Intellectual Property Law Coursework

WHAT IS INTELLECTUAL PROPERTY LAW?

Intellectual property refers to the minds creations, such as, symbols, images, designs, names and inventions; all of which are protected by the various elements listed below [WIPO, 2019]. To ensure these creations are protected the UK has law surrounding the fair use of these ideas, known as intellectual property law.

Intellectual property law (IP law) can be defined as the, "legal rights associated with creative skill and effort, inventiveness, trade marks and signs used by undertakings, and commercial reputation and goodwill." [Bainbridge, 2018].

The aim of IP law is to promote an environment in which creativity and innovation can prosper by striking a balance between the interests of innovators and public interest [WIPO, 2019].

IP law breaks down into various elements, the main areas being:

• Copyright
• Malicious falsehood
• Trademarks
• Passing off
• Patent law

[Bainbridge, 2018]

All of these are well established areas of IP law, with a plethora of case law to improve their rigidity. However, when this is applied to a business context there can be confusion about what quantifies as a breach of another's intellectual property. The following report will focus on reviewing the effectivity of IP law in its current form, with a focus on the law of 'passing off', with input from trademark and copyright law.

WHAT IS 'PASSING OFF'?

Passing off is an element within IP law and is closely linked with trademark law. The term 'passing off' can be defined as, "an early common law attempt at preventing the deceptive use of marks and signs used by traders to distinguish their goods from those of other traders." [Bainbridge, 2018].

Passing off occurs when a defendant attempts to misrepresent consumers by using a distinguishing sign or mark of the claimant, that subsequently causes damage to the claimant's goodwill [CPS, 2019]. The law of passing off is typically used for distinct names or signs that are not registered; a registered mark would naturally fall under trademark law.

Figure 1 below is a visual representation of two brand marks that would quantify as passing off.

FIGURE 1 – VISUAL PASSING OFF REPRESENTATION

THE THREE INGREDIENTS TO PASSING OFF

There are three elements that must be met to have a successful passing off claim, they are referred to as the 'classic trinity':

1. The claimant must possess goodwill associated with the claimants goods or services and is recognised by consumers as distinctive.

2. The claimant must prove that the defendant has misrepresented your mark, which has led to, or is likely to lead to, consumers being confused as to whether the defendants goods or services are that of the claimants.

3. The claimant must present that he has suffered or, in a quia timet^[1] action, is likely to suffer damage from the defendants misrepresentation.

[Bainbridge, 2018]

These three elements have been developed over the years and were originally five requirements set out by Lord Diplock in the case of Erven Warnink BV v J Townend & Sons Ltd (1979). This case saw the Dutch Advocaat drink manufacturers make a claim against an inferior product called, 'Keeling's Old English Advocaat'. It was upheld that this was passing off as it met the following criteria set out by Lord Fraser:

1. "That his business consists of, or includes, selling in England a class of goods to which the particular trade name applies;

2. That the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods;

3. That because of the reputation of the goods, there is a goodwill attached to the name;

4. That he, the Plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value;

5. That he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the Defendant selling goods which are falsely described by the trade name to which the goodwill is attached."

[Bainbridge, 2012]

This was later refined by Lord Oliver in the case of Reckitt and Colman Properties Ltd v Borden Inc (1990) to the three elements mentioned above. This case saw the claimant's 'Jif Lemon' trading style being passed off by the defendants who used a very similar packaging design that could cause confusion amongst consumers. Figure 2 below compares the two similar designs.

FIGURE 2 – 'JIF LEMON' AND 'REALEMON' PRODUCT COMPARISON

The defendants argument was to claim that consumers should be more aware of the products they're purchasing to mitigate any confusion. Lord Oliver held the claimants allegation of passing off, stating, "It is no defence to an allegation of passing off that members of the public would not be misled if they were more literate, careful, perspicacious, wary or prudent.". Lord Oliver went on to state the law on passing off, in turn creating the 'classic trinity', simplifying Lord Frasers previous criteria [Bainbridge, 2012].

