Friday, 12 December 2014

Taiwan IP Court asked to designate how TIPO assists litigants

Author: Hsiu-Ru Chien (Lee and Li, Attorneys-at-Law)

Aten International Co, Ltd v Wavekee International Co, Ltd, Taiwan Supreme Court, 2013-Tai-Shang-1800, 25 September 2013

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu197, first published online: December 11, 2014

The Taiwan Supreme Court set aside the country's Intellectual Property Court's judgment for its failure to specify which party the Taiwan Intellectual Property Office (TIPO) should assist or to ask the TIPO to express which party it would like to assist.

Legal context

Article 16 of the Intellectual Property Case Adjudication Act (the ‘IP Adjudication Act’) of 1 July 2008 provides that:
[W]hen a party claims or defends that an intellectual property right shall be cancelled or revoked, the court shall decide based on the merits of the case, and the Code of Civil Procedure, Code of Administrative Litigation Procedure, Trade Mark Act, Patent Act, Species of Plants and Seedling Act, or other applicable laws concerning the stay of an action shall not apply.
Under the circumstances in the preceding paragraph, the holder of the intellectual property right shall not claim any rights during the civil action against the opposing party where the court has recognized the grounds for cancellation or revocation of the intellectual property right.

Paragraphs 1 and 2 of Article 17 of the Act further stipulate that:
[T]o rule on the claims or defence raised by a party pursuant to the first paragraph of the preceding Article, the court may, whenever necessary, order the competent intellectual property authority to intervene in the action.
The competent intellectual property authority may intervene only to determine if there is ground for a claim or defence pursuant to the first paragraph of the preceding article, and Article 61 of the Code of Civil Procedure may apply.

Article 61 of the Code of Civil Procedure reads:
[E]xcept for acts that contradict the acts conducted by a supported party, an intervener may conduct all acts of litigation for the supported party according to the phase of litigation at the time of intervention.
Facts

The appellant, Aten, filed a patent infringement lawsuit against the respondent, Wavekee, alleging that the products sold by Wavekee fell within the scope of two of its patents and claiming a damage award of NT$10 million plus interest. Wavekee challenged the validity of the asserted patents and submitted several prior art references as evidence. The first instance and the second instance of the Taiwan IP Court recognized Wavekee's viewpoints concerning patent invalidity, both courts holding that the two patents lacked inventive step in light of the prior art citations, thus dismissing Aten's complaint. During the second instance proceeding, while the IP Court ordered the Taiwan Intellectual Property Office (TIPO) to participate in the trial as an intervening party, the TIPO's examiner did not express any opinion, nor did he declare which of the two parties the TIPO would like to assist. The Supreme Court thus set aside and remitted the IP Court's second-instance judgment. In its decision, the Supreme Court ruled that, when ordering the TIPO to intervene in litigation, the IP Court should expressly designate the litigating party to be assisted by the TIPO, so that the TIPO can act accordingly and make appropriate arguments. The Supreme Court pointed out that the IP Court's failure to specify which party the TIPO should assist, or to ask the TIPO to express which party it would like to assist, ran counter to the legislative intent of the Intellectual Property Case Adjudication Act. The Supreme Court also criticized the IP Court's listing of the TIPO as an intervening party on behalf of Wavekee without first performing the procedures mentioned above.

Analysis

The formation of the Taiwan IP Court and implementation of the Intellectual Property Case Adjudication Act marked an important transition in the development of Taiwan's intellectual property litigation mechanisms. A distinguishing feature of the newly formed IP Court is that an allegation by the defendant in a patent infringement case that the patent at issue is invalid now requires the IP Court itself to rule on the validity issue rather than wait for the TIPO to resolve the matter through a cancellation action; the IP Court also no longer has discretion to stay patent litigation pending the outcome of a cancellation action, as provided in Article 16 of the Act. Because the TIPO remains the government authority in charge of patent affairs, Article 17(1) of the IP Adjudication Act further provides that the IP Court may, when necessary, order the TIPO to participate in litigation, as an intervening party, to provide opinions on patent validity.

