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30/10/2012

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snIPpets – October 2012

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Designs


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Copyright

Revised Initial Obligations Code published under Digital Economy Act 2010

Ofcom has published its revised draft Initial Obligations Code ("IOC"), which underpins the initial obligations imposed on internet service providers ("ISPs") to reduce online copyright infringement under the Digital Economy Act 2010 ("DEA").

The key aspects of the 2010 code remain unchanged but the recent changes include the following:

  • Ofcom must approve copyright owners' procedures for gathering evidence of infringement. In this regard, Ofcom is to sponsor the development of a publicly-available standard to help promote good practice;
  • ISPs must now tell subscribers the number of copyright infringement reports that are connected to their account; and
  • Subscribers have 20 working days to appeal an allegation of infringement but can only do so on grounds specified in the DEA.

A one month consultation period for ISPs and rights-holders to make representations closed on 26 July 2012. The IOC is now being scrutinised by the European Commission and is likely to be laid before the European Parliament in December 2012. 

The implementation of the DEA is therefore progressing. However, Ofcom is not expecting the first notification letters (informing customers that their accounts are being linked to suspected online copyright infringement) to be sent until 2014 so the first technical measures will not be imposed until 2015. In the meantime, copyright owners need to apply for court orders against ISPs to obtain details of infringers akin to those granted in the Newzbin and Pirate Bay proceedings, as reported in our previous edition of SnIPpets.

Digital Copyright Exchange

As a follow-up to the Hargreaves Review of Intellectual Property, a government report conducted by Richard Hooper and Dr Ros Lynch has recommended the creation of a UK-based Copyright Hub.

The first phase of the Hooper review highlighted the need for easier and cheaper copyright licensing and the latest second stage report has recommended a not-for-profit, industry-led and funded UK Copyright Hub, including a Copyright Registry. The Hub will focus on high-volume, low-value transactions, will operate on a voluntary, opt-in, non-exclusive basis and will have the following purposes:

  • A register of works, associated rights and licences;
  • A digital copyright exchange, which will provide a market place for the simple licensing of copyright works. This will be an automated web-based computer system allowing licensees to pay for rights online within the normal e-commerce framework;
  • A due diligence site allowing users to demonstrate that they have performed reasonable searches on orphan works before digitising them;
  • An educational and navigational portal, which will direct companies to informative websites. 

Reaction to this report has been positive if rather cautious. Many recognise that these are all positive objectives but also appreciate that they will not be easily achieved.

Designs

Proposed changes to Design Law

The Government published a consultation through the IPO in July 2012 setting out its proposals for improving the framework for UK design law. The changes proposed are as follows:

  • Sanctions: introducing criminal sanctions for deliberate infringers of registered UK or Community design rights;
  • Ownership: harmonising UK law with Community design and copyright by recognising that the designer, and not the commissioner of a design, is the first owner of registered and unregistered design rights;
  • Validity: establishing a non-binding designs opinion service on questions of validity and a notification system to inform applicants for registered designs about potential conflicts to the validity of their designs; and
  • Unregistered Design Right: amending the definition of "design" to make it consistent with the registered designs and community registered designs and extending the meaning of "commonplace" to the EEA to harmonise with Community unregistered design.

These proposals have generally been welcomed as a "clean up" exercise rather than a major overhaul of the system.  However, some concerns have been raised that the extension of the definition of commonplace will cause confusion and uncertainty. Similarly, there are some reservations that criminal judges lack the necessary experience to deal with complex matters of design law (although trading standards and representative trade bodies have been successfully pursuing criminal prosecutions in relation to copyright for some years). The Consultation closed on 2 October 2012.

Unintentional Infringement of Designs

In August 2012, the IPO also proposed "equalising" the sanctions available for unintentional infringement of UK registered design and Community design right in the UK.  Under current legislation, damages or an account of profit are available for unintentional infringement of a Community design, but not for unintentional infringement of a UK registered or unregistered design.  Following a consultation on how harmonisation could be achieved, the IPO is proposing:

  • to permit the owner of a UK registered design to seek an account of profits but not damages from an unintentional infringer of the design; and
  • to prevent the owner of a Community design from seeking damages from an unintentional infringer of the design.

The IPO has stated that it will introduce the required legislative changes "as soon as possible".

Whilst these changes harmonise the remedies available for unintentional infringement of Community, UK registered designs and copyright, innocent infringers of other IP rights will still be treated differently.  Neither damages nor accounts of profits are available against innocent infringers of patents whilst it is possible to seek all financial remedies from innocent infringers of trade marks. However, the IPO recognises that this situation reflects the nature of the different types of IP rights and the relative complexity involved in searching for prior rights.

