Latest JIPLP: L'Oréal, eBay and tyranny of the unknown

The October 2011 issue of the Journal of Intellectual Property Law & Practice (JIPLP) has been available in full to online subscribers since last week. The contents of this issue can however be viewed by everyone, whether they subscribe or not, by clicking here. Here's the Editorial:
"L'Oréal, eBay and tyranny of the unknown

When I realised that I would be writing an editorial in the week in which the Court of Justice of the European Union (ECJ) was delivering its judgment in a vigorously contested trade mark infringement suit brought by the world's largest cosmetics and beauty products company against the world's largest internet auction and sales host, I at first assumed that I would be writing a commentary on the substantive law, explaining how it would affect that relative positions of trade mark owners, sellers of genuine and infringing goods bearing their trade marks, internet service providers and consumers. As it turns out, there is no real need to do so. The judgment reiterated both the existence of a privileged immunity from liability of internet service suppliers and the conditions which they must fulfil in order to enjoy that immunity; it confirmed the jurisprudence relating to trade mark infringement which it has articulated in a series of decisions stretching back to its Google France rulings in March 2010 (16 months is a long time in internet law; this ruling now seems to belong to the distant past); it also left a set of answers shorter and easier to understand than the raft of questions on which it was asked to give its preliminary ruling.

The really interesting thing about this case is not the ruling but the circumstances in which businesses trade.

Non-European readers of this journal may need a short explanation of the role of the ECJ in the field of intellectual property. European Union law on trade marks, copyright, database rights, designs and plant varieties is largely harmonized between the 27 formerly autonomous countries of the Union. To ensure consistency as between those countries in the application of harmonized IP rules, national courts may refer questions regarding ambiguities and uncertainties inherent in those rules to the ECJ for a preliminary ruling. Once that ruling is given, the national court which referred the questions now has its answers and can get on with judging the dispute before it. Additionally, in the case of pan-European rights such as the Community trade mark and registered Community designs, the ECJ serves as a top-tier court of appeal: this function is exercised in respect of both procedural and substantive law.

As a system, the referral of questions for a response works well in theory. ECJ rulings are binding on all national courts, inferior Community courts and tribunals. They ensure that, as far as possible, the same rules are interpreted and therefore applied consistently across a vast, multilingual and multicultural single market. But does the theory work in practice?

The reference of questions for preliminary rulings is not a novel notion, dating back to the ECJ's foundation in 1952. In that year, postwar Europe was still striving to rebuild shattered local and national economies. The creation of a single market consisting of even the original six countries—only three of which were of any real size—was an almost unimaginably ambitious goal, a far cry from the global markets for goods and services we take for granted today. Never mind computers: most households didn't even have a telephone or a refrigerator. It was a slow-moving world by modern standards. It was a world in which the interruption of litigation for around two years (the average time now taken for a preliminary ruling to be delivered) was, if not welcomed, certainly tolerated.

Fast-forward to 2011 and globalisation—though still far from uniform—has become the accepted means of implementing business strategies, not least through the internet. When enterprises like L'Oréal and eBay trade, their daily turnover is vast (at the outbreak of their dispute, L'Oréal's annual sales were a little short of US$ 20 billion; those of eBay were ‘only’ US$ 7.7 billion). What is more, this litigation was viewed by many as a test case since L'Oréal was by no means the only company that considered eBay was not taking adequate care to avoid infringing sales, and eBay is certainly not the only company hosting online sales, as the emergence and rapid growth of Alibaba has shown.

When all the other questions are answered, one remains. Should the ECJ's procedures be amended to provide a truly rapid response when legal issues arise, or is it better to let the parties adjust their commercial activities to lessen the risk of disaster in a market in which, two years down the line, they may be either the substantial winners or the losers in the wake of a ruling which they can seek to influence but cannot control?"

NewzBin2: the first section 97A injunction against an ISP

Author: Darren Meale (SNR Denton UK LLP)

Twentieth Century Fox Film Corp & Others v British Telecommunications Plc [2011] EWHC 1981 (Ch) (28 July 2011), Chancery Division, England and Wales

Journal of Intellectual Property Law & Practice (2011), doi: 10.1093/jiplp/jpr153, first published online: September 19, 2011

After many years of fighting online piracy, the film studios finally deploy, successfully, section 97A of the Copyright, Designs and Patents Act 1988 (‘CDPA’) to force internet service provider BT to block its customers' access to an online service used for mass copyright infringement.

