Hauck v Stokke: CJEU clarifies ‘nature of goods’ and ‘substantial value’ exceptions in relation to shape marks

Author: Jonty Warner (King & Wood Mallesons)

Hauck GmbH & Co KG v Stokke A/S and others, Case C-205/13, EU:C:2014:2233, Court of Justice of the European Union, 18 September 2014

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu226, first published online: December 23, 2014

The Court of Justice of the European Union has provided clarification regarding the interpretation of the grounds in Articles 3(1)(e)(i) and (iii) of the Trade Marks Directive which preclude the registration as trade marks of signs which consist exclusively of the shape which ‘results from the nature of the goods themselves’ or the shape which ‘gives substantial value to the goods’.

Legal context

Article 3(1)(e) of Council Directive 89/104 on Trade Marks (subsequently repealed and re-enacted) provides:
The following shall not be registered or if registered shall be liable to be declared invalid: …

(e) signs which consist exclusively of:

the shape which results from the nature of the goods themselves, or

the shape of goods which is necessary to obtain a technical result, or

the shape which gives substantial value to the goods.
Facts

Stokke sold its famous ‘Tripp Trapp’ children's chair, in particular, in the Scandinavian and Dutch markets for several decades. The chair comprises sloping uprights and sliding plates, which can be adjusted so that the chair continues to fit a child as it grows older. In 1998, Stokke obtained a Benelux trade mark registration for the following shape resembling the ‘Tripp Trapp’ chair:

Hauck made and sold two children's chairs named ‘Alpha’ and ‘Beta’. Stokke brought an action against Hauck before the District Court of The Hague for infringement of copyright in the ‘Tripp Trapp’ chair and infringement of its Benelux trade mark registration. Hauck counterclaimed for a declaration that the mark was invalid. The court decided that Hauck had infringed Stokke's copyright, but upheld Hauck's counterclaim that the trade mark was invalid on the grounds that the sign consisted exclusively of a shape corresponding to the grounds for invalidity set out in Articles 3(1)(e)(i) and (iii) of the Trade Marks Directive in that the shape of the ‘Tripp Trapp’ chair resulted from the nature of the product itself and the appearance of the ‘Tripp Trapp’ chair gave the product substantial value. The Court of Appeal of The Hague upheld the decision in relation to the findings of both copyright infringement and invalidity of the mark. In relation to the grounds for invalidity under Article 3(1)(e), the Court of Appeal considered that the attractive appearance of the chair gave it substantial value and its shape was determined by the very nature of the product, it being a safe, comfortable, reliable children's chair.

On further appeal, the Netherlands Supreme Court referred three questions to the Court of Justice of the European Union (CJEU), summarized as follows:
1. Does the ground for refusal in Article 3(1)(e)(i) refer to a shape which is indispensable to the function of the goods, or can it also refer to the presence of one or more substantial functional characteristics of goods which consumers may possibly look for in the goods of competitors?

2. Does the ground for refusal in Article 3(1)(e)(iii) refer to consumers' motive for purchasing the goods? Further, does the ground only apply if the shape is the main or predominant value of the goods, or does it also apply if other substantial values of the goods (such as safety, comfort and reliability) exist? When assessing whether the value is ‘substantial’, is the opinion of the majority of the relevant public decisive, or can the opinion of a portion of the public suffice (if so, what size must the portion of the relevant public be?)

3. Can the grounds for refusal in Article 3(1)(e)(i) and (iii) be applied in combination?
Analysis

Nature of the goods

The CJEU has consistently held that the various grounds for refusal of registration in Article 3 must be interpreted in the context of the public interest underlying them. In relation to the shape objections in Article 3(1)(e), the court followed the Opinion of Advocate General Szpunar that each of the provisions of Article 3(1)(e) pursued the same objective and, accordingly had to be interpreted in a consistent manner.

In Philips (Case C-299/99, EU:C:2002:377) the CJEU had decided that the rationale underlying Article 3(1)(e)(ii) (shape of goods necessary to obtain a technical result) was to prevent trade mark owners gaining a monopoly on technical solutions or functional characteristics of a product which a user was likely to seek in the products of competitors. Meanwhile, in Lego Juris v Office for Harmonization in the Internal Market (OHIM) (Case C-48/09 P, EU:C:2010:516), the court had identified that the aim of Articles 3(1)(e)(ii) and (iii) was to prevent trade mark protection, effectively extending indefinitely the life of rights which the EU legislature intended to be subject to limited periods (ie, predominantly registered designs but also patents).

