Brands Update. March 2015

DESIGNS: Old new means of fighting against patent trolls

The most recent court practice in disputes with bad faith owners of design patents is not setting in favor of the latter. Now bona fide rights holders and importers have an additional powerful legal tool for fighting against ‘patent trolls’. Such court practice may have a positive effect on further practices of and approaches to combating this unfair practice.

Background

In 2013-1014, some individuals obtained design patents for trivial designs of rubber gloves, household scrapers, and clothes-pegs. Later IP rights in the designs were assigned to a Chinese company, which, in its turn, recorded the designs with the Customs Register of IP Rights.

At the end of 2014, a Ukrainian company (the "Claimant") imported household goods, including, inter alia, rubber gloves, clothes-pegs, and household scrapers. Customs clearance of the shipment was suspended due to an alleged infringement of IP rights. Further, the infringement of IP rights in the designs was confirmed by an expert opinion. As a result, customs officers executed a protocol on violation of customs regulations as set out in Section 476 of the Customs Code of Ukraine (“Movement of Goods Infringing IP Rights Across the Customs Border”), and issued a refusal to perform customs clearance of the goods.

The Claimant challenged the refusal to the administrative court. Having considered the case, the court satisfied the claim. The court agreed with the Claimant’s arguments that the latter enjoys the prior user rights (Section 22 of the Law of Ukraine "On Protection of Designs"). In particular, the court stated that the design owner's IP rights are not infringed, and the decision on the suspension of customs clearance is unlawful. In particular, the court pointed out that (i) applications for design patent were filed in 2013-2014; and (ii) the Claimant has been importing the respective goods since 2007 according to the customs declarations, that is long before the dates of filing applications for the underlying design patents.

Likely impact

The discussed decision is of significant importance as it may have a substantial influence on further practice of combating against bad faith registrations of designs and discourage such registrations. In particular, it may have the following potential consequences:

• There will be no ultimate need to seek invalidation of every offensive design patent through the court, as well as cancelation of its recordation with the Customs Register of IP Rights. This is even more important in the light of the fact that invalidation of a certain design patent does not usually preclude a further registration of similar design by ‘patent trolls’ (e.g. the situation with design patents for hanger where the offensive patent is obtained for the third time, despite invalidation of the previous two). Notably, usually the consideration of cases on invalidation of design patents, including the time for forensic examination, lasts for about six months.
• Those importers that enjoy the prior user rights (Section 22 (1) of the Law of Ukraine "On Protection of Designs") can significantly save their costs and time for combating ‘patent trolls’. The fact of importation of goods prior to the date of filing an application for design patent can suffice to prove prior user rights. Undoubtedly, the fact of import should not be the only good evidence. It seems admissible to present other evidences proving both creation and existence of such rights. Importantly, there is a mandatory requirement to prove the fact of pre-filing use of a specific design on the territory of Ukraine.

Seeking invalidation of the offensive design patents due to a lack of novelty will remain a primary solution for those importers who do not have the prior user rights. Statutory limitations on transfer of the prior user rights – i.e. either together with the whole enterprise or as a part of a certain business – contribute to this.

It is obvious that popularity of such practice will raise, given the support by the state authorities (for example, Informational Letter No. 6885/1/1-15of 04 March 2015 issued by Mr. Vyacheslav Kyrylenko, the Vice-Prime Minister and Minister of Culture of Ukraine).

The discussed court practice and the position of state authorities may significantly discourage ‘patent trolls’ to obtain design patents for ordinary (trivial) things, as their ‘target audience' (well-known foreign manufacturers, their distributors and retailers) should not have problems with proving the fact of use of the relevant designs in good faith before design patent filing date.

COPYRIGHT: For rights holders to note

The judgments of the commercial courts rendered in February 2015 regarding copyright infringement of intellectual property rights in both the "Masha and Medved" (SK: to be translated as “Masha and the Bear”) cartoon and its characters make one more contribution to the law enforcement practice for settling similar disputes. The rights holders ought to more thoroughly prepare for filing the claim, which is confirmed by the below mentioned judgments of the court:

• Statutory damages below the statutory minimum. The Kyiv Commercial Court satisfied a claim in part and ordered to recover statutory damages for copyright infringement in the amount of UAH 121 (about EUR 4). Notably the adjudicated amount is significantly lower than the statutory minimum (SK: 10 minimum statutory salaries, i.e. about EUR 400) as stipulated by the Law of Ukraine "On Copyright and Related Rights". The court found that general principles of civil law (fairness, reasonableness and good faith) constitute a good reason for awarding such amount. Moreover, the court also took into account the official explanations of the High Commercial Court of Ukraine. According to the explanations, in determining the amount of statutory damages the court should take into account the duration of the infringement and its volume (single or multiple use of the copyright); the estimated amount of damages of an aggrieved party; the amount of profit gained due to the infringement; a number of aggrieved parties; the respondent's intent; previous infringements (if any) of the claimant’s IP rights by the respondent; and the ability to restore the rights of the claimant and efforts to be used. As far as we are aware, the claimant appealed the decision. The final decision in the dispute will be discussed in one   of  our next issues of the Brands Update. In any case, this decision confirms the need of more thorough substantiation of  the amount of statutory damages in case of copyright infringement.

• Admissible evidences of goods sale.The High Commercial Court of Ukraine upheld the rulings of the lower courts and rejected a claim of the rights holder against a private entrepreneur on the recovery of statutory damages for copyright infringement. The court agreed that there are no good evidences that could prove the fact of purchase of goods containing the copyright infringement (unlawful exploitation of animated characters). The court pointed out that the provided delivery note cannot be regarded as a payment document within the meaning of the Law of Ukraine "On the Application of Payment Transactions Recorders in the Sphere of Trade, Public Catering and Services". Moreover, the delivery note lacks details of the respondent, including its seal. Therefore, the court came to the conclusion that the provided delivery note is not sufficient to prove the fact of sale of the goods by the respondent.

For more information, please contact Oleksandr Padalka or Oleg Klymchuk, or e-mail us at Brand-protection-team@sk.ua.