It’s a truism that a patent is only as valuable as the patent owner’s willingness and ability to enforce it. And therein lies the challenge faced by companies or institutions with substantial IP assets when they attempt to justify allocating resources to pursue claims.

By the time a patent exists to enforce, the company has likely already made a substantial investment to develop the asset. Protecting it through litigation will require still more money to be invested. The challenge is not only the very high price tag of that additional investment—it is also its high degree of risk, given the even more uncertain outcomes of IP litigation compared to other forms of commercial litigation. As a result, many companies, universities and other entities find themselves with untapped IP assets because of their inability to bear the additional cost and risk of protective litigation.

It gets worse. Companies that are able to overcome the hurdle of added cost and risk, and move forward with IP litigation, face a further challenge in the negative impact of litigation spending on corporate balance sheets. And although private practice lawyers tend not to think about balance sheets, GCs—and CFOs—think about them a lot, and they know that litigation impacts corporate balance sheets in ways that reduce profits and pull down earnings. Indeed, this was specifically cited by 23% of GCs surveyed as part of Burford’s 2016 Litigation Finance Survey as a reason their companies stopped pursuing a viable claim—because legal expenses were hitting the company’s bottom line. For the same reasons, many more choose not to pursue the claims at all.

To understand how negatively IP litigation impacts corporate balance sheets, one must understand how litigation is treated as an accounting matter.  A pending litigation claim to enforce IP rights is a corporate asset, similar in form to any other contingent receivable. However, spending to pursue that claim, and increase its asset value, is peculiarly not added to its asset value, or “capitalized”, and instead is immediately expensed, flowing through the P&L and reducing operating profits. Indeed, a pending litigation claim—despite having legal status as an asset, or a “chose in action”—is affirmatively not an asset for accounting purposes. It is found nowhere on financial statements. Finally, when a significant litigation claim succeeds, the associated income from the claim is often not treated as operating income on the P&L. Instead, it’s put “below the line” as a non-operating or one-off item.

In practical terms, the GC responsible for generating a lot of IP litigation expense and risk is likely going to be persona non grata in the CFO’s office because no matter the ultimate value of that IP litigation to the company, the immediate hit to earnings can be significant. Obviously, companies want to maximize their profits and minimize their expenses. Being hit with expenses as a litigation matter goes forward and then not later recognizing the income from the win is a bad outcome. The situation is even worse for publicly traded companies with significant IP litigation. When investors and stock market analysts look at the balance sheet and don’t see an asset, they don’t credit it; and when they see the kind of expenses associated with high value IP litigation, they may take an overly negative view of the company’s risk factors and value.

Yet despite all of this, the situation is far from dire. Companies have new options.  Litigation finance is growing rapidly in the IP space as part of a broader growth trend that saw a quadrupling of litigation finance use by leading U.S. law firms between 2013 and 2016, according to Burford’s latest research. Among the reasons for its growth in the IP space is its ability to neutralize the negative impact of IP litigation on corporate balance sheets and to shift the cost and risk of IP litigation to a third party. In simplest terms, outside finance enables GCs with significant IP assets to move the cost and risk of pursuing litigation off their corporate balance sheets—because the litigation financier assumes the cost and risk of the IP litigation. The financier provides capital to cover fees or expenses, or both, typically in exchange for a portion of the proceeds if the litigation is successful. Due to the risky nature of IP litigation, the more innovative finance providers will most often develop bespoke financing approaches including portfolio deals where risk is diversified across a pool of matters.

Moving litigation cost off the balance sheet immediately removes any concern about the negative accounting impact of litigation on earnings and profits. When a litigation financier pays the costs of proceeding, those costs do not flow through the company’s P&L, thus conserving the company’s profitability from its operations. Working with an outside financier also enables the company to husband its cash to use for other purposes—and to avoid having it flow out of the company’s coffers and thus reducing its asset value. As a result, when the company wins its claim, the very first time its financial statements are impacted by being a litigant is when it has a positive cash and income event. That obviously yields a far happier accounting outcome for clients.

In sum, outside capital gives GCs a dramatically de-risked platform to unlock the asset value of IP litigation claims—and it also provides longevity and the ability to commit to the long-term nature of IP litigation, whatever the business situation of the company.

Chapter XXXIII of the Intellectual Property Law No. 36 of 2003 makes provision for the protection of geographical indications.

Geographical Indications (GI) are off shoots of indications of source and appellations of origin which were first accorded recognition in the Paris Convention. Indications of source is a broad concept and designates a country or place situated in that country from where the particular product in question originates.  Accordingly expression such as made in Sri Lanka would fall into this category.

Appellations of origin is a geographical names of a country or place in that country. The product just necessarily have its characteristics and quality linked with the geography of the place by way of for instance agro climatic conditions and human factors.

