Tuesday, 21 April 2015

"A Welcome Addition to the Literature on the Economics of Copyright"

JIPLP has an excellent record for commissioning and publishing books relating to intellectual property while they are still current, by using this weblog as a means of advertising the availability of books for review and then matching them up with suitably qualified and interested reviewers. Recent jiplp weblog posts seeking qualified reviewers can be seen, for example, here, here, here and here.

Here we reproduce a recently-commissioned review which shows that the gulf between economic theory of intellectual property and the practical work of a judge in deciding cases is not nearly as great as one might imagine. The book under review here is the Handbook on the Economics of Copyright: A Guide for Students and Teachers, edited by Richard Watt, published by Edward Elgar, 2014 ISBN: 978-1-84980-852-1, Hard cover, 351 pp. Price: £130.00. The reviewer: Richard Arnold (Judge of the High Court of England and Wales, Chancery Division) and the review was first published online in JIPLP on 20 April.

Here is what the reviewer had to say:
Although there were some early pioneers of the study of the economics of copyright, such as Arnold Plant, the subject only really began to develop in the 1980s. Now there is a substantial literature on the subject, and it is of increasing importance. As this collection reveals, the subject is a multi-faceted one. I would divide it into three main branches. The first is the study of copyright markets: analysis of the functioning of markets in subject matter protected by copyright (and related rights, such as performers' rights). This includes such matters as the earnings of authors, the impact of infringement and the efficiency of collecting licensing. Practitioners in this branch face huge difficulties in obtaining data for analysis, but persistent efforts have enabled some useful work to be done. The second main branch is the study of copyright law from an economic perspective: what are the economic consequences of such matters as copyright term and copyright scope? Much of the past work in this branch has focused on term, including term extensions, but practitioners are now starting to look at the harder question of scope, such as the effect of particular limitations and exceptions. The third main branch is the study of copyright policy from an economic perspective: how, informed by an economic understanding of copyright, should we frame legislation? Much of this work is concerned with the purposes of conferring copyright protection, and involves trying to understand how those purposes are served, or disserved, by particular policies. The first branch is largely empirical, while the other two are more theoretical.

Given the rapid growth in the field, this new book is a welcome addition to the literature. It is edited by Richard Watt, Associate Professor of Economics and Finance at the University of Canterbury, New Zealand, a leading figure in the field, who has also contributed seven of the 18 chapters. Other chapters have been contributed by several of the most prominent scholars in this area, including Wendy Gordon, Christian Handke, Paul Heald, Stan Liebowtiz and Ruth Towse. The collection is divided into five sections: ‘the economic theory of copyright’; ‘the legal structure of copyright and the public domain’; ‘licensing and authors' earnings’; ‘copyright collectives’ (ie collective management organisations); ‘copying and copyright piracy’; and ‘other issues in the economics of copyright law’. As these section titles indicate, the chapters cover a broad range of topics. Each chapter provides an overview of the current state of research into that topic. Many indicate areas where further research is needed. A couple make an original contribution to the subject under discussion.

According to the publishers, the book is ‘pitched at a level designed to be accessible to advanced undergraduate and postgraduate students in economics and law’, ‘covers all of the topical content that a student of copyright economics should know’ and provides teachers with ‘all the required material to provide a comprehensive overview of the subject’. It should be emphasized, however, that this is not a textbook. Further, some of the chapters, particularly those contributed by Prof Watts, assume that the reader already has a grounding in economics and thus knows (for example) what an inverse demand curve is and can follow moderately sophisticated mathematical modelling. As a lawyer without a training in economics, but some acquaintance with many of the issues discussed, I found some of the chapters easier to follow than others. No doubt for the same reason, I found some of the chapters more enlightening than others.

