13 from 2013: cases of the year


13 from 2013: cases of the year

Courts across the world have been busy dealing with some high-profile intellectual property disputes this year. WIPR picks 13 of the most interesting and examines their implications.

Hands off my genes

Four years after a group of ‘gene’ patents were challenged in court, the US Supreme Court had the final say against Myriad Genetics. The patents, directed to mutations in the BRCA1 and BRCA2 human genes, allow the US biotech company to test for a risk of breast and ovarian cancer. But various groups, led by the American Civil Liberties Union, fought to invalidate the patents, even campaigning with messages such as ‘hands off my genes’.

In June, the Supreme Court held unanimously that isolated human DNA is patent-ineligible, wiping out some of Myriad’s claims. But the court said in some circumstances composition claims for complementary DNA (cDNA), which is synthesised from messenger RNA, can be patented.

Myriad is still enforcing some patents covering its tests and has already sued two new entrants to the market. Mercedes Meyer, partner at Drinker Biddle & Reath LLP, says Myriad is another case that makes “Swiss cheese” out of what is patent-eligible subject matter in the US. “The case creates another gaping hole for what is patent eligible in the area of biotechnology compositions. Despite the court’s attempt to restrict its decision to cDNA, it will likely impact additional technology areas.” 

Trademarks, keywords and flowers

This case pitted flower supplier Interflora against British retailer Marks & Spencer (M&S), which had bought Google AdWords matching Interflora’s trademarks. The keywords produced search results for M&S’ flower delivery service. 

"A central point was that the adverts did not allow the 'reasonably well informed and resonably attentive Internet users' to discern who owned them."

After an initial ruling and a referral to the Court of Justice of the EU, the England & Wales High Court found in May that M&S’s use of the keywords had infringed Interflora’s trademarks.

It took Mr Justice Arnold 326 paragraphs to settle the case, but a central point was that the adverts did not allow the “reasonably well-informed and reasonably attentive Internet users” to discern who owned them.

Ian Wood, partner at Charles Russell LLP, says the decision is of real commercial importance in the world of Internet trading and will affect many traders who, to attract customers who might be thinking of their competitor's products, use their competitor’s trademarks as keywords to attract custom. “It makes such practices much more difficult,” he says. “The fact that Interflora operates through a network of florists added to the likelihood of confusion,” he adds, “as it would not always be clear that M&S was not part of that network and was not economically connected with Interflora.”  

Amazon’s gTLD woes

Not a court case, but important nonetheless, Amazon’s struggles at ICANN provide an interesting taste of what is likely to come. Governments play a powerful role at ICANN, the non-profit organisation that manages the new generic top-level domain (gTLD) programme. Their role is so important that members of ICANN’s Governmental Advisory Committee (GAC) can, in effect, strike down gTLD applications they object to.

Several applications have incurred the GAC’s wrath, but none more controversially than .amazon, one of scores the online retailer applied for. From within the GAC, some South American governments opposed .amazon because it shares the name as the Amazon region, an area covering countries including Brazil and Peru. But the term ‘Amazon’ was not on ICANN’s list of geographic names which, if sought by prospective applicants, required letters of non-objection from the relevant government.

This didn’t matter to the GAC, which filed a consensus objection to .amazon in July, provoking an angry and lengthy (316 pages) formal response from Amazon. ICANN’s delay at making a final decision means Amazon “may still have a shot” at maintaining its application, says Brian Winterfeldt, partner at Katten Muchin Rosenman LLP. “The mere fact the decision is taking this long is evidence of that.” But, he says, IP owners will be worried about the setting of a worrying precedent of governments unilaterally striking down legitimate trademark rights. 

Millions spared ‘infringer’ tag

For now, Internet users can breathe a sigh of relief, after the UK Supreme Court confirmed in April that they do not require permission to browse and view copyrighted material on web pages. The case centred on whether customers of Meltwater—which indexes news articles and provides search reports via email and on its website—should pay a licence to view a web page or a cached version of it. Lower courts said a licence is required, but the Supreme Court found conclusively that end users merely reading copyrighted articles are exempted by Article 5.1 of the 2001 Copyright in the Information Society Directive.

For clarity, the court asked the CJEU whether the findings satisfy Article 5.1. The CJEU is expected to follow the Supreme Court, says Joel Smith, partner at Herbert Smith Freehills LLP, as the opposite outcome would “make infringers of many millions of ordinary users across the EU in browsing the Internet”. He adds: “Copyright owners will take some comfort that any more active steps taken (without a licence) in printing, downloading or storing material may not be covered by the temporary copying exemption, and therefore may still infringe.”

Hefty Chinese fine for Castel

In July, French wine company Castel was fined $5 million for infringing a Chinese rival’s trademark. Castel paid Shanghai-based wine company Shanghai Banti Wine for using ‘Ka Si Te.’, a transliteration of ‘Castel’. Making use of China’s first-come-first-served trademark system, the Chinese company’s owner registered the trademark in 1998. After Castel was sued and held liable for infringement, the Zhejiang Provincial High Court confirmed the $5 million damages award, which was based on Castel’s sales.

