On Your Marks

12 Apr 2010

In this issue:

• Lookalike Products? Europe and Australia - Not So Alike
• Patents - To Amend or Not to Amend. Let’s Not Decide
• Leading a Horse to Water and Making the Calf Drink
• Remedies Corner: Compound Interest on an Account of Profits
• Team News: New Zealand’s Leading Intellectual Property Law Firm

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Lookalike Products?  Europe and Australia - Not So Alike

In the last few months, Europe and Australia have taken divergent approaches to the issue of lookalike products. Lookalike products often arise in the context of cheap knock-offs such as perfumes or designer sunglasses, or supermarket chains copying the get-up of well known brands for their own products. This article takes a look at two recent decisions - one from Europe involving knock-off perfumes, and the other from Australia involving a look-alike of Maltesers confectionery. Both of these decisions are a reminder for companies to look at options for protecting all of the distinctive elements of their products that might be susceptible to imitation, rather than just the brands - including the product itself, the smell and taste, the overall look and colours. 

L'Oreal prevents imitation fragrances

The European Court of Justice (ECJ) has taken a strict approach to lookalike products and essentially moved closer to recognising unfair competition as a basis for trade mark infringement. In a recent decision, L'Oreal sued Bellure for producing cheap, smell-alike fragrances of its well-known Miracle and Tresor perfumes.

L'Oreal's case involved two main arguments. First, that the use of its well-known brands such as TRESOR and MIRACLE in price and product comparison lists took unfair advantage of its trade marks. The second related to the imitation of the get-up or overall look of the L'Oreal products. L'Oreal claimed that Bellure's packaging infringed its trade mark registrations for the packaging and bottle shapes of its perfumes.

What is 'unfair advantage' in trade mark infringement?

Under European law, use of a mark that is identical or similar to a well known mark will amount to trade mark infringement if that use takes unfair advantage of, or is detrimental to, the distinctive character or repute of the mark. There is no need to show that confusion is likely to arise from the use of the infringing mark. An equivalent provision appears in the New Zealand Trade Marks Act 2002, but the effect of that provision has never been considered by the New Zealand Courts.

At the centre of L'Oreal's claims is the issue of what it means to take "unfair advantage" of a well-known mark. The ECJ considered that "unfair advantage" occurs where a trader seeks to ride on the coat-tails of the well-known mark in order to benefit from the power of attraction, the reputation and the prestige of that mark, and to exploit - without paying any financial compensation - the marketing efforts of the trade mark owner in order to create and maintain the marks image. "Unfair advantage" can therefore occur even where there is no detriment to the owner of the well-known mark. The focus is not on the damage suffered by the owner, but the advantage taken by the third party as a result of using or referencing the well-known mark.

In this case, the Court found that the use of well-known marks such as TRESOR and MIRACLE in Bellure's price and product comparison lists was use of the mark for advertising purposes. It was intended to give a "wink" to the well-known brands. Similarly, the use of imitation packaging on the Bellure products was also intended to create an association with L'Oreal's products. It was unfair for Bellure to derive a commercial advantage through such use.

Brand owners in Europe will clearly welcome the Court's message that imitation and cheap knock-off products will not be tolerated.

Australian position - Malt Balls v Maltesers

In stark contrast, a recent Australian case has set a much higher standard for look-alike cases, leaving a bitter-sweet taste in the mouth of trade mark owners down under. Sweet Rewards was the local importer of Delfi confectionery products, including Malt Balls. Mars, the global confectionery giant, alleged that the packaging of Delfi's Malt Balls product was similar to its well known Maltesers product. In particular, Mars alleged that Delfi's product reproduced distinctive features of its packaging such as the floating malt balls motif, the brand name at an angle and the red background.