GOODWILL

A business will develop goodwill during the course of trade that will relate to a business's distinctive 'get up'² [Bainbridge, 2018]. Lord Macnaghten defined goodwill in the case of Commissioners of Inland Revenue v Muller & Co's Margarine Ltd (1901) as, "the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. … The goodwill of a business must emanate from a particular centre or source.".

Goodwill is established through various means, most prominently, through use. It was established by Mr. Justice Buckley in Stannard v Reay (1967) that goodwill can be established as rapidly as three weeks from the conception of a new business or a business' new 'get-up'. This case saw the claimant start up a mobile fish and chip van intitled 'Mr. Chippy'; after three weeks the business had made £300, which equates to £5,176.08 when accounting for inflation [Webster, 2017]. The defendants then started a rival van operating under the same name. This led to loss of business for the claimant and was the catalyst for the legal proceedings. Mr. Justice Buckley found the defendants to be liable of passing off.

MISREPRESENTATION

Once goodwill has been proven to exist, the claimant must show that the defendant has made an actionable misrepresentation [Bainbridge, 2018]. Misrepresentation is when consumers are led to believe that the goods or services of the defendant are that of the claimants, therefore causing confusion about the company's offerings [Carter, 2017]. This can be in the form of advertising/marketing, actions or words, either intentionally or inadvertently. There are four main types of misrepresentation:

1. Source

2. Quality

3. Reverse Passing Off

4. Extended Misrepresentation

The most common misrepresentation is source, which is the false impression of association with another business. This can be seen in United Biscuits (UK) Ltd. v Asda Stores Ltd (1997), in which the claimant, who produce the famous 'Penguin' biscuits, alleged that the defendant was intentionally misrepresenting their product through the sale of their own brand biscuit, intitled 'Puffin'. The defendants packaging design followed a very similar pattern to that of the claimants. Figure 3 below illustrates the similarities.

FIGURE 3 – 'PENGUIN' AND 'PUFFIN' PACKAGING COMPARISON

² 'get-up' refers to any mark used by a business that is capable of being graphically represented [S2, TMA 1994].

Mr. Justice Robert Walker held that the defendant had confused the consumer, stating, "The word Puffin in not very different in form from Penguin," and "The Puffin packaging and get up was, in the material sense, deceptively similar to those of the Penguin." [Burrell, 1997].

DAMAGES

To complete a claim of passing off, the claimant must suffer, or is likely to suffer, damage if the defendant continued with its current proceeding. The damage is not just financial, it could also be reputational amongst consumers or even erosion of the unique mark the claimant holds [Bainbridge, 2018]. These are broken down into:

1. Actual or potential loss of sales

2. Blurring

3. Tarnishing

All of these are very common in successful passing off claims, with a majority of cases having multiple damage types. All of them require evidence proving their validity to have a successful claim. Collating evidence for loss of sales is by the far the simplest to obtain, as it does not require interaction with consumers to successfully identify. In Parker-Knoll Ltd v Knoll International Ltd (1962), Lord Morris explains, "the issue … is whether the respondent clearly established that if furniture is sold under the mark Knoll or Knoll International there will be a serious risk that substantial numbers of the purchasing public will be led to believe that they are buying Parker-Knoll furniture." [Bainbridge, 2018].

Furthermore, this can be seen in Stannard v Reay (1967) as after the defendant started operating under the same 'Mr. Chippy' mark, the claimants sales drastically dropped due to consumer confusion.

REMEDIES

There are various remedies for a claimant after a successful case. Table 1 below represents the remedies open to a claimant and their meanings.

