Thursday, 29 January 2015

Italy: the exercise of the employer's statutory right of first refusal on the inventions of the employee

Author: Michele Giannino (Desogus Law Office, Italy)

PE v Snamprogetti Spa, Court of Cassation, First Chamber, No 19009, 10 September 2014

Journal of Intellectual Property Law & Practice (2015) doi: 10.1093/jiplp/jpu236, first published online: January 24, 2015

The Italian Supreme Court held that an employer can exercise the right of first refusal that Article 64(3) of the Code of Intellectual Property confers on her with regard to employee inventions by way of a declaration, ruling out that the exercise of such right might be established only when the employer uses the invention.

Legal context

The Italian Code of Intellectual Property (CIP) divides inventions made by an employee during the term of employment into three categories, each being subject to a different regime depending on the allocation of the economic rights arising from the invention. Article 64(1) CIP refers to inventions made by an employee when the inventive activity constitutes the subject matter of the employment contract. Article 64(2) CIP deals with the inventions made by an employee in the performance or fulfilment of the employment contract when the inventive activity does not constitute the subject matter of the contract and the contract does not provide for any payment in favour of the employee for the invention. Articles 64(1) and 64(2) CIP award the employer the ownership of the inventions of the employee. The latter enjoys only the right to be recognized as the author of the invention. In addition, the employee is entitled to a fair compensation for inventions falling within Article 64(2) CIP.

Article 64(3) CIP applies to employee inventions which are outside the scope of Articles 64(1) and 64(2) CIP. This provision confers on the employer, against the payment of a price or a fee, the right to enter into an exclusive or non-exclusive licence agreement for the use of that invention or the right to have the patent granted to the employee assigned to her. In addition, the employer also has the right to buy the patents granted abroad for the employee's invention.

In PE v Snamprogetti the Court of Cassation was asked to clarify under which circumstances the employer can be found to have exercised these rights and, accordingly, the right of the employee to receive a price or fee arise. In other words, the question before the court was whether the employer must exercise these rights by way of an express declaration or whether their exercise might be inferred from the conduct of the employer in commencing use of the patented invention.

Facts

The plaintiff, PE, was an employee of the defendant, Snamprogetti (now Saipem) from 1959 until 1992. Under the terms of his employment contract PE was not obliged to carry out inventive activities. In 1992, PE was appointed director of the defendant's plant in Bratislava. While there, PE developed an idea that enhanced the reliability of the plant. PE applied for a patent for it, which was granted by the Italian Patent Office. When PE learned that Snamprogetti ordered from a third party a number of tools that apparently incorporated his patented invention, he sued Snamprogetti before the Court of First Instance of Milan. PE pleaded that, through its conduct, Snamprogetti exercised the right that Article 24 of Royal Decree No 1127/1939 (now incorporated with slight amendments into Article 64(3) CIP) conferred on employers with regard to employees' inventions. Accordingly, PE claimed that he had the right to receive payment of a price or a fee from his former employee. Snamprogetti, however, argued that PE's patent should be revoked for lack of novelty and that the invention was made by a team of its employees.

The Court of First Instance, and then the Court of Appeal of Milan, dismissed all PE's claims. In particular, the appellate court made it clear that the inventor employer is entitled to a price or fee only when the employer exercises the rights conferred by Article 24 of Royal Decree No 1127/1939. This was not the case with Snamprogetti, which had never expressed its intention to use or buy PE's patented invention. On the contrary, it manifested its lack of interest in it, as when it contested the validity of that patent on the ground of lack of novelty. PE then challenged the judgment of the Court of Appeal of Milan before the Court of Cassation.

Analysis

PE pleaded that Article 24 of Royal Decree No 1127/1939 and Article 64(3) CIP must be read as not requiring any particular form for the employer to exercise the rights conferred by them. As a result, so ran PE's argument, the right of the employee to a price or fee also arises when the employer tacitly exercises her rights by simply making use of employee's invention.