Since such ‘intervention’ is by nature ‘supportive’, Article 61 of the Civil Procedure Code should apply. This stipulates that ‘an intervener may conduct all acts of litigation for the supported party according to the phase of litigation at the time of intervention, except for acts that contradict the acts conducted by the supported party’. In other words, this means that, when intervening in litigation, the TIPO not only should express an opinion with respect to the validity of the patent at issue, but should also assist only one of the litigants, the plaintiff or the defendant.

However, under the current system, the defendant in a patent litigation may also initiate a cancellation action with the TIPO so as to invalidate the plaintiff's patent. If this action is still pending, the TIPO will be put in a difficult situation as it would not be able to express any opinion on patent validity, let alone decide which of the litigants it should ‘assist’. Even if there is no cancellation pending before the TIPO as a third party to the litigation, it is difficult to ask the TIPO examiner carefully to review and study the files of the litigation, fully comprehend the dispute between the parties and then give his or her opinion during the litigation. Consequently, at the initial stage of the IP Court's operation, it seems that the IP Court had not been actively engaging the TIPO, for assistance during patent litigation, as there had been little actual benefit from the TIPO's intervention.

As a result, the Supreme Court has reiterated on numerous occasions, between 2009 and 2011, the importance of ‘the TIPO's intervention in litigation’ (Judgments Nos 2009-Tai-Shang-2373, 2010-Tai-Shang-112, 2011-Tai-Shang-480, 2011-Tai-Shang-1013 and 2011-Tai-Shang-986). In particular, these judgments established that intervention by the TIPO in litigation deserves consideration if the court is leaning towards overturning a TIPO-issued rejection of a cancellation action. In Judgment No 2011-Tai-Shang-986, wherein a cancellation action is still pending before the TIPO, the Supreme Court even pointed out that the IP Court should consider whether to wait until the cancellation action becomes final and then seek the TIPO's professional opinion.

As the Supreme Court has repeated this principle in its judgments, it appears that the IP Court tended to order the TIPO to intervene in the patent litigation in order to avoid any procedural defects. However, it remains difficult for the TIPO to express any concrete opinions with regard to patent validity. Accordingly, even if the TIPO is ordered by the court to intervene in the litigation, such intervention is no more than a formality with little substantive effect. The requirement for ‘the TIPO to assist a litigant’ in intellectual property rights cases has been rendered superfluous. In light of this situation, the Supreme Court gave specific instructions on the improvement to be made by the IP Court in Judgment No 2013-Tai-Shang-180, according to which the IP Court is required to clearly indicate which party to the litigation the TIPO should support.

Practical significance

Doubts remain as to the circumstances under which the IP Court can order the TIPO to assist the plaintiff to secure patent validity, and conversely, as to the situations under which the court can order the TIPO to assist the defendant to support its position for invalidating the patent. This would be particularly difficult if a cancellation action to be heard by the TIPO has not yet been concluded.

After the Supreme Court had issued the procedural guidelines mentioned above, the IP Court did not seem to be completely adhering to the newly prescribed practice of expressly indicating in orders for TIPO intervention which party is to be assisted. Rather, the IP Court tends to require the TIPO to make its own decision in this regard, and then incorporate a paragraph in the judgment describing the TIPO's statement. For example, in IP Court's Judgments Nos 2012-Min Juan Shan-39 (24 April 2014) and 2013-Min Juan Shan-42 (8 May 2014), the court remarked that the TIPO expressly declined to support either of the parties or to submit any substantial arguments for the reason that the relevant cancellation actions are still pending. In Judgment No 2013-Min Juan Shan-53 of 11 April 2014, the TIPO even stated that it would like to keep silent in respect of patent invalidity and would not identify which party to assist. It is not yet known whether the Supreme Court will insist on or change its view with regard to TIPO intervention.