Legal context

Online copyright infringement remains one of the key copyright-related issues, if not the key issue, of the modern age. Film studios and record labels have been fighting piracy on the internet for more than a decade, and despite many victories, infringement still persists. One of the greatest problems rightsholders face is that, almost every time a significant infringer is defeated, another simply rises in its place. When this happened in this case, the Studios successfully made use of an until-now unused power under the CDPA to require ISPs to prevent their users from accessing the offending service.


Over a year ago, in Twentieth Century Fox v Newzbin Ltd [2010] EWHC 608 (Ch) (29 March 2010), the Studios scored a significant victory when the High Court held that NewzBin was committing primary and secondary infringements of the Studios' copyright in major Hollywood films on a grand scale. For more information on the first NewzBin decision, see "Copyright: Online service provider's liability for the activities of its users", Journal of Intellectual Property Law & Practice (2010) 5(7): 491–492. NewzBin was turning over £1 m a year and generating significant profits by charging users for a service which greatly facilitated their downloading of copyright-protected films and other material from the Usenet, a bulletin board system predating, but less popular than, the World Wide Web.

Following the High Court's ruling, NewzBin very quickly shut down. But shortly thereafter, under different ownership, a sequel service was created named, as Hollywood convention dictates, NewzBin2—which provided exactly the same infringing service as its predecessor. Rather than bring the same costly infringement action again (in circumstances where NewzBin had now moved itself entirely out of the jurisdiction), the Studios instead sought to rely on section 97A of the CDPA, which provides simply that ‘The High Court … shall have power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright.’ The Studios thus brought a test application before Mr Justice Arnold, targeting the largest ISP in the jurisdiction, BT, which opposed the application.


Section 97A was inserted into the CDPA in 2003 by the implementing regulations for Directive 2001/29 (the Information Society Directive), Article 8(3) of which provides that rightsholders must be ‘in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright’. Section 97A(1) is set out above and section 97A(2) essentially provides that ‘actual knowledge’ is to be determined having regard to all the circumstances.

The Studios' case was that there was already a finding of copyright infringement against NewzBin1. NewzBin2 was an identical service to NewzBin1. BT was aware of both the judgment and NewzBin2, and there was evidence that BT's users were accessing it. This provided the requisite knowledge and an injunction should be granted requiring BT to block access to NewzBin2 using the same system it deploys to block access to other unlawful websites, such as those containing child pornography: (1) IP address blocking, using the unique IP address of a website to block a user's access to it; and (2) Deep Packet Inspection (‘DPI’) based URL blocking, which monitors internet traffic to block users destined for particular internet pages.

BT disagreed, advancing five arguments against an imposition of a block. Each failed to convince the judge.

  • BT's service was not being used to infringe copyright

BT contended that its users were using NewzBin2, not BT's internet service, to infringe copyright. This argument failed in light of Tele2 Case C-557/02 [2009] ECR I-227, a judgment of the Court of Justice of the European Union (ECJ) which held that providers whose services provide merely internet access are nevertheless to be regarded as ‘intermediaries’ for the purposes of Article 8(3) of the Information Society Directive, and thus injunctions were available against them.

  • BT does not have actual knowledge

BT contended that its ‘actual knowledge’ must be of its service being used to commit a particular infringement of a particular work by a particular identified individual. Arnold J rejected this contention. Noting that the wording of section 97A was of a general and open-ended nature he held that, while knowledge that a particular infringing act was being committed, that a particular work was being infringed, or that a particular individual was infringing would all be indicators towards a finding of actual knowledge, it was not necessary to establish one or all of these facts in order to make such a finding. The more information the service provider can be shown to have about infringing activity, however, the more likely a finding of actual knowledge.

BT, the judge held, had actual knowledge in this case: it knew that users of NewzBin2 infringe copyright on a large scale (including the copyrights of the Studios); those users include BT subscribers; and those subscribers use BT's service to receive infringing copies of works made available to them by NewzBin2.

