Intellectual Property update breakfast seminars

Shepherd and Wedderburn invites you to attend one of our upcoming Intellectual Property update breakfast seminars at which we shall provide you with a review and commentary upon the most important developments in intellectual property law in the last year, accompanied of course by a bacon roll and coffee. The details of the seminars are as follows:

• 13th May 2008 Glasgow – The Lighthouse, 11 Mitchell Lane, Glasgow
• 21st May 2008 Edinburgh – Sheraton Grand Hotel & Spa, 1 Festival Square, Edinburgh
• 3rd June 2008 London – Shepherd and Wedderburn, Condor House, 10 St Paul's Churchyard, London
• 24th June 2008 Aberdeen – Ardoe House Hotel & Spa, South Deeside Road, Blairs, Aberdeen

All of the seminars will run from 8:30am to 10:30am.

Please note the original date advertised for the Aberdeen seminar was Thursday 8th May.  Due to unforeseen circumstances this date was cancelled and rescheduled to Tuesday 24th June.

For more details and to sign up to attend any of the seminars please visit our web site at www.shepwedd.co.uk.

07 May 2008

The value of format-shifting to the UK music industry: The music industry hits back at Gower

The UK market works on a principle that has served it well: "if it's worth copying, it's worth protecting". However, with the technological metamorphosis of the music industry, which has seen a shift of power from producers to consumers, this principle is being challenged.

The 2006 Gowers Review of Intellectual Property recommended a private copying exemption to copyright infringement for "format-shifting" – such as ripping CDs (for example copying music from a CD to a home computer) or moving your music collection to your iPod. This exception would be without compensation to rights-holders. But the UK music industry, as represented by the Music Business Group (MBG), has now hit back in its response to the UK-Intellectual Property Office ("UK IPO") consultation on implementing the Gowers Review, by seeking redress for this loss in value by imposing a copyright licence.

At present, much to the surprise of the general public, the practice of format-shifting is actually illegal. This is all set to change. One of the most contentious copyright proposals recommended in the Gowers Review is to allow format-shifting, provided that:

• it is purely for personal use;
• it is for the purpose of allowing the playback of a copyright work on another device;
• only one copy is made; and
• there is no distribution of copies to anyone else, such as P2P file sharing.

The UK IPO published a consultation paper that echoed the Gowers proposal, which closed on 8 April 2008. The MBG response calls for the licensing of private offline copying in order to create a new revenue stream for rights-holders. Licences would be negotiated between rights-holders and those who manufacture and distribute devices for making copies of music, such as MP3 players.

But how can the MGB justify a licence fee for consumers making a single copy from a lawfully owned copy for personal use? Their response is very much grounded in the rhetoric of "value" to rights-holders. The MBG states that "enormous value is derived by those companies who enable consumers to copy. UK creators and rights owners are legally entitled to share in this value (of the transferability of music), but are currently excluded from the value chain".

The MGB states that a system of compensation would not leave the UK at odds with the majority of EU countries. There the "format-shifting" exception is counter-balanced by a levy on the makers of storage devices and blank CDs, where the proceeds are routed back ultimately to copyright owners via their collecting societies. The EU copyright levy systems are themselves the subject of heavy criticism due to a lack of uniformity and their arbitrary nature. Thus the EC is currently investigating the levy system and if it should be introduced on a harmonised Community-wide basis.

Article 5 of the Copyright Directive (2001/29/EC) requires that fair compensation be provided in respect of private-copying exceptions. However, the UK IPO's opinion is that the proposed exception is very narrow and presents no obligation under the Directive on the consumer to pay fair compensation. They also say that rights-holders could still protect their assets by incorporating Digital Rights Management technologies (DRM) into their works and set sales prices at higher levels to reflect the ability to copy conferred by the new exception.

It is difficult to see how the MBG's proposed licence system will actually operate on a fair basis. The industry gets paid once for the sale of a lawful copy and possibly further by rights-holders receiving additional payments through DRMs – and now they want a second bite of the same apple via a copyright licence fee. It is this form of "double payment" that has raised concerns in the EC consultation.