Geographical indications are indications identifying a particular good as originating in a country or locality in that country.  The quality of characteristics or reputation of such goods must be essentially attributable to the geographic origin.  Definitions would include not only geographical names but also any non-traditional names which have acquired significance.  Ceylon Tea would fall into this category.

There are has been no uniform approach by various countries in respect of protection of geographical indications. Some countries have enacted specific “sui generics” to protect GI’s.  Other protect GI’s under existing laws and still others afford protection by a combination of both.  For protection of GI’s Unfair Competition, Consumer Protection Laws protecting tradenames and marks and passing off and laws relating to false and misleading trade practices would also be relevant.

As far as international treaties and agreements are concerned the protection of GI’s are concerned they began with the Paris Convention for the protection of industrial property in 1883 where protection was afforded to appellations of origin.  In the recent past the TRIPS Agreement the WTO afforded protection of GI’s by promoting a standard definition of GI’s and prescribing certain minimum standards by which they should be legally protected by all WTO member States.  Some of the more important international agreements relating to GI’s are –

1. Convention for the protection of Industrial property 1883
2. Madrid Agreement for the repression of false or deceptive indications of source on goods 1891
3. General Agreement on tariffs and trade (GATT) 1947
4. Lisbon Agreement for the protection of appellations of origin and their international registration 1958
5. Agreement on trade related aspects of intellectual property right 1995.

Section 161 provides as follows –

“(1)     Any  interested  party shall be entitled to prevent –

• the use of any means in the designation or presentation of goods that indicates or suggests that the goods including an agricultural product, food, wine or spirit in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of goods; or
  

• any use of a geographical indication which constitute an act of unfair competition within the meaning of section 160;
  

• the use of a geographical indication identifying goods including an agricultural product, food, wine or spirit not originating in the place indicated by the geographical indication in question or identifying goods not originating in the place indicated by the geographical indication in question, even where the true origin of the goods is indicated or the geographical indication is used in translation or accompanied by expression such as kind, type, style or imitation or the like.
  

(2)      The protection accorded to geographical indications under sections 103, 160 and 161 shall be applicable against a geographical indication which, although literally true as to the territory, region or locality in which the goods originate, falsely represents to the public that the goods originate in another territory.

(3)      In the case of homonymous geographical indications for goods including an agricultural product, food, wine or spirit, protection shall be accorded to each indication, subject to the provisions of subsection (2) of this section. The Minister in case of permitted concurrent use of such indications, shall determine by prescribed practical conditions under which the homonymous indications in question will be differentiated from each other, taking into consideration the need to ensure equitable treatment of the producers concerned and the protection of consumers from false or deceptive indications.

(4)      The Court shall have power and jurisdiction to grant an injunction and any other relief deemed appropriate to prevent any such use as is referred to in this section.  The provisions of Chapter XXXV of the Act shall mutatis mutandis, apply to such proceedings.

(5)      For the purposes of this section “geographical indications” shall have the same meaning as in section 101. “

At present in Sri Lanka whilst there is a provision for the protection of GI’s including injunctive relief, the form of registration of GI’s is generally in the form of certification marks.  For instance as far as Ceylon Tea is concerned Sri Lanka Tea Board grants a certification mark subject to the provisions contained in the Intellectual Property Act in respect of certification marks.  However there are other produce of Sri Lanka which may not be eligible at present for the grant of certification marks because there is no authority to grant such rights under the provision of Chapter XXIX.

Several exporters have pointed out to the Government that when seeking protection of Sri Lanka produce in foreign countries they find it easier and more convenient if Sri Lankan authorities could certify that the mark is in fact registered in Sri Lanka as a GI.  The Spice Council of Sri Lanka representing the exporters of spices and Export Development Board have constantly drawn the attention of the authorities that early measurers must be taken in this regard.  Accordingly the authorities have agreed on principle to make interim provisions relating to Ceylon Cinnamon and certain other products taking into account the provisions of Section 204 of the Act which enables the Minister from time to time to make regulations for the purpose of carrying out or giving effect to the principles of the Act and sub-section 2 provides that without prejudice to the generality of the powers conferred by subsection 1 the Minister may make regulations in respect of the matters referred therein –

Subsection 2 refers to 8 such matters . In terms of section 2 (2) the Director General shall be vested with the powers of the implementation of the provisions of this Act control and superintendence of the registration and administration of industry designs, patents, marks and any other matters as provided by the Act and the supervision and control of all persons appointed for or engaged in the implementation of the provisions of this Act. As provisions relating to GI’s are contained in Part IX of the Act the regulations could be made in respect of GI’s as well.  Accordingly the Government is expected to make regulations for the better protection of Ceylon Tea and Ceylon Cinnamon. Consideration is also being given as to whether a new Act should be enacted in respect of registration of GI’s.  Meanwhile regulations as an interim measure referred to are expected to be enacted early and this would at least to some extent further protect the exporters of Ceylon Tea and Ceylon Cinnamon and other spices.