The court rejected PE's arguments, opting for a more restrictive construction of Article 64(3) CIP. Before dealing with the question how employers can exercise the rights in Article 64(3) CIP, the court focused on the legal nature and subject matter of such rights. It did not qualify them as a pre-emption right, but rather as a right of first refusal that empowers the employer, upon the condition that the employee decides to patent the invention, to buy the patent or take a licence to use that invention, regardless of the consent of the employee.

The court then looked at the provisions governing the exercise of the employer's right of first refusal. Under Article 64(4), the employer must exercise the right within a three-month deadline, starting from the receipt of the notice of filing of the patent application, and by way of a declaration addressed to the employee. The declaration must indicate the patent the employer intends to use or buy and the price or fees offered by the employer to the inventor. The employee must then agree on the proposed price or fees for the assignment or the licence. If no agreement is reached, the price or fee must be determined by arbitrators on the basis of Articles 64(4) and 64(5) CIP.

Considering the wording of Article 64(3)–(5), the court concluded that the employer may not tacitly exercise the right of first refusal on the inventions of employees; instead, a declaration from the employer to that effect is required. In PE v Snamprogetti, on the contrary, no such declaration made by the employer could be found. Indeed, the court held that Saipem expressed an intention not to buy or use the patent, as evidenced, among other things, by the fact that the employer contested the validity of the patent granted to PE before the lower courts. Finally, the Court of Cassation ruled that the Court of Appeal of Milan had correctly applied Article 64(3) CIP and rejected PE's appeal.

Practical significance

The most important ruling in this case is that, in order for the employer to exercise the rights in Article 64(3) CIP, an express declaration addressed to the employee is necessary. Accordingly, the right of the employee to be paid a price or a fee does not arise unless the employer makes a requisite declaration, even if the employer had effectively used the invention of the employee. Importantly, as hinted by the court, the employer's use of the invention might trigger tort liability. It follows therefore that the employee can sue the employer and seek compensation for the damages suffered due to the unlawful use of the invention. Incidentally, the action in tort filed by PE against the employer was rejected by the lower courts because the plaintiff brought the action after the expiry of the deadline set out in the statute of limitations for initiating litigation.

Wednesday, 28 January 2015

More books for review

Here's a further batch of books received by the Journal of Intellectual Property Law & Practice for review.  If you would like to review one of these titles, please email Sarah Harris of Oxford University Press at sarah.harris@oup.com and let her know, by not later than close of play on Monday 2 February.  If you are not already known to the journal, do let us know why you think you are particularly qualified to review the book. 

The books on offer are as follows:


Harmonising Copyright Law and Dealing with Dissonance

Authors: Sheldon Halpern and Phillip Johnson 
Publisher: Edward Elgar Publishing
This insightful study explores the constitutional, institutional, and cultural barriers to harmonisation of the copyright laws of the United States and the European Union. It considers these matters in the real world transnational environment in which copyright law operates and suggests that the reality transcends the differences, offering a framework for meaningful harmonisation.

The authors examine in detail and offer a critique of the sporadic and historic attempts at one or another form of harmonisation, via treaty and otherwise, from the creation of a minimal standards regime to the proliferation of substantive treaties. They similarly examine the respective competencies of the US and the EU to adopt a transnational regime, and propose a workable framework consistent with these competencies.
Further information about this title can be obtained from the book's web page here

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Information Environmentalism: A Governance Framework for Intellectual Property Rights
Author: Robert Cunningham
Publisher: Edward Elgar Publishing
Information Environmentalism applies four environmental analytical frameworks to the information commons. The book neatly captures the metaphorical relationship between the physical environment and the information environment by alluding to the environmental philosophy of ‘social ecology’ and the emergent informational discourse of ‘cultural environmentalism’. Robert Cunningham builds upon the proposition that the success of the environmental movement can be traced directly to these four analytical frameworks. He develops, refines and integrates the theoretical foundations of ‘cultural environmentalism’ and applies them to the digital age, in which the regulation of information will have a critical impact upon the manner in which human beings conduct their lives, and the manner in which society functions more generally.
Further information about this title can be obtained from the book's web page here