An injunction would be contrary to Article 12(1) of Directive 2000/31 (the E-commerce Directive)
This Article provides an exclusion of civil and criminal liability for service providers who are ‘mere conduits’. A service provider is a mere conduit where information merely flows through its service without the provider knowing what it comprises, in circumstances where the provider neither initiates the information flow nor modifies that information. The Article does not, however, prevent an injunction being imposed—in fact Article 12(3) specifically preserves such jurisdiction. Given the wording of Article 12(3), BT's reliance on the exclusion failed.

  • An injunction would be contrary to Article 15(1) of the E-commerce Directive

Article 15(1) forbids Member States from imposing general obligations on providers to monitor the information which they transmit. An injunction which required BT to block access to a particular website would, BT contended, amount to a general obligation to monitor. The Studios argued that no monitoring was required and that even if it were, the obligation would be specific and limited, not general. Arnold J agreed with the Studios, drawing on the ECJ's judgment in L'Oréal v eBay Case C-324/09, in which the ECJ noted that ‘a general obligation to monitor’ meant ‘an active monitoring of all the data of each of a website's customers in order to prevent any future infringement via that provider's website’: this would not be the effect of the injunction the Studios sought.

An injunction would be contrary to Article 10 of the European Convention of Human Rights (‘ECHR’)
Article 10 of the ECHR provides the right to freedom of expression, subject to such restrictions as are ‘prescribed by law’ and are necessary in a democratic society in the interests of security, public safety, and so on. BT contended that the injunction sought by the Studios was not ‘prescribed by law’. Arnold J again disagreed, considering that the injunction sought fell well within the range of orders which would foreseeably be ordered pursuant to section 97A.

  • Could but should not?

Having rejected the above arguments, Arnold J satisfied himself that he could make the order sought. BT then tried to dissuade him from exercising his discretion to do so on three grounds, but failed in each case.

Scope of the injunction too wide

Relying on the reasoning of Kitchin J in the first NewzBin case for declining to grant a section 97A injunction against NewzBin1, BT argued that the Studios were interested only in that part of NewzBin2 that involved infringement of film and television material. That only accounted for 70 per cent of NewzBin2's content, and so the Court should not grant an injunction which covered 100 per cent of the content including the 30 per cent in which the Studios had no legal interest but which was owned by an uncertain number of third parties not parties to the case. Arnold J, however, considered that the injunction sought would be certain, as it would require NewzBin2 to be blocked. While it would benefit third party rightsholders, this was a reason in favour of the injunction, not against it.

Floodgates will open

A flood of requests for blocking orders from rightsholders against BT would follow were the Studio's application to be granted, warned BT. Arnold J felt this concern unfounded: the Studios had only got this far by taking a separate action against NewzBin1 and then bringing this second action, all at considerable effort and expense. Although this was a test case, success in it would not, he thought, lead to a section 97A free-for-all. Instead he considered that rightsholders would not undertake future applications lightly and would concentrate their resources on the ‘more egregious infringers’.

Circumvention is too easy

BT contended that a block on NewzBin2 would have little effect as it would be too easy to circumvent. The Studios accepted the block it wanted BT to impose—a mix of IP address blocking and DPI-based URL blocking—could be circumvented by determined users (a proxy server might be one method). Although a real issue, Arnold J did not think that every user would circumvent, or would have the ability to circumvent, the block, which would be justified even if it only prevented access by a minority of users. Circumvention might require users to pay for a further service (such as a good proxy server) and that, once that cost was added to the cost of NewzBin2 membership, users might be persuaded that, economically, they would be better off simply paying to obtain content lawfully.

Practical significance

It is surprising that it has taken the content industries so long to deploy section 97A in their war against internet piracy. On the face of it, it is a straightforward provision with little get-out for the ISP once it has been proven that a website is infringing copyright. And there are many such websites where infringement is beyond doubt. With this success, the Studios will ask (or, failing that, force) all other major UK ISPs to also block NewzBin2. Provided they can do so in a cost-effective manner, the Studios (and other rightsholders) are likely to bring further applications against ISPs in respect of other infringing websites.

Whether the floodgates will be opened may depend on perceptions of how effective the block really is. The simplest of Google searches will reveal a list of possible circumvention methods and, four months before the judgment was handed down, NewzBin2 announced a new web address to which users can navigate (utilizing the free-of-charge TOR anonymous network) which, it says, is impossible for ISPs to block. If that method works, this may be but another pyrrhic victory for the film and television industry.

