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

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

Tuesday, 28 June 2016

EU Trade Mark Owners: Article 28 declarations – have you filed yours yet?

Former Guest Kat, Darren Meale, of Simmons & Simmons, London, continues to share his thoughts about Article 28 declarations.  Over from one Darren to another...

Like this and this, this one is about Article 28 declarations. Those are the declarations you have until September 2016 to file to ensure your pre-22 June 2012 EUTMs cover all the goods and services you think they cover.

We are now halfway through the six month period the EUIPO has granted trade mark owners to file Article 28 declarations.

In that time, the EUIPO has made a few public statements on how these are going, and I have my own experience from filing a significant number of them. So here are a few pearls of wisdom, and a few of frustration, to help you along with your portfolio reviews and your declarations:

1.    More relevant to you than you think. It is surprising how some portfolio owners assume their portfolios will not be eligible for or benefit from Article 28 declarations. Experience tells me there are many more EUTMs with specifications covering entire class headings than their owners think. Remember that your registration only has to cover the class heading, it doesn’t have to have the exact wording.

2.    Plenty of declarations to come? The EUIPO has undoubtedly (optimistically) underestimated the number too. It reported in its April Alicante News newsletter than around 300 declarations had been filed in the first month, reflecting, in its view, that “affected trade mark owners have essentially understood that declarations should only be considered when there is a real interest in filing one”. In my view, the reality is that while some very well prepared EUTM owners will have filed once the window opened in March, most still have it on their to do list for the summer. We have recently filed more than 120 declarations for just one (major) portfolio owner. We also know, based on analysis we have conducted using software we have developed to automate Article 28 declarations, that there are a significant number of EUTM owners who can (if they wish) file declarations at this order of magnitude. World Wrestling Entertainment, for example, could file up to 285 declarations. El Corte Ingles, the largest department store group in Europe, could file up to 379. Intesa Sanpaolo, the Italian banking group, could file up to a massive 425.

3.    What declarants are getting wrong. Those who have filed declarations early on have frequently made mistakes, according to the EUIPO. Most of those mistakes arise from not reading the EUIPO’s guidance and a failure to understand exactly what Article 28 declarations are and what they are for. Here are the top mistakes according to the Office:
a.    Declarations containing long lists of terms clearly covered by the literal meaning of the relevant class heading. The EUIPO was very clear it would not accept these – it will only accept terms not clearly covered already. It has already published a list of “orphan” goods and services which it will accept. If a term is not in that list, you can still file a declaration, but be prepared to argue for it as and when the EUIPO issues a deficiency notice.
b.    Declarations for goods and services not contained in the Nice classification alphabetical list in force at the time of filing. The Nice classification has changed over time – make sure you are using the right one, or you’ll get a rejection.

4.    Unhelpful online form. The EUIPO is not making life easy for us all. Its online form, which it encourages us all to use, only allows a declaration for one mark at a time, which is a slow and tedious way of dealing with a large portfolio. The form is not mandatory.

5.    Too much paper. To make matters worse, even if declarations are filed together in a batch – because they all relate to one EUTM owner – the EUIPO is dealing with them all individually. So individual recordal numbers, potentially multiple examiners, individual acknowledgement letters, individual deficiency notices, individual acceptances, and so on. So if you file 100 declarations, you’ll be getting 100s of pieces of paper back. This is not how things are done for other recordals. Thanks EUIPO!

6.    Are you authorised? The EUIPO has refused to accept declarations where the filer is not the representative on file. It is often the case that EUTM owners manage their own portfolios, but instruct external counsel to correspond with the EUIPO on particular issues. This additional red tape simply adds time and cost to the whole exercise. The EUIPO tells us it is requiring this because of “the risks of our users being targeted by companies employing the sharp practice of filing declarations without their consent or authorisation in an attempt to charge for unsolicited services”. Different examiners are taking different approaches. Some require a power of attorney, some require a letter of authorisation, some require nothing. So be warned!

7.    Once a declaration is accepted. In future, it is not going to be easy to see whether or not a declaration has been filed for a particular EUTM and what was in the declaration, at least not until the EUIPO makes some updates to its database software. If you take a look at this example, which is one of the early declarations which has now been recorded, although there is a notice in the “Publications” and “Recordals” section of the EUTM’s entry, to see what’s gone on you have to log in to the EUIPO website. You can then download the EUIPO’s letter confirming recordal of the Article 28 declaration, which only shows what the entire specification looks like now. If you want to see what has actually been declared, you will have to download the TM owner’s own declaration.

Three months to go – so plenty more time – but don’t forget! 

Monday, 27 June 2016

Never Too Late: If you missed the IPKat last week

Is it safe to come out yet?
You could be forgiven for being too distracted by the last week of news to catch up with IPKat... but not to worry! Never Too Late 102 is here with what you missed.

 Neighbouring rights for publishers: are national and (possible) EU initiatives lawful?

Eleonora Rosati explains the limitations and restrictions on introducing a sui generis neighbouring right for publishers. National initiatives may fall short, but introduction at the EU level could be possible.

The Pendulum Swings: US Supreme Court Makes it Easier to Obtain Patent Enhanced Damages

The US Supreme Court unanimously rejected the Federal Circuit's standard for obtaining enhanced damages for willful infringement in Halo Electronics v. Pulse Electronics and Stryker Corp. v. Zimmer (Halo). Mike Mireles puts the decision in context - a swing by the Supreme Court away from anti-patent sentiment.