The Malt Balls and Maltesers products in question were:

            Mars' Maltesers                                          Delfi's Malt Balls

The Judge at the first instance rejected Mars' claims, and this has subsequently been upheald on appeal. The Judge first held that the MALT BALLS and MALTESERS brands were not confusingly similar. The Judge considered that the MALTESERS brand was so well known in Australia that consumers would not confuse it with MALT BALLS. The Judge also commented that there were distinguishing features on the Malt Balls product such as the Delfi logo and a different shade of red. Given that a lookalike product would presumably always use its own logo, as well as making subtle differences to alter the colour or brand names used, this decision suggests that it will be difficult to ever succeed with a passing off claim in a lookalike case, without a finding of trade mark infringement.

What does this mean for you?

Both of these decisions show how important it is for companies to think laterally about their brands - it's not just the trade name (eg Coca-Cola) that gives value to a company's brand. In the case of L'Oreal, the look of the packaging, the colours selected, and the smell of the fragrance were also of value. The Court was able to pin infringement on Bellure based on the fact that although it had not copied the brand name on its products, it had used a similar bottle and packaging to those covered by L'Oreal's trade marks. In the Mars decision, besides the trade mark MALTESERS, Mars believed that goodwill lay in the distinctive visual features of its packaging – the colour and floating balls motif. But the court was not convinced. Traders should carefully consider protecting all distinctive elements of the packaging – not just the brand name.

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Patents - To Amend Or Not To Amend.
Let's Not Decide

The unusual history of some patent litigation has led to an unusual result in an application to the Court to amend a patent.

In Lucas v Peterson, the New Zealand High Court has, after full argument, elected to adjourn an application to amend a patent until a further trial of issues of infringement and invalidity. This leaves the Court, at a further trial, having to address the issues taking into consideration two versions of the patent: the unamended version and the patent as proposed to be amended.

Jurisdiction for Patent Amendments

Applications to amend a patent can be made either to the Intellectual Property Office or the High Court. Where an infringement or revocation action is on foot in Court however, an application to amend the patent in question must be made to the Court.

Amendments cannot be made after acceptance of a complete specification except by way of disclaimer, correction or explanation. Any amendment, except one that corrects an obvious mistake, must not claim or describe anything not in substance disclosed in the specification pre-amendment, and must not claim anything which does not fall wholly within a pre-amendment claim of the patent.

Discretion to Allow Amendment

Whether to allow an amendment is at the discretion of the Court or tribunal. The factors which may be relevant are not finite, but include:

(a) Whether there was unwarranted delay on the part of the patent holder which caused detriment to the defendant or the general public;
(b) Any bad faith or attempt to obtain an unfair advantage by the patent holder, such as knowingly obtaining claims of undue width or attempting to enforce claims which the patent holder knows are invalid;
(c) Whether the amendment will cure the invalidity problem which has led to the application to amend;
(d) Any failure to disclose all relevant prior art known to the patent holder;
(e) Any other disentitling conduct by the patent holder.

The onus to establish that amendment should be allowed is on the patent holder, who must disclose all relevant matters.

In the earlier Ancare case in New Zealand, the Court of Appeal had observed that, because competitors need to know the scope of the monopoly they face, the patent amendment jurisdiction is not to be used to permit patent holders to try to support the validity of patents in alternative versions (ie, the original version and the proposed amended version). The Court left open the possibility of special circumstances in which amendment could be entertained after judgment, such as where a patent is held invalid in part and amendment is required to excise invalid parts. In general, however, the patent holder should notify any amendments sought before trial.

History of Lucas v Peterson

In a case related to a patent for a new portable sawmill, infringement proceedings were issued by the Lucas parties in 1999. The defendants initially counterclaimed for revocation. Owing to a procedural error, the defendants elected to non-suit their counterclaim when the case came on for trial in early 2001. The defendants then sought, and were granted on conditions, an adjournment of the trial.

When the case came to trial again in 2003, the defendants were prepared enough to proceed on invalidity challenges only for the key independent claim, claim 7. The High Court held that the patent was infringed and claim 7 was valid. Rather than progress the remaining invalidity arguments for claims 8-19, the defendants were allowed to simply pursue an appeal of the High Court finding that claim 7 was valid. The Court of Appeal then upheld the High Court decision. In 2006, the Supreme Court overturned the decisions and found claim 7 invalid for lack of novelty and obviousness.

