Two recent CJEU decisions and the fuzzy border between trademarks and designs

While no definite trend toward the approximation of trademark and design law has so far emerged in European case law, two recent decisions of the CJEU relating to designs show how fuzzy the border between trademark and design rights may be.

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In Doceram (C-395/16, ECLI:EU:C:2018:172), the CJEU had to interpret the concept of designs subsisting “in features of appearance of a product which are solely dictated by its technical function”, which are excluded from protection under Article 8(1) of Regulation 6/2002 on Community designs (RCD). The Court was asked, in particular, to state whether such exclusion applies even when alternative designs exist which can perform the same technical function, so that the features of the design cannot be considered indispensable for performing said  function.

It is a classic dilemma. As AG Henrik Saugmandsgaard Øe noted in his opinion, in Europe the Courts and legal scholars have given both negative and positive answers.

The position whereby Article 8(1) RCD and the corresponding national provisions only apply when copying the design is the sole way to achieve the technical result is commonly referred to as the “mandatory” (or “multiplicity of forms”) theory. The opinion whereby, to the opposite, it does not matter whether or not alternative designs can fulfil the same function, insofar as the function in question is the sole driver of the shape, is usually referred to as the “causative theory”. In the past the EUIPO has ruled in line with the first theory [also supported by AG Colomer in the opinion submitted in Philips v. Remington (paragraph 34); and followed by the EU General Court in Industrias Francisco Ivars (see paragraph 22)], which is much more favorable to design right holders. Recently it seems to have veered towards the latter. As far as Italy is concerned, there is probably greater support for the “mandatory theory”.

In Doceram the Court (and before the Court AG Saugmandsgaard Øe) endorsed, with little hesitation, the “causative” theory:

if the existence of alternative designs fulfilling the same function as that of the product concerned was sufficient in itself to exclude the application of Article 8(1) of Regulation No 6/2002”, it said,

then

“a single economic operator would be able to obtain several registrations as a Community design of different possible forms of a product incorporating features of appearance of that product which are exclusively dictated by its technical function” (paragraph 30).

 That, added the Court,

“would enable such an operator to benefit, with regard to such a product, from exclusive protection which is, in practice, equivalent to that offered by a patent, but without being subject to the conditions applicable for obtaining the latter, which would prevent competitors offering a product incorporating certain functional features or limit the possible technical solutions, thereby depriving Article 8(1) of its full effectiveness” (ibidem).

By stating this, the CJEU de facto extended to designs the principles it affirmed with regard to trademarks “consisting exclusively of the shape of goods which is necessary to obtain a technical result”.

As is well known, in Philips v. Remington the CJEU stated that the relevant impediment to registration [now contained in Article 4(1)(e)(ii) of Directive 2015/2436] “cannot be overcome by establishing that there are other shapes which allow the same technical result to be obtained: which is, mutatis mutandis, what the CJEU said in Doceram.

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Interestingly, another recent CJEU decision ended up extending the interpretation of provisions concerning trademarks to provisions concerning designs.

In Nintendo v. Bigben (C‑24/16 and C‑25/16, ECLI:EU:C:2017:724), the Court had (inter alia) to issue a preliminary ruling with regard to Article 20(c) RCD, which prevents design right holders from exercising their rights in respect of “acts of reproduction for the purpose of making citations or of teaching, provided that such acts are compatible with fair trade practice and do not unduly prejudice the normal exploitation of the design, and that mention is made of the source”.

The dispute in the main proceedings concerned the use of images of goods corresponding to EU registered designs in the advertisement of goods intended to be used as accessories to the above goods corresponding to EU registered designs. As in the following picture, which shows Nintendo Wii remote controllers, registered as EU designs, together with the charger for such controllers produced and sold by the defendant Bigben.

bigben

In addressing the issue, the Court said that Article 20(c) RCD, insofar as it refers to “acts … compatible  to fair trade practice”, can be interpreted in the light of the case law regarding uses of trademarks made in accordance with “honest practices in industrial or commercial matters” under Article 6(1) of Directive 89/104 [now Article 14(2) of Directive 2015/2436]. And it explicitly applied to designs – again: mutatis mutandis – the principles asserted in Gillette (17 March 2005, C-228/03, ECLI:EU:C:2005:177) with respect to the limitation of trademark rights:

an act of reproduction of a protected design for the purpose of making citations or of teaching is not compatible with fair trade practice … where it is done in such a manner that it gives the impression that there is a commercial connection between the third party and the holder of the rights conferred by those designs, or where the third party, who wishes to rely on that limitation in the course of selling goods that are used jointly with goods corresponding to the protected designs, infringes the rights conferred on the holder of the design protected by Article 19 of Regulation No 6/2002, or where that third party takes unfair advantage of the holder’s commercial repute” (paragraph 80).

Riccardo Perotti

CJEU delivers its judgement in the Liffers case: there is no bar in the Enforcement Directive on claiming compensation for both moral and material damage

By its 17 March 2016 decision (here), the CJEU cleared the doubts raised by the Spanish Tribunal Supremo as to an IP holder’s right to be compensated, in accordance with Article 13(1) of the Enforcement Directive (Directive 2004/48), for both material damage on the basis of the hypothetical royalty criteria laid down by subparagraph 2, heading (a), of said article, and moral damage under heading (b) of the same subparagraph 2.

The Tribunal Supremo’s doubts arose from the wording of Article 13(1), whose subparagraphs 1 and 2 read as follows (emphasis and numbers added):

“[1] Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.

[2] When the judicial authorities set the damages:

(a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;

or

(b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question”.

Indeed, the expressions “or and “as an alternative to (a)” contained in subparagraph 2 of Article 13(1) may well be read as dividing the criteria for setting damages provided by headings (a) and (b), in such a way that the two cannot be invoked together by IP holders (nor merged by the judicial authorities). The CJEU did not stop at a literal interpretation of Article 13(1), though, but looked at the article “in light of the objectives” pursued, in its view, by the Enforcement Directive.

From this perspective, the Court said that subparagraph 1 of Article 13(1) was aimed at ensuring full compensation for the “actual prejudice suffered” by right-holders, which means compensation for both material and moral prejudice (see paragraph 25 of the ECJ decision).

As the “hypothetical royalty” criterion provided by heading (b) of Article 13(1), subparagraph 2, does not take into account moral prejudice, each time an IP holder suffered moral prejudice in addition to material prejudice, application of this criterion alone would prevent full compensation being awarded. This outcome is inconsistent with the goal and the very rationale of said provision.

On these grounds the Court of Justice, upholding the opinion of Advocate General Whatelet (here), answered the preliminary questions raised by the Tribunal Supremo by stating that Article 13(1) must be interpreted as permitting a party injured by an IP infringement, who claims compensation for his material damage as calculated on the basis of the “hypothetical royalty”, to also claim compensation for the moral prejudice he/she has suffered.

It may be noted that, from a strictly Italian standpoint, the CJEU decision does not really add anything new, as the national provisions into which Article 13(1) of the Enforcement Directive has been transposed do not contain any reference to an alternative between compensation for moral prejudice and for material prejudice. Article 158(3) of Italian Copyright Law expressly states that moral damages can be recovered in addition to material damages calculated on the basis of the “hypothetical royalty” criterion. And, albeit less explicitly, but nevertheless clearly, Article 125 of the Italian IP Code, concerning IP rights other than copyright, does the same.

Riccardo Perotti

CJEU, 17 March 2016, C-99/15, Liffers