On 24 June 2016, the United Kingdom voted to leave the European Union. The United Kingdom and the European Union are now dealing with the aftermath of this momentous decision, raising many questions as to what this means for our clients and the protection of their valuable IP rights both in the United Kingdom and the European Union. The process of leaving the EU is complex and to a great extent unknown—no country had ever left the EU before, although Greenland left the scope of the European Union about 20 years ago. The UK may not be alone however as the same political forces which have welled up and overwhelmed the political establishment in the United Kingdom are present in other European countries so Britain may not be the last European country to break-away from the EU in the near future. Furthermore, there are elections set down in virtually all the big countries of Western Europe over the next 18 months. The political atmosphere can only be described as both febrile and explosive.

The Near Term

The UK will not be leaving the EU until the British PM invokes Article 50 of the Lisbon Treaty. Once this has been done, it triggers a 2 year time limit for the EU and UK to negotiate the UK’s exit terms. However, some commentators have said that the re-organisation is the most complex economic reorganisation since 1945, so it could take 5 or even 10 years for the entire process to work itself out.

Patents and European Patents

Patents which are administrated through the European Patent Office are not affected by the vote of 24 June 2016, and such patents will continue in force, in the United Kingdom or any other territory which is part of the European Patent Convention. Nationals of European Convention (including nationals of the United Kingdom) can continue to act for clients before the EPO without restriction. Membership of the European Union is not relevant regarding such representation. With respect to the Community Patent, that is simply treated as a designated office in a European patent office and is no different from any other country in this respect. Finally in relation to the Unified Patent Court there simply is not enough known at the moment to proffer any manner of meaty information.

 Trademarks and Designs

As you may know, a trademark may be protected in the UK by a national UK or EU registration both of which can be obtained directly or via an International Registration under the Madrid Protocol. Ultimately, I anticipate EU registrations for both trademarks and designs will no longer cover the UK. At this stage, no one knows whether existing EU registrations will extend automatically to the UK or whether some kind of validation process will be instigated. It may be wise for brand owners to consider seriously the value of securing rights in the UK now, particularly if they plan to licence those rights in the UK and some or all of the European Union Member States going forward. It will probably be at least two years and probably much longer before the process to be followed becomes clear. In so far as Designs are concerned the Regulation 2015/2424 established the EUIPO in March 2016 and deals with the EUIPO generally and does not distinguish between trademarks and designs.

Copyright

Copyright Law has been harmonised at the European level in numerous respects – for example, the term of protection, the acts amounting to infringement, performers’ rights and qualifying criteria for protection. EU legislation also regulates important issues such as the liability of internet service providers. The extent to which these will be affected by Brexit negotiations remain to be seen.

Customs Seizure

EU Legislation empowers IP owners to partner with customs authorities  in the EU Member States to seize, detain and ultimately destroy imported goods which infringe their rights. This is a particularly important tool for trademark owners in the fight against counterfeits. If the UK remains part of the EEA, the EU legislation on customs seizure would most likely continue to bind the UK. However, under a WTO model, the UK would be free to reject EU legislation and determine its own border controls. This in conjunction with the possibility of amendment of rules relating to the Exhaustion of Rights could mean that businesses could find it easier to prevent counterfeits from entering the UK, although, at the same time it also increases the costs in maintaining two separate border protection regimes.

If you have any questions or have any comments, please contact John Olsen ([email protected]).

The formation of the European Union (EU) as an integrated regional bloc was considered as a major success towards regional integration and harmonization; however, the recent Brexit has proved otherwise. With the Brexit there are political as well as legal implications. The member countries of the EU had successfully established the Office for Harmonization in Internal Market (OHIM) by virtue of which a party could apply for Trade Mark and Design registration in all the member countries through one application however, with the possibility of U.K. no longer being a member of the EU it will imply that the community registration of trade mark and design might not be valid for claiming protection in U.K. The proprietors of such marks and designs will have to file separate applications in U.K for protection. The filing of separate application for registration in U.K. and the E.U will naturally have cost implications on the applicants, making the process a little more expensive than earlier. Furthermore, the injunction orders passed by the U.K. courts in the event of infringement may no longer have a pan-EU effect. The Indian trade mark and design applicants will have to carefully assess the situation and accordingly apply for separate application for protection with the Intellectual Property Office in U.K. Furthermore, for trade marks it will be necessary to show ‘use’ of the mark in U.K as well as EU use in either one might lead to application for revocation of registration of a mark in the territory where use cannot be shown.