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Medical Monopoly 
Author: Joseph Gabriel
Publisher: Chicago University Press 
During much of the nineteenth century, physicians and pharmacists alike considered medical patenting and the use of trademarks by drug manufacturers unethical forms of monopoly; physicians who prescribed patented drugs could be, and were, ostracized from the medical community. In the decades following the Civil War, however, complex changes in patent and trademark law intersected with the changing sensibilities of both physicians and pharmacists to make intellectual property rights in drug manufacturing scientifically and ethically legitimate. By World War I, patented and trademarked drugs had become essential to the practice of good medicine, aiding in the rise of the American pharmaceutical industry and forever altering the course of medicine.
Further information about this title can be obtained from the book's web page here

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The Copyright Wars: Three Centuries of Trans-Atlantic Battle
Author: Peter Baldwin
Publisher: Princeton University Press
Peter Baldwin explains why the copyright wars have always been driven by a fundamental tension. Should copyright assure authors and rights holders lasting claims, much like conventional property rights, as in Continental Europe? Or should copyright be primarily concerned with giving consumers cheap and easy access to a shared culture, as in Britain and America? The Copyright Wars describes how the Continental approach triumphed, dramatically increasing the claims of rights holders. The book also tells the widely forgotten story of how America went from being a leading copyright opponent and pirate in the eighteenth and nineteenth centuries to become the world’s intellectual property policeman in the late twentieth. As it became a net cultural exporter and its content industries saw their advantage in the Continental ideology of strong authors’ rights, the United States reversed position on copyright, weakening its commitment to the ideal of universal enlightenment—a history that reveals that today’s open-access advocates are heirs of a venerable American tradition.
Further information about this title can be obtained from the book's web page here

Monday, 26 January 2015

Books for review

Here's the latest batch of books received by the Journal of Intellectual Property Law & Practice for review.  If you would like to review one of these titles, please email Sarah Harris of Oxford University Press at sarah.harris@oup.com and let her know, by not later than close of play on Thursday 29 January.  If you are not already known to the journal, do let us know why you think you are particularly qualified to review the book.

The books available are as follows:

Intellectual Property, Trade and Development (second edition)
Author: Daniel Gervais
Publisher: Oxford University Press
This work responds to the increasing need in many countries to better understand linkages between intellectual property, trade rules, and economic and social development, and to find new ways of implementing intellectual property rules and optimizing their effects. It provides a comprehensive analysis of the latest legal, economic, political and social research and advanced current thinking on the relationship between intellectual property and trade and development.

With new chapters addressing access to educational resources and innovation in the developing world, the use of traditional knowledge as a source of innovation, and TRIPS, TRIPS Pus and Developments across the whole of South Asia, this fully updated second edition presents new insights and discussions from economists and social scientists and benefits from access to the latest metrics and analytical tools available.
Further information is available from the book's web page here

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Patrons, Curators, Inventors and Thieves: The Storytelling Contest of the Cultural Industries in the Digital Age
Author: Jonathan Wheeldon
Publisher: Palgrave Macmillan
This book is a rare and unusually reflective insider account of the transformational challenges of the cultural industries over the past 15 years. Opening with a fresh new perspective on music industry history, it explores how the industrial world evolves more by narrative plausibility than by strategic precision, recognizing that corporate identity, purpose and power can be both reinforced and subverted by modifications to various cultural master-plots and their traditional heroes and villains. 
Of most interest are the insights into the strategic struggles faced by corporate managers and by intellectual property policymakers dealing with the seismic new millennium shifts in technology, communications and related social behaviour. Illustrating how a satisfactory 'postprivate' master-narrative of social equality in the digital age has yet to emerge, the book also helps to loosen the industrial-political deadlock in the debate over copyright reform. It is essential reading for anyone who takes an interest in the changing processes of creation, dissemination and industrialization of knowledge and culture.
Further information is available from the book's web page here