The Lucas parties then applied to amend the patent, essentially to bring elements of subsequent claims into claim 7. While the application was after judgment on one aspect of the case, the challenges to validity of the original claims 8-19 had not been addressed.

Reasons to Adjourn the Application

The Judge on the application to amend had not presided over either of the trials in the matter. He did not reach any conclusions on jurisdiction and discretionary issues, although he appears to have proceeded on the assumption that the amendment application satisfied the jurisdiction thresholds. The concerns which influenced the decision to adjourn the application until trial were:

(a) The Judge was left in doubt whether the proposed amendment was designed to side-step the Supreme Court's observations on obviousness, or provide the patent holder with justifiable patent protection;
(b) The issues arising on the amendment application were intertwined with those to be addressed in the balance of the proceeding, such as whether the elements proposed to be brought into claim 7 would result in the amended claim 7 being inventive.

Comment

A patent amendment application is a streamlined process. Amendment may be refused if the amendment will, plainly, not cure the invalidity concern which has been identified, in this case by the Supreme Court decision. This does not involve full examination of other possible challenges to the validity of the amended patent. Those wider invalidity questions will usually involve substantial evidence, including from experts, and cross-examination.

The tortured history of the case made it difficult for the Judge to reach a level of confidence about what might be at issue for the amendment application. Instead, he appears to have been spooked by the possibility of a subsequent finding of invalidity of the amended patent. This left him feeling unable to make a decision on the application to amend. But those wider invalidity considerations are beyond the narrow focus required for the discretionary decision whether to allow an amendment. The result is that we are left with a new wedge in the double jeopardy door which had been shut by Ancare.

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Leading a Horse to Water and Making the Calf Drink
Stallion Plastics Limited v McInnes

In a recent decision (Stallion Plastics Limited v McInnes), the High Court heard an appeal from an interlocutory decision of the Assistant Commissioner of Patents in connection with a patent opposition. The Court considered two questions:

• whether the opponent in a patent opposition is entitled to include references to the common general knowledge in its Statement of Case; and
• whether the restriction upon publication of specifications under section 91 of the Patents Act 1953 precluded the disclosure of the applications and any specifications of parent and grandparent applications relied on by the patentee for its priority claim.

Common general knowledge references

The invention, filed by Mr McInnes, related to a mobile animal feeder adapted to dispense liquid food such as milk by way of multiple teats.

Stallion Plastics Limited opposed the grant of the patent on several grounds, including obviousness. In connection with its pleading that the claimed invention was obvious and lacking any inventive step, the opponent pleaded 10 particulars alleged to have been common general knowledge at the priority date, such as "that animal feeders could have a manifold feeding into a plurality of feeding teats" and "that such manifolds could be open manifolds". The opponent also made further references to what constituted common general knowledge at the priority date, such as material which had been published in New Zealand in specified sources. It was alleged that this other material, in combination with the common general knowledge, rendered the claimed invention obvious.

The applicant objected to the references to common general knowledge in the Statement of Case. The Assistant Commissioner upheld the objection and ordered that the references be struck out of the Statement of Case.

The opponent appealed the decision to the High Court. The High Court found that the references to the common general knowledge were simply the opponent's contention of what the Assistant Commissioner would find, on evidence to be adduced, to be the state of knowledge rather than a truthful or unquestionable state of the relevant knowledge. Accordingly, the Court found there was no justification for the references to be excluded and directed that the opponent's original Statement of Case be reinstated.

In reaching its decision the Court referred to the opponents' acknowledgment that it was not seeking to assert common general knowledge as a ground of opposition in its own right. Rather, it was included to reflect the state of knowledge of the skilled addressee and, as a result, provided a contextual framework within which the claims were to be assessed against prior use and prior publication material to determine if what was claimed was obvious.

The Court also referred to the difference between the Notice of Opposition and the Statement of Case which is filed in support. As a matter of pleading, the Notice of Opposition only sets out the grounds of opposition. The Trade Mark Regulations require that the Statement of Case, on the other hand, must set out the facts upon which the opponent relies and therefore should fully and fairly inform the applicant of the case it has to meet in order to enable the applicant to prepare its Counterstatement and evidence on relevant issues.