The IPO considers the proposed design provisions to be a "fair and balanced outcome" as an unintentional infringer of a design "may need to pay the holder of the right some or all of the profits that he has made from using that person’s intellectual property. On the other hand, unintentional infringers would not be liable for damage claimed to have been caused to the right holder. In this way the unintentional infringer’s liability would be effectively capped at the level of his own profits."

Practically, this removes one of the advantages of a Community design registration over a UK registration. Companies may also benefit from not having to put a design notice on their product, which until now has been a prudent measure to prevent infringers claiming lack of knowledge of the design and thereby avoiding financial remedies.

Patents

Latest on Unitary Patents Court

There have been calls for many years to revise the European patents system to make it cheaper to obtain patent protection across jurisdictions, easier to litigate pan-European issues and to avoid inconsistent outcomes in different countries. The proposals for reform therefore aim to create a European Patent with unitary effect across all participating member states (as opposed to the current bundle of national rights) and a unitary European Patent Court to hear all infringement and revocation cases concerning European patents.

The proposals met a major stumbling block in March 2011 when the Court of Justice of the European Union ("CJEU") ruled that the then draft agreement was incompatible with EU treaties because the proposed European Patents Court would usurp the CJEU's authority to answer questions referred by national courts of EU member states on provisions of EU law, including the future regulation of the European patent. The envisaged procedure would also deprive the CJEU of the opportunity to oblige EU member states to make good damage caused to individuals as a result of breaches of EU law for which it is responsible.

Under the Polish presidency of the EU, there were various amendments made to the proposals and a significant push to resolve the issues raised by the CJEU ruling. However, the major break-through expected at the Competitiveness Council in December 2011 did not materialise.

The latest proposal envisages 3 types of division of the European Patents Court: a Central Division to hear revocation actions and applications for declarations of non-infringement and Local and Regional Divisions to hear infringement disputes. There will be no jurisdiction over issues relating to ownership and inventor remuneration. The Central Division will hear disputes in the language of the patent (ie English, French or German) whereas the Regional and Local Courts will hear disputes in the language of the country where the Court is established.

It is also proposed that parties will have to apply specifically for "discovery" by showing that the other party is likely to have documents that are significant to live issues in the dispute. As a consequence, a "saisie" will rarely be needed. However, if a saisie is still required in order to commence an action, the presumption will be that this should be done on notice. The parties will have the right to examine a witness, subject to the Court's control.

One of the final sticking points in the proposed arrangements was the location of the Central Division. This was resolved on 29 June 2012 when the European Council agreed that the Central Division of the Court of First Instance should be located in Paris, with specialist divisions located in London (chemistry, pharmaceuticals and life sciences) and Munich (mechanical engineering).

The other controversy surrounding the agreement was the legal definition of the effects of a Unitary Patent as set out in Articles 6-8 (Article 6 defines what constitutes a direct infringement to a Unitary Patent, article 7 defines what constitutes an indirect infringement to a Unitary Patent and article 8 defines limitations to rights conferred by a Unitary Patent). As the Regulation would be subject to CJEU jurisdiction, these articles would give increased jurisdiction over patent matters to the CJEU. The Council therefore decided in June to remove these articles from the proposal.

However, this agreement still needed to be approved by the European Parliament and the vote scheduled for 4 July 2012 was postponed amidst strong disapproval from European Parliament rapporteurs. The European Parliament Legal Service had advised that the removal of Articles 6-8 would render the agreements incompatible with the requirements of the Treaty on the Functioning of the EU and hence liable to be struck down at a later stage.

This has therefore meant yet another delay while the issue is given more consideration.  A draft of the Agreement was published on 28 September 2012, which incorporates the agreed location of the Central Division and currently also includes the controversial Articles 6 and 8. The new Agreement was debated by the European Parliament on 10-11 October 2012. A further draft was published on 12 October 2012, which in addition to some procedural issues, extends the competence of the Court to Supplementary Protection Certificates ("SPCs") and provides for the exhaustion of rights conferred by an EU patent. The Court of Justice of the European Union has also heard Spain and Italy's arguments as to why the use of the "enhanced procedure" to press ahead with the Unitary patent system without their agreement breaches EU law.

Despite these complications, the overall aims of the Unitary Patent remain desirable and the Cypriot Presidency would like to reach an agreement before the end of the year. We wait to see if this can eventually be achieved.

ACTA

In the last edition of SnIPpets, we reported on protests raised against the Anti-Counterfeiting Trade Agreement ("ACTA"). However, the final blow for the agreement in the EU was probably delivered on 4 July 2012 when the European Parliament voted (resoundingly) to reject it.