The Government will be faced with weighing up the respective interests of consumers and the music industry when considering what action to take, if any, following on from the UK IPO consultation. Music fans deserve legal clarity on this area as well as the freedom to enjoy music they have legitimately obtained, but this must be balanced against ensuring that this will not hinder the creative industries by failing to provide it with adequate protection. In considering this issue it is suggested that the Government will also need to ensure that an education programme accompanies any reforms, so that consumers do not go beyond the permitted limits of copying.

07 May 2008

Trade Mark Trolls

According to a recent report by a BBC undercover journalist, a "trade mark troll" has been registering the names of juice bars in Scotland as trade marks and attempting to hold the owners to ransom.

A trade mark is a sign or logo that can be used as a marketing tool to distinguish your goods or services from those of a competitor. A trade mark can be words or pictures or a combination of both. A trade mark helps the holder to build up a strong brand like "Coca Cola" for example. A trade mark troll is someone, often a company, who registers a trade mark or trade name in respect of particular goods or services. This person then obtains a monopoly right to use that name in connection with those goods or services in the relevant territory such as the UK. Trade marks are territorial and protection can also be obtained outwith the UK. The troll then tends to approach the unsuspecting owner of the related goods or services and demand an upfront sum to transfer or license the registered trade mark to that party.

According to the BBC report, "Juiceling" in Glasgow and "Juiced Up" in Edinburgh were among a number of juice bar businesses contacted by a company claiming it owned the trade mark to their name/brand. The trade mark troll threatened court action if they did not pay up. This undoubtedly was a big concern for the companies being targeted and caused a significant amount of anxiety. The owner of Juiceling apparently said "It felt like I had the carpet swiped from under me and that I was effectively being robbed by this company".

However there are things that can be done to prevent trade mark trolls. Assuming the various juice bars had been trading for a period, they would have built up goodwill in their brands and would have unregistered trade mark rights. A trade mark is not valuable unless there are goods or services associated with it so if the registered trade mark owner were not trading the brand would not be valuable to them.

The juice bars may be able to oppose the trade mark applications on the basis of these earlier unregistered rights. They may also be able to oppose the trade mark application on the grounds that the application was made in bad faith. The existing businesses may also be able to raise an action for passing off.

The relevant trade mark legislation provides for the possibility of someone having an earlier unregistered trade mark so even if an application goes through unopposed, you may still be able to continue using your unregistered mark without challenge on the basis of your earlier right in a particular locality.

If you are targeted in such a fashion, the best thing to do is to check the UK trade mark registry to see if the person claiming to own the trade mark actually does. If they do, do not panic and do not hand over any money without speaking first to an IP lawyer or similar advisor. The best advice if you are building up a brand nonetheless remains that you should seek registered protection and the costs of doing so are not prohibitively expensive.

Please contact Paul Carlyle or Joanna Boag-Thomson if you would like further information.

07 May 2008

Secondary copyright infringement – a reassuring confirmation

Directive 2001/29/EC (the Copyright Directive) provides for the harmonisation of certain aspects of copyright. The UK's implementing Regulations [1] came into force on 31 October 2003, amending the Copyright, Designs and Patents Act 1988 (CDPA).

At the time, the CDPA already provided for rights to prevent copying and distribution. However consideration of the scope of the wording of the Copyright Directive is of course relevant to the UK courts' implementation of the CDPA. The April 2008 case of Peek & Cloppenburg KG v Cassina SpA [2] provides such an opportunity, in this case in relation to the scope of "distribution" as a form of copyright infringement.

Peek operated clothing shops throughout Germany, and placed an armchair in a display window which had been held to be a copy of chairs in which Cassina held a licence of copyright. The offending chairs were manufactured without Cassina’s consent by an undertaking in Italy. At the time, Italian copyright law did not protect such furniture designs. Cassina therefore raised an action against Peek in Germany to cease the display and pay damages, based on its "distribution" in Germany.

The German court referred to the European Court of Justice (ECJ) the question of whether there was distribution to the public within the meaning of Article 4(1) of the Copyright Directive which provides:

"Member States shall provide for authors, in respect of the original of their works or of copies thereof, the exclusive right to authorise or prohibit any form of distribution to the public by sale or otherwise."

The ECJ outlined that the Copyright Directive was designed to implement the World Intellectual Property Organisation (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty, which define distribution as a right to authorise making available to the public the original or copies of works through sale or "other transfer of ownership".