Therefore, while the Court acknowledged that pleadings should not be allowed to stray into providing evidence, it held that the references to the common general knowledge in this case fell short of pleading evidence.

The Court also pointed out that another good reason for including full pleadings in the Statement of Case (and Counterstatement) is to enable IPONZ to assess the entitlement to a grant from a public interest standpoint if, for whatever reason, the opponent does not ultimately contest the patent.

Access to predecessor documents

The patent opposed by Stallion Plastics was a divisional from two earlier patents - the immediate predecessor being the "parent" application, which was itself a divisional from the "grandparent' application.

In order to qualify as a divisional, and thus claim priority from the earlier application, the terms of the subsequent application must be identical to those of the earlier application. The grandparent application had a priority date of 1 August 2000. IPONZ accepted the current application (filed on 30 July 2004) as a divisional of the parent which was itself a divisional of the grandparent, thus entitling the present application to a priority date of 12000.

Neither the parent nor grandparent applications were accepted by IPONZ and so were never published.

When filed, the parent application was accompanied by a provisional specification and later, a complete specification.

In the case of a first generation patent application, the justification for the priority date allocated to it will be apparent from the details which are published on acceptance as both a provisional and a complete specification will be published. However, in this case, IPONZ published the application with no details of the parent or grandparent applications. While potential opponents could reconstruct the timing of filings of the earlier applications, they are unable to verify for themselves whether IPONZ has correctly accepted the earlier priority date when the current application is finally published, for example whether the complete specification is fairly based on the original provisional.

The opponent sought copies of the documents justifying the extent of ante-dating of the current application from IPONZ. The applicant opposed this.

The Assistant Commissioner held that a challenge to the priority date allocated on acceptance of an application is not a ground of opposition. Accordingly, such a challenge cannot be argued in opposition proceedings and so documents which might be sought to challenge the allocation of the priority date are irrelevant to any valid grounds of opposition. As a result, access to the documents was refused.

The Court disagreed, and held that this was an incorrect approach to the scope of the grounds of opposition. The opponent was not seeking to challenge the priority date as a ground of opposition. Rather, the correct priority date was a contextual fact, extremely important to the strength of other arguments available to the opponent, such as prior use and prior publication.

The Assistant Commissioner also held that section 91(1) of the Act prevented disclosure of the documents.

Section 91(1) provides that:

An application for a patent, and any specification filed in pursuance thereof, shall not, except with the consent of the applicant, be published by the Commissioner or be open to public inspection at any time before the date advertised in the Journal in pursuance of subsection (2) of section 20 of this Act:

Provided that nothing in this subsection shall preclude the Commissioner from publishing the date and number of an application and such details of the application and invention as are required to be given in the application form.

However, section 91(1) must be considered in light of section 20(2) which provides:

On the acceptance of a complete specification the Commissioner shall give notice to the applicant, and shall advertise in the Journal the fact that the specification has been accepted, and thereupon the application and the specification or specifications filed in pursuance thereof shall be open to public inspection.

The Assistant Commissioner considered that the parent and grandparent documents were not part of the accepted application and therefore publication of them was not authorised.

However, the Court pointed out that the Assistant Commissioner's approach meant that less would be published in relation to a divisional application than is the case with an original application. Potential opponents to a divisional application would not be in the same position as for an original application.

With an original application, the basis for a priority date is clear from the provisional and complete specifications. With a divisional, however, the Assistant Commissioner's approach would mean that the documents establishing the chain of entitlement back to the priority date could not be accessed.

The Court held that, conceptually, that leads to the undesirable notion that applicants could attempt to "bury the trail" back to the earliest possible priority date by insisting that there be no publication of antecedent applications which are critical to establishing entitlement to an earlier priority date.

It further held that there was no prejudice to an applicant by allowing publication of the parent and grandparent applications upon which it relies for backdating of the priority date. Indeed, the entitlement to reach back depends on the subsequent applications being in the same terms as the preceding ones.