TABLE 1 – REMEDIES MATRIX

Remedies	Definition
Injunction	Injunctions are court orders, typically ordering the defendant to stop operating under the mark of the claimant.
Delivery up	Delivery up is when the defendant is ordered to send the effected products to the claimant. Typically, the plaintiff will destroy these products.
Damages	Damages provide financial resolve to the claimant. The amount will be decided by the courts but typically corelate to the level of damage attained.
Account of profits	Account of profit is similar to damages, but it is not designed to punish the defendant but to remove unjust profit made by the infringement.

[Bainbridge, 2018]

HOW EFFECTIVE IS THE LAW ON 'PASSING OFF'?

Trademark law and passing off are closely linked in regards to their use. However, unlike trademark law, which is governed by the Trade Marks Act 1994 and case law, 'passing off' is solely developed through case law [Reckitt and Colman Properties Ltd v Borden Inc (1990)]. This form of law making, known as 'non-statutory law' or 'common law', is developed organically in due course as judges make informed decisions, develop precedent and deliver rulings [Dahl, 2017].

The following sections will discuss the effectiveness of passing off as non-statutory law.

ADVANTAGES TO PASSING OFF AS A NON-STATUTORY LAW

SPECIFICITY

Acts of parliament are often written with generic and broad wording, as to not restrict judges on their rulings. However, it provides little support and occasionally hinders judges in certain specific situations. Case law resolves this by assessing specific facts for individual cases, then applying the law to these findings, this allows for complete freedom for judges to make tailored rulings [Dahl, 2017].

This can be seen in the Trade Marks Act 1994 as it states, "The proprietor of a registered trade mark has exclusive rights which are infringed by the use of the trade mark in the United Kingdom without his consent.". It allows for the registration of, "[A]ny sign capable of being represented graphically which is capable of distinguishing goods of services of one undertaking from those of other undertakings" [TMA 1994].

This is a rather broad definition of what represents a registered mark. It has been suggested that this will limit the role of passing off as it allows almost anything to be registered as a trademark, therefore, limiting the use of passing off and restricting judges to only use the Trade Marks Act 1994.

SPEED AND EFFICIENCY

Statutes have a very long alteration time frame due to political and procedural constraints. Case law is more responsive, faster and more flexible. It is able to respond to changing social expectations and values [Dahl, 2017].

This is emphasised by the long process of getting a bill passed through parliament. Every bill and alternation will follow the process presented in figure 4 below.

FIGURE 4 – UK GOVERNMENT BILL APPROVAL PROCESS

[Parliament, N.D.]

These processes are very long and can take on average a year to get passed. Although, it has been known for bills to take up to 7 years to get passed [Cabinet Office, 2013]. However, bills can be 'fast tracked', which is a rare occurrence and only takes place on matters of extreme importance, such as the Banking (Special Provisions) Act 2008 that nationalised Northern Rock bank after it started to fail and was deemed "not to provide sufficient value for the taxpayer"[Marshall, 2019]. This comes with it's own risks as lawmakers have less time to correctly ensure the basic principles of the bill are met.

UNFORESEEN CASES

It is impossible for the government to legislate for all of society's problems, conditions or actions. So when niche cases arise it is challenging for judges to stick to the act of parliament. Case law can react to situations that were not foreseen by lawmakers [Dahl, 2017].

This can be seen within the Trade Marks Act 1994 as it classifies a sign as "anything that can be apprehended by the senses". However, when businesses have attempted to trademark less common signs, like taste, they are restricted. This can be seen in Eli Lilly's & Co's CTM Application (2004), who tried to register the 'taste of strawberries' for a pharmaceutical medicine. This was rejected for a lack of distinctive character.

Due to the case of Sieckmann v Deutsches Patent- und Markenamt (2002) the likelihood of any non-visually perceived mark becoming trademarked is highly unlikely, if not impossible. This case saw an application of a smell that was described as, 'balsamically fruity with a slight hint of cinnamon'. The application was submitted with odour samples and the scents chemical formula. The European Court of Justice ruled that a scientific formula, description in words, a sample of the odour or a combination of those methods does not satisfy the requirement of graphical representation. This ruling from this case spawned new requirements for non-visual marks, intitled the 'Sieckmann criteria' [Kanesarajah, 2008]. The Sieckmann case, therefore, makes an element of the Trade Marks Act 1994 incorrect which has allowed the uprising of businesses like 'Copycat Fragrances' who describes themselves as, "The perfect perfume, minus the price-tag". They provide fragrances that smell exactly like big brand perfumes, for example 'Dior Sauvage', but for half the cost.