It is thought to be one of the largest compensation rulings seen in an IP case in China. Gloria Wu, partner at Chinese law Kangxin, says there are several lessons for foreign companies to learn, most notably “file your trademark in China as early as possible”. She adds: “File the Chinese equivalent of your original English mark or mark in other languages as early as possible, since Chinese transliterations are not considered similar to the English version unless the relevant public already recognises the two as closely connected.”

Finally, she says, “When there is a trademark dispute, obtain accurate risk evaluation about trademark infringement before actually distributing goods. It seems Castel might have underestimated the risk of damages in litigation in China.” 

Broadcasters triumph over TVCatchup

A battle between business models old and new. Internet streaming companies must obtain broadcasters’ permission to re-transmit their copyrighted works to the public, the CJEU ruled in March. A group of British commercial TV broadcasters, including ITV and Channel 4, had sued TVCatchup (TVC), which reproduces free-to-air TV programmes and films to computers and smartphones. The claimants sued for breach of copyright in their films and broadcasts, saying UK law prevents such a communication of works to the public.

The case was referred by the England & Wales High Court, as it was unsure whether retransmitting works included in a TV broadcast was a “communication to the public” under EU law. The CJEU said ‘yes’, one of its reasonings being that because retransmitting TV broadcasts over the Internet uses a specific technical means that is different from the original communication’s, the retransmission must be considered a communication.

“The decision may give fresh impetus to broadcasters to pursue any site or service they believe to be infringing their copyright or using their content in an unlicensed, illegal capacity,” says John Davidson-Kelly, partner at law firm Osborne Clarke. “As for streaming services, they will have to ensure their licensing arrangements are adequate and pay any corresponding licence fees or risk the wrath of the broadcasters.”

Unitary Patent survives collapse

Spain and Italy were aggrieved with the Unitary Patent (UP) deal, but they failed in their attempts to derail the project in April. The CJEU dismissed a challenge to a 2011 decision that allowed the EU’s 25 remaining states to use an “enhanced cooperation” procedure to negotiate the UP without Spain and Italy. Before that decision, which was issued by the European Council, Spain and Italy had refused to participate in UP negotiations, complaining that UP applications would not be translated into their languages.

The UP’s official languages—English, French and German—are part of the package approved in December 2012. Spain and Italy had five arguments before the CJEU, including that there was a “misuse of powers” when their language objections were ignored, but all were rejected. If the court had ruled otherwise, the system would have collapsed, says Raimondo Coletti, patent attorney at IP management specialist CPA Global.

Looking ahead, the UP is unlikely to be ready for early 2015—the targeted launch date—while “with national and European patents continuing to be available and a Unified Patent Court opt-out clause lasting at least seven years, the UP will see a slow and cautious start in co-existence with current systems”. 

NPE leaves empty-handed

Several cases could have provided the blueprint for this entry, but Kaspersky Lab’s fight against the patent trolls was particularly feisty. The IT security company claimed victory in its patent battle with Lodsys, a non-practising entity (NPE), after settling accusations of patent infringement for nothing just days before a trial was set to start.

Lodsys owns patents that it claimed cover in-app purchases for Google and Apple apps. According to Kaspersky, Lodsys also claimed the patents covered many of Kaspersky’s services, such as standard notifications about new security updates, assistance given to users in downloading and installing security updates and cloud technologies.

Fifty-five defendants, including Samsung, Symantec and Hewlett Packard, had settled with Lodsys in earlier proceedings, but with a trial due to start on October 7, Lodsys agreed to dismiss the case with no settlement fee on September 30.

The case demonstrates a good response to “low budget trolls looking for quick settlements or trolls looking for settlements based solely on the cost of litigation”, says Chris Broderick, partner at Orrick, Herrington & Sutcliffe LLP. There are many strategies for dealing with NPEs, he adds, but “the proper response to defending against patent trolls depends upon the type of troll that is attacking”.

Cadbury loses purple trademark

In a twist in the tale, the UK Court of Appeal upheld Nestlé’s opposition to chocolate maker Cadbury’s purple trademark in October, overturning the UK’s Intellectual Property Office and High Court. The decision clarifies the requirements for colour marks, requiring more specificity from applicants on elements such as the mark’s size and coverage.

Sir John Mummery, writing the judgment for the court, found that the mark “lacks the required clarity, precision, self-containment, durability and objectivity to qualify for registration”, and that to allow it “would offend against the principle of certainty”.