The Court distinguished the Formulast decision on the basis that that was a case about obtaining. The allegation of obtaining was not a stand-alone challenge to the correctness of the date attributed by IPONZ. Rather obtaining was to be dealt with on its own merits and, if made out, could require IPONZ to reconsider the appropriateness of the date attributed.

As a result the Court granted Stallion Plastics Limited access to the requested documents.

Comment

The decision seems to show a consistent approach by the Court in relation to information. Opponents are entitled to, and indeed should, plead their case in full and set out all facts upon which they rely in order to enable an applicant to prepare its Counterstatement and evidence. Similarly, an opponent is entitled to have access to information which the applicant relies on in support of the application.

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Remedies Corner: Compound Interest on an Account of Profits
It's not so 'simple' anymore

In June this year, the High Court in Kabushiki Kaisha Sony Computer Entertainment v Van Veen considered whether it is appropriate to apply compound interest to an account of profits ordered in copyright infringement proceedings.

Account of Profits

An account of profits strips an infringer of profit derived from the copyright infringement. Damages, on the other hand, compensate for losses suffered by the copyright owner, and are intended to place the owner in the position he or she would have been in 'but for' the infringement of his or her rights.

Upon a finding of liability a plaintiff copyright owner must choose or 'elect' between the two forms of monetary relief. In practical terms, this means choosing the more lucrative remedy (for example, in one case a defendant's gains may be greater than a plaintiff's losses and in another the reverse may apply).

In the present case, the defendant was found to have infringed copyright, and was ordered to account for the profit made from sales of the infringing work - a program known as HD Loader. The issue for consideration by the High Court was whether the defendants should be ordered to pay both the sales profits, and interest on interest (that is, compound interest) thereon.

Compound Interest

While the Judicature Act 1908 does not allow compound interest to be awarded on sums for which judgement is given, it has been recognised that such interest can be awarded by the courts of equity if it is equitable to do so. This was recognised in the New Zealand case of Equiticorp Industries Group Ltd, in which the court held that an award of compound interest stems from the principle that equity will not allow a trustee to make a profit as a consequence of breaching his or her trust. If a trustee is presumed to have earned compound interest through the use of trust money, then equity will award compound interest as part of the restitution.

Although the issue of compound interest had not been considered in New Zealand in relation to remedies for intellectual property wrongs, the issue has been considered by the Australian Courts in LED Builders. In LED Builders, the Federal Court of Australia held that the rationale for awarding compound interest in cases of an accounting by a defaulting fiduciary was also applicable where a person, in the course of business, infringes another's copyright and is required to account for profits arising from the infringement. The Judge in that case inferred that the profits made were "used as working capital for earning further profits", and that compound interest was required to disgorge all profits made from the infringement.

The Judge in the present case was of the view that the situation described in LED Builders was directly similar, and the same principles were applied. Accordingly, the Court awarded compound interest on the account of profits, with yearly rests and at the rates prescribed by the Judicature Act, as claimed by the plaintiff.

Comment

This decision means that compound interest may be awarded on an account of profits in future copyright cases, provided the court finds that it is equitable to do so on the facts of that case. This, in turn, will affect the choice to be made by plaintiffs upon a finding of liability against the defendant, and may well lead to more plaintiffs electing to receive an account of profits.

Moreover, as this is the first time compound interest has been considered in any intellectual property proceedings, it remains to be seen whether the New Zealand Courts will extend this principle to apply to the infringement of types of intellectual property other than copyright.

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Team News: New Zealand's Leading Intellectual Property Law Firm

Simpson Grierson's intellectual property team was recognised as one of only two leading firms in the recently announced PLC Which Lawyer? rankings.

Both Earl Gray and Richard Watts were also personally recognised for their intellectual property expertise.

INTA Annual Meeting Boston, May 2010

Earl Gray and Richard Watts will be attending the INTA Annual Meeting in May 2010. If you would like to meet up, please contact Earl or Richard directly.

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