Licensing Update - IPR in business (December 2003)

• The International Federation of the Phonographic Industry (IFPI) announces new one stop shop licensing agreement (11/11/03). The recording industry announced a new international agreement that will allow webcasters to clear record producers' rights in a multitude of countries by entering into one licence in a participating country. The agreement is expected to be signed by several countries including the USA, France, Germany, India, Spain and the UK.

  For more details visit the International Federation of the Phonographic Industry website at: www.ifpi.org

• EU and Russia sign science and technology co-operation agreement (06/11/03). The European Union and the Russian Federation agreed to step up joint efforts in science and technology during the EU-Russia summit in Rome on 6 November 2003. This agreement is key to ensuring the participation of Russian scientists in the EU Sixth Research Framework Programme (FP6). This new agreement is based on the principles of mutual benefit, reciprocal opportunities for participation in each other's science and technology programmes and activities covered by the agreement, non-discrimination, effective protection and equitable sharing of IPRs. For further details on this agreement and FP6 please visit www.europa.eu.int. For further information on the scientific co-operation with Russia, including Russia's participation in FP6 visit: www.europa.eu.int/comm/research/iscp/countries/russia.html

• R v Derrick Davies [2003] EWCA Crim 3110 (06/11/03). The judge had jurisdiction to make a confiscation order under the Criminal Justice Act 1988 against a defendant who, without the proprietor's consent, possessed goods bearing a sign identical to the proprietor's registered trade marks with a view to sale or distribution.

  The appellant pleaded guilty to a specimen indictment containing 13 counts alleging breaches of s.92 Trade Marks Act 1994. The majority of the charges were for possession of goods bearing a sign identical to registered trademarks without the proprietor's consent and with a view to sale or distribution. Prior to sentencing, a Newton hearing was held at which it was agreed that the judge should assess the turnover of the appellant's counterfeiting business at £1 million. The Crown had served a notice under s.71 Criminal Justice Act 1988 giving notice that the court should consider whether it was appropriate to make a confiscation order.

  The fact that the appellant was not charged with having sold or disposed of items that bore a false trademark was not determinative of the appeal. The question was whether the items that bore false trademarks or enabled false trademarks to be applied to goods were "property" and whether they had been obtained in connection with the commission of the relevant offence. In the majority of the charges, the trademarks were being stolen by the appellant and applied to the items. There was very little distinction between that act and the act of a burglar who took property from a house, which was then immediately seized. In one sense, "with a view to gain" demonstrated that the property bearing the false trademarks had a value of benefit to the appellant There was therefore no reason why s.71 (4) of the 1988 Act should not be construed so as to apply to it. Accordingly the judge did have jurisdiction.

• The World Wide Web Consortium (W3C) sides with Microsoft (04/11/03) and calls on the USPTO to revoke the Eolas "906" patent. The W3C has urged the USPTO to re-examine the patent in order to prevent "substantial economic and technical damage" to the internet. This puts the W3C firmly on the side of Microsoft, which in August 2003 was ordered to pay $520m in damages to Eolas technologies and the University of California for patent infringement. The feature covered by the Eolas "906" patent provides critical flexibility to web browsers and nearly every web user relies on plug-in applications that add services such as streaming audio and video, advance graphics and a variety of special purpose tools.

  The latest news on this battle (13/11/03) is that the US Patent and Trademark Office (USPTO) has ordered the re-examination of the "906" patent. Re-examinations are fairly unusual and could take anywhere from 12-18 months.

  See: www.computerweekly.com for further details.

• First UK ruling on a Community Design (31/10/03). The High Court of Justice has ordered Simba Toys to stop manufacturing, distributing and selling products sold under the name "My Style" in the European Union, and further ordered Simba to request the return of these products from retailers and its other customers. The Court declared that Mattel has Community Design rights in its My Scene™ range of dolls, and that Simba infringed those rights by copying Mattel's design. Since the High Court's decision was based on Community Design rights, the Court's decision applies across the whole of the European Union. This is the first time that a European Court has made a Union-wide Order based on a Community Design right. The Court ordered Simba to inform all those supplied with the infringing dolls of the Court's order, and ask for return of the infringing products. In addition, the Court awarded Mattel costs (including attorneys fees) and ordered Simba to make an interim payment of £450,000 to Mattel while the detailed costs are assessed. Simba must also pay Mattel damages suffered as a result of the infringement throughout the European Union, which will be determined in future proceedings

• The Inland Revenue has issued consultation paper "Tax Law Rewrite-Receipts from Intellectual Property (24/10/03) dealing with the taxation of receipts from IPRs.

  See: www.inlandrevenue.gov.uk

• Centrica v Corus UK Ltd [2003] EWHC 2395 (20/10/03). A claim for breach of confidentiality in relation to a trade secret failed on the proper construction of the relevant licence granting the right to use the technology at issue.

  The case concerns the trial of the following preliminary issues in the High Court:

  1. were the defendants liable to Centria in respect of use of the Technology?; and if so
  2. when did such liability arise? And were Centria estopped from asserting their cause of action?

  The answer to the first of these questions turned on the true construction of the Licence Agreement (see below).

  The technology in question is called Versacor ("Technology"). It is a coating which is used to protect metal sheets from extreme environmental conditions. It is mainly used in making buildings. This Technology has always been a trade secret and has never been in the public domain.

  The Technology was originally developed by a US company called H.H. Robertson Co ("HHR"). In 1990 HHR merged with another company called Ceco Industries Inc to form Robertson-Ceco Corporation ("RC"). HHR and RC continued to use the Technology.