US Supreme Court in Halo and Kirtsaeng makes IP victory sweeter for successful parties

Amerikat Annsley Merelle Ward explains the additional factor sweetening the success for successful litigants, now the US Supreme Court has lowered the hurdles for both patent enhanced damages and recovering attorney's fees in copyright cases.

Enlarged Board publishes decision: EPO President violated judicial independence

Merpel bring us the latest decision from the extraordinary "House Ban" disciplinary action. The Enlarged Board of Appeal refused to make a proposal to terminate the appointment of the Board Member, ordered reimbursement of his costs, and ordered the decision to be published. You can find the document here.

We are so, so sorry. The UK has voted by a narrow margin to leave the EU; IPKat will continue to report for the global community and chart the future territory for IP.

The IPKat has been so grateful to receive so much support from our European IP colleagues at this turbulent and uncertain time. Sven Klos writes:
We must rid ourselves of unconstructive criticism and the mortal danger of taking everything our union has achieved for granted. We must rediscover, love and cherish it.


Never too late 101 [week ending on Sunday 19 June] Procedure to remove EPO Board Member ends abruptly | Trade mark "bully" | EU Trade Secrets Directive | Cannibalism, Branding and Market Segmentation | A-G Szpunar declares Rubik's Cube shape mark invalid | Apple and the podcast industry | IP Inclusive | Coke defends opposition to 'ZERO' marks

Never too late 100 [week ending on Sunday 12 June] 5G wireless technology | European Commission Update: Revised SPC tender now open | CJEU considers implemetation of the private copying exception | CJEU gives guidance for communication to the public cases  Google's fair use defence succeeds against Oracle | The state of patent valuation | EPO's plans to restrict post-service employment | Tuesday tiddlywinks (pirates and cake)| Is obscurity a greater threat than piracy? | Justice Slade delivers judgement in Arthur J Gallagher Services v Skriptchenko 

Never too late 99 [week ending on Sunday 5 June] German Constitutional Court sends sampling saga into another loop | Who should pay for the independence of the Boards of Appeal? | Sorry not sorry - Justin Bieber and Skrillex deny copying | CJEU gives guidance for communication to the public cases  Series marks are a bundle of separate marks, says Court of Appeal | Paying for peace of mind? C-567/14 | Life as an IP Lawyer: Dusseldorf, Germany | ISP's delay in removing content can remove safe harbour | Avengers: when is confusion not confusion? | De Minimis sampling of sound recordings is not infringing, says Ninth Circuit

Never too late 98 [week ending on Sunday 29 May] Are academic publishers liable for ginormous damages? | Update on UPC's draft code of conduct | Implications of new EU and US trade secret legislation | CJEU reference over Schweppes trade mark | New transfer and triage process for IPEC| Thursday Thingies | IP (Unjustified Threats) Bill: from the horses mouth | New Master of the Rolls | PRINCE's personality rights | EU Council adopts Trade Secrets Directive | Book review (copyright lawmaking) | Nominative Fair Use defence in trade mark law

US Supreme Court Accepts USPTO "Death Squad (?)" "Broadest Reasonable Construction" Standard

Will Congress react?  The US Supreme Court issued the much-awaited decision in Cuozzo Speed Technologies v. Lee.  In that decision, the Supreme Court upheld the United States Patent and Trademark Office's (USPTO) use of the "broadest reasonable construction" standard in reviewing claims challenged in Inter Partes Review Proceedings (IPRs) before the Patent Trial and Appeal Board (PTAB).  This standard makes it more likely that a challenged patent will be found invalid for obviousness.  The Supreme Court also decided that the decision to institute an IPR is not appealable.

In Couzzo Speed Technologies, Justice Breyer wrote the unanimous opinion basically affirming the USPTO's power to adopt the "broadest reasonable construction" standard in IPRs.  The Leahy-Smith America Invents Act clearly provided the USPTO with rule making authority concerning IPRs.  The Supreme Court had little trouble following the statute.  The Supreme Court also rejected arguments that IPRs were more like court proceedings than specialized agency proceedings.  For example, challengers do not have to have constitutional standing, have a different burden of proof, and the USPTO can continue to hear the action without the challenger.  Justice Breyer also noted that IPRs' predecessor was reexamination--essentially a return to review the agency's decision to grant a patent. The Court notes that there is nothing in the text, purpose or history of the statute to support a differing viewpoint. Notably, Justice Breyer recognizes that there may be inconsistent results between district courts and the PTAB, but that this was "inherent" in Congress' "regulatory design."

Justice Breyer also wrote the majority opinion on whether the decision to institute an IPR is not appealable.  This may prove to be important because it essentially allows the PTAB full authority to decide whether an IPR should be instituted.  Thus, ways to critique the application for an IPR may, over time, become more limited because of a lack (or threat) of judicial review.

"Looks like a job for Congress!"
Notably, the PTAB and its handling of IPRs and other proceedings has been subject to some controversy. For example, former Chief Judge Rader of the U.S. Court of Appeals for the Federal Circuit labeled it, "the death squad killing property rights".  However, some commentators have challenged that label and its meaning.  In a study including data in 2014, the law firm Fitzpatrick, Cella, Harper & Scinto concluded that challenges under American Invents Acts procedures such as IPRs were "challenger friendly," but did not go so far as to say that the PTAB was a "death squad."  IPRs can be based on section 102 (novelty) or 103 (non-obviousness).  The authors state that the percentage of successful challenges based on section 102 (novelty) was similar in district courts and at the PTAB.  Notably, the percentage of successful challenges based on section 103 (non-obviousness) were higher at the PTAB (58%) than in district courts (28%).  The authors' theory for the difference, in part, is that the PTAB uses the "broadest reasonable construction" standard and the district courts use the "person of ordinary skill in the art at the time of the invention."  The authors also state that the PTAB relies on the preponderance of the evidence standard for proof that a patent is invalid while the district courts presume the patent is valid and apply the clear and convincing evidence standard.

