News

THE THREE-DIMENSIONAL TRADEMARK MARK ON NESPRESSO CAPSULES HAS BEEN DECLARED INVALID BECAUSE ITS SHAPE IS NECESSARY TO OBTAIN A TECHNICAL RESULT

01/06/2022

The Swiss Federal Court ruled that the three-dimensional trademark on Nespresso capsules is invalid. The shape of the capsules has been considered by the Swiss Court to be necessary to achieve a technical result.

 

The lengthy case that pitted the Swiss-based multinational against Ethical Coffee SA recently ended with a declaration of invalidity of the 3D trademark of the capsules containing the ground coffee of the well-known manufacturer controlled by Nestlé SA.

The dispute arose from Nestlé’s claim of infringement of the registered three-dimensional trademark against Ethical Coffee. The plaintiff company claimed that Ethical Coffee’s production and marketing of capsules compatible with Nespresso coffee machines constituted an infringement of the shape trademark. Nestlé had, in fact, registered the three-dimensional distinctive sign, first internally, with the Federal Institute of Intellectual Property (IPI) and, subsequently, also at European Union and international level.

For these reasons, in 2011 Nestlé start a provisional proceeding against Ethical Coffee, requesting an injunction to stop the production and sales conduct considered in violation of to the plaintiff’s intellectual property rights. The case, which had been protracted in time, also for reasons due to the bankruptcy of the defendant, was decided on the merits by the Cantonal Court of Vaud, rejecting the plaintiff’s claim. On the other hand, the court of first instance upheld the counterclaim brought by Ethical Coffee and declared the invalidity of the claim brought by Nestlé. According to the judge, the title in question had become a public domain trademark.

The unsuccessful party then appealed against this decision, but the court of second instance also declared the three-dimensional trademark invalid. The reasoning given by the Federal Court, however, emphasized a different aspect compared to the decision of the judge at first instance, focusing on the notion of form „causally and sufficiently to obtain the intended technical result„.

Pursuant to Art. 7 (1) (e) RMUE, it is not possible to register a trademark characterized only by the shape or other component of the goods which is necessary to solve a technical problem.

The underlying purpose of the European legislator’s provision is to prevent technical solutions that should instead be subject to patenting and thus subject to expiry of the limited period of protection conferred by the patent title from being protected by a potentially infinitely renewable protection, as is the case with trademarks.

In line with the Court of Justice of the European Union judgments CJEU, Koninklijke Philips Electronics NV v. Remington Consumer Products Ltd, June 18th 2002, C-299/99 and CJEU, Lego Juris A/S v. Mega Brands Inc, September 14th 2010, C-48/09, the decision of the Court of second instance holds that the shape is considered to be technically necessary if it is not possible for competitors to use different solutions to solve the same technical problem, which in this case is the compatibility of the capsules with Nespresso coffee machines.

Technical experts’ reports provided during the proceedings have in fact shown that there are various solutions on the market, but that they are worse in terms of production costs, insertion into Nespresso machines and quantity of coffee contained in the capsules.

In conclusion, it follows that the declaration of invalidity of the three-dimensional trademark in question was based on the consideration that the shape of the capsules is technically necessary to allow them to be inserted into a Nespresso coffee machine.

Alfredo Bergolo


 

THE EXISTENCE OF A SELECTIVE DISTRIBUTION NETWORK MAY, UNDER CERTAIN CIRCUMSTANCES, PRECLUDE THE APPLICATION OF THE PRINCIPLE OF EXHAUSTION OF THE TRADEMARK RIGHTS

25/05/2022

The owner of a luxury brand may oppose the resale of its products, even through online sites, by a reseller who is not part of the selective distribution network and who operates in a way that damages the prestige and reputation of the brand itself. This was affirmed by the Court of Milan in a case involving a well-known company of high fashion products operating in the luxury sector

 

With Order No. 2635/2022 of 28 February 2022, the Court of Milan confirmed, on appeal, the preliminary injunction with which the court had allowed the action brought by Chanel against a company outside its selective distribution network – Trilab s.r.l. – which resold, through e-commerce for hairdressers, perfumes and cosmetics of the well-known French maison.