  The dispute between the parties had its origins in an agreement dated 20 December 1991 in which RC sold some of its business to a company called United Dominions Industries Inc. ("UDI"). One of the terms of this sale agreement was to execute an Intellectual Property Licence Agreement with substantially the same terms as the term sheet which was attached as an exhibit.

  Considerable renegotiation of the terms took place and the signed agreement ("1992 Licence") executed between RC and UDI seemed to envisage a different scheme from the term sheet. Basically the term sheet provided for a licence to use the know how in the US only. The actual 1992 Licence was strangely drafted and included a worldwide exclusive licence to the know how, but only a restricted licence to use the trade marks in the US. RC reserved the right to use the trade marks in relation to the know how for the rest of the world. The parties also agreed to share improvements for use under the licence which was not much use when they had granted an exclusive licence. Additional provisions dealt with territorial restrictions and the transfer of know how within the US.

  In 1996 Centria acquired such part of the business from UDI and alleged that by virtue of this acquisition it acquired an exclusive world-wide licence to the Technology.

  In May 2000 Centria claimed that as successor to UDI they had an exclusive worldwide right to the Technology. The defendants claimed that Centria only have exclusive rights to the Technology in America (and other defined territories).

  Mr Justice Hart expressed the opinion that that 1992 Licence was poorly drafted. In construing the agreement he concentrated on the wording of the Licence and what made commercial sense at the time of drafting the agreement. The judge did not allow Centria to infer complex ideas into the document for which there was little evidence.

  Mr Justice Hart remarked that the worldwide exclusive licence to use the know how but only a licence to use the trade marks within the US a "commercial puzzle" and explained the meaning of an exclusive licence and the fact that it was at odds with the rest of the agreement.

  Also, RC was never in a position to grant an exclusive licence because certain of its subsidiaries overseas were already licensed to use the know how and this fact was well known to the parties at the time.

  The judge ruled that the phrase "the right to use the Shared Know-How only within the American Territory" were unambiguous and fatal to Centria's claim. Mr Justice Hart concluded that Centria's claim failed simply because the right to which it claims to have succeeded is, as a matter of construction, a right to use the Technology only within the US. None of the defendants have at any time acted inconsistently with that right, or any obligation of confidence which they may owe to Centria as a result of its existence.

  The point of estoppel was discussed but not relevant to the ruling once the first issue had been decided.

  Hart J suggested that the doctrine of estoppel by acquiescence should apply to Centria. This is because they did not assert their claim to an exclusive worldwide right until 2000. The 1992 Licence was executed in 1992. Centria were aware that the defendants were using the technology outside America for 8 years and Centria allowed them to do so. Hart J believed that Centria should be estopped by acquiescence despite the fact that the claimant did not know it had a claimed right. Hart J suggests that in this case it would be enough for the claimant to have no excuse as to his lack of knowledge.

• EC formally adopts a Decision and Regulation linking Madrid Protocol with Community Trade Mark (27/10/03).

  The text of the European Council's decision of 27 October 2003 (2003/793/EC) approving the Madrid Protocol is now available in the Official Journal, together with the text of the regulation of the same date (1992/2003/EC) amending the Community Trade Mark (CTM) Regulation in order to give effect to the European Community's accession to the Madrid Protocol (OJ 2003 L296/1 and L296/20).

  Once accession takes effect, CTM applicants and proprietors (domiciled in one of the Member States of the Community) will be able to apply for international protection of their marks through the filing of an international application under the Madrid Protocol. Conversely, an applicant for registration of a mark, in say, the US (the US are now members of the Madrid Protocol), will be able to designate registration of the mark in the EU as a CTM without having to make a separate application.

  See www.europa.eu.int/eur-lex/en/archive/2003/l_29620031114en.html

• Cintec International Ltd v Parkes & ANR [2003] EWHC 2328 (Ch). Defendants had wrongfully threatened the Claimant company and third parties with proceedings in respect of alleged infringements of patents.

  The evidence indicated there had been clear threats to the Claimant of legal proceedings in respect of the alleged infringement of the Defendant's patents (water filled bags to prevent the effects of explosions) in addition to a threat to a customer of similar action. None of the Claimant's products infringed the Defendant's patents. In those circumstances the Claimant was entitled to an order restraining any threat of legal action.

• IMS Health GMBH & Co & NDC Health GMBH & Co - Case C-418/01 (Advocate General Opinion 02/10/03). Advocate General Opinion concerning the application of Art.82 EC treaty to a situation where a dominant undertaking refused to grant a licence to use its IPR.

  IMS Health GmbH and NDC Health GmbH are undertakings which compile, process and interpret information on regional sales of pharmaceutical products in Germany. IMS had compiled a data bank for the purpose of its activities which was widely recognised as a norm for analysis of the pharmaceuticals market in Germany. NDC however, began to use a databank which was based on that used by IMS. IMS therefore brought an action in 2000 before the Landesgericht seeking to prevent NDC from using its databank and claimed that the way in which NDC presented its information was a breach of IMS's copyright. The German Court considered that IMS's refusal to grant a licence to NDC for the use of the databank would constitute an abusive practice under Article 82 EC Treaty and referred a number of questions about the application of Article 82 to the ECJ by way of a preliminary reference.

  Advocate-General Antonio Tizzano's opinion in this case considers the situations under which an IPR may be subject to compulsory licensing and makes it clear that direct competitors of an IP owner may seek a compulsory licence in certain circumstances. The Advocate General's opinion also confirms that compulsory licences may be sought where a market is covered by a de-facto standard.