The implications are less for patent applications since the European Patent Office was formed as a result of the European Patent Convention which is not a result of EU membership. However, there may be a delay in the implementation of Unified Patent Court which will be a common Court for examination of Patent applications in the EU members. The Protocol on the Provisional Application of the Agreement on the Unified Patent Court (UPC) has not yet come into effect; the designated Court for the UPC was situated in London however as an after effect of Brexit the Court will have to be relocated to a member country. This will require the approval and ratification of other member countries thereby delaying the implementation of the UPC. If an Indian entity/person has to file a patent infringement action against an infringing entity in EU, separate suits will have to be filed in U.K. and E.U. thereby considerably increasing expenses.

In the light of the Brexit it is necessary to note that there will be a transition phase of almost 2 years for implementing the changes. It will also be beneficial if the IP laws in U.K. continue to be in line with the EU laws and regulations thereby providing for uniformity of procedure for the applicants.

The Brexit has led to uncertainty therefore; the IP owners should assess the situation and seek maximum protection for their IP rights.

Intellectual property rights (IPRs) provide the holder with a monopoly and control over competitors use of a particular technology, trademark, creation or trade secret. Accordingly, injunctive relief for an IPR holder is an extremely useful and important remedy to prevent infringement of their IPRs. In Canadian Courts this is recognised and the Courts have shown a willingness and flexibility where necessary to use the power of the injunction to ensure compliance with IPRs. This includes the permanent injunction, interlocutory injunctions, injunctions that extend beyond the geographical bounds of Canada, and injunctions against entities that are not per se infringing IPRs but are, even inadvertently, facilitating that infringement.

Most IPRs are embodied in statutes in Canada and those statutes include a statutory authority for the grant of an injunction in cases of infringement of the IPR. The Patent Act[1] authorises the Court, on the application of either a plaintiff or defendant in an action for infringement to “make such order as the Court…sees fit restraining or enjoining…further use, manufacture or sale”. Broad language to similar effect is found in the Industrial Design Act[2]. The Trademarks Act[3] seems broader since “any interested person” may apply for an injunction where something has been done contrary to the Act. The broad discretion of Courts is quite explicit in the wording of the Copyright Act which states that the owner of copyright is entitled to an injunction as a remedy for infringement of copyright and may be entitled to an injunction for infringement of moral rights[4]. The Copyright Act goes even further than other Canadian intellectual property statutes in that it authorises what are known as wide injunctions[5], that is an injunction to prevent infringement of a copyright work that has not been infringed where it is granting an injunction in respect of a copyright work that has been infringed provided the other work that will be the subject of the wide injunction has the same copyright owner (or person with an interest) and the plaintiff satisfies the court that the defendant will likely infringe the copyright in those other works unless an injunction issues. The wide injunction can even apply to works that were not owned by the plaintiff at the time proceedings were commenced and even to works that did not exist at the time the proceedings were commenced. Clearly, the Courts are granted a broad discretion to award the equitable remedy of an injunction in order to remedy a wrong in relation to an IPR.

While injunctions are usually considered discretionary the Federal Court of Appeal (which most frequently hears intellectual property matters) has said that it is only conduct of the party claiming an injunction that can bar interlocutory relief. The refusal to grant a permanent injunction after a determination of infringement  has been likened to “the imposition of a compulsory licence…[in] the absence of legislative authority”[6]. In one recent patent infringement lawsuit the Federal Court acknowledged the granting of an injunction is discretionary but the injunction “will be commonly granted for infringement or threatened infringement, unless there is some equitable reason not to do so, such as acquiescence, long delay, lack of clean hands, unconscionability, or triviality”[7]. The Court continued by acknowledging “the granting of injunctive relief is not only to the benefit of a successful party but it is issued by the Court in the public interest to ensure the enforceability of the Canadian patent system.

While an injunction has almost always been granted following a finding of infringement there has been an exception in the Federal Court of Canada. In 1993, the Federal Court declined to grant a permanent injunction in the unique circumstances faced by the Court in that case[8]. In that case the Court was faced with allegations of a delay by the plaintiff of eight years in commencing the action. While this delay was not mentioned by the Court as a basis for refusal of the injunction. The factors the Court did explicitly consider in its refusal of the injunction were: (1) the patent at issue had only eighteen months remaining on its term; (2) the plaintiffs had never practised the invention in Canada nor employed anyone to practice the invention in Canada; and (3) the defendants would suffer hardship as would their “innocent employees in these hard economic times which still appear to be a full blown recession”. Clearly the Court considered factors beyond either parties’ control and considered the social effects of the injunction.