Taking these objectives into account, the CJEU emphasized that, in accordance with its decision in Lego Juris, the ground for refusal in Article 3(1)(e)(i) would not apply if another element of the shape of the goods, such as a decorative or imaginative element which was not inherent to the generic function of the goods, played an important or essential role. The CJEU rejected the interpretation that Article 3(1)(e)(i) would only apply to signs consisting exclusively of a shape which was indispensable to the function of the goods in question. Such a restrictive interpretation would not, the court said, allow producers of goods scope to make a ‘personal essential contribution’ to the product and would effectively limit the provision to refusal of protection for products whose shape was prescribed by legal standards or ‘natural’ products, which had no substitute.

Accordingly, the court concluded, the ground for refusal in Article 3(1)(e)(i) extends to signs which consist exclusively of the shape of a product with one or more essential characteristics which are inherent to the generic function or functions of that product and which consumers may be looking for in the products of competitors.

Substantial value

The second question concerned Article 3(1)(e)(iii), ie, shapes which give substantial value to the goods. The Dutch Court of Appeal had decided that, although the shape of the ‘Tripp Trapp’ chair gave it significant aesthetic value, it also had other characteristics (such as safety, comfort and reliability) which gave it essential functional value. The CJEU held that Article 3(1)(e)(iii) could apply to the shape of products where, in addition to its aesthetic function, the shape also performs essential functions. Otherwise, it noted, products which have essential functional characteristics in addition to a significant aesthetic element would not be covered, and the objectives of Article 3(1)(e) would not be fulfilled.

Further, the presumed perception of the sign by the average consumer was not decisive in considering this ground, but was one of a number of factors which had to be considered. As indicated by the Advocate General, other criteria could include the category of goods concerned, the artistic value of the shape in question, its dissimilarity from other shapes in common use on the market, a substantial price difference in relation to similar products, and the development of a promotion strategy focusing on the aesthetic characteristics of the product.

Grounds to be applied independently

The third issue was whether the provisions of Articles 3(1)(e)(i) and (iii) could be applied in combination. Noting that the three provisions of Article 3(1)(e) were set out successively, and that the word ‘exclusively’ was used, the CJEU concluded that they should be applied independently of each other. Accordingly, even if only one of the three provisions fully applied to a sign, the court stated that a sign consisting exclusively of the shape of a product could not be registered.

Practical significance

The case will now return to the national court for it to apply the CJEU's ruling. Given, in particular, the finding in the Dutch proceedings that the shape of the Tripp Trapp chair gives it significant aesthetic value in addition to those characteristics that give it essential functional value (such as safety, comfort and reliability), it appears likely that the finding of invalidity will be upheld. The CJEU's decision is likely to mean that applicants will continue to face significant obstacles in registering shape marks, especially when such marks are for the shape of the product, even when such shapes have acquired distinctive character through use. In many cases, of course, it will be possible for design protection to be obtained, albeit for a limited period, provided this is applied for before, or shortly after, public disclosure.

In the meantime, the CJEU will hear argument in due course on a reference from the High Court, England and Wales, in Société des Produits Nestlé SA v Cadbury UK Ltd [2014] EWHC 16 (Ch) (C-215/14) concerning Nestlé's application to register the shape of the Kit Kat chocolate bar as a UK trade mark. The main focus of the reference is on the issue of acquired distinctiveness but Arnold J has also sought clarification in respect of Article 3(1)(e).

Dutch judge orders disclosure of source code in China

Author: Ruud van der Velden (Hogan Lovells)

Autodesk, Inc v ZWCAD Software Co, Ltd and others, Provisions Judge of the District Court of The Hague, 7 April 2014, ECLI:NL:RBDHA:2014:7073

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu227, first published online: December 23, 2014

The Provisions Judge of the District Court of The Hague ordered a Chinese defendant to provide the source code of its software product to a custodian in China for possible later use in copyright infringement and trade secret violation proceedings in the Netherlands.

Legal context

Measures for obtaining evidence of intellectual property infringement can be very important, especially where it is otherwise difficult to obtain such evidence. Such difficulties can arise when there is a suspicion of infringement of, for instance, a process patent claim or infringement of copyright of software, but direct evidence is missing. The Enforcement Directive (Directive 2004/48) has partially harmonized the possibilities of obtaining evidence of intellectual property infringement throughout Europe, but these possibilities are still often applied differently in different Member States. Since the implementation of the Enforcement Directive in the Netherlands, the possibility of obtaining evidence before the courts in the Netherlands has improved significantly and orders are sometimes even granted with cross-border effect, this decision being an example.

Facts

Autodesk is a developer of computer-aided design programs (CAD programs). CAD programs enable a designer to draw and design with the aid of a computer. CAD may concern drawings and designs, for instance, in the fields of architecture, civil engineering, mechanical engineering and the media. AutoDesk brings CAD programs on the market under the name AutoCAD. The first version of the program was brought on the market in 1982. Since then, Autodesk further developed the program and different versions were brought on the market over the years, including AutoCAD 2008. The source code of AutoCAD is protected by copyright. Autodesk also treats its source code as a trade secret.