In an analysis published in 2016, Harper Batts of Baker Botts explains that the "death squad" label is fiction.  He argues that the relatively early high rates of invalidity were because those challenged patents were particularly weak and that defenders have learned how to successfully critique IPRs.  Moreover, he notes that the PTAB may have received a signal from Chief Judge Rader that they may want to proceed with care.  Additionally, a study published by Corporate Counsel announced that the "PTAB is Not a 'Property Rights' Death Squad." (behind a paywall).

In a study by Arti K. Rai, Jay Kesan and Saurabh Vishnubhakat titled, "Strategic Decision Making in Dual PTAB and District Court Proceedings," the authors state that, in part, based on the high percentage of PTAB proceedings that are instituted after a district court action is filed that the PTAB and district courts should apply the same standard.  However, they do note that a substantial percentage--about 30%--do not involve proceedings at the agency and court.

The impact of In re Cuozzo Speed Technologies and IPRs remains to be seen.  IPRs were designed to improve patent quality through a relatively quick and cheap method with knowledgeable judges.  Apparently, the bio-pharmaceutical industry has been somewhat surprised at the use of IPRs against pharmaceutical patents by the generic industry.  How did they not see this coming?  It will be interesting to see if Congress moves to change the USPTO's rules.

Sunday, 26 June 2016

Registration of a trademark license: the result of the CJEU is reasonable, but what about the Court's reasoning?

In the best of circumstances, the law of licensing is the murky side of trademark law. A broad chasm in approach between the common law and civil
law traditions has characterized trademark licensing for over a century and even within each of the legal traditions, differences remain. This Kat, having penned a treatise on the subject two decades ago, continues to prowl the legal landscape for current developments, although he admits to sometimes missing an event worthy of notice. For this reason, he is grateful to Eckhard Ratjen, a member of the Bremen office of Kat friend Boehmert & Boehmert, for discussing, in the firm’s most recent newsletter (and sharing his thoughts with this Kat), the judgment given by the CJEU on February 4, 2016 (Case C‑163/15, Youssef Hassan v Breiding Vertriebsgesellschaft mbH).

At issue is a question that has occupied trademark law and practice for many decades: must a trademark license be registered for a licensee to be authorized to bring an action for infringement? In the words of the referral—
“Does the first sentence of Article 23(1) of [the Regulation] preclude a licensee who is not registered …from bringing proceedings alleging infringement of a Community trade mark?”.
Member States of the EU differ on the answer to the question (e.g., Spain— “yes”; Germany— “no”). The answer given by the CJEU is that no registration is required. While this Kat believes that the result is reasonable, the legal analysis given shows how inadequate the nature of CJEU decision-making can sometimes be in providing a compelling explanation in support of it ruling.

The focus of the Court’s attention is Article 23(1) of the European Union Trademark Regulation, which provides that—
“Legal acts referred to in Articles 17, 19 and 22 concerning a Community trade mark shall have effects vis-à-vis third parties in all the Member States only after entry in the Register. Nevertheless, such an act, before it is so entered, shall have effect vis-à-vis third parties who have acquired rights in the trade mark after the date of that act but who knew of the act at the date on which the rights were acquired.”
The Court states (para. 18) that--
“Read in isolation, that sentence could be interpreted as meaning that the licensee cannot, if the licence has not been entered in the Register, rely on the rights conferred by that licence vis-à-vis third parties, including the party infringing the trade mark.”
However, the Court goes on to qualify what seems to be the plain meaning of Article 23(1) in favor or requiring registration of the license, stating that (para. 19) –
“… in interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part (citation omitted).”
Given this analytical framework for resolving the question, the Court reaches the conclusion that (para. 25)--
“With regard to the purpose of the rule laid down in the first sentence of Article 23(1) of the Regulation, the Court takes the view that … the lack of effects, vis-à-vis third parties, of the legal acts referred to in Articles 17 [transfer], 19 [rights in rem] and 22 [licensing] of the Regulation which have not been entered in the Register is intended to protect a person who has, or may have, rights in a Community trade mark as an object of property. It follows that the first sentence of Article 23(1) of the Regulation does not apply to a situation, such as that in the main proceedings, in which a third party, by infringing the mark, infringes the rights conferred by the Community trade mark.”
With all due respect, this Kat finds the Court’s reasoning conclusion unconvincing why the plain meaning of Article 23(1) should be disturbed. Even if we acknowledge that Articles 17, 19 and 22 all deal with trade marks as on object of property, this still does not explain why Article 23(1) does not govern the legal effect of a registration pursuant to Article 22(5) (“On request of one of the parties the grant or transfer of a licence of a trade mark shall be entered and published’). One gets the sense that the CJEU reached the result that it wanted and then it imposed a restriction on the scope of Article 23(1) to comport with this result, what Eckhard Ratjen calls a “teleological” construction of the Regulation.

The question of whether registration of a trademark license is mandatory or permissive has arisen in various jurisdictions and the ultimate result is not uniform. At the end of the day, the tribunal decides either “yes” or “no”. As such, whatever their decision, courts that place a value on fully disclosing the underlying policy grounds for their decision will need to address two major issues; (i) do we want to require registration in such circumstances, and (ii) if so, it is workable? It is unfortunate that the CJEU did not do so to provide a helpful window into its policy considerations in connection with its ruling on trademark licensing.