Refusal of a permanent injunction in an intellectual property matter is extremely rare. While a factor in the above example was the fact that the claimant did not practice the invention in Canada, more recent case law shows that a non-practicing entity can obtain a permanent injunction in Canada. In the Uponor case[9] decided this year the Court granted a permanent injunction to a non-practising entity. The permanent injunction was granted notwithstanding evidence suggesting the plaintiff was aware of the infringement for about six years prior to commencing a lawsuit, that the plaintiff was not a competitor for the product of the patented process in Canada or North America, and that the plaintiff does not practice the invention in Canada or North America. Thus, it seems a permanent injunction will only be denied in exceptional situations such as when the right holder has acquiesced or there has been long delay or it would be unconscionable to grant the injunction.

Injunctions prior to a final determination on the merits are more difficult to obtain than a permanent injunction and must satisfy a long standing three part test. The three part test involves consideration of: (1) the strength of the plaintiff’s case; (2) whether the plaintiff will suffer irreparable harm; and (3) the balance of convenience. The Ontario Court of Appeal has explained that the purpose of this test is really to balance the risks to the parties, i.e. if the injunction is not granted will the plaintiff’s rights be so impaired that it will be impossible to provide an adequate remedy at trial or if the interlocutory injunction is granted will the defendant suffer such harm from being enjoined in what proves to be unlawful conduct. It is for this reason that if an interlocutory injunction is granted, ordinarily the plaintiff will be required to provide an undertaking in damages to the defendant to compensate them in case the interlocutory injunction later turns out to have been inappropriate.

The Canadian Courts have utilised a series of variations on the interlocutory injunction in order to assist the resolution of IPR disputes. One form is the Anton Piller order which is tantamount to a civil search warrant to find and preserve evidence for which there is a real threat of destruction or dissipation. The party seeking the Anton Piller order needs to establish an extremely strong prima facie case, clear evidence the defendants have the evidence and a real threat the evidence will be destroyed or dissipated[10]. Norwich orders, also known as equitable bills of discovery, are another form of discretionary injunction. The Norwich order compels a non-party to produce information to the applicant where an applicant has a bona fide claim against another party but requires the information from the non-party in order to identify the wrongdoer or violator of the IPR.

Mareva injunctions have been used by the Court to secure assets that may be used to satisfy a judgment and prevent them from being removed from the jurisdiction or otherwise dissipated. Applications for such orders are usually made ex parte and in addition to requiring a showing of a strong prima facie case will also require from the applicant full and frank disclosure of relevant facts. In Equustek[11] the plaintiff applied to the Court for an interlocutory injunction prohibiting the defendants from using certain confidential information and trademarks of the plaintiff and for a limited Mareva injunction. Initially the court granted the interlocutory injunction but denied the Mareva injunction concluding that “the plaintiffs have failed to show a good reason why the court should deprive the defendants of control of their assets before the plaintiffs have succeeded at trial”. The defendants in that case promoted and sold their products exclusively over the internet.

When the defendants failed to comply with this interlocutory order the plaintiffs brought a second application for a Mareva injunction. In particular, the defendants had not produced the ordered information, their websites did not comply with the earlier order, carried on business or moved outside the jurisdiction of the Court and had sold some of their assets within the Court’s jurisdiction. On this second application the Court considered not just the dissipation of the assets sought to be frozen but also the protection of the court’s own process from abuse. The Court granted a Mareva injunction in these new circumstances “especially given the ephemeral nature of intellectual property which once disseminated likely cannot be retrieved and whose value diminishes as a result”. The Mareva injunction prohibited the defendants from dealing with any of their assets worldwide with the exception for retaining counsel and meeting ordinary living expenses.

That same Equustek[12] proceeding has also led to a worldwide injunction against non-parties, Google Inc. and Google Canada Corporation, in a decision which is now scheduled to be appealed to the Supreme Court of Canada. The proceeding had progressed such that the defendants had failed to comply with various court orders, had moved their business from being in Vancouver to operating as a virtual company and proliferated their network of websites through which they advertised and sold the allegedly infringing product. The application was for an injunction to compel Google to remove the defendants’ websites from its Google search results. Google resisted the injunction but admitted it could remove websites from its search engine results and routinely does so in various situations. After concluding that the British Columbia court had jurisdiction and that California was not a more appropriate forum to hear the application, the Court went on to consider whether the injunction should be granted.

The two main issues on whether an injunction should be granted were whether this injunction could be issued against a non-party, and whether the Court could make an order with worldwide effect. The Court after noting that there were exceptions in which injunctive relief can be granted against a non-party, concluded that injunctions can be issued when the court considers it just and convenient to do so on terms and conditions the court thinks just. The Court concluded that in order to preserve the effectiveness of their judgments, they must “adapt to new circumstances”. Applying this consideration, the Court commented that it must “adapt to the reality of e-commerce with its potential for abuse by those who would take the property of others and sell it through the borderless electronic web of the internet”. As a result the Court granted an interim injunction compelling Google to block the defendants’ websites from Google’s search results worldwide.