The ECJ confirmed therefore that the concept of distribution to the public, otherwise than through sale of the original of a work or a copy thereof, applies only where there is a transfer of the ownership of that object.

As a result, the ECJ confirmed that neither granting to the public the right to use reproductions of a work protected by copyright, nor exhibiting those reproductions to the public can constitute such a form of distribution.

This case provides a reassuring confirmation of the ECJ's views on "distribution" under the Copyright Directive.

[1] Copyright and Related Rights Regulations 2003 (SI 2003/2498)

[2] Case C 456/06

07 May 2008

Hard graft to hold on to Guitar Hero status

Guitar Hero, the hugely popular Playstation game, has had a turbulent time recently in respect of claims that it is infringing third parties' intellectual property rights.

The most significant challenge has come from a reasonably surprising source; Gibson Guitar Corp, producers of the iconic "Les Paul". Gibson has accused Activision, the makers of Guitar Hero, of infringing a patent granted in favour of Gibson in 1999. The patent in question relates to a system and method that enables the generation and control of simulated musical performances. The system featured the use of a musical instrument, a 3D headset with stereo speakers and a pre-recorded concert.

The reason that this challenge may have come as somewhat of a surprise to Activision is that Gibson are already a major partner in the Guitar Hero product. The controller for the game itself is modelled upon the shape of the "Les Paul" guitar favoured by such real life guitar heroes as Jimmy Page of Led Zeppelin and Slash of Guns & Roses. Gibson has licensed to Activision the right to use the "Les Paul" shape, which is protected by trade mark. Activision has raised a counter action against Gibson to declare the patent invalid.

To further occupy Actvision's legal counsel, Guitar Hero has also been the subject of a separate dispute this time relating to use of one of the songs in the game. This has raised some interesting issues regarding the interplay of copyright infringement, imitation and trade marks under US legislation.

A band called "The Romantics" have raised a claim against Activision and others not for copyright infringement but because they believe the cover version used in Guitar Hero is too similar to the original recording of the song "What I Like About You" and therefore infringes other rights. Activision had permission to record a cover version but the Romantics claim that by recording a "sound-alike imitation" it had infringed the Romantics' rights of publicity relating to the band's "identity, persona, and distinctive sound" and had also infringed a trade mark that the band had in respect of that identity, persona, name and distinctive sound in relation to which the band were entitled to protection under the US Langham Act.

There are certainly some interesting arguments contained in the Romantics' claims but commentators suggest that the band may find this a difficult argument to win. If the band can be successful it will no doubt reap extensive financial rewards and it is perhaps no surprise that both these claims and in particular Gibson's patent infringement claim have arisen only now that Guitar Hero, three years after it was first launched, has proven itself a massive success, generating over $1 billion in sales.

07 May 2008

Lucasfilm lays claim to the Storm Trooper legions

Imagine the scene:  You are in a distinctly non-space age courtroom in London. The judge and lawyers are in robes and wigs...and standing in the midst of the court is a 6-foot tall, helmeted warrior of the evil Galactic Empire, familiar to anyone who has seen a Star Wars film.

No, this is not a new method of dispensing justice but a dispute about what Lucasfilm attorney Michael Bloch called "one of the most iconic images in modern culture."
Lucasfilm won a $20 million judgment against Andrew Ainsworth, a prop designer, in a California court in 2006, and is seeking to have it enforced here.

Mr Ainsworth sculpted the Stormtrooper helmets for the first "Star Wars" movie in 1977. London-based Ainsworth sells replicas of the helmets and armour on his website and says that they are made from the original moulds. They sell for up to £1,000.

Lucasfilm claims violation of trade marks and copyright but Ainsworth is countersuing, claiming that he owns the copyright. He is seeking to share the merchandising revenue from the six "Star Wars" films, estimated at a massive £12 billion by his lawyers. Lucasfilm claims that the design of the Stormtroopers was created by Lucas and his artistic team, and the designs were already in place when Mr Ainsworth was engaged to create the helmets.

Whatever the facts and outcome, the case is a timely reminder to make sure that clear contracts are in place with designers and contractors to avoid protracted court proceedings as a well drafted contract will be clear about ownership of intellectual property and, just as importantly, ownership, use or destruction of moulds and tooling created by contractors.

07 May 2008