In 2002, the Chinese company ZWSoft started to bring CAD programs on the market under the name ZWCAD. ZWSoft continued to develop the ZWCAD program and brought several different versions on the market over the years. In 2012, ZWSoft brought a new CAD program on the market, ZWCAD+. When introducing this program, ZWSoft indicated that ZWCAD+ would be fundamentally different from ZWCAD and that it would have developed it ‘from the ground up’. ZWCAD+ could be purchased in the Netherlands through ZWSoft's website.

Autodesk took the view that ZWCAD+ was not developed ‘from the ground up’, but instead was based on the source code of Autodesk's AutoCAD 2008 program, and that ZWSoft infringed Autodesk's copyrights and violated its trade secrets. According to Autodesk, many functions of AutoCAD which did not provide a useful contribution to the performance of the system for the user or which could be even qualified as mistakes were also found in the ZWCAD+ program. Autodesk also noted that ZWSoft developed the program remarkably quickly. Autodesk initiated preliminary relief proceedings before the Provisions Judge of the District Court of The Hague claiming inter alia an injunction and an order for a copy of the source code of ZWCAD+ to be provided to a custodian in the Netherlands.

Analysis

The court rejected the injunction claim, as the judge was of the opinion that Autodesk had not made it sufficiently plausible that ZWSoft had obtained the source code of AutoCAD and that it had used parts of it in the source code of its ZWCAD+ program. The judge noted that Autodesk had not submitted direct evidence that parts of the source code of ZWCAD+ were identical to parts of the source code of AutoCAD. Autodesk did not have the source code of ZWCAD+ in its possession and could thus only make statements regarding similarities in the functionality of the programs. This was considered problematic, as similar functionality can be achieved with a different source code. The judge thereby followed ZWSoft's core argument. ZWSoft stated that it intended to develop a program that was functionally closely similar to AutoCAD because AutoCAD was the market standard for CAD programs, but that it did not use the source code of AutoCAD. Given the absence of any direct evidence, the judge considered that there was insufficient evidence to warrant an injunction.

The judge, however, granted Autodesk's alternative claim that ZWSoft must provide a copy of the source code of ZWCAD+ to a custodian. He considered that the fact that there was insufficient evidence to warrant an injunction does not preclude the possibility of granting an order for preservation of evidence for later use in proceedings on the merits: the threshold for granting an order for the preservation of evidence is lower than that for granting an injunction. It is sufficient that the plaintiff puts forward specific facts and circumstances from which a reasonable suspicion of infringement can follow. The judge considered that, although the evidence submitted by Autodesk was not sufficient to meet the threshold for an injunction, it was sufficient to meet the threshold for granting the requested evidentiary measure.

ZWSoft tried to avoid the evidentiary measure by stating that Chinese law would not allow the source code of the program to be brought outside of China. The judge did not consider this to be an adequate ground for disallowing evidence preservation altogether and came up with a practical solution: the judge ordered ZWSoft to provide its source code to a custodian in China. In a follow-up decision of 12 May 2014, the judge specifically ordered the source code to be provided to Alvarez & Marsal, an international group of companies with subsidiaries in, inter alia, Beijing and Shanghai. He ordered ZWSoft to provide the source codes of ZWCAD+ 2012 and ZWCAD+ 2014, including the build and mastering scripts, third-party binary components and libraries to Alvaraz & Marsal, under forfeiture of a penalty payment of 50 000 euros for each violation of the order or each day of non-compliance with the order.

Following this decision, the evidence (the source code) will be preserved, and Autodesk may have an opportunity to claim access to and use this evidence for further substantiating its copyright infringement and trade secret violation claims in proceedings on the merits.

Practical significance

This decision shows that courts in the Netherlands are willing to assist in evidence collection and to take practical measures, even where it concerns foreign entities and infringement cannot yet be established. The decision fits with other decisions rendered in the Netherlands in recent years. For instance, on 8 June 2012, the Dutch Supreme Court held that it is possible to claim access to evidence before a court in the Netherlands, even if that evidence is to be used in proceedings outside the Netherlands (Supreme Court 8 June 2012, ECLI:NL:HR:2012:BV8510, Abu Dhabi Islamic Bank v ABN Amro Bank). And the Court of Appeal of Amsterdam decided, on 24 April 2012, that it is possible to levy an evidentiary seizure in the Netherlands in order to preserve evidence of patent infringement outside the Netherlands, even if there is no parallel patent in force in the Netherlands (Court of Appeal of Amsterdam 24 April 2012, ECLI:NL:GHAMS:2012:BW4100, Rhodia Chimie v VAT Logistics and others). Recent case law thus shows that the Netherlands has become an interesting jurisdiction for obtaining evidence.

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.

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.

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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