While courts in Canada have always recognised their discretion to award an injunction to assist a holder of IPRs there appears to be a greater willingness to grant injunctive relief to preserve the integrity of the Court process (including fact finding, evidence and asset preservation) and the effectiveness of judgments. This includes injunctions against parties and non-parties and injunctions with worldwide effect. As commerce takes on a more global or international scale it seems likely the possibility of injunctive relief to facilitate a court’s process will increase in Canada.

[1] section 57

[2] section 15.1

[3] section 53.2

[4] section 34

[5] section 39.1

[6] R. v. James Lorimer & Co., [1984] 1 F.C. 1065 at 1073 (C.A.)

[7] Eurocopter v. Bell Helicopter Textron Canada, 2012 F.C. 113 at para. 397

[8] Unilever PLC v. Proctor & Gamble Inc. et al, (1993) 47 C.P.R. (3d) 479 F.C.T.D.)

[9] Uponor AB v. Heatlink Group Inc. et al., 2016 FC 320

[10] Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36

[11] Equustek Solutions Inc. v. Jack, 2012 BCSC 1490

[12] Equustek Solutions Inc. v. Jack, 2014 BCSC 1063

On 23 March 2016, a new EU regulation entered into force, which amends the law relating to EU trade marks. The EU trade mark is a unitary right which provides protection for the current 28 member states of the EU.

The purpose of the reform is to create a system that is more efficient, cost-effective and predictable than the previous system. The reforms are also expected to increase harmonization across the various EU trade mark regimes and to promote greater cooperation between the Office for Harmonization in the Internal Market (OHIM) and national trade mark offices.

Furthermore, it has been over 15 years since the Community Trade Mark (CTM) was introduced and during this time there have been significant developments in case law, as well as in technology and the needs of businesses. Yet despite these developments, there has not been any major reform to the substantive EU trade mark law.

Key Reforms

The key changes which are introduced by the regulation, are set out below.

Terminology

OHIM will now be known as the European Union Intellectual Property Office (EUIPO). The CTM will be known as the European Union trade mark (EUTM) and the Community trade mark court is to be termed the European trade mark court. It is thought that these names are more self-explanatory than the previous terminology.

Filing and fees

The previous CTM application fee was €900 for up to three classes. Consequently applicants who were seeking protection in one or two classes were encouraged to extend their application to three classes due to the cost being the same.

However, under the new regime, an applicant filing in one class pays a lower fee of €850 with a €50 fee for the addition of a second class and thereafter each additional class incurs a €150 fee. Trade mark renewal, opposition, cancellation and appeal fees have also been reduced under the new regime.

In addition, the option of filing EUTMs at national offices has been abolished, so applications can now only be filed directly with the EUIPO.

Class headings

Following the IP Translator case (Chartered Institute of Patent Attorneys v the Registrar of Trade Marks: C-307/10), the ‘class heading covers all’ approach no longer applies and trade mark specifications that simply list class headings will be interpreted as including only the goods and/or services covered by the literal meaning of the terms listed.
Please note that, the new regulation provides that until 24 September 2016, declarations can be submitted in respect of trade marks that predate the IP Translator decision (i.e. that were filed before 22 June 2012) where the specification refers to the entire headings for one or several classes.

Search for earlier EUTMs

The EUIPO no longer automatically send search reports detailing earlier, potentially conflicting, EUTMs to applicants.

Proving acquired distinctive character in invalidity cases

Under the new law, registrants who are subject to an invalidity action will now be able to rely on evidence of acquired distinctive character from after the registration date of trade mark. Previously, this evidence had to relate to the period before the date of the trade mark application. Therefore a trade mark will not be declared invalid if the proprietor can show that the mark has acquired distinctiveness before the date of the invalidity application.

Own name defence

Under the new regulation, the own name defence is no longer available for companies. Thus the defendant’s use of a trade mark which is the same as its company name will not be a defence to infringement. The own name defence is now only available for natural persons.

Opposition procedure

During opposition proceedings, a trade mark owner whose trade mark has been registered for more than five years, may be required to provide evidence of actual use of the trade mark. Currently, the relevant date is five years preceding the publication of the trade mark application. This has been amended, with the relevant date being the date of filing or the priority date of the contested EUTM.

The time period for opposing an EUTM designation of an international registration has also been reduced. The three month period for filing an opposition is now triggered only one month after the trade mark publication date, as opposed to the current period of six months after publication.

Our Recommendations

The main change that will impact EUTM owners will be the interpretation of class headings in trade mark specification. Trade mark owners should take this opportunity to review the specifications of goods/services of their EUTMs. The scope of protection of their trade marks may be limited to goods/services which are covered by the literal meaning of the class heading, and consequently will not cover other products and services that belong in the class but cannot be construed from the general wording. As detailed above, trade mark owners have until 24 September 2016 to submit a declaration to the EUIPO amending the specification where the entire class heading is used. Bond Dickinson can assist with this process.