In a separate decision but conjoined appeal, the UK Court of Appeal upheld the cancellation of Mattel’s UK registration for a Scrabble tile. The cases’ connection lies in the interpretation of Article 2 of the Trade Marks Directive (2008/95/EC). If these decisions stand, says Roland Mallinson, partner at Taylor Wessing LLP, applicants should take even greater care in the wording of the text box ‘Mark Description/Limitation’ on a UK application form (and its equivalent for Community trademarks). “Certainly for colour marks, the consequences are not confined to new applications.

However, it is clear that any existing colour mark registration that uses the ‘predominant’ wording would still need to be considered separately on its merits,” he says. 

Novartis hits the wall in India

In 1998, Novartis tried to patent an updated version of its leukaemia drug Glivec in India. The application covered an improved beta crystalline version of imatinib mesylate (the drug’s active compound) and claimed the new formulation was more soluble, more absorbent and had greater thermodynamic stability than the previous version.

In 2005, India’s patent act was amended to include Section 3(d), which states that the mere discovery of a new form of a known substance is not patentable unless it improves the “therapeutic efficacy” of the substance.

A year later, Novartis’s application was rejected for failing to meet Section 3(d). On appeal, the Supreme Court was asked to decide whether the product qualifies as a ‘new product’, but it said no in April. Pravin Anand, managing partner at law firm Anand and Anand, says pharmaceutical companies are unhappy with the outcome.

Jason Rutt, head of patents at law firm Rouse, adds: “Pharmaceutical companies operate in a global market; they expect countries to have a harmonised view on what is patentable. The Glivec patent had been upheld in most major territories, so the Indian rejection of the application crystallised in the minds of innovator companies the belief that Indian patent law was skewed against them and encouraged the view that Indian patent and regulatory law isn’t TRIPS-compliant.”

Apple fights back in Brazil

Brazil’s IP office, the INPI, dealt Apple a blow in February, rejecting its ‘iPhone’ trademark application for selling smartphones. Apple has been selling its iPhone in Brazil since 2007, but local company Gradiente had applied to register the mark ‘Gradiente iphone’ in 2000—six years before Apple’s application. Gradiente’s application was approved in 2008.

After Apple’s registration was rejected, the company tried to cancel Gradiente’s mark. In September, a Brazilian court partially upheld that request, finding that Gradiente does not have exclusive rights to the ‘iPhone’ mark in Brazil. Unless the ruling is reversed on appeal, says Paulo Parente Marques Mendes, partner at law firm Di Blasi Parente & Associados, the ruling is good news for Apple, but he adds: “The ultimate lesson is that trademark owners should always monitor their marks.”

Elsewhere in South America, the Mexican Supreme Court confirmed in March that that Apple cannot operate its ‘iPhone’ trademark for telecommunications services, owing to a local company’s ‘iFone’ trademark. But, in better news for Apple, the ruling does not restrict its ability to sell mobile phones in Mexico.  

Apple and Samsung keep rumbling

Neither Apple nor Samsung has scored a victory strong enough to settle what is now a familiar patent dispute. Perhaps the most talked-about decision this year came in August, when the White House vetoed an International Trade Commission sales ban on Apple products held to infringe a standards-essential patent (SEP) owned by Samsung.

It was the first such veto since 1987, and raised some eyebrows about the US government protecting a US company.But the US trade representative said there were “substantial” concerns about the potential harms arising from the owners of SEPs, who have agreed to license them on fair reasonable and non-discriminatory terms, gaining “undue leverage”. 

"Neither Apple nor Samsung has scored a victory strong enough to settle what is now a familiar patent dispute."

Rodney Sweetland, partner at Duane Morris LLP, says neither Apple nor Samsung is in a substantially stronger litigation position at the end of 2013, but adds that the biggest development is yet to come, either this year or early next year. “This is a decision from the Federal Circuit on the availability of an injunction for Apple. If Apple can obtain a solid injunction on a key feature, then Samsung may have to seek an end to this world patent war on terms more favourable to Apple.”

Blame the bean

It was widely expected, but nonetheless emphatic. In May, the US Supreme Court decided unanimously in favour of agricultural company Monsanto in its patent battle against Indiana farmer Vernon Bowman. The court found that Bowman had infringed Monsanto’s patents covering a genetically modified soybean—sold as Roundup Ready—when he replanted a crop of modified seeds in breach of his licensing agreement with Monsanto.

Bowman had argued that because the seeds for replanting were bought from a grain elevator following a ‘first-authorised sale’ from farmers to the elevator, the patent rights had been exhausted.

The court rejected that argument, further explaining that “Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.”

Donald Zuhn, partner at McDonnell Boehnen Hulbert & Berghoff LLP, says of the case: “Because the court confirmed that the patent exhaustion doctrine applies to the actual article sold, and not subsequent recreations (new copies) of it, the decision favours companies marketing self-replicating technologies.”  

This article was first published on 01 November 2013 in World IP Review

Apple, Samsung, Interflora, Castel, TvCatchup, UP, NPEs, Cadbury, Novartis, Monsanto, Myriad,

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