In particular, the Judge held that there were ‚legitimate reasons‘ to prevent the exhaustion of trade mark rights, both from the point of view of the antitrust law compatibility of Chanel’s selective distribution contracts, and from the point of view of the prestige of the protected goods, which qualify as luxury goods.

It should be clarified that selective distribution is a system based on agreements between the supplier and the distributor, whereby the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to distributors selected based on specified criteria. The distributors undertake not to sell those goods or services to unauthorised resellers in the territory that the supplier has reserved for the system. This system is generally used for high-tech goods for which the buyer needs specific and qualified assistance or for luxury goods in order to protect the investments made by the owner in terms of brand prestige.

This sales system is in the abstract liable to prevent, restrict or distort the game of competition. According to Italian and Community case law, can be considered legitimate if: (i) it is limited to products of high technicality or luxury and prestige, in order to preserve their quality and ensure their proper use; (ii) the choice of authorised reseller is based on objective criteria; (iii) the limits imposed on free trade do not exceed what is necessary.

In the present case, the Court, after recognising the legitimacy of Chanel’s selective distribution network (since the clauses contained in the agreements were intended only to safeguard the prestige and high reputation of the brand), focused on the possibility of considering selective distribution a legitimate ground for exception to the principle of exhaustion, allowing the owner of the luxury brand to prevent the circulation of the goods marketed by a third party in violation of the clauses agreed with the authorised distributor.

The principle of exhaustion under Art. 5 of the CPI states that the exclusive rights granted to the owner are exhausted with the first marketing of the goods by the owner or with the owner’s consent unless there are ‚legitimate reasons‘ justifying the trademark owner’s opposition to the further marketing of its goods.

In Chanel’s view, Trilab marketed the Chanel-branded products outside the selective distribution network with serious prejudice to it because the way in which they were sold and offered for sale, by the characteristics they presented, were detrimental to the reputation of the maison.

These methods, contrary to Chanel’s quality standards, consisted in offering the products on an e-commerce site for hairdressers, with blurry images and with crowded content next to products of a different merchandise nature and with lower profile brands. The products were thus presented on the e-commerce site for hairdressers in contrast to the message of exclusivity and elitist luxury of haute perfumeries that Chanel intends to communicate.

The manner of sale described was also combined with the alteration of the original products through the removal of the identification codes: the alteration of the products constituted a further and different element capable of excluding the application of the principle of trademark exhaustion.

Chanel argued that the altered packaging not only compromises in the eyes of consumers the image of quality and prestige that distinguishes Chanel’s products, but also prevents them from identifying the genuineness of the products and their origin, thus frustrating the entire tracking system set up by Chanel as part of the controls necessary for the protection of the selective distribution network.

The panel therefore found all of Chanel’s arguments to be valid and therefore ordered an injunction, supported by a penalty, against the further marketing, offer for sale, promotion and advertising of Chanel-branded products on Trilab’s e-commerce website, as well as the publication of the operative part of the order on Trilab’s website.

The order under comment herein highlights that the selective distribution system must be viewed not only from the perspective of protection of the trademark owner, but also of the consumer who can trust the high-quality standards of the products distributed and the professionalism of the distributors.

Anna Colmegna


WHAT PROTECTION IS PROVIDED FOR SO-CALLED “ WELL-KNOWN” TRADEMARKS: THE GUCCI CASE

04/11/2021

Well-known trademarks enjoy an enhanced protection which goes beyond the mere risk of confusion between products. This has been affirmed by an interesting ruling of the Italian Supreme Court concerning the famous maison Gucci.

 

With decision no. 27217/2021, filed on October 7, 2021, the Italian Supreme Court upheld Gucci’s action requesting the invalidation for lack of novelty of the registration by a Chinese company of two similar trademarks and returned the case to the Court of Appeal. The latter, which had previously dealt with the matter, while acknowledging the similarity of the conflicting signs and the reputation of Gucci’s trademarks, had rejected the invalidity actions by limiting its analysis to the risk of confusion between the signs themselves. Based on that, the Court of Appeals of Florence had observed that the high reputation of a mark not only is irrelevant for the purposes of assessing the risk of confusion, but it represents an additional argument in support of lack of confusion instead. Accordingly, it is precisely the trademark’s reputation and its imprint in the minds of consumers that exclude the possibility that the latter may be misled, “since it cannot be held that the power of attraction of the earlier well-known trademark may be compromised by a later sign (of the infringer)” incapable of causing a risk of confusion in a public of careful and informed purchasers like those of Gucci’s products.