Thursday, 4 December 2014

General Court holds K-Swiss five-stripe mark invalid

Author: Matthew Dick (D Young & Co LLP)

K-Swiss, Inc v OHIM and Künzli SwissSchuh AG, Case T-85/13, EU:T:2014:509, General Court of the European Union, 14 June 2014

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu224, First published online: December 3, 2014

The General Court of the European Union has recently decided that the following Community trade mark registration owned by K-Swiss, Inc for ‘footwear’ is invalid on absolute grounds as it lacks distinctiveness.

Künzli applied to invalidate Community trade mark (CTM) registration no 4771978 (the ‘contested mark’) owned by K-Swiss on absolute grounds on the basis of Articles 51(1)(a) and 7(1)(b) of Regulation 40/94 (now Articles 52(1)(a) and 7(1)(b) of Regulation 207/2009). These provisions prohibit the registration of trade marks which lack distinctiveness and which are therefore incapable of indicating the commercial origin of the goods and services covered by the mark.

Facts

K-Swiss applied for the contested mark in December 2005 in respect of ‘footwear’. The application was published in July 2006, and the contested mark was registered in August 2007.

In February 2009, Künzli filed an application for a declaration of invalidity against the contested mark in its entirety at the Office for Harmonisation in the Internal Market (OHIM). The Cancellation Division of OHIM assessed the matter and referred to the fact that manufacturers of sports and leisure shoes often place figurative and decorative elements as trade marks on the sides of shoes, particularly because sports shoes are frequently presented to consumers side-on, on shelves in stores. The Cancellation Division accepted that this is a common practice to which consumers are accustomed and confirmed their view that consumers can in principle be guided by such practices to indicate the commercial origin of a product they are purchasing.

The Cancellation Division added, however, that very simple elements, for example seams which are purely decorative or required for technical reasons, cannot be considered to have distinctive character. In light of this, the Cancellation Division upheld the application for a declaration of invalidity on the basis that the contested mark did not provide ‘an adequate point of contact for a function that indicates the commercial origin’ of the shoes, as consumers would view the five stripes as necessary to reinforce the shoe or as an indistinct embellishment.

K-Swiss appealed to the Second Board of Appeal of OHIM, and, in October 2012, the Board dismissed the appeal. The Board held that signs which are indistinguishable from the appearance of the goods themselves will only be distinctive if they depart significantly from the norms or customs of the sector. Accordingly, the Board considered that the contested mark did not possess the minimum degree of distinctiveness required for registration as it was not distinguishable from the appearance of the product which it covers (ie a shoe) and did not possess any distinctive character in relation to those goods. In particular, the Board considered that the contested mark
… does not depart significantly from the standard designs that are shown on the sides of these kind of goods and will be perceived simply as decorations, namely a variation of the patterns commonly found on shoes, without a characteristic, memorable or eye-catching feature in the sign that would make it distinguishable from the appearance of a part of that product and that endows it with distinctive character for the goods in question (Case R 174/2011-2, at Para.31).
The Board agreed with the Cancellation Division that the contested mark would be perceived as embellishment rather than an indicator of origin.

The Board was not persuaded by K-Swiss's arguments that similar marks had previously been registered by OHIM: every individual mark must be assessed on its own merits. The Board also dismissed K-Swiss's evidence that the contested mark had been registered in a number of European Union Member States, pointing out that OHIM must base its decisions solely on the Regulation.

K-Swiss appealed to the Court of Justice of the European Union (CJEU) which dismissed its appeal. The court confirmed that the contested mark was indistinguishable from the appearance of the product it designates, ie shoes. According to the court, this was so even if the contested mark was characterized as a ‘position mark’ (as K-Swiss argued it should be). The court considered that, even if the contested mark was limited to five parallel stripes to be positioned on the side of shoes, it would still be a design intended to be placed on part of the products and therefore could be distinguished from the appearance of the products, as it is likely to be considered by consumers to be merely decorative.