For reasons that were never clear, the Digital Economy Act 2010 was originally intended to include provision for website blocking, notwithstanding that section 97A long pre-dated it. After much controversy, in August 2011 the Government dropped plans for those new measures. This followed a report from Ofcom which noted that, while blocking was possible, current methods were imperfect and technically challenging, with circumvention of all techniques possible by users and site owners—the latter often being able to relocate their services fairly easily. Ofcom considered the same methods which are available pursuant to section 97A, so while rightsholders may now have an old (but previously unused) weapon to add to their anti-piracy arsenal, it is evidently far from the silver bullet that will stop infringement dead. The war will continue.

Polymorphs in the field of pharmaceutical drug development

Author: David Rogers (Boards of Appeal, EPO, Munich)

Atorvastatin T-0777/08, European Patent Office, Technical Board of Appeal 3.3.01, 24 May 2011

Journal of Intellectual Property Law & Practice (2011) doi: 10.1093/jiplp/jpr147, first published online: September 19, 2011

This case concerns an appeal by the proprietor from a decision of the Opposition Division revoking the patent. Pharmaceutically active molecules often occur in various amorphous and crystalline (‘polymorphic’) forms. This case involved the provision of a crystalline form of a known pharmaceutically active compound which had previously been isolated in an amorphous form. The question before the Board was whether an inventive step could be based on the improved filterability and drying characteristics of this crystalline form over the known amorphous form. The Board found that it could not.

Legal context

Under Article 56 of the European Patent Convention (EPC), dealing with inventive step, ‘An invention shall be considered as involving an inventive step if, having regard to the state of the art, it is not obvious to a person skilled in the art …’.

Facts and analysis

The Board applied the classic ‘problem–solution’ approach to the assessment of inventive step. First, the closest prior art was identified and from this prior art the problem to be solved was defined:
… The board considers, in agreement with the appellant, that the amorphous form of atorvastatin, as obtained according to the processes of documents (1) and (2) … represents the closest state of the art.
The appellant defined the problem to be solved in view of this prior art as lying in the provision of atorvastatin in a form having improved filterability and drying characteristics (paragraph 5.1).

The Board then considered whether this problem was solved:
… The solution as defined in claim 3 of the main request and claim 1 of the auxiliary request relates to a specific polymorph of atorvastatin.
Having regard to the experimental results reported in document (25), which demonstrate shorter filtration and drying times for form IV compared to the amorphous form, the board is satisfied that this problem has been solved (id).
The Board next had to consider whether the proposed solution would have been obvious to the skilled person in the light of the prior art and the relevant common general knowledge, performing an analysis of the common general knowledge:
… From his common general knowledge, the skilled person would firstly be aware of the fact that instances of polymorphism are commonplace in molecules of interest for the pharmaceutical industry … 
The skilled person would also have known it to be advisable to screen for polymorphs early on in the drug development process … 
Indeed, the skilled person would also have been aware of regulatory requirements to provide information on the occurrence of polymorphic, hydrated, or amorphous forms of a drug substance … Moreover, he would be familiar with routine methods for screening for polymorphs by crystallisation from a range of different solvents under different conditions … 
It follows from the above that, at the priority date of the patent in suit, it belonged to the routine tasks of the skilled person involved in the field of drug development to screen for solid-state forms of a drug substance (paragraph 5.2).
In view of this analysis, the Board disagreed with the statement in paragraph [0011] of the patent in suit (‘We have now surprisingly and unexpectedly found that atorvastatin can be prepared in crystalline form’):
… in the absence of any technical prejudice, … the mere provision of a crystalline form of a known pharmaceutically active compound cannot be regarded as involving an inventive step (contrary to the statement in the patent in suit, paragraph [0011]) (id).
The appellant–proprietor argued in favour of finding an inventive step:
… the appellant relied in support of the presence of an inventive step on the improved filterability and drying characteristics of form IV atorvastatin hydrate compared to the amorphous form (id).
In the light of this, the Board considered that the question of obviousness depended on whether there was an incentive for the skilled person to arrive at the present solution in the expectation of achieving these improved characteristics. The Board found that:
… in view of his general knowledge … the skilled person, starting from the amorphous form of a pharmaceutically active compound as closest prior art, would have a clear expectation that a crystalline form thereof would provide a solution to the problem … Although this might not be true of every crystalline form obtained … it was nevertheless obvious to try this avenue with a reasonable expectation of success without involving any inventive ingenuity (id).
The appellant also argued that the probable lower solubility and bioavailability of the crystalline form, when compared to the amorphous form, would have dissuaded the skilled person from attempting to obtain the crystalline form. The Board rejected this argument as it considered this to be a trade-off between expected advantages and disadvantages of these two classes of solid-state forms.