For me, probably the most interesting single contribution was Stephen Margolis's chapter on ‘law and economics of copyright remedies’. This illustrates quite neatly both the problems and the virtues of the law and economics approach. On the debit side, Margolis relies on a difference which exists in US law, namely that an account of profits is available as a remedy for copyright infringement but not patent infringement, as reflecting the fact that copyright infringement is usually intentional while patent infringement is frequently inadvertent. He also considers that this shows that patent remedies accommodate efficient infringement while copyright remedies do not. I assume he is right about US law (I have not checked). Under English law, however, an account of profits is equally available for both types of infringement. Now Margolis may say that this shows that English law is defective by comparison with US law. I think it shows that the availability of different remedies in different legal systems is not based on economic considerations. Nor I am convinced that economic analysis has much to contribute in deciding whether an account of profits is an appropriate remedy for patent infringement. On the credit side, Margolis persuasively analyses the correct approach to deducting costs on an account of profits. As he explains, two different rules can be identified in case law, namely the fully allocated costs rule (which allows the defendant to deduct an appropriate allocation of its fixed costs) and the incremental costs rule (which does not allow the defendant to do so). Margolis demonstrates that, in real-life multi-product companies, the fully allocated costs rule is more economically accurate than the incremental costs rule. Here the law can learn from economics. It is therefore unfortunate that Margolis's analysis (which he first published in an article in 2007) was not cited to the Court of Appeal of England and Wales when it adopted the incremental costs rule in Hollister Inc v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419, [2013] Bus LR 428.

Monday, 20 April 2015

FLIP-TOP not distinctive of Philip Morris, rules Federal Court of Canada

Authors: Emir Crowne and Adrian Werkowski (University of Windsor, Faculty of Law)

Philip Morris Products SA v Imperial Tobacco Canada Ltd, 2014 FC 1237, Federal Court of Canada, 18 December 2014

Journal of Intellectual Property Law & Practice (2015) doi: 10.1093/jiplp/jpv072, first published online: April 18, 2015

The Federal Court of Canada held that the term ‘FLIP-TOP’ was not distinctive of Philip Morris as it described a type of packaging and was not necessarily indicative of source.

Legal context

Section 38 of Canada's Trade-mark Act, R.S.C., 1985, c. T-13 sets out the grounds on which a proposed mark may be opposed. Subsection 38(2)(d) provides that a mark may be opposed where it is ‘not distinctive’.

Facts

Philip Morris applied to register ‘FLIP-TOP’ as a trade mark for tobacco and a variety of tobacco products. This mark had not yet been used and the Trade-marks Opposition Board found that it lacked distinctiveness because it described a type of packaging commonly used for tobacco products.

Philip Morris appealed the decision.

Analysis

A trade mark's lack of distinctiveness is not one of the grounds under which the Registrar may refuse an application (2014 FC 1237 at para 51 (discussing subsection 37(1) of the Act)). It is only after advertisement, and during the opposition stage, that non-distinctiveness may be raised under subsection 38(1)(d).

‘FLIP-TOP’ is a commonly used word in the tobacco industry and ‘is a defined word that refers to a container that has a lid that is easily flipped open’. By definition then, as a proposed mark the term lacked the requisite distinctiveness for the public to necessarily associate it with Philip Morris's products.

Although descriptiveness is related to distinctiveness, the two concepts were explicitly distinguished by the Court. At para 81 Justice Bédard emphasized that her analysis was confined to that of distinctiveness only:
I do not find it necessary to determine whether the term ‘flip-top’ is descriptive of an intrinsic quality of the wares themselves such as a feature, trait or characteristic. In the present context, the key consideration is not whether the mark describes an aspect of the product that is necessarily ‘intrinsic’, but whether the term is capable of identifying the source of the wares in light of the overall product and market.
Practical significance

Source identification is the main purpose of a trade mark. Proposed marks that are themselves a common term will necessarily lack the requisite distinctiveness for registrability. Allowing such marks to acquire distinctiveness, and a secondary meaning, through concerted marketing efforts and actual use, may have been the wiser course of action in this case, instead of having the mark snuffed out at first instance.

Editorial board: JIPLP welcomes two new members

The Journal of Intellectual Property Law & Practice is delighted to announce the appointment of two new members of its Editorial Board. They are, in alphabetical order, Emir Crowne and Molly Torsen Stech. Here we introduce you to them:

Dr Emir Crowne, BA, LLB, LLM, LLM, PhD is an Associate Professor, with Tenure, at the University of Windsor Faculty of Law. He is the Founder of the Harold G. Fox Intellectual Property Moot, and the Donald G. Bowman National Tax Moot. He has also published widely in the fields of intellectual property law, information technology law, gaming law, torts, contracts, legal education, constitutional law, human rights and banking, and is ranked in the top 1.2% of authors on the Social Science Research Network.

A Current Intelligence note co-authored by Emir, "FLIP-TOP not distinctive of Philip Morris, rules Federal Court of Canada", will be posted on this weblog later today.