There are also a number of other changes which will impact trade mark owners. For instance, given the change in period to prove acquired distinctiveness, we strongly recommend that trade mark owners planning to rely on acquired distinctiveness keep evidence of use, dating from prior to the application, during the opposition stage and post-registration of the trade marks. Also, it is now no longer possible to rely on the use of a mark which is a company name as a defence to trade mark infringement.

A positive of the changes, is that it is now potentially cheaper to file an EUTM application, for instance, the official fee for a trade mark one class has been reduced from €900 to €850. However, to file a trade mark in three classes has actually increased from €900 to €1050, therefore it depends on the protection required as to whether the changes in fees will be a negative or positive change.

Unified legislation

The EUTM is a unitary right covering the current 28 EU member states, it enables trade mark owners to obtain one form of protection covering all these jurisdictions. A main benefit of the system to applicants is that it is cheaper than filing individually in each of the countries. It allows trade mark owners to obtain the same form of protection at a fraction of the cost of filing nationally.

However, the drawback of a unitary right means that an issue in one member state, such as a conflicting national right, can knock out the entire EUTM. This will mean that the applicant will have to apply nationally in each of the jurisdictions of interest, thereby increasing the cost of obtaining protection.

As well as amending the EUTM system, the new regulation aims to harmonise national trade mark law at member state level. For instance, it is now mandatory for national trade mark law to allow a six month grace period for the renewal of trade mark registrations. The harmonisation will offer certainty for trade mark owners and ensure that national trade mark law is uniform across the EU, as well as in line with the EUTM regime.

Conclusion

The next step in the reform is the introduction of secondary legislation, which contains further reforms to the EU trade mark system, which is due to come into force on 1 October 2017. These changes include, the introduction of certification marks and the removal of the graphical representation requirements for  trade marks. The individual EU member states will have until 15 January 2019 to implement the new elements of the regulation in their national legislation.

The reform is a welcome change for the EUTM system, implementing developments in case law and practice into EU trade mark statute. It will provide certainty and uniformity across the 28 EU member states and enable trade mark owners to have consistency in their protection in the EU.

Bond Dickinson LLP is a full service law firm and has a specialist team of solicitors and trade mark attorneys dedicated to advising on intellectual property matters for a wide variety of clients operating across various sectors. If you have any further queries concerning these changes or any other intellectual property queries, please contact the individuals below:

If you are a trade association, a business or a government department in Canada and a blog service has written an article making allegations about you and the full article is only accessible behind a pay wall … it seems that you have to pay to see if your reputation has been injured … as you could face severe penalties if you ask a subscriber to share a copy of the article with you.  So says the Ontario Superior Court of Justice, Ottawa Small Claims Court, in 1395804 Ontario Limited (Blacklock’s Reporter) v. Canadian Vintners Association, 2015 CanLII 65885 (ON SCSM).

This case engages the recently approved technical protection measures provisions  introduced into the Copyright Act, 1985 RSC, c. C-42 in order that Canada could implement the WIPO Copyright Treaty.  Those provisions were seen as controversial for numerous reasons.  The Vintners’ case will likely add to the controversy.

In this case the plaintiff is a news organization that provides a subscription based service.  The corporate defendant is an association that represents about 90% of the wine producers in Canada and advocates on public policy issues for its members.

The plaintiff published an article discussing the defendant association and circulated a “teaser” article to the defendant with enough information to let the defendant association know they were a subject of the full article reporting on the personal defendant’s testimony before the House of Commons.  The plaintiff did not offer to let them see the story.  Instead they offered only a subscription to their service.

The corporate defendant was provided a copy of the full article from an association member who was a subscriber and who was not pursued by the plaintiff.  The defendant called the plaintiff to discuss the article.  The defendant claimed that the sole purpose they wanted to see the article was to assess inaccuracies in it.

When the plaintiff realized that the defendant had obtained a copy of the article they sent a bill for two individual subscriptions to the defendants (as a second staff person was copied on the email).  When the defendant asserted they did not reproduce, duplicate or distribute the article, the plaintiff sued for copyright infringement.

The small claims court took a literal approach in this case.  The court found that access to the full article was obtained without colour of right and without permission from the publisher.  The court noted that the Defendants embarked upon “a course of conduct explicitly designed and coupled with the intent of obtaining an article which was not available openly, transparently and without taking steps otherwise open only to subscribers”.

The judgement does not show any analysis of the anti-circumvention prohibition nor does the judgment consider if there are any limits on the terms a copyright holder may impose (such as requiring a waiver of rights) in making copyright subject matter available via technical protection measures.