The appellant further argued for a finding of inventive step on the basis that a specific polymorph was being claimed rather than crystalline forms in general. The Board rejected this argument too:
… The board does not deny that there may be other options for solving the problem posed … However, an arbitrary selection from a group of equally suitable candidates cannot be viewed as involving an inventive step (id).
Practical significance

Although at first glance, this case seems to be purely based on specific technical considerations, it is of great interest to patent attorneys concerned with pharmaceutical patents. It is the first time that the Board of Appeal has given a clear decision that, in the absence of a technical prejudice and an unexpected property, the mere provision of a crystalline form of a known pharmaceutically active compound cannot be regarded as involving an inventive step.

Why not have a tilt at writing for JIPLP?

Here are some more topics on which JIPLP would dearly like to receive articles:
  • Problems relating to proof of foreign intellectual property rights in domestic infringement proceedings and/or in Office actions;

  • Initial interest confusion as a ground on which an action for trade mark infringement may be based;

  • Practical implications in intellectual property for the doctrine of freedom of commercial speech;

  • Strategic implications of "trade fair" injunctions;

  • Whatever happened to patent marking?

  • Practical guidance on securing geographical indication protection in the European Union;

  • Trade mark and trade name disputes: are shared market surveys (i) feasible, (ii) desirable?

  • Calculation of compensation where a defendant's business has been harmed by an interim injunction that should not have been ordered;

  • Best practice in negotiating a co-existence agreement with a competitor with a not-too-similar brand r trade name;
If you think that you would be suitably qualified to write on one of these topics, (i) check the journal's Instructions for Authors and consider whether you can manage to keep within their parameters, then (ii) on the understanding that you are comfortable with the Instructions for Authors, please email Sarah Harris (Commissioning Editor), who will deal with you on all logistical and practical issues arising from the submission and publication of your text.

European Commission publishes Memorandum of Understanding on the sale of counterfeit goods over the internet

Author: Leigh Smith (McDermott Will & Emery UK LLP)

Memorandum of Understanding on the sale of counterfeit goods over the internet, 4 May 2011

Journal of Intellectual Property Law & Practice (2011), doi: 10.1093/jiplp/jpr139, first published online: September 5, 2011

On 4 May 2011, participants in one of the European Commission's Stakeholder Dialogues signed a non-binding Memorandum of Understanding on the sale of counterfeit goods over the internet, aimed at collaboration between interested parties in the reduction of the sale of counterfeits via e-commerce platforms.

Legal context

Stakeholder Dialogues are used by the European Commission to bring together a representative group of participants in a particular field to discuss the common issues affecting that field. The desired outcome of a Stakeholder Dialogue is to find solutions based on voluntary cooperation within the pre-existing legal framework, thus avoiding the need for legislative reform. The current dialogue, which focuses on the problems of IP rights enforcement, forms part of the wider Digital Agenda for Europe, outlined by the Commission in May 2010.


The Stakeholder Dialogue comprised a number of meetings in 2009 and 2010, which resulted in the Memorandum of Understanding on the sale of counterfeit goods over the internet (the ‘MoU’). The MoU was signed on 4 May 2011 and was effective from 5 May 2011. The signatories to the MoU include anti-counterfeiting organizations, as well as leading rights holders and trade associations with a vested interest in the field. The majority of the MoU focuses on the relationship between two categories of signatories: ‘rights owners’ and ‘internet platforms’. The latter are defined in the MoU as providers of e-commerce trading services.