********************************************

Molly Torsen Stech, a copyright and trade mark policy attorney based in New York City, recently joined INTA as Editor-in-Chief and is involved in pro bono work for Volunteer Lawyers for the Arts of New York (VLANY). Before moving to New York, she was Counsel in the Office of Policy and International Affairs at the US Copyright Office, where her portfolio included Europe, Russia, Canada, relevant WIPO committees, and the OECD. She was also a professorial lecturer in law in international copyright law at the George Washington University Law School, and has acted as a consultant for WIPO’s Creative Heritage Project and for the British Academy. She has published often, most recently a book on authors’ rights with the Institute of Art and Law in Wales. Molly is from Seattle, WA, where she earned both her BA and JD from the University of Washington.

Wednesday, 15 April 2015

Three new books in search of a reviewer for JIPLP

JIPLP has received three more books for review. If you are interested in reviewing one of them, please email Sarah Harris at sarah.harris@oup.com and tell her of your interest, ideally by close of play on Monday 20 April. If you are not yet known to JIPLP as a contributor or reviewer, do send us your CV or tell us why you think you are the right person to review the book you are are requesting. Don't forget: if you review the book, you get to keep it. These are the books:

Title: Proceedings Before The European Patent Office A Practical Guide to Success in Opposition and Appeal 

Authors: Marcus O. Müller , Cees A.M. Mulder
Publisher: Edward Elgar
Proceedings Before the European Patent Office: A Practical Guide to Success in Opposition and Appeal provides a better understanding of how opposition divisions and boards of appeal approach the cases before them.  ... 
The Rules of Procedure of the Boards of Appeal are also discussed including their influence on opposition proceedings. This insightful book focuses on the practical aspects of the proceedings and contains numerous ‘practical advice’ sections and ‘example cases’.
Further information concerning this publication can be obtained from the publisher's website here.


*********************************

Title: Intellectual property, Entrepreneurship and Social Justice 
Editor: Lateef Mtima
Publisher: Edward Elgar
Through an exploration of the techniques used in social entrepreneurship, Intellectual Property, Entrepreneurship and Social Justice provides a framework by which historically marginalized communities and developing nations can cooperate with the developed world to establish a socially cohesive global intellectual property order. The knowledgeable contributors discuss, in four parts, topics surrounding entrepreneurship and empowerment, education and advocacy, engagement and activism and, finally, commencement. 
Further information concerning this publication can be obtained from the publisher's website here.


*********************************


Title: Intellectual Privacy: Rethinking Civil Liberties in the Digital Age
Author: Neil Richards
Publisher: Oxford University Press
How should we think about the problems of privacy and free speech? In Intellectual Privacy, Neil Richards offers a different solution, one that ensures that our ideas and values keep pace with our technologies. Because of the importance of free speech to free and open societies, he argues that when privacy and free speech truly conflict, free speech should almost always win. Only when disclosures of truly horrible information are made (such as sex tapes) should privacy be able to trump our commitment to free expression. But in sharp contrast to conventional wisdom, Richards argues that speech and privacy are only rarely in conflict. America's obsession with celebrity culture has blinded us to more important aspects of how privacy and speech fit together. Celebrity gossip might be a price we pay for a free press, but the privacy of ordinary people need not be. True invasions of privacy like peeping toms or electronic surveillance will rarely merit protection as free speech. And critically, Richards shows how most of the law we enact to protect online privacy pose no serious burden to public debate, and how protecting the privacy of our data is not censorship.
Further information concerning this publication can be obtained from the publisher's website here.

Greek consumers perceive dominant word indication on garments as a source identifier, not as embellishment

Author: Manos K. Markakis (IP LAW GREECE, Athens)

Journal of Intellectual Property Law & Practice (2015), doi: 10.1093/jiplp/jpv064, first published online: April 15, 2015

Judgment No 1876/2014 of the Athens Three Member Civil Court of Appeal (Greek Community Trade Mark Court of 2nd Instance), 21 March 2014

The Athens Court of Appeal ruled that the average Greek consumer of garments perceives a word sign prominently displayed on a garment front as an origin indicator and, accordingly, rejected the relevant ‘decorative use’ defence as unsubstantiated.