DISADVANTAGES TO PASSING OFF AS A NON-STATUTORY LAW

Passing off is reducing its efficiency with each new case and will soon be ineffective without statutory guidance, as it gradually blends in with other elements of IP law. The following sections will show the failings of passing off at each of its key requirements and how statutory guidance can help provide fairer rulings in the future.

GOODWILL REQUIREMENT

Lord Macnaghten in Commissioners of Inland Revenue v Muller & Co's Margarine Ltd (1901) describes goodwill as the, "attractive force which brings in custom.". However, when we look at the case of Starbucks (HK) Ltd v British Sky Broadcasting Group plc (2015), which looked at whether the defendant was passing off the name "NOW TV" as the claimant ran the same service in Hong Kong under the same name. Lord Neuberger concluded, "...In my view, a claimant who has simply obtained a reputation for its mark in this jurisdiction in respect of his products or services outside this jurisdiction has not done enough to justify granting him an effective monopoly in respect of that mark within the jurisdiction.".

To consider the presence or even absence of customers as the main definer for a passing off claim is misguided. Goodwill should be combined with misrepresentation to determine if a claim should be successful. It is getting increasingly challenging to prove goodwill due to courts high demand of evidence and claims are being unfairly dismissed like in the case of Starbucks [Singfield & Warren, 2017]. A lack of goodwill does not mitigate the potential for misrepresentation.

MISREPRESENTATION REQUIREMENT

A major benefit to passing off is the wide breadth of behaviour that can be classified as passing off, for example substitution, as seen in Red Bull GmbH v Mean Fiddler Music Group plc (2004) as the claimant got a temporary injunction against the defendant for selling an own-brand alternative to Red Bull in their bars but with a very similar get-up.

However, the issue is that courts have a lower threshold for certain types of misrepresentation within passing off, for example:

1. Reverse misrepresentation

2. Invisible misrepresentation

3. Post-sale misrepresentation

[Singfield & Warren, 2017]

The major concern is with 'reverse misrepresentation'. Although this type of misrepresentation has had a successful claim against it in the past with Bristol Conservatories Ltd v Conservatories Custom Built Ltd (1989); this case saw the defendants using the claimants images of conservatories and attempting to pass them off as their own work. The courts have applied limits on when they will allow these rules to be invoked as they are reluctant to allow businesses to utilise passing off as a way of alleviating gaps in their IP protection [Clark and Hitchens, 2015]. Passing off is supposed to protect un-registered marks, however, with the courts limiting the types of claims there is a strong argument for passing off to have similar statutory rights as trademarks [Singfield & Warren, 2017].

DAMAGE REQUIREMENT AND REMEDIES

The damage requirement is standardised and is fair. However, on occasion there can be dilution of goodwill but with an absence of customer confusion [Singfield & Warren, 2017]. In this event the claim would typically be unsuccessful even though damage has occurred. An increase in statutory guidance could allow for these niche cases to still receive some form of remedy.

REMEDIES

There are clear remedies for a successful passing off claim as previously stated earlier on in this report. However, there is no real structure to them, especially when you compare them to the punishments of copyright law. Under the Copyright, Designs and Patents Act 1988 the punishment for a business or person found guilty of copyright infringement is up to 6 months imprisonment and/or up to £5,000 fine in Magistrates Court and up to 10 years imprisonment and/or an unlimited fine in Crown Court [Intellectual Property Office, 2017]. There should be some statutory guidance for passing off in relation to the financial remedies depending on the severity.