However, the Supreme Court noted on this point that lack of confusion is “totally irrelevant for the application of the discipline of well-known marks”. Indeed, well-known trademarks, unlike non-renowned marks, enjoy a special and enhanced protection provided for by Legislative Decree 30/2005, implementing EC Directive 89/104. Therefore, in order to exclude the novelty of the later sign pursuant to art. 12 letter. f) of the Decree and allow the owner of a well-known mark to prohibit third parties from using the sign pursuant to art. 20 letter. c) is not necessary that there is a risk of confusion in the relevant public. According to the Supreme Court, it is in fact enough that “the infringer may take unfair advantage from the distinctive character or the reputation of the earlier sign, or that the use of the sign without good reason by the infringer may damage the well-known mark”, thereby generating the so-called “dilution” with reference to distinctiveness and the so-called “corrosion” with reference to the reputation of the mark. On the other hand, the “unfair advantage”, also known as “parasitism”, refers not to the prejudice suffered by the owner of the earlier renowned mark, but rather to the unfair advantage gained by the owner of the infringing trademark. This is the case where the infringer, by placing himself “in the wake” of the well-known trademark, benefits from its reputation, its power of attraction and its prestige without de facto paying any monetary compensation. As for the public of consumers, the Court observed that it is irrelevant that those who usually purchase Gucci products may not be mistaken, as counterfeited products may be consciously chosen by a number of consumers not for their intrinsic decorative or material characteristics, but merely for their strong resemblance to the “famous” products, perhaps in order to “pass them off” as originals.

It will therefore be for the referring court, on the basis of what has been established by the Supreme Court, to determine whether the use of the later trademark lacks a just cause that allows to take unfair advantage and profit from the distinctive character or the reputation of the Gucci trademark and it is detrimental to the characteristics of such trademark.  This is definitely an important decision on the issue of famous brands and is in line with other previous decisions on the matter (see, for example, the L’Oréal ruling of June 18 2009, cited by the Supreme Court in the present decision).

Margherita Corrado


ARTIFICIAL INTELLIGENCE AND INDUSTRIAL PROPERTY LAW: GRANTED IN AUSTRALIA THE FIRST PATENT ‚INVENTED‘ BY A MACHINE

14/10/2021

With a groundbreaking decision of July 30, 2021 (available at https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca0879), the Federal Court of Australia has ruled – for the first time in the world – that an artificial intelligence system can be named as the inventor of a patented invention. As a result, the owner of the AI system can legitimately be named as the patent’s applicant and enjoy the exclusive rights arising from its registration.

 

The case

The dispute comes from a patent application filed by Dr. Stephen Thaler, developer and owner of an artificial intelligence system called „DABUS“, able to generate ideas by modifying the interconnections between different neural networks and to analyse the most critical consequences of such ideas. According to Thaler himself, DABUS developed entirely on its own the invention underlying the patent application, relating to a heterogeneous set of products and processes concerning containers, devices and methods for attracting enhanced attention using convex and concave fractal elements.

The patent application, filed by Dr. Thaler (among others) with the Australian Patent Office, did not name a natural person as the inventor, but „DABUS“. For that reason, the Office rejected the application on the ground that the applicable legislation was not compatible with the possibility of designating a non-natural person as the inventor of the patent. Dr. Thaler appealed this decision before the Australian Federal Court.

The decision

With the commented decision, the Australian Court, while confirming that the applicant for a patent registration must necessarily be a natural person (or a person with legal personality), excluded the existence of a valid legal ground to prevent an artificial intelligence system from being named as the inventor of the patent.

