CJEU to toy with design rights: Does a disclosure outside the EU commence protection or destroy novelty?

The CJEU has been asked to consider two questions in relation to unregistered Community design rights. Even though (as the name suggests) Community design rights relate to protection within the EU, the issues relate to activities happening outside the EU territory.
The CJEU has been asked to consider two questions in relation to unregistered Community design rights. Even though (as the name suggests) Community design rights relate to protection within the EU, the issues relate to activities happening outside the EU territory.

Community designs recap

Regulation (EC) No. 6/2002 on Community designs ("CDR") covers both registered and unregistered Community designs.

In order to be protected, Community designs must have individual character and be novel (Articles 5(1) and 6(1) CDR, respectively) at the date when protection commences. According to Article 11(1) CDR, protection under unregistered community design right commences "from the date on which the design was first made available to the public within the Community".

Article 7(1) CDR states that a design is not novel if it has been "been made available to the public" before that date, unless that disclosure could not reasonably have become known in the relevant sector operating in the EU. An earlier case of Gautzsch held that a disclosure outside the EU could destroy novelty.

Here, the question was whether a disclosure outside the EU could also activate the protection as an unregistered community design right. In other words, is "the public in the community" referred to in Article 11, the same as the "public" in Article 7(1)?

Agreement on the facts

In this case (Beverly Hills Teddy Bear Company v PMS – the defendant being the same PMS from the famous Trunki case), the claimant was seeking to enforce various rights (including UCDs) in design drawings for its "Squeezamals" toys. The defendant's position was that the UCDs were invalid and so applied to strike out this aspect of the claim.

It was accepted by both sides that the toys were first shown to the public at a Hong Kong exhibition in October 2017, however it was not until January 2018 that the toys were shown to the public in the EU. The parties also agreed that appearing at the Hong Kong trade fair was sufficient for the design to have become known in the normal course of business to circles specialising in the sector concerned, operating within the EU (and therefore enough to fall within Article 7(1) CDR).

Disagreement on the law

The defendant argued that the earlier disclosure in Hong Kong meant that the designs were not "novel" at the time the designs were disclosed in the EU which, the defendant argued, is the relevant time to assess novelty. As such, no UCD right could subsist in the claimant's designs.

The claimant's position was that the Hong Kong disclosure was when the UCD right commenced. In other words, when the relevant sector in the EU became aware of the designs at the Hong Kong trade fair, this was enough to trigger the UCD protection. Therefore, the Hong Kong disclosure had not destroyed the novelty, but rather it had initiated the start of the protection of the designs under UCD right.

UK academics are divided on whether disclosure outside the EU can create a UCD, and there is no direct CJEU authority on the point. It was, however considered by the German Federal Supreme Court (Case I ZR 126/06) which held that UCD right protection could only be triggered by a disclosure within the EU. This approach also appears in line with Article 110(a) CDR which reads "a design which has not been made public within the territory of the Community shall not enjoy protection as an unregistered Community design”. On the other hand, given that Article 11(1) and Article 7(1) have substantially similar drafting, others believe that a disclosure outside the EU could trigger UCD protection, as long as the design could reasonably have become known in the EU as a result.

Reference to the CJEU

Although Hacon J leaned towards the opinion that the first disclosure must take place within the EU for UCD protection to arise, as the law was not clear on this topic, he decided to refer two questions to the CJEU:

1. For a UCD right to arise, must the event of disclosure take place in the EU or is it sufficient that the event could reasonably have become known to specialised circles under the conditions set out in Article 7?
2. Should the novelty of a design be assessed by reference to first disclosure in the EU as set out in Article 11, or by reference to disclosure under Article 7 type conditions, or by reference to some other date?

Implications

The outcome of this case could have wide implications for many industries which currently rely on the UCD to protect their designs. If the first disclosure must occur within the EU to give rise to UCD protection, designers will have to be very careful about where designs are displayed and consider ensuring protection in the EU via registered rights (which would be more costly and time consuming). Depending on the importance of the EU market for a product, this may lead to designers avoiding trade shows outside the EU (which will, of course, include the UK following Brexit).

For now, we must wait to hear the opinion of the CJEU. As ever, we will report back once that decision is published. For any businesses that rely on UCDs and have any concerns arising from this reference, please contact a member of our IP team who will be happy to discuss your IP right protection strategies moving forward.

POSTSCRIPT
 
This case was subsequently settled and the reference to the CJEU withdrawn in February 2020.