SUMMARY

Overall, there are some serious disadvantages to maintaining the law of passing off without the development of statutory rights. With each new case the requirement for evidence keeps increasing and making it more complicated and costly for claimants to protect their IP rights [Clark and Hitchens, 2015]. The issue is exacerbated by each judges interpretation of the classic trinity and there are no boundaries on how strict their judgements are [Singfield & Warren, 2017]. If there was statutory guidance setting limits for each element of the classic trinity then there would be a fairer system for claimants to protect their IP rights.

IS THE LAW ON 'PASSING OFF' CLEAR AND EASY FOR NON-LAWYERS?

The law on passing off is arguably not very clear but it is relatively easy to understand when provided with the correct resources. When it comes to passing off there are generic definitions scattered around the internet, all of which provide a varying description of what passing off is. This is drastically different to trademark and copyright law as they both have statutes which allow the public to understand the context of the law from one central hub of information.

Applying this to a business context, the organisations that should be concerned are start-ups. A new business will not have the budget for a department specifically designed to manage their IP rights and therefore they will need to manage it themselves. Especially as their IP is the most valuable asset they hold and are the foundations of the whole business [Kroninger, 2017].

The following areas are recommendations on how the law on passing off can be made more accessible for startups to understand and the effect Brexit will have on businesses IP rights.

STATUTE INTEGRATION

The previous section of this report clearly identified significant issues with the core elements of passing off law. The main focus of these issues resolves around the lack of statutory guidance, as the law is formed by each new case. However, it is getting increasingly difficult for claimants to win legitimate cases as judges increase the demand for more evidence [Singfield & Warren, 2017]. This is having a negative effect on the law of passing off by putting businesses off claiming due to the increased costs.

Passing off can still be reliant upon case law but could have elements of statutory regulation to improve the fairness of claims. This is not an uncommon proceeding within law and has occurred within tort law previously. For example, the Law Reform (Contributory Negligence) Act 1945 was introduced to allow claimants to receive reduced damages even when they were partly at fault for their injury; beforehand they would have not received any damages [UK Public General Acts, 1945].

Furthermore, with more legislation surrounding passing off it will make it easier for start-up businesses to understand their rights as it provides a central hub of information. Although lawmakers need to be cautious in their terminology to avoid businesses exploiting the statute and using it as a tool to avoid trademarking their goods or services.

BREXIT CONSIDERATIONS

Brexit will have severe implications on IP law within the UK as we lose access to certain protections, agencies and market sectors, for example the European Economic Area (EEA) [Farrand, 2017]. It is important for businesses who operate, or have suppliers, within the EU to confirm with them that they have the correct permissions to be distributing their goods [Intellectual Property Office, 2019].

HOW TRADEMARK LEGISLATION WILL EFFECT PASSING OFF

When the UK leaves the EU, all UK businesses with EU registered trademarks (EUTM) will have them registered as UK marks by the IPO [Intellectual Property Office, 2019]. These will run along side the EUTM, so a business will not lose any IP rights in Europe.

When this comes into effect, the courts could see an increase in passing off claims and a decline in trademark infringement claims. This is due to the increased cost of setting up the same trademark under two authorities, the UK and EU. It currently costs £170 minimum to set up a UK trademark and €850 for an EUTM [Farrand, 2017]. Businesses who are limited on spending may look to only register within the EU and therefore rely on passing off law to protect their IP rights within the UK.

EU CASE LAW IN THE UK POST BREXIT

There are a lot of ECJ rulings that effect UK IP law, for example, the 'Sieckmann criteria'. Unfortunately for businesses, these rulings will remain a UK precedent due to the European Free Trade Association (EFTA) court ruling that states, "…conflicts between the EEA Agreement and national law, the Agreement rules prevail." [Farrand, 2017]. Furthermore, relevant EU legislation will be retained in UK law under the EU Withdrawal Act 2018, this will allow the continued formation of businesses that focus on copying marks that are unprotectable by law, for example the aforementioned, Copycat Fragrances [Intellectual Property Office, 2019].