This is because, in the first place, there is no definition of inventor in the Australian legal context that unequivocally links that status to a natural person: in the Court’s view, the term ‚invent‘ has been used to describe actions directly attributable to men only because – historically – such actions could not (yet) be performed by machines: ‚however, now that artificial intelligence systems can perform the same functions, the word [invent] can also refer to them‚.

Secondly, the Court continues, the argument put forward by the Australian Patent Office according to which an AI system could not be identified as an inventor because – being it an artificial intelligence system – it could not be considered as the owner of a title to be transferred to the applicant-physical person (in this case Dr. Thaler), cannot be accepted. In fact, Art. 15(1)(c) of the Patents Act 1990, in providing that “a patent for an invention may only be granted to a person who [… ] derives title to the inventor or a person mentioned in paragraph (b)„, when it refers to „deriving title to the inventor”, would not necessarily require an act of assignment from the inventor/AI system to the applicant/individual, since the applicant, in his capacity as owner of the AI system, would be the owner of all inventions created by that system at the very moment those inventions came into his possession.

Finally, in conclusion of its reasoning, the Court points out that extending the definition of inventor in a way of including an AI system not only wouldn’t be contrary to the applicable legislation, but would also be in line with the objective set in section 2A of the Patents Act to promote technological innovation and its dissemination: otherwise, a disincentive for investments would be generated and owners of AI systems would be forced to protect patentable inventions as trade secrets.

Conclusions

The Australian decision, which is not yet definitive being it subject to appeal, could mark a turning point in the global panorama with regard to the increasingly discussed and topical issue of the relationship between artificial intelligence and industrial property law. For the time being, however, this is an almost isolated case which, in fact, appears to be in contrast with some other decisions (most recently the one of the Court of Appeal of England rendered on September 21, 2021, available at https://iponline.cipc.co.za/Publications/PublishedJournals/E_Journal_July%202021%20Part%202.pdf), which in front of similar cases, confirm that the status of inventor of a patent can only be attributed to a natural person.

Giorgio Rapaccini


WILL THE SEARCH FOR (FAIR) COMPENSATION BE LOST IN THE CLOUDS?

07/10/2021

In his Opinion of 23 September 2021 in Case C-433/20, Advocate General Hogan considered that the fair compensation for private copying provided for in Article 5(2)(b) of Directive 2001/29/EC must also cover the provision of cloud storage space or capacity made available by a third party such as an internet service provider and used by private users to obtain and store copies of protected works. That fair compensation is, however, presumed to have already been paid by the providers of the media enabling such storage (smartphones, tablets, etc.), unless the rightholder demonstrates that that amount is inadequate, with the assessment of the merits being left to the courts of the Member State.

 

The case

The case, which has reached the Court of Justice of the European Union, originates from a dispute brought by the German society for the collective management of copyright and related rights on musical works (Austro-Mechana) for the assessment of the enforceability (and consequent quantification) of fair compensation for private copying against the German company Strato AG, a provider of virtual cloud storage services (through the service called „HiDrive“) within the Austrian territory.

According to Austro-Mechana, Austrian law provides for the payment of royalties for any type of recording media that has been placed on the market in Austria, including the provision of cloud storage space, as provided by Strato AG. On the other hand, the application of fair compensation for private copying also to „dematerialised“ storage spaces (such as the cloud) was contested by Strato AG, according to which, in the absence of a physical support for the recording of the protected work, the law in question would not be applicable. Strato AG also argued that such remuneration would not be due since the rightholders would have already obtained the payment of the remuneration for private copying (i) from the manufacturers of the devices, without which it would be impossible to upload the protected content to the cloud (i.e. smartphones, tablets, etc.), and (ii) from Strato AG itself for the acquisition of the storage servers located in Germany.

The Commercial Court of Vienna dismissed Austro-Mechana’s claims, finding that the fair compensation for private copying provided by Austrian law was not applicable to the cloud storage space provided by Strato AG, because the user would not have physical access to the media for storing protected content (i.e. servers), but only the possibility to access the storage capacity in some unidentified location in the provider’s cloud. Austro-Mechana appealed the decision and the appellate court raised two preliminary questions before the Court of Justice.

The Advocate General’s Opinion

Both preliminary questions concern the interpretation of Article 5