The MoU, which is stated to be non-binding, provides that the signatory companies will commit themselves to undertake certain measures to combat counterfeit sales and to collaborate in the fight against the sale of counterfeit goods over the internet, while the signatory trade associations will further promote the MoU among their members. Explicitly excluded from the ambit of the MoU are parallel imports, or so-called grey goods. The MoU includes a moratorium on litigation whereby the signatories state that they are willing to cooperate and assist each other to reduce internet counterfeit sales and agree not to initiate any new litigation against each other concerning matters covered by it.

With regard to mechanisms of enforcement other than litigation, the MoU notes the importance of notice and takedown procedures, describing them as ‘indispensable’ in the fight against the sale of counterfeit goods over the internet. It states that rights owners should have the ability to notify internet platforms of sellers engaged in such sales. Internet platforms agree to take such information into consideration as part of the preventive measures they are required to introduce under the MoU. Internet platforms agree to take appropriate, commercially reasonable, and technically feasible measures to identify and/or prevent the sale of counterfeit goods. However, the MoU is clear that the primary responsibility for enforcement remains with the rights owners. To this end, rights owners agree to take commercially reasonable and available steps to monitor sales on internet platform websites.

Internet platforms commit to adopt, publish, and enforce IPR policies, which should be clearly communicated and indicated on their websites and reflected in the contracts they conclude with their sellers. Further, they commit to disclose, upon request by rights owners, relevant information including the identity and contact details of alleged infringers and their user names insofar as permitted by applicable data protection laws (recognizing that in some Member States a court order may be required). Rights owners commit to making requests for disclosure in good faith and in compliance with data protection laws.

As for repeat infringers, internet platforms commit themselves to implement and enforce deterrent repeat infringer policies, which will include the suspension or restriction of accounts or sellers. Rights owners are to provide information to internet platforms concerning repeat infringers. In return, internet platforms will use their best efforts to prevent re-registration of permanently suspended sellers. All signatories commit to cooperating and assisting law enforcement authorities such as customs and border authorities, where appropriate.

There will be an assessment period of 1 year to review and measure progress. After the assessment period, signatories may extend the MoU indefinitely. The signatories will meet biannually to review the MoU and take further steps if necessary.


The European Commission's response to the MoU has been positive, describing the MoU as striking ‘a fair balance between the interests of the parties concerned’ and ‘a good first pragmatic step to strengthen the fight against counterfeiting and piracy on the internet’. Further, ‘The agreement on the MoU demonstrates that voluntary arrangements can, in certain circumstances, provide flexibility to adapt quickly to technological developments and deliver efficient solutions.’

Whether ‘efficient solutions’ are actually delivered will no doubt form the subject of the reviews envisaged by the MoU. Arguably, much of its content reflects the present relationship between rights owners and the internet platforms, especially with regard to notice and takedown procedures. There is already a broad consensus on the importance of notice and takedown procedures. Where disagreement lies, however, and what the MoU carefully avoids, is the more controversial minutiae of these procedures, such as the evidential threshold an internet platform will apply before removing listings or releasing the details of sellers of alleged counterfeit goods. The explicit exclusion of grey goods also avoids a complex area which would have benefited from clarification.

While the European Commission encourages these voluntary arrangements, arguably the better solution in the long term is appropriate legislation to deal with counterfeiting and piracy in the digital age. This could perhaps at least be addressed as part of the review of the Community trade mark regime, when this review is formally set in motion, or the planned review of the IP Enforcement Regulations, scheduled for 2012.

Practical significance

As the MoU is non-binding and signed by only a small portion of the participants in the market, the practical significance of the MoU is likely to be limited. It is more of a symbolic gesture, which through its reviews may lead to something more concrete, whether a binding agreement or by influencing the European Commission's legislative policy.

In the meantime, signatories should ensure that their actions are aligned with the wording and spirit of the MoU. Although it explicitly states that it does not create any binding obligations on the signatories, a signatory can request that the European Commission call a plenary meeting of the signatories if it believes that another signatory is ‘not respecting the principles’ established by the MoU. The European Commission can then request that the signatory withdraws from the MoU, although it does not appear that the signatory would in fact have any obligation to do so.

Non-signatories affected by the contents of the MoU should consider whether, as a first step, they are willing to adopt the contents of the MoU as best practice in their enforcement activities. As the MoU is open to additional signatories, non-signatories may wish to consider signing both to be seen to be aiming for the higher standards envisaged by the MoU and to have the opportunity to shape the approach to IP enforcement online in the future.