Dear UK...

Since publishing IPKat's letter to our European IP colleagues (see letter here) following Friday's EU referendum result, the IPKat has received an outpouring of comments, emails and tweets from across Europe and the globe.  Although there has been some criticism, the majority of responses have been warm and positive.  The IPKat received a letter in reply from Sven Klos of the Netherlands that the team thought was worth sharing with our readers:

Dear British IP friends,

We will miss you. We will be much weakened and diminished without you.

It has been an immense privilege travelling a considerable part of the long and winding road to unity with you.

It will be difficult reaching our goal of unity in the interest of lasting peace and prosperity without you.

We will sorely miss your sense of tradition, history, innate civility, benign conservatism, libertarian- and contrarian streaks, eccentricity, sense of fairness and humour. Your DNA, however, is woven into our union and we will therefore always recognize you as our brothers.

We will from now on be an incomplete family. We are left as orphans in the largest English-speaking IP jurisdiction in the world without native speakers to guide us. [Merpel considered correcting Sven on this point by uttering a brilliantly Wildean epigram, but thought better of it.]

The forging of a union is a fascinating, messy process. It takes, as Churchill famously said at the 1948 Congress of Europe, the pooling of all our comradeship and luck.

We will always have comradeship in plenty. But our luck ran out.

None of you, or hardly any of you, voted to leave us. You are the people of good will who run the country, legal system and government. You are the young, you are the educated. You are the 48 percent.

You are the victims of an insincere, clownish demagogue deftly stoking the visceral fears and unbritish xenophobia caused by a series of economic and political crises not of your making. You are caught in the destruction caused by a schoolboy rivalry played out on the world stage.

You are not to blame.

Well, there is perhaps one thing some of you could have done. Friends must be honest with each other. It is, however, something that all IP lawyers in all member states are guilty of.

We all could perhaps at times have been a little milder for the plodding European courts who have to wade through a swamp of 28 slowly converging legal cultures to make their essential contribution to our unity. A little less superior, a little less cynical. We have perhaps had a little too much CJEU bashing by judges and academics. Even British lawyers may someday find themselves nostalgic for that much maligned court.

So, that occasional we do-things differently attitude – that we are at times all guilty of - is the only thing we will not miss.

Once you re-apply to our by then far more perfect union you will be welcomed as the lost brothers you are. But we should in the meantime all learn the lesson that you are paying for so dearly.

We must rid ourselves of unconstructive criticism and the mortal danger of taking everything our union has achieved for granted. We must rediscover, love and cherish it.

Friday, 24 June 2016

Dear Europe...

The IPKat loves his European colleagues

Dear Europe

We are sorry.

Not one person in the IPKat team wanted to be writing this post this morning.  Least of all, me.  Despite my moniker, I have spent over 20 years in the UK, over half of which has been devoted to the study and practice of European intellectual property law.

As lawyers, we are taught that cases turn on the evidence.  Patent litigators will tell you that you win or lose on the credibility of your expert witness. Strong expert evidence, strong case, strong prospects of success.

The expert evidence was strong and unambiguous.  The UK must remain with the Union to continue to enjoy economic and political security and progress.  Business leaders, economists and heads of state all agreed that turning our backs on the European Union would spell disaster for the UK's economic future.  Our Katonomist, Nicola Searle, says she has never seen economists so unanimous on a subject.  They have so far turned out to be right with shares and the British pound plummeting to a 30 year low, this morning.  Experienced politicians and security advisers agreed that retreating from Europe would result in social and political insecurity.

The UK IP profession was in favour of remaining.  The negative impact on key innovative industries, including life sciences, could not be ignored.

On the cold, hard evidence, the UK should have voted to stay.  But the Leave campaign was built on emotion.  And instead of a judge, the vote went to a jury.  And any good trial lawyer will tell you, emotion can often displace the evidence.

And that is why we are writing to you.  We wanted to share our emotion this morning.

We are sad.

Many of us are angry.

Some are ashamed.

I am a European IP lawyer.  The IPKat team is heavily comprised of European IP lawyers, with representatives from the UK, Ireland, Italy and Switzerland in our mix.  Since the IPKat's founding in 2003, our blog's predominant focus has been on European IP developments.  A large proportion of our readership is European.

Although the IPKat has often been critical of decisions of European institutions, whether that be of the CJEU in SPC and trade mark matters, or the manner in which the Unified Patent Court came to fruition, we and the creative and innovative industries have overwhelmingly benefited from the European Union.  The harmonization of IP laws across such a significant marketplace has made it easier for industry to protect, exploit and enforce their IP.  It has led to job creation and fostered a shared understanding of how to improve IP law and practice for the benefit of all.

The European Union has made us stronger and closer as a profession.  At IP conferences, you often see mini reunions with UK lawyers running up to hug their German, French or Italian counterparts, opponents and friends.  It has benefited our clients, as much as it has enriched our professional and personal lives.

This morning's result is not a reflection of our profession's respect or love for our European colleagues or European IP law.  That, at least, remains.

We do not want to lose our bond and we will not.  You are our colleagues.  You are our friends.

One of the IPKat's key objectives is to bring our global IP community closer together by sharing IP decisions, legislation and practice from across the world with our readers.  Our aim is that by fostering a shared understanding of our unique perspectives, we can work together to improve IP law for innovators, creators, users and the public.