Twenty-two EU member states, including the UK, had signed the ACTA treaty and it also had the support of countries such as the US, Australia, Canada, Japan, Singapore and South Korea. However, the agreement had not formally been ratified.

Alan Drewsen, executive director of the International Trademark Association said he expected ACTA to move ahead without the EU. EU Trade Commissioner, Karel De Gucht, said that he recognised the choice the European Parliament had made and welcomed the debate which ACTA had created among Europe's citizens. The European Commission will continue to seek the legal opinion of the European Court of Justice on whether this agreement harms any of the fundamental rights of European citizens, including freedom of speech, and will then consult with the EU's international partners on how to move the issue forward. In the meantime, ACTA may still be ratified by other nations with the benefit of raising standards of IP enforcement outside of the EU.

Google search results to penalise persistent copyright infringers

Google announced in August 2012 that it was changing its search algorithm so that websites with a high number of valid copyright takedown notices might appear lower down in Google's search results. The new algorithm will also take account of notices filed through Google's search engine reporting system and YouTube's infringement reporting system.

Google stated that it now has more data from copyright owners on infringing online content, noting that it is currently processing more copyright removal notices per day than it did in the whole of 2009. Google is therefore starting to use this data as one of a number of signals in its search rankings.

Google has confirmed that it is treating YouTube like any other site in search rankings and not giving it any sort of preferential treatment. Despite YouTube often being the recipient of copyright infringement allegations, Google does not envisage that the change will demote results for YouTube or other popular user-generated content sites.

The move follows prolonged lobbying by copyright owners, in particular those in the movie and music industries for Google to take more proactive steps in the fight against online piracy.

Small Claims Track in Patents County Court

A new small claims track was introduced into the Patents County Court (PCC) on 1 October 2012 with the aim of speeding up the court process and making it cheaper and easier to protect IP rights. Appropriate amendments have been made to CPR Rule 63, which governs IP disputes.

In 2010, Lord Justice Jackson led a review of the costs of civil litigation and recommended a small claims track in the PCC for IP claims with a monetary value of less than £5,000. He noted that allocating all IP disputes to the multi-track, didn't assist IP owners who might wish to enforce their rights for little monetary value eg a journalist who wishes to claim a few hundred pounds for the reprinting of his article without permission. Similarly, Professor Ian Hargreaves in his Review of Intellectual Property and Growth in 2011 recommended that a "small claims track for low value IP claims” be introduced to the PCC.

The small claims track will provide copyright, trade mark and unregistered design holders the option of pursuing basic IP disputes through an informal procedure. It is aimed at small businesses or individual creators who wish to protect their rights for little cost, generally without legal representation. Claims allocated to the small claims track will be subject to damages restrictions of £5,000 or less to ensure they are proportionate to what is at stake. However, injunctions, which are often the most important remedy in IP cases, will still be available.

Orphan Works Directive Adopted by European Council

On 4 October 2012 the European Council adopted a Directive on certain permitted uses of orphan works. The European Parliament approved the directive with a large majority on the first reading in September and it will become law following publication in the Official Journal of the European Union. Member States will have two years to implement it.

In the official press release, Commissioner Baroness Barnier said "Today's adoption of the Orphan Works Directive is a significant achievement in our efforts to create a digital single market. It will enable easy online access for all citizens to our cultural heritage…. The swift and successful outcome of the legislative process and the broad consensus reached both in the Council and the Parliament prove that by working together we can agree on measures to ensure that the EU copyright rules are fit for purpose in the digital age…..this Directive is one more step in making licensing and online access to cultural content easier."

Currently, digitising an orphan work can be difficult if not impossible, since in the absence of the right holder there is no way to obtain permission to do so. Under the Directive, a work is deemed to be orphan if, after a "diligent" search made in good faith (there are criteria for carrying out the search), it is not possible to identify or locate the copyright holder. Works granted orphan status would then be made public through digitisation and only for non-profit purposes. This would apply to any audiovisual or printed material, including a photograph or an illustration embedded in a book, published or broadcast in any EU country. It would also apply to works not published but nonetheless made available by institutions, provided that they could reasonably assume that the right holder would not object to this act.

The right holder is entitled to put an end to the orphan status of a work at any time and claim an appropriate compensation for the use made out of it. In order to keep compensation payments small, they are to be calculated on a case by case basis, taking account of the actual damage done to the author's interests and the fact that the use was non-commercial. Public institutions will be able to generate some revenue from the use of an orphan work (e.g. goods sold in a museum shop) if it is used to pay for the search and the digitisation process.

Concurrently, the UK is proposing its own changes to the Enterprise Act to allow the use of orphan works. The UK government has said that its proposals are "complementary" to the EU Directive but they are also wider in that they will include commercial purposes and will require the verification of the diligent search by an independent body.