The court agreed with the Board's finding that consumers would not consider that decorative elements on the sides of shoes are indicators of the commercial origin of the product, unless such elements have been fixed in the minds of consumers through intensive use.

The court also considered that the contested mark did not depart significantly from the customs or norms of the sector. Further, in order to be considered to have distinctive character,
… a design applied to the surface of a product must be capable of being apprehended without the product's inherent qualities being perceived simultaneously, so that the design can be easily and instantly recalled by the relevant public as a distinctive sign.
Ultimately K-Swiss had not proven that the contested mark, applied to the external surface of business or dress shoes, could be apprehended without the intrinsic characteristics of those shoes being perceived at the same time.

Analysis

In reaching its decision, the court considered a number of cases relating to shape marks, which essentially established that such marks are not capable of registration unless they depart significantly from the norms or customs of the sector. While this requirement is understandable when considering three-dimensional marks, where the basic design of the product is similar across the industry, it is more difficult to apply to two-dimensional designs such as lines and patterns, where it is harder to argue that there is an industry norm as such.

The decision also suggests that simply stating that a mark is intended to be a ‘position mark’ will not assist an applicant in registering a mark which is inherently lacking in distinctiveness. Nor does the fact that some signs placed on the side of shoes have acquired distinctive character through use suggest that consumers have learned to establish a link between any sign placed on the side of a shoe and a particular manufacturer.

Perhaps most importantly, the General Court stated:
[I]n order to be conceded distinctive character, a design applied to the surface of a product must be capable of being apprehended without the product's inherent qualities being perceived simultaneously, so that the design can be easily and instantly recalled by the relevant public as a distinctive sign.
The fact that the K-Swiss registration did not include a verbal indication noting that the registration covered the mark as applied to the sides of shoes was not necessarily determinative, but it did not help its case. Nevertheless, the court seems to be saying that the fact that a sign is intended to be a ‘position mark’ is not a valid argument that will assist in claiming inherent distinctiveness.

Practical significance

This case is the latest in a line of recent cases at both OHIM and the CJEU which have the effect of making it more difficult to register marks such as these. It is hoped that further guidance will ultimately be forthcoming on the question of when a mark may be held to be indistinguishable from the appearance of the relevant product, as many logos and trade marks are applied to products such as t-shirts and sweatshirts in a similar manner to the five stripes in this case. If such marks are to be treated in the same way as the contested mark, a high hurdle has been set for trade mark owners. At the time of writing, no appeal has been filed in this case.

Monday, 1 December 2014

Federalism and localisation in intellectual property law-making

"Federalism and localisation in intellectual property law-making" is the title of the December JIPLP guest editorial by Phillip Johnson (Professor of Commercial Law, Cardiff University). It reads like this:
Had there been a “Yes” vote in the Scottish independence referendum on 18 September 2014 all sorts of interesting intellectual property questions would have arisen: What happens to existing patents, trade marks and designs? Should an independent Scotland join the European Patent Convention or TRIPS? Should a Scotland outside the European Union extend Community trade marks and Community designs while it waited to (re)-join the EU? Thankfully, Scotland voted “No” and we do not have to answer these issues (although some countries have done so already for example, Montenegro when it separated from Serbia).

Yet the “No” vote allows us to consider another possibly more interesting question. Why is it that the power (competence) to make intellectual property laws is usually a federal one? If one looks to the United States when its Constitution was drafted in 1787, copyright and patents were firmly within the legislative powers given to the US Congress (rather than left to the states). Similarly, the Constitution of Canada (British North America Act 1867) and that of Australia (1900) both reserved such matters to the federal parliament. This phenomenon is not confined to common law federations, so for example, that of Argentina (1853) and the North German Confederation (1867 and later the German Empire (1871)) also left intellectual property to the federal parliament. Similarly, the European Economic Community (now the European Union) tried to set up federal (ie Community) trade marks and patents soon after the coming into force of the Treaty of Rome in 1958. The former taking over thirty years to come into being and we are still waiting on the latter. And more recently, the Court of Justice (in C-114/12 Commission v Council) seems to have made copyright something (almost) exclusively within the power of the EU (and not Member States). Indeed, returning to Scotland, the devolution settlement likewise reserved intellectual property matters to Westminster (except plant varieties). So what is it about intellectual property that makes it invariably federal?