The IPKat's objective is now even more important.  We will be as engaged as ever in European IP law, sharing news and commentary from national and European courts.  With our readers, the IPKat will continue to foster the strong bond with our European colleagues that we have so luckily enjoyed for over forty years.

In the coming weeks, months and years, there will be a lot of questions about what the European IP landscape looks like without the UK.  We will keep you updated on the latest news and insight as matters progress.

But, for now, all we can say is - we are sorry.

Your friends

The IPKat Team

Thursday, 23 June 2016

Enlarged Board publishes decision: EPO President violated judicial independence

Merpel has now got her paws on several copies of the Enlarged Board of Appeal's decision in the latest round of the "House Ban" disciplinary action (reported here). If you like your IP decisions to be explosive, then she can't recommend it highly enough. The case reference is Art. 23 1/16, incidentally.

Readers can access the document here. It arrived in several copies today thanks to a number of correspondents who would no doubt prefer not to be identified, for reasons of modesty and career security. The decision is marked for "Publication in OJ", but the Board notes with admirable deadpan that its orders in the two earlier sets of proceedings, to publish those earlier decisions "have not yet been executed by the competent authorities of the Office."

It was already known that this third set of proceedings collapsed due to what was seen as an improper intervention by Mr Battistelli, the EPO President, regarding a decision by the EBA to hold oral proceedings in public, and that this was aggravated by the fact that the Administrative Council refused to distance itself from the actions of Mr Battistelli. Bear in mind, in what follows, that Mr Battistelli was not party to these proceedings, which were instigated by the Administrative Council (“Petitioner”) and the only other party was the impugned Board Member (“Respondent”).

Time prevents Merpel from doing full justice to this decision, but she believes that it speaks for itself pretty well in the most revealing passage, entitled:


36. In his letter of 10 June 2016 (see quotations in point XXVI. above), the Office President expressed his view that the Enlarged Board’s decision to hold public oral proceedings was unlawful. He further elaborated that the Enlarged Board does not have the competence to determine the facts in these proceedings. Finally, he indicated that he would not hesitate to take any appropriate steps available to him to ensure the orderly running of the Office and the safety of its employees in respect of the present case. 

37. The making of an unlawful decision is clearly misconduct. Hence the general, abstract threat to the independence of the Enlarged Board resulting from the amendment of Article 95(3) ServRegs (see para 8 to 13 above) has now crystallised as a result of the Office President’s procedurally irregular intervention in these proceedings. 

38. As the present case has shown, the Office President assumes the power to investigate and to suspend members of the Boards of Appeal and bar them from the Office. 

39. In addition, he may also propose any other disciplinary measures to the AC, pursuant to Article 10(2) (h)EPC. 

40. Thus, in the presence of these facts, ascertainable by any objective observer, all present members of the Enlarged Board find themselves threatened with disciplinary measures if they continue with these proceedings in the presence of the public, and seek to determine the facts of this case. This undermines the fundamental principle of judicial independence as set out in Article 23(3) EPC. Thus the conditions of Article 23(3) EPC are not fulfilled, unless the AC as appointing and disciplinary authority for all members of the Enlarged Board, including its external members, distances itself from this position of the Office President.

41. After having been given time during the in camera conference held on 14 June 2016 to reflect upon this situation, the Chairman of the AC made the following remarks in writing concerning the Office President’s letter and enclosure of 10 June 2016: 

"... Such a communication does not emanate from a party to the proceedings. In view of the fact that the Administrative Council is only represented in the proceedings pursuant to Article 12a(2) of the rules of procedure of the EBA, it cannot take position on a communication from the Executive Head of the Office. 

In this respect, and as per Article 23 (3) EPC, the EBA members are not bound by any instruction but must abide by the provisions of the EPC. This cannot be prejudicial to them, bearing in mind that the Council is the sole competent disciplinary authority for them ...”

42. The Petitioner in this case is the AC. The AC is the appointing and disciplinary authority for the Office President (the highest ranking appointee of the AC) , as well as for the members of the Enlarged Board, (the highest judicial authority of the EPO) . The Petitioner thus has an institutional obligation to clarify whether it endorses or not the Office President’s position as set out in his letter of 10 June 2016 and referred to above. 

43. For the Enlarged Board to be able to continue with these proceedings the position of the Petitioner would have to be that it did not agree with the Office President and acknowledged that, from an institutional point of view, the pressure exercised by the Office President in the present case was incompatible with the judicial independence of the Enlarged Board guaranteed by the EPC. As the Petitioner did not clearly distance itself from the Office President’s position, there is the threat of disciplinary measures against the members of the Enlarged Board. It is then the Enlarged Board’s judicial independence in deciding on this case which is fundamentally denied.

44. As can be derived from the statement of the Chairman of the AC, there was no clear and unequivocal declaration that the AC distanced itself from (or did not share) the Office President’s position. In such a situation, the Enlarged Board cannot legally continue with these proceedings. As a consequence it cannot make a proposal to the Petitioner to remove the Respondent from office. 

45. Thus to summarise, the Enlarged Board was reduced to the following alternatives:

— either, to take an “unlawful decision”; 

— or, to take a “lawful decision” according to the demands of the Office President, i.e. setting aside its decision on the public oral proceedings and taking as granted the facts established in the IU Report and/or the DC’s opinion.

46. In either case, the respective decision would be inherently vitiated because it would have been made under pressure from the executive and without the serenity and independence needed for a fair trial.