BIBLIOGRAPHY

Statutes

Banking (Special Provisions) Act 2008

Copyright, Designs and Patents Act 1988

EU Withdrawal Act 2018

Law Reform (Contributory Negligence) Act 1945

Trade Marks Act [TMA] 1994

Cases

Bristol Conservatories Ltd v Conservatories Custom Built Ltd (1989) RPC 455

Commissioners of Inland Revenue v Muller & Co's Margarine Ltd (1901) AC 217

Eli Lilly's & Co's CTM Application (2004) ETMR 4

Erven Warnink BV v J Townend & Sons Ltd (1979) AC 731

Parker-Knoll Ltd v Knoll International Ltd (1962) RPC 265

Reckitt and Colman Properties Ltd v Borden Inc. (1990) 1 All E.R. 873

Red Bull GmbH v Mean Fiddler Music Group plc [Application: Interim Injunction] (2004) EWHC 991

Sieckmann v Deutsches Patent- und Markenamt (2002) RPC 38

Stannard v Reay (1967) RPC 589

Starbucks (HK) Ltd v British Sky Broadcasting Group plc (2015) UKSC 31

United Biscuits (UK) Ltd. v Asda Stores Ltd (1997) RPC 513

References

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Bainbridge, D. (2012). Intellectual Property. 9^th Edn. Harlow, Pearson Education Limited.

Burrell, I. (1997). Penguin wins its suit as Puffin gets the crumbs in battle of the biscuits. Article. Independent.

Cabinet Office. (2013). Legislative process: taking a Bill through Parliament. Online, GOV.UK. [Accessed on 15/11/2019, Available at: https://www.gov.uk/guidance/legislative-process-taking-abill-through-parliament].

Carter, M. (2017). How To Prove 'Passing Off'. Article. Online, Gowling WLG. [Accessed on 13/11/2019. Available at: http://www.mondaq.com/uk/x/655778/Trademark/How+To+Prove+Passing+Off].

Clark, B. and Hitchens, B. (2015). United Kingdom: The perils and powers of passing off. Article.

Online, World Trademark Review. [Accessed on 17/11/2019. Available at: https://www.worldtrademarkreview.com/united-kingdom-perils-and-powers-passing].

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Dahl, T. (2017). 5 Advantages Of Common Law Legal Systems. Article, Tyler Q. Dahl.

Farrand, B. (2017). Bold and newly Independent, or Isolated and Cast Adrift? The Implications of Brexit for Intellectual Property Law and Policy. Vol. 55, Issue 6. Article, Wiley Blackwell.

Intellectual Property Office. (2019). Intellectual property and Brexit. Online, GOV.UK [Accessed on 17/11/2019. Available at: https://www.gov.uk/guidance/intellectual-property-and-brexit].

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Kanesarajah, V. (2008). The taste of ripe strawberries: representing non-visual trademarks.

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Marshall, J. (2019). Fast-tracked legislation. Online, Institute For Government. [Accessed on 15/11/2019. Available at: https://www.instituteforgovernment.org.uk/explainers/fast-trackedlegislation].

Parliament. (N.D.). How does a bill become a law?. Online, www.parliament.uk[Accessed on 14/11/2019. Available at: https://www.parliament.uk/about/how/laws/passage-bill/lords/lrds-royalassent/].

Singfield, P. and Warren, R. (2017). Passing Off Pitfalls. Article. Intellectual Property Magazine.

UK Public General Acts. (1945). Law Reform (Contributory Negligence) Act 1945. Online, legislation.gov.uk [Accessed on 17/11/2019. Available at: http://www.legislation.gov.uk/ukpga/Geo6/8-9/28/contents].

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World Intellectual Property Organisation [WIPO]. (2019). What is Intellectual Property. Switzerland, WIPO.

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[1] "Quia Timet" is Latin for, "because one fears".