Conversely, as international treaties relating to intellectual property law have become more prescriptive (particularly the TRIPS Agreement) there are increasingly calls to push for the use of the “flexibilities” permitted under those treaties. Utilising them means countries can have more control over what is protected by intellectual property laws and what is not. In other words, this flexibility enables the domestic law to reflect a country's particular stage of development while still being compliant with international requirements.

If one concentrates on patent law alone, it is fair to say that, invariably, the various provinces, states or regions within a federation will be at very different stages of development when the federation is formed. And so, if the logic applied to TRIPs is applied more generally, this would suggest against a federal patent power, rather leaving it local governments to legislate for their own particular needs. For example, the Southern United States was predominately agricultural long after the industrialisation of the North. A state (rather than federal) patent law would have allowed flexibilities to exist to cater for this difference.

We know little of why patent law was reserved to Congress, it had been a matter for each of the thirteen colony before the revolution and James Madison in The Federalist when explaining the grant of the federal power say no more than the States could not make effectual provision for patents (or copyright). So why do national (federal) laws traditionally prevent local governments exercising flexibility to fit local needs? Some reasons are put forward below, but each must be discarded.

Simple reasons, such as patent law is too important to be left to the governments of constituent states are clearly nonsense. Many federations leave much more important and politically sensitive matters than patent law to those states. The divergence cannot be put down to the international elements of patent law. The United States avoided international entanglement in intellectual property for most of its first century—and of the other examples all but Australia predate any of the major intellectual property treaties. Neither can it be put down to the stages of industrial development when the constitutional powers are allocated. The role of patents in the newly independent United States must have been marginal at best; at least based on number of patents granted: fewer than 100 were granted annually before 1807 and it took until 1854 to top 1,000 a year (very similar figures to England in fact). These low numbers also point against another modern actor, namely, big corporations who are currently blamed for lobbying for international/federalisation so as to set uniform laws set at a ‘high' protection standard. Not only were too few patents granted to have much effect on business overall but at this time patents were largely granted to individuals (indeed, the inventor has, until recently, had to personally apply for the patent in the US; and in the UK it was not until 1852 that a company could even own a patent).

Another reason might be that a federal power and rules avoid patent laws creating internal barriers to trade (and what would now be called the imposition of transaction costs). This could also extend to avoiding problems being created by needing to localise the patent under internal federal conflict rules so as to avoid multiple state laws applying to one incident. Thus avoiding these barriers and conflicts is more important than local development needs within the federation. This fits with the EU Commission's reasoning for harmonisation, but it does not fit other federations. In the US, the law governing the sale of goods and the formation of corporations are state matters and, arguably, both put up more significant trade boundaries than patent law (so much so the former has led to the states adopting a Uniform Commercial Code). So why at the foundation of the United States would federal powers be allocated to avoid one type of trade barrier but not other more significant ones? So there must be another reason for this trend. Or is there? Maybe it has simply become a tradition to federalise intellectual property law-making.

December JIPLP now out

The December 2014 issue of the Journal of Intellectual Property Law & Practice is now available online for the benefit of the journal's e-subscribers.  You don't need to subscribe, though, if you wish to peruse the contents (below) -- and even if you're not a subscriber you can still purchase short-term access to individual articles and other content via the journal's website here.

Phillip Johnson's guest editorial will be reproduced in full on this weblog later today.

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