47. The intervention of the Office President, and this intervention alone, prevented the Enlarged Board from continuing the proceedings as had been planned, (see above points XVI to XXI) , from examining the case on its substantive merits as put forward by the Petitioner, and from establishing whether serious grounds for the removal from office of the Respondent existed in accordance with Article 23(1) EPC. 

The result of all this was that the EBA refused to make a proposal to terminate the appointment of the Board Member, ordered reimbursement of his costs, and ordered the decision to be published. Merpel is happy to comply with the last part.

One has to wonder how long Mr Battistelli's position can be considered tenable, given that he has been held by the highest tribunal in the European Patent system to have violated the judicial independence of that tribunal, and to have threatened its members? 

Then again, some AC delegates will not be fans of this decision (this being their third rebuff from the Enlarged Board in relation to a single disciplinary matter). Bear in mind that the AC was already given the opportunity to distance itself once from Mr Battistelli's actions and did not do so, or at least not unambiguously. One must assume that Mr Battistelli still enjoys the love and support of at least a faction within the AC (though Merpel hears that the faction shrinks at each meeting...).

US Supreme Court in Halo and Kirtsaeng makes IP victory sweeter for successful parties

The AmeriKat getting her paws on some sweet
IP victory pie, thanks to the US Supreme Court
While the AmeriKat has had her eyes and whiskers towards Europe over the past couple of weeks, there has been exciting news emanating from the U.S. in the form of two Supreme Court decisions which shows a growing trend of the Court to more fully compensate the victor of IP disputes. The first decision of Halo, subject to a piece by guest Kat Mike Mirelles here, opens up the lucrative world of enhanced patent damages. The second decision of Kirtsaeng provides for recovery of attorney fees in copyright cases. The AmeriKat's fellow American friend, Taly Dvorkis (Allen & Overy LLP), ties the two decisions together:
"Last week the U.S. Supreme Court issued two decisions enhancing the ability of the victor in IP disputes to further collect against the losing party—in one decision, easing the standard by which courts can enhance (triple) damages in patent cases, and in the second decision setting out the factors by which a court determines whether winners in copyright cases can collect attorney’s fees. 
Enhanced (Treble) Damages in Successful Patent Suits 
The decision on enhanced damages concerns two cases consolidated for Supreme Court review: Halo Electronics, Inc. v. Pulse Electronics, Inc., et al., No. 14-1513, and Stryker Corp. et al. v. Zimmer, Inc., et al., No. 14-1520. Writing for a unanimous Court, Chief Justice Roberts discarded the previously-used Federal Circuit Court of Appeals’ two-part test limiting a patentee’s entitlement to enhanced damages only to cases when there is a finding of objective recklessness by the infringer, in favour of awarding enhanced damages as a sanction for egregious infringement behaviour. 
The statute governing the award of enhanced damages in patent cases, 35 U.S.C. § 284, provides that “the court may increase the damages up to three times the amount found or assessed.” As pointed out by Justice Breyer during oral argument, the statute does not provide much guidance as to when awarding treble damages is appropriate. The Federal Circuit had previously established the following test: first, a patent owner must show by “clear and convincing evidence that the infringer acted despite an objectively high likelihood that the actions constituted infringement of a valid patent,” and second, the patentee must demonstrate, also by clear and convincing evidence, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” 
In rejecting the Federal Circuit’s test, the Supreme Court remarked that “enhanced damages are as old as U.S. patent law. The Patent Act of 1793 mandated treble damages in any successful infringement suit. In the Patent Act of 1836, however, Congress changed course and made enhanced damages discretionary” and within the power of the district court. 
A district court’s discretion is not without limits. As the Court stressed, “a motion to a court’s discretion is a motion, not to its inclination, but to its judgment.” In using discretion a district court is “to be guided by [the] sound legal principles” developed over the last two centuries’ application of patent law. Awards of enhanced damages “are not to be meted out in a typical infringement case, but are instead designed as a punitive or vindictive sanction for egregious infringement behavior.” 
Ultimately, a district court may award enhanced damages when appropriate given the preponderance of the evidence presented (rather than on a clear and convincing standard mandated by the previous Federal Circuit test). In addition, the district court’s decision to enhance damages will only be reviewed on appeal for abuse of discretion. 
The decision comes as no surprise given the 2014 Supreme Court cases regarding attorney’s fees in patent cases: Octane Fitness LLC v. Icon Health & Fitness Inc., 134 S. Ct. 1749 (2014) and Highmark Inc. v. Allcare Health Management System, Inc., 134 S. Ct. 1744 (2014). Those decisions, cited in Halo, rejected the Federal Circuit’s test for awarding attorney’s fees in patent cases by similarly lowering the standard of proof to a preponderance of the evidence and limiting appellate review to abuse of discretion. 
Attorney’s Fees in Successful Copyright Suits 
In contrast, last week’s decision on awarding attorney’s fees in copyright cases made no mention of the Supreme Court’s jurisprudence on attorney’s fees in patent suits. In Kirtsaeng v. John Wiley & Sons (2016), the Supreme Court overturned the Second Circuit Court of Appeals’ rejection of attorney’s fees under the Copyright Act and remanded the case to the district court to reassess whether such fees are appropriate. Copyright law aficionados will recall that this is the second time Kirtsaeng’s case has come before the Supreme Court. In 2013, the Court held, by a 6-3 margin, that the “first sale” doctrine made it lawful for Supap Kirtsaeng to resell foreign-made books of publisher John Wiley & Sons in the United States. Kirtsaeng v. John Wiley & Sons, 568 U.S. ___ (2013) (see Kat report here).
This time around, the question presented was whether Kirtsaeng could recover his attorney’s fees (totalling over $2 million) from John Wiley & Sons. Justice Elena Kagan wrote for a unanimous Court, tracking the language used in Halo and emphasizing that the statute at issue allows for broad discretion of the district court, but that discretion is not without limits. 17 U.S.C. §505 of the Copyright Act states simply that “a court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.” In determining when such an award is appropriate, the reasonableness of the losing party’s argument needs to be taken into account, but is not the single controlling factor. 
In this case, Wiley & Sons had argued that since three Supreme Court justices had previously agreed with its position on the merits, its position was reasonable, and therefore no attorney’s fees should be awarded. The Supreme Court rejected this and the Second Circuit’s approach which gave not just “substantial,” but nearly “dispositive,” weight to the question of reasonableness. Rather, the reasonableness of the losing party’s position is but one factor a court must take into account. Other factors include frivolousness, motivation, objective unreasonableness and the need in particular circumstances to advance considerations of compensation and deterrence. 
In remanding the case, the Supreme Court made clear that it was not intimating that the lower court should reach a different conclusion and award Kirstaeng attorney’s fees. Rather, the question of attorney’s fees needs to be reassessed by “giving substantial weight to the reasonableness of Wiley’s litigation position, but also taking into account all other relevant factors.” It remains to be seen how the district court applies the instruction and whether Kirstaeng ever collects his attorney’s fees. 
In one week the US Supreme Court removed (or at least lowered hurdles) to receiving enhanced damages in patent cases and attorney’s fees in copyright suits, reminding litigants that these decisions are at the discretion of the district court, which is not to be abrogated on appeal. Parties opposing requests for enhanced damages or attorney’s fees must be aware of the lower standards now at play." 