Legal context

The ‘decorative use’ of someone else's trade mark is not a statutory infringement defence expressly laid down in the Trade Mark Directive, the Community Trade Mark (CTM) Regulation or the Greek Trade Mark Act. However, the Court of Justice of the European Union (CJEU) carved decorative use out of infringing subject matter in the course of examining the conditions of application of Article 5(1) and (2) of the Trade Mark Directive. In particular, the CJEU has ruled, in Case C-408/01 Adidas-Salomon AG et al v Fitnessworld Trading Ltd (paragraphs 39 and 40), that:
the fact that a sign is viewed as an embellishment by the relevant section of the public is not, in itself, an obstacle to the protection conferred by Article 5(2) of the Trade Mark Directive, where the degree of similarity is none the less such that the relevant section of the public establishes a link between the sign and the mark. By contrast, where, according to a finding of fact by the national court, the relevant section of the public views the sign purely as an embellishment, it necessarily does not establish any link with a registered mark.
In addition, according to the judgment of the CJEU in Case C-102/07 Adidas AG et al v Marca Mode CV et al (paragraph 34):
the public's perception that a sign is a decoration cannot constitute a restriction on the protection conferred by Article 5(1)(b) of the Trade Mark Directive when, despite its decorative nature, that sign is so similar to the registered trade mark that the relevant public is likely to perceive that the goods come from the same undertaking or, as the case may be, from economically-linked undertakings.
The requirement of the sign being viewed ‘purely’ as an embellishment is not further elaborated in the case law of the CJEU. In view of the absolute character of the concept of ‘purity’, it may be argued that, for the decorative use defence to operate, 100% of the relevant public must perceive the contested sign as serving 100% decorative and 0% source-identifying function. However, such a monolithic legal test is impracticable in real life, particularly when it is dependent upon the impalpable and constantly fluctuating consumer perception. Inevitably, the qualification of a disputed use as ‘decorative’ is always a case- and fact-specific exercise.

Facts

In the autumn of 2006, Jumbo (a large retailer located in Athens) offered for sale children's athletic suits bearing the ‘CHAMPION COLLEGE’ sign. Champion Products Europe Ltd (a clothing manufacturer located in Dublin) issued a warning letter to Jumbo complaining about infringement of its ‘CHAMPION’ trade marks. Following negotiations, Jumbo and Champion entered into a settlement agreement, finalizing the matter on 3 November 2006. Under the agreement, Jumbo undertook, among other things, to refrain from commercializing any garment bearing the ‘CHAMPION COLLEGE’ sign or any other indication identical with, or confusingly similar to, the ‘CHAMPION’ trade marks. In addition, Jumbo promised to pay Champion a minimum amount of 15,000 euros as a contractual penalty in the event of breach of its cease-and-desist undertaking.

In November 2007, Jumbo offered for sale toddlers' sleeveless pullovers bearing the term ‘champion’ emblazoned across the front breast section. This wording was written in lower case stylized font and painted in the same colour used for decorating the pullover's side-lines. The contested ‘champion’ sign did not appear on any other part of the pullovers. However, Jumbo's trade mark (which enjoys reputation in Greece) featured both on (a) the sewn-in care label and (b) the swing tag attached to the pullover by a plastic joiner. Apart from the ‘champion’ term and Jumbo's trade mark, no other word or figurative signs were placed upon the contested pullovers. Moreover, no further use of the ‘champion’ sign was made in the course of promoting/offering the contested pullovers. Instead, the pullovers were simply identified by reference to the generic term ‘sleeveless pullover’ in conjunction with their size, namely the corresponding toddler's age (eg 23 months). An indicative photo presenting the contested pullovers is shown on the right.

In January 2008 Champion instigated main infringement proceedings against Jumbo before the Athens Three Member First Instance Civil Court (CTM Court of 1st Instance) asserting as grounds of action, among others, trade mark infringement and breach of contract. In particular, Champion invoked (a) its earlier trade mark registrations CTM
000122630 ‘CHAMPION’, CTM 000122598 (above, right), GR 69657 (left) and GR 81821 (below, right) (all covering articles of clothing in Class 25), as well as the settlement agreement of 2006. Relying upon these rights, Champion claimed, among other things, (a) a permanent injunction against the commercialization of any garment bearing the ‘champion’ sign, (b) an award of moral damages for trade mark infringement and (c) an award of the contractually fixed penalty for breach of contract.

In defence, Jumbo argued, among other things, that the contested ‘champion’ wording was not used ‘in the trade mark sense’ but merely in a decorative manner ‘as a pure embellishment’. Expanding upon the decorative use defence, Jumbo further argued that the contested term (a) solely contributed to the overall aesthetic value created by the pullover's adornment (ie this is why it is written in stylized font and painted in the same colour as the side-lines) and (b) appears on the garment's section where the average consumer (namely, the toddler's parent, guardian or relative) normally expects to read a laudatory message concerning the garment wearer (ie not the manufacturer's mark). Given that both labels of the contested pullovers prominently bore Jumbo's famous trade mark, any risk of confusion with, or dilution of, the asserted Champion marks should be ruled out. Similarly, the settlement agreement cannot be held breached, since Jumbo's undertaking should be narrowly construed to cover origin-identifying uses only.

