that it did not use the CTM was that the Court of Justice had said ub Case C-324/09 L’Oréal SA and Others v eBay International AG and Others [2011] RPC 27, [2011] EUECJ C-324/09, [2011] ETMR 52, [2012] Bus LR 1369, [2012] All ER (EC) 501, [2012] EMLR 6:
"C— The eighth question concerning the use of signs corresponding to trade marks in offers for sale displayed on the website of an operator of an online marketplace
98    By its eighth question, the referring court asks, in substance, how the display, on the website of the operator of an online marketplace, of signs identical with or similar to trade marks is to be regarded in the light of Directive 89/104 and Regulation No 40/94.
99    In that regard, it is first necessary to point out that, where sales are made through online marketplaces, the service provided by the operator of the marketplace includes the display, for its customer-sellers, of offers for sale originating from the latter.
100    Next, when such offers relate to trade-marked goods, signs identical with or similar to trade marks will inevitably be displayed on the website of the operator of the online marketplace.
101    Although it is true that, in those circumstances, those signs are 'used' on that site, it is none the less not evident that it is the operator of the online marketplace that is 'using' them, within the meaning of Directive 89/104 and Regulation No 40/94.
102    If a sign identical with, or similar to, the proprietor's trade mark is to be 'used', within the meaning of Art.5 of Directive 89/104 and Art.9 of Regulation No 40/94, by a third party, that implies, at the very least, that that third party uses the sign in its own commercial communication. In so far as that third party provides a service consisting in enabling its customers to display on its website, in the course of their commercial activities such as their offers for sale, signs corresponding to trade marks, it does not itself use those signs within the meaning of that EU legislation (see, to that effect, Google France and Google, paras.56 and 57).
103 As was stated, inter alia by the United Kingdom Government and the Commission at the hearing and by the Advocate General at points 119 and 120 of his Opinion, it follows that the use of signs identical with or similar to trade marks in offers for sale displayed on an online marketplace is made by the sellers who are customers of the operator of that marketplace and not by that operator itself.
104 Inasmuch as it enables that use to be made by its customers, the role of the online marketplace operator cannot be assessed under Directive 89/104 or Regulation No 40/94 , but must be examined from the point of view of other rules of law, such as those set out in Directive 2000/31 , in particular in s.4 of Chapter II , which concerns the 'liability of intermediary service providers' in electronic commerce and comprises Arts.12 to 15 of that directive (see, by analogy, Google France and Google , para.57).
105 In view of the foregoing, the answer to the eighth question is that the operator of an online marketplace does not 'use' —for the purposes of Art.5 of Directive 89/104 or Art.9 of Regulation No 40/94 —signs identical with or similar to trade marks which appear in offers for sale displayed on its site."
Mr Baldwin was unimpressed. He said at paragraph [55]:
"It is clear from this that if third party sellers were using the Lush mark on their goods and were using the Amazon site merely as an online market place, then Amazon would not be using the mark. But that is not this case. None of the products offered on Amazon bear the Lush trade mark of the Claimants (those that do bear the Lush mark, eg Lush Hair Extensions, do so because they are outside the scope of the Claimants' trade marks)."
He continued at paragraph [57]:
"The facts of the present case are quite different from those in either Google France or in L'Oreal v eBay. In brief, in this case Amazon is both the designer and operator of the search engine and the operations on its site include the three categories referred to in paragraph 15 above. Although it may be wearing different hats when it designs its search engines and sells its goods, I have no doubt that the design of the search engine is carried out in order to maximize the sale of goods from the site. It is this philosophy which has made Amazon the UK's biggest online retailer. Nor do I consider it necessary to distinguish for the purposes of determining liability the three separate categories of sales via the website. In relation to the third category, Amazon may just be an online market place but the items in this category are mixed up with those in the other two categories, and Amazon's involvement in the transactions of these other two categories is more than sufficient for it to be commercially involved in the offering for sale and selling; the display on the website is part of its own commercial communication within paragraph [102] of L'Oreal v eBay. In my judgment this use is much more than merely use in a service consisting of enabling its customers to display on its website signs corresponding to trade marks."
Returning to the question of whether Amazon's use of the word "Lush" in generating the web page complained of affected the functions of the CTM the deputy judge held that Amazon could not be held responsible for the typing in by a customer of the word Lush into its search box (paragraph [58]). However, it could be held liable for its software offering consumers "Lush Bath Bombs" and other products the moment they typed in the letters "Lu". In His Lordship's judment the average consumer was unlikely to know how the software worked and was likely to believe that it was "intended to be helpful to him and is some consequence of other searches that have been carried out". He would conclude that that if he were looking for Lush Bath Bombs on Amazon, he would find them by clicking on that menu item. Mr Baldwin rejected in terms the contention that "the average consumer who was typing Lush into the search box would think that the drop down menu reference to Lush Bath Bombs was a reference merely to products which were similar to or competitive with the Lush product." He concluded at paragraph [75] that
"The use complained of by Lush clearly damages the origin function and the advertisement and investment function of the Lush trade mark....."
Although I struggle to appreciate the distinction  that Mr Baldwin drew between the first and second complaints I believe his reasoning as a whole will be hard to challenge however inconvenient it may be for Amazon and other on-line retailers.

