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In recent years, the widely predicted rise in importance of intellectual property to the commercial world has happened. In August 2005, Coca Cola valued its brand at $67.5bn. A reported 38% of the value of a Mercedes saloon is attributable to its computer software. VW bought the Rolls Royce car business, but BMW picked up the trade-mark licence.

Intellectual property rights are territorial, and the law governing them sometimes struggles to deal with this. While international conventions and treaties encourage different countries to respect rights arising elsewhere in the world, the interpretation of what is capable of protection has become a contentious area.

Trade Marks

Trade mark law is more harmonised and should therefore be generally less controversial than patent law in Europe. The series of cases around the millennium has clarified the law on grey goods and parallel imports (the importing of branded goods from outside the EU or from one EU market to another and selling them cheaper than the distribution channels licensed directly in the territory). The case law has done much to confirm the rights of trade mark owners, who have been held not to have lost their rights even if they make no express limitation on distributors outside the EU about resale of those goods into the EU. However, good practice for brand owners wishing to manage their brands in the EU would be, wherever it is legally possible to do so, to restrain licensed distributors outside the EU from exporting branded goods into the EU.

Comparative advertising and trade marks

One area of development in trade mark law in the UK has been the addition of a new limitation on comparative advertising, a result of European harmonization. English law has resisted the introduction of any limits on comparative advertising provided that it is honest and accurate. The same is not true of several European jurisdictions, where it has been held that it is not a fair use of a trade mark to cite price advantages of your own over a competitor’s products.

In the first case before the courts under the new regime, L’Oreal successfully sued a number of sellers of “smell-alike” perfumes that did not use similar trade names, but smelled similar and in packaging and choice of name gave a wink to the public in the direction of better known and more prestigious fragrance brands. The courts held that this was taking unfair advantage of a well-known brand. The dramatic extension of protection lay in the fact that there was no longer a need to prove confusion in the minds of the public – it was enough that the combination of the fragrance, name and packaging “brought to mind” the more prestigious brand. It is yet to be seen how much this may limit price comparisons – but the court felt that where the original branding was unlawful, then any price comparisons would fail the legal test of fairness (“in accordance with honest practices”).

Patents

One area where intellectual property law continues to differ substantially is the patentability of software programs. The EU has been considering whether to bring Europe in line with the US and allow the patenting of business methods and software programs “as such” (currently excluded from the European Patent Convention). The many patent applications for computer software, and the divergent interpretation and application of what is and what is not patentable, has led the European Commission to adopt a proposal for a directive on the patentability of software-implemented inventions, with a view to harmonizing the approach throughout the EU.

The directive closely mirrored the stand of the European Patent Office in its more recent judgments. The directive retained the exclusion of so-called “business method patents”, which are allowed in the US and would need to be allowed in the EU if the international inconsistencies were to be brought closer together. The Software Directive has turned out to be a very hot political potato, with first the Parliament, then the Council both making substantial amendments and ruling against each other. And in July 2005, the European Parliament voted overwhelmingly to reject the whole draft directive.

Database Right

The database right is a European invention to address the fact that some, but not all, European jurisdiction law gave protection to collections of data that somebody had spent time in compiling. The database right lasts 15 years, but reinvents itself with each and every database update. It has been assumed that the difference under English law between the protection afforded by copyright in a compilation and by the database right was a matter of degree – the amount of time and effort necessary for the database right to arise being lower than for copyright protection. In a dispute between the bookmaker William Hill and the British Horseracing Board (“BHB”), the European Court of Justice (“ECJ”) has given guidance as to what is required for the database right to arise.

William Hill maintained and published a database of horse racing in the UK. Much of that information derived from data published by the BHB and licensed to others. The ECJ found that where, as with BHB, the collection of data comprised publication of results of an organization’s normal activities (the official list of riders and runners was published by the BHB as part of its regulatory remit) then no “database right” arose. The court made a distinction – a database right arises only if the time, effort and skill is spent in the collecting of data for inclusion in a database, but not if the time, effort and skill is spent in generating data as part of its normal activities, and the database is a mere publication of these.

Agent owns marketing database

An agent who built a database of his or her principal’s customers by offering a dedicated sales telephone line in the principal’s name owned the database of those prospects. In an interesting judgment, the court held that once the agency relationship was finished and the agent no longer owed a duty to his or her principal, then the established right of a creator to be first owner of an intellectual property right would hold, and the agent and not the principal was entitled to keep the marketing database for exclusive use. Businesses using sales agents in the UK should ensure that they have a properly drafted agency agreement, which assigns to itself all intellectual property rights, including database, which may arise during the term of the agency (even if created by the agent).

Copyright

Differences of interpretation abound within Europe and between Europe and the US. So do differences in treatment for infringers, and this has been starkly highlighted in the approaches to tackle peer-to-peer file sharing (“P2P”) of infringing copies of recorded music and computer software. Cases against Grokster, the P2P software provider, have succeeded in the US and would probably succeed in the UK for similar reasons. However, the copyright owners have realized that their main targets need to be the sharers rather than the software provider, and actions have started in the US and the UK. Last year, the High Court in England handed down summary judgments in damages with costs in two cases, deciding in each case that the sharers had no possible case to argue in their defence. As a result, the British Phonographic Institute, which polices copyright infringement for the music industry, has been able to reach settlements out of court with a substantial number of P2P infringers.

However, the UK lacks the US’s regime of special, exemplary damages, which allow copyright holders to claim as much as $750 for each and every unlawful download of every song. In the UK, rights owners must prove the extent of damage and the amount of loss which is claimed.

Copyright in software

The courts have considered the difficult question of whether there exists any protectable copyright in the higher level architecture of computer software. It is accepted that the code containing instructions which make a computer application function is protected by copyright as a literary work. Copying of computer code is an infringing act. But in the case brought by a computer software developer against the airline Easyjet and another software developer, the courts were told that there was no suggestion of copying of code, but that the claimant asked the court to rule that its design of how a database manipulated the data contained in it was also copyright. For the application, based on a database, to function, it was necessary that all the data entered into it be ordered in a particular way – the so-called “schema” of the database.

The claimant claimed there was copying of business logic, of a substantial proportion of the command codes, the on-screen displays and the architecture of the database.

The courts found only that certain on-screen icon designs had been infringed. The judge used the analogy of a chef who likes a particular pudding, and rather than reproducing someone else’s recipe, writes his own to produce a pudding which tastes the same. Even though the results were the same, there would be no infringement of copyright in the previous recipe.

Contact: Edward Hoare or Paul Taylor on
Tel: +44(0) 20 7450 4500
Email: info@faegre.co.uk
Website: www.faegre.co.uk

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