In September 2010 the court issued preliminary Judgment No 5610/2010, partially upholding the action. In particular, the court dismissed Jumbo's defences and ruled that (a) the asserted trade marks of Champion have acquired high reputation among the relevant Greek consumers, (b) the contested wording was perceived by the relevant public as an origin indicator and (c) a likelihood of consumer confusion/association was created as a result of the commercialization of the contested pullovers. Nevertheless, the court ascertained that it was unable to safely assess Champion's damage on the basis of the evidence included in the case file to that date. Therefore the court ordered Jumbo to disclose to Champion certain figures in connection with the sales of the contested pullovers.

In compliance with the order, Jumbo produced official documentation establishing total sales of 3,817 items throughout the material period of two months, the total retail value of which amounted to 38,132 euros. In July 2012, the court handed down definitive Judgment No 3549/2012, under which the court (a) permanently enjoined Jumbo against commercializing any garment bearing the ‘champion’ indication, (b) awarded Champion the amount of 40,000 euros (plus interest) as moral damages and (c) awarded Champion the amount of 15,000 euros (plus interest) as a contractual penalty. Jumbo appealed and Champion cross-appealed.

In March 2014 the Athens Three Member Civil Court of Appeal handed down the final judgment on this long-running dispute. Under the final judgment (a) both the appeal and the cross-appeal were dismissed and (b) both judgments under appeal were affirmed in their entirety, thereby also ratifying the first instance damage and penalty awards. Notably, the overall compensation award of 55,000 euros amounted at the time of delivery of the appeal judgment (ie calculating also legal interest) to the total of approximately 80,000 euros.

Analysis

The appellate court focused its analysis on Jumbo's decorative use defence. First, the court noted that the limitations to the trade mark right (ie descriptive use, use of customary terms, etc) must generally be applied narrowly. Secondly, the court noted that, in the context of consumer confusion, ‘use as a trade mark’ is any use that is capable of generating confusion/association, in the sense that a non-negligible portion of the relevant public may apprehend the used sign as serving a source-identifying function. Thirdly, the court observed that, as a general principle, decorative use is logically conceivable as regards figurative trade marks; however, it is hard to conceive how a word mark can be used as such, as a pure embellishment.

Following the above preliminary considerations, the court then evaluated whether the contested label actually served a purely embroidering function. Following examination of the layout/design of several (third-party) garments brought in by the parties (many of which bore the manufacturer's mark on the same section as in the contested pullovers), the court reached the conclusion, relying also upon the teachings of experience, that (a non-insignificant section of) the garment-buying public perceives the sole word sign prominently displayed on the garment front as an origin indicator, not as mere ornamentation. Therefore, considering (a) the close similarity between the contested indication and the asserted reputable trade marks and (b) the identity of the goods in question, the court concluded that a risk of consumer confusion (in the sense of association) was obviously created.

Regarding breach of contract, the court upheld Jumbo's proposed narrow interpretation of the cease-and-desist undertaking (namely, that it should be limited to ‘trade mark use’ only). Nevertheless, in the light of the analysis and conclusion regarding the trade mark infringement ground, the undertaking was, almost automatically, deemed to have been breached.

Practical significance

The decorative use will continue to ‘fly’ as valid infringement defence; though with clipped wings. Even if the defendant can establish the prima facie decorative function of the contested use, an additional evidential threshold will need to be met: the contested use must still not be perceived by a non-negligible portion of the relevant public as (also) serving an origin-identifying function. Proving the latter may be a highly burdensome task, particularly if (a) the asserted trade mark has acquired reputation or high distinctive power or (b) other players in the relevant business sector implement the same or similar branding methods (as the contested use), thereby educating and formatting consumer perception accordingly.

The annotated judgment brings good news for trade mark owners, as it effectively restrains ‘hands-off’ situations, where the trade mark owner must tolerate the decorative use of identical or similar signs by third parties.

Disclosure of interest

The author represented in court the plaintiff in the above litigation proceedings, both at first instance (two trials) and on appeal (one trial). However, the views expressed in this article are personal to the author and in no way reflect the views of the author's clients.