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Handbook on the Economics of Copyright: A Guide for Students and Teachers
Editor: Richard Watt
Publisher: Edward Elgar Publishing
Featuring expert contributors from around the world, this book offers insight into the vital theoretical and practical aspects of the economics of copyright. Topics discussed include fair use, performers’ rights, copyright and trade, online music streaming, internet piracy, copyright and visual art markets, and open source publishing. In addition to in-depth coverage of these timely topics, the authors also offer insightful predictions and policy recommendations for the future.

Each of the self-contained chapters is written by a distinguished expert and is pitched at a level designed to be accessible to advanced undergraduate and postgraduate students in economics and law. As a whole, the book covers all of the topical content that a student of copyright economics should know. Teachers and lecturers will find all the required material to provide a comprehensive overview of the subject in a single volume. For scholars with a legal background, the book will also act as an effective introduction or refresher in the economic theory underlying copyright.
Further information is available from the book's web page here

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Innovation And Intellectual Property In China: Strategies, Contexts and Challenges
Editors: Ken Shao and Xiaoqing Feng
Publisher: Edward Elgar Publishing
China is evolving from a manufacturing-based economy to an innovation-based economy, but the delicate context behind this change has not been properly understood by foreign governments, companies and lawyers. This book is an insightful response to ill-conceived notions of, and mis-assumptions regarding, the Chinese innovation economy. It represents an effort to marry a variety of “insiders’ perspectives” from China, with the analysis of international scholars.  
With contributions from leading authors - including Dr Kong Xiangjun, President of the Intellectual Property Tribunal at the Supreme People’s Court of China - this book is the first comprehensive response to a highly controversial and largely under-developed field of inquiry. It seeks to unveil and understand the complexities and challenges that confront China’s innovation economy, setting out the cultural and historical context, the strategies that form the basis for this evolution, and the measures China has at its disposal to protect intellectual property. 
Further information is available from the book's web page here

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Innovation and Intellectual Property: Collaborative dynamics in Africa
Editors: Jeremy de Beer, Chris Armstrong, Chidi Oguamanam and Tobias Schonwetter
Publisher: UCT Press

In the global knowledge economy, intellectual property (IP) rights – and the innovations they are meant to spur – are important determinants of progress. But what does this mean for the nations of Africa? One view is that strong IP protection can facilitate innovation in African settings. Others say that existing IP systems are simply not suited to the realities of African innovators. 
 
This book, based on case studies and evidence collected through research across nine countries in Africa, sheds new light on the complex relationships between innovation and intellectual property. It covers findings from Egypt, Nigeria, Ghana, Ethiopia, Uganda, Kenya, Mozambique, Botswana and South Africa, across many sites of innovation and creativity including music, leather goods, textiles, cocoa, coffee, auto parts, traditional medicine, book publishing, biofuels and university research. Various forms of intellectual property protection are explored: copyrights, patents, trade marks, geographical indications and trade secrets, as well as traditional and informal mechanisms of knowledge governance. 

Further information is available from the book's web page here

Thursday, 22 January 2015

Rihanna T-shirt case: Paul Joseph speaks

Earlier today the Court of Appeal, England and Wales, upheld the decision of Mr Justice Birss in Fenty & Others v Arcadia Group Brands Ltd (t/a Topshop) & Another [2013] EWHC 2310 (Ch) -- the "Rihanna T-shirt" case which has attracted a good deal of attention among both lawyers and the public at large.

JIPLP is delighted that one of our Editorial Board members, Paul Joseph, was invited by the BBC to deliver an authoritative comment on this ruling: you can see Paul on the BBC video clip if you click here and scroll down a bit.