The only thing that worries me is whether he complicated the issue that he had to resolve by taking as his starting point the 6 point summary that he set out at paragraph [29] of his judgment and I have reproduced in full above.  The real argument was the 6th issue and I suspect that that arose because there was a defence under the Trade Marks Act 1938 that a mark was not being used in a trade mark sense. That was the point that arose in Case C-206/01 Arsenal Football Club v Reed [2002] ECR I-10273, [2002] EUECJ C-206/01, [2003] Ch 454, [2003] 3 WLR 450, [2003] CEC 3 and it was knocked on the head pretty comprehensively by the Court in that reference. It is a particularly English notion that is very attractive but has no real place in the Directive or CTM Regulation.

I suggest that Mr Baldwin could have arrived at the same result more simply and directly by considering the language of art 9 (1) (a) of the CTM Regulation.  In this regard it is interesting to note in passing that throughout his judgment the deputy judge referred not to the Regulation but the Directive even though the case concerned a CTM and not a British trade mark. The wording of the provision is as follows:
"A Community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
(a)    any sign which is identical with the Community trade mark in relation to goods or services which are identical with those for which the Community trade mark is registered."
Unlike s.10 (4) the Trade Marks Act 1994 "use" is not defined in the Regulation but paragraph (2) is to similar effect:
"(a) affixing the sign to the goods or to the packaging thereof;
(b) offering the goods, putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder;
(c) importing or exporting the goods under that sign;
(d) using the sign on business papers and in advertising."
To my mind, there is no doubt that Amazon was offering goods within the specification or that it was advertising such goods using that sign within the meaning of art 10 (4) (d). It is true that it did not label those goods "Lush" but it offered them to customers in response to enquiries about Lush products.  Being an unsophisticated North Country lass I don't see a whole heap of difference between software that analyses a customer's on-line behaviour and offers competing products and the substitution by a barman of beverage A for beverage B as in the Showerings cases 40 years ago. I do have some sympathy for the argument that intellectual property rights have to be weighed against consumer interests but that is something for the legislature - in this case the European Parliament and Council - and not the judiciary to fix.

If anybody wants to tick me off for spouting nonsense my phone number is 020 7404 5252 and I can be contacted there during normal office hours. Outside those hours and indeed at any other time you can send me a message at any time through my contact form  You can also tweet me, write on my wall or get in touch through G+, Linkedin or Xing,

01 April 2014

What Price for IPO plc's Shares at its IPO?

The Royal Mail's Privatization was too cautious according to the National
Audit Office. Will Vince Cable ask too much for the shares of IPO Plc?

Ever since the announcement by Viscount Younger of Leckie that the Intellectual Property Office is to be privatized, there has been intense speculation in the City as to what the price that the shares will be offered to the public upon the agency's privatization. Originally it was rumoured that the price would be 255p but following the National Audit Office's criticism of the Royal Mail Privatization analysts now believe that it could be set very much higher. A figure of 375p has been suggested by some analysts, especially after the IPO's staff received tempting offers from the Bogof hedge fund.

According to the South Wales Argus and the Western Mail there has been a rush of enquiries for top of the range models at Sytner the luxury car distributor for Newport.  Jewellers and pubs in the town have also noticed an upturn in business.  When I was last last in Newport for a performance by Ballet Cymru I met two of them whom I know only as Lawrence and Gary in The Dragonfly at Lakeside Drive who insisted on plying me with drinks all evening while singing "We're in the Money" somewhat out of tune.

So what sort of business is IPO Plc? According to its latest report and accounts its turnover was nearly £74 million in 2013 which generated an operating surplus of £8.3 million. Renewal fees for British and European patents generated the lion's share of that revenue of over £50 million with trade mark applications providing a further £10 million. Analysts believe that there is scope for developing the publications and commercial services side of the business which contributed only £138,000 and £187,000 respectively in the IPO's last year as a government entity.