Wednesday, 22 June 2016

The Pendulum Swings: US Supreme Court Makes it Easier to Obtain Patent Enhanced Damages

Is the U.S. Supreme Court pro-patent or anti-patent?  One of my favorite books on patent reform is by economists Adam B. Jaffe and Josh Lerner titled, "Innovation and its Discontents: How Our Broken Patent System is Endangering Innovation and Progress and What to do About It," published in 2004 by Princeton University Press.  One of the insights from the book is the recognition of how patent legal protection moves like a pendulum throughout history.  Notably, we tend to swing either too far in favor of protection or too far away from protection.  We have trouble finding the middle way.  On June 13, 2016, the U.S. Supreme Court in Halo Electronics v. Pulse Electronics and Stryker Corp. v. Zimmer (Halo) made it easier to obtain enhanced damages for willful infringement in patent infringement cases.

In Halo, Chief Justice Roberts in a unanimous opinion rejects the Federal Circuit's standard for obtaining enhanced damages for willful infringement.  The Federal Circuit's standard is essentially its interpretation of section 284 of the 1952 Patent Act which states, "courts 'may increase the damages up to three times the amount found or assessed.'"  The Federal Circuit's standard included two parts: 1) "a patent owner must first 'show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,' 'without regard to the state of mind of the infringer," and 2) "the patentee must demonstrate, again by clear and convincing evidence, that the risk of infringement 'was either known or so obvious that it should have been known to the infringer.'"  Notably, under the first step objective recklessness is not found if a substantial question about noninfringment or invalidity is raised by the alleged infringer--even if they didn't know about that question at the time of infringement.

"Rigid rules are not always the right answer."
The Supreme Court ultimately rejected the Federal Circuit's standard as inconsistent with the historical understanding of prior iterations of the statutory section at issue and the language of the current statute.  First, the Supreme Court pointed to court decisions that explained enhanced damages are available for willful or egregious conduct and "not where the defendant 'appeared in truth to be ignorant of the existence of the patent right, and did not intend any infringement."  As in other cases, the Supreme Court paid close attention to the statutory language noting that it did not include any limiting language similar to the objective recklessness prong and rejected the Federal Circuit's desire to create a "rigid rule."  The "rigid rule" effectively made it too easy for willful infringers to escape awards for enhanced damages.

The Supreme Court further rejected the clear and convincing evidence standard for awarding enhanced damages because it does not find support in the statute.  For similar reasons, it also rejected the Federal Circuit's review standards and now requires the abuse of discretion standard.

The majority opinion addressed the policy behind the creation of the Federal Circuit's test.  The Supreme Court noted that concerns with impeding innovation "as companies steer well clear of any possible interference with patent rights" and the "embold[ing] of trolls" because of district court's "unlimited discretion to award up to treble damages" are not justified based on the discretion in the statute.
Justice Breyer author of
"The Uneasy Case for Copyright:
 A Study of Copyright in Books,
Photocopies and Computer Programs"

 Harvard Law Review 1970

Importantly, Justice Breyer in a concurring opinion notes that the decision does not "mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more."  Further, he notes that the decision is consistent with statutory language that a failure to obtain an opinion letter from counsel does not mean enhanced damages should be awarded.  Justice Breyer expresses concern with the costs of such letters for small businesses. Justice Breyer also addresses the "patent troll" issue:

"Consider that the U.S. Patent and Trademark Office estimates that more than 2,500,000 patents are currently in force.  Moreover, Members of the Court have noted that some "firms use patents . . . primarily [to] obtai[n] licensing fees." eBay Inc. v. MercExchange, L.L.C. (2006) (KENNEDY, J., concurring).  Amici explain that some of those firms generate revenue by sending letters to "'tens of thousands of people asking for a license or settlement'" on a patent "'that may in fact not be warranted.'"  . . . How is a growing business to react to the arrival of such a letter, particularly if that letter carries with it a serious risk of treble damages?  Does the letter put the company "on notice" of the patent?  Will a jury find that the company behaved "recklessly," simply for failing to spend considerable time, effort, and money obtaining expert views about whether some or all of the patents described in the letter apply to its activities (and whether those patents are even valid)?  These investigative activities can be costly.  Hence, the risk of treble damages can encourage the company to settle, or even abandon any challenged activity.  To say this is to point to a risk: The more that businesses, laboratories, hospitals and individuals adopt this approach, the more often a patent will reach beyond its lawful scope to discourage lawful activity, and the more often patent-related demands will frustrate, rather than "promote," the "Progress of Science and useful Arts." . . . Thus, in the context of enhanced damages, there are patent-related risks on both sides of the equation.  That fact argues, not for abandonment of enhanced damages, but for their careful application, to ensure that they only target cases of egregious misconduct."
 My understanding is that fear of enhanced damages often led counsel advising clients not to do extensive and detailed patent searches.  Is this the incentive we want to create?  The case could signal a course correction against the perception that there is a general anti-patent sentiment at the U.S. Supreme Court.  Notably, the case is a unanimous decision. The Supreme Court issued Couzzo Speed Technologies on June 20, 2016, which pushes back the other way.  What message should the Federal Circuit receive?

Tuesday, 21 June 2016

Neighbouring rights for publishers: are national and (possible) EU initiatives lawful?

... or, in alternative,
to introduce an EU-wide neighbouring right
for publishers
Over the past few years debate has ensued at the level of EU Member States and the EU alike on how to address declining revenues in the press publishing sector. Although this is not a new phenomenon (in some European countries newspaper circulation has been in decline since the 1950s, in parallel with the advent of television), since 2000 newspaper advertising sales in Europe have fallen across the board. This data is in line with what has also occurred in the US where, according to the Pew Research Center, from 2013 to 2014 newspapers’ annual overall revenues have fallen from approximately $46m to approximately $20m.

Some have indicated the internet, notably news aggregation services (ie aggregators of syndicated web content in one location, an example being Google News), as primarily responsible for this phenomenon. According to two studies by the Iowa University and ETH and Boston University respectively, not only are news aggregators unlikely to have complementary effects on the number of visits received by newspapers' homepages, but rather appear to have a substitution effect, which is said to have contributed to declining online traffic.

Possible solutions to tackle this phenomenon have been discussed in a number of EU Member States. These have resulted in either the conclusion of agreements between Google and local press publishers (Belgium, France, Italy) or the adoption of legislative initiatives in relation to news content (Germany, Spain). Currently also the EU Commission is considering whether a neighbouring right for publishers (come to be known as ‘ancillary copyright’) – whether in the press sector alone or also other sectors – should be proposed for adoption at the EU level.

Readers may be interested in this new article of mine, forthcoming in the International Review of Intellectual Property and Competition Law, in which I discuss: 
  1. the compatibility with EU law of national legislative initiatives (Germany and Spain) that have resulted in the creation of sui generis rights for press publishers, and 
  2. whether a neighbouring right for publishers may be adopted at the EU level and, if so, what changes of the copyright acquis are required to this end. 
In my piece I do not discuss the merits of introducing a neighbouring right for publishers as such, but solely its legal feasibility.

Following an overview of recent national developments and legislative initiatives in the press sector and current discussion at the EU level, the analysis consists of two parts. 

The first part will focus on the compatibility of national rights for press publishers with the current acquis in the area of copyright – notably the InfoSoc Directive and the Rental and Lending Rights Directive. By considering relevant case law of the Court of Justice of the European Union (CJEU), it will recall that the InfoSoc Directive intended to achieve a broad harmonisation of national copyright laws. 

In Svensson the CJEU clarified that, by adopting the InfoSoc Directive, the EU legislature deprived Member States of the freedom to broaden the scope of relevant economic rights. In Reprobel the CJEU held that the term ‘rightholders’ in the InfoSoc Directive does not include ‘publishers’. From a combined reading of Svensson and Reprobel, it follows that publishers cannot be granted any rights under the InfoSoc Directive. This is not only true in the copyright area, but also in relation to neighbouring rights. While C More suggests that Member States can broaden the scope of the neighbouring rights harmonised in the Rental and Lending Rights Directive (including in relation to communication to the public), this decision does not also suggest that Member States are free to add new categories of rightholders in addition to those indicated in that directive.

The second part considers the possibility of adopting a neighbouring right for publishers at the EU level. In particular it suggests that to this end the wording of both the InfoSoc Directive and Rental and Lending Rights Directive should be amended. In relation to the InfoSoc Directive, this part also considers Article 5(3)(d) of the InfoSoc Directive in light of Article 10(1) of the Berne Convention and the apparent mandatory nature of the exception or limitation for quotation. It considers the CJEU decision in Painer, and concludes that, even assuming that the InfoSoc Directive is incompatible with the Berne Convention in respect of Article 10(1) thereof, the exception or limitation for quotation would not cover the reproduction (and possible subsequent communication/making available to the public and distribution) of extracts of third-party works or other subject-matter protected by neighbouring rights where such reproduction is not also accompanied by commentary or criticism.

The contribution concludes that, while national initiatives that have resulted in the adoption of sui generis rights for press publishers are likely incompatible with EU law, a similar initiative at the EU level might be feasible and achieved by amending the InfoSoc Directive and the Rental and Lending Rights Directive.

You can access my article on SSRN here.
And here are the PowerPoint slides I made for a talk on the topic of my article.

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