While the court noted that the defendant’s sole purpose of obtaining the copy was “determining whether statements made therein were truthful and accurate, and if necessary, taking steps to challenge, debate and correct, or alternatively for educational purposes, such steps were not taken”.  Instead, the court stated that the “Defendants took steps which they knew or ought to have known were contrary to the process required by the paywall and to the terms and conditions which were extant and applicable”.

The court found that since the defendants obtained the article illegally that the fair dealing defense was not applicable.  In effect the Court found that circumvention of the technical protection measure (the pay wall) by getting a copy of the article from another person, was a matter of strict liability.

The court went on to find appropriate damages for access to the single article were at the corporate institutional subscription rate for the plaintiff’s service of $11,470.00 plus HST despite that the plaintiff had offered to settle for $314.  The court went further and found this was a case where punitive damages were warranted, namely where the “Defendants’ conduct amounts to being high-handed, malicious, vindictive and oppressive” and awarded $2,000 in punitive damages.  So, the cost to the defendants for obtaining access to a single article written about them was $13,470.00 in compensatory and punitive damages as well as prejudgment interest.

Of course, it is important to respect paywalls and other technical protection measures.  However the facts of this case appear to suggest that this is a case of a particularly severe remedy in what appear to be the circumstances.

One sees several lessons in this case should it be adopted by future Courts.  Firstly, the Court gave a broad meaning to the technical protection measures provisions under the Copyright Act seeing the bypassing a paywall by obtaining a copy of the article from another source to be a circumvention.  Secondly, the Court has interpreted that the “user’s rights” protections, the fair dealing rights, that are a core part of the balance of copyright law , are not available in such cases.  Thirdly, the Court focused on the plaintiff’s terms and in this Court’s uncritical view the plaintiff defined terms become absolutely determinative of the permitted conduct.

More specifically to the facts of the case some lessons include that if other courts were to take the unsympathetic approach that appears to arise in this case then no effort should be made to obtain a copy of an article behind a paywall without going through the subscription process.  In this case the terms and conditions of the plaintiff’s service specifically require a subscriber to waive certain rights and accept limitations on liability and other restrictions under such terms.

It appears that a new business model may be supported by this decision.  A news or other organization can write about a person or entity, share some possibly limited controversial details with the subject and then refuse to share the details with the subject unless they agree to waive some of their rights against the publisher and pay for the privilege of seeing what was said about them.

In is reported that the plaintiff has been active in the Canadian courts having filed 10 law suits since the middle of 2014.   It appears that at least another defendant has been prepared to mount a novel defense against what they allege is the plaintiff’s business model in a Federal Court motion , where the defendant, in that case, was successful in obtaining an order to permit it to plead copyright abuse as a defense.  In that case the Case Management Judge considered the novel defense as follows:

The defence that the Defendant seeks to raise, based on abuse of copyright, is novel but as the Plaintiff itself recognizes, the door has been opened and there is no case law that traces the outer limits of that defence. The Plaintiff makes a spirited argument that the proposed defence is based on three elements: teaser, use of ATIP [Access to Information] request and speculative invoicing, none of which are unlawful or tortious.  However, I think that this mischaracterizes the allegation.  The allegation also includes that the teaser often includes incorrect or misleading information and is designed to interest the department in reading and distributing the articles.  The novel doctrine of trolling is, also, said to sometimes include patterns of behaviour that, taken individually, are entirely lawful but which, in the way and circumstances in which they are used, become abusive.  Finally, the argument of counsel for the Plaintiff based on the Bill of Rights and the propriety of the Attorney General pleading use of ATIP requests as part of an unlawful scheme certainly does not rise to my mind to the level that it makes it plain and obvious that the proposed defence cannot success.  Again, I am not certain that it is fair to characterize the scheme alleged by the Defendant as being founded on the use of ATIP requests.  The ATIP requests are one of the factual steps alleged but may not be an essential step; one has to give a fair and wide reading to a proposed defence.  It is not my purpose to say whether the argument of the Plaintiff will eventually be well founded or not.  At this point, what the Plaintiff had to do was to satisfy me that the proposed defence does not have a scintilla of a chance of success or that it is so clearly improper that it should not be permitted. I am not satisfied that this is the case.

Merely pleading the defense does not mean it will be accepted by a Court or will be made out at trial but it should allow the Court to consider the alleged business model in this context of the technical protection measures provisions.

The Vintners’ case is only one of the few times that a Court, in this case a small claims court, has considered the technical protection measures provisions.  We can expect other Courts will examine this area and how the technical protection measures provisions fit into the scheme of the Copyright Act in future cases.  As this area evolves and we see the results of other (more senior) Court’s deliberations the results and final analysis should be of considerable interest to both those whose businesses depend on technical protection measures as well as users.