JIPLP has taken an interest in this instructive passing off action, publishing a Current Intelligence note by Darren Meale, "Passing off: Rihanna's face on a T-shirt without a licence? No, this time it's passing off" (abstract and details here). A subsequent Current Intelligence note "Boop oop a doop—protection for cartoon image of Betty Boop" by Jeremy Blum and Nicholas Round makes substantial reference to the Rihanna case. You can access their note on this weblog here.

Tuesday, 20 January 2015

Guest editorial: Confusion surveys and confused judges

The author of this month's guest editorial is Anna Carboni. This is what she writes:
Confusion surveys and confused judges 
Anna Carboni
Should we trust judges to rely on their own experience of the world to decide whether the reasonably observant average consumer is likely to be confused by a particular trade mark or get-up? English judges tell us that we should, except in cases involving particularly unusual goods or services. So a bald male judge will opine on how a ladies' salon haircare brand will be perceived, and a judge who has never owned a pet may decide a case about the get-up of cat food packaging.

The traditional explanation for this state of affairs is that the presence or absence of a likelihood of confusion is ultimately a ‘jury question’, to be determined by the judge using his or (very occasionally) her common sense and experience of the world. But one of the main points of a jury is to represent the common public and ensure that a case is not decided on the basis of one person's possibly idiosyncratic view of the world. Why then, in a case where there is no evidence of actual confusion, is it preferable for a judge to rule on the likelihood of confusion without the assistance of anyone other than the parties themselves, who ‘one can assume’ will have a biased view?

It is not suggested that we should return to the bad old days of allowing parties to select the most-likely-to-be-confused witnesses from the respondents to a market survey questionnaire to come to court and explain the answers that they gave, and inviting the judge to substitute his personal perception with the perceptions of a group of handpicked and well-prepared individuals. Lord Justice Lewison was right to put a stop to that practice in the Interflora v Marks & Spencer cases. But the long-standing and continued approach of English judges making it ultra-difficult for a party to adduce survey evidence on the issue of confusion is an illogical one that deserves further consideration. That is not to say that surveys for use in court should not comply with strict rules. Such rules have been set down in many jurisdictions: surveys must target a statistically significant number of the relevant public; they must be conducted fairly; they must avoid asking leading questions; they must be carried out under careful instruction and supervision by appropriately qualified individuals; and the answers given must be accurately recorded, coded and disclosed.

The cost of a survey exercise that meets these criteria is considerable when one includes the fees of the organisation that carries it out, the individual expert who explains it to the court, and the lawyers preparing the case. But the developing approach in the High Court for England and Wales of holding lengthy preliminary hearings on the question of whether survey evidence will be “of real value” to a particular case and is justified by the cost involved is leading to a disproportionate increase in the overall costs of running a trade mark case, and needs to be stopped.

The tail appears to be wagging the dog. While controlling costs is of course important, adding an interim stage in litigation that racks up a layer of additional costs cannot be the right way to go about it. The costs are undoubtedly increased in part due to the efforts that a legal team feels it has to go to overcome the built-in prejudice against survey evidence on the issue of confusion. Bearing in mind that such evidence is readily accepted as helpful to judges (and even juries) in other jurisdictions such as the United States and many countries in Europe, the current approach leads to huge frustration on the part of litigants.

So let's finish with some questions. First, will Judge A, with no experience of a particular market (even if it is not an unusual one) be assisted by a properly constructed and conducted survey of consumers who do have such experience? Secondly, is it safe to assume that Judge B, who regularly buys the trade mark owner's products and would not be confused by the defendant's lookalike, would not change her mind if survey evidence showed that her response is unusual? And thirdly, will new Judge C, who was in practice as a barrister for 25 years (which involved neither managing cases nor giving cost quotations), have the skills to do a cost benefit analysis in relation to a survey for a case that in all probability he will not even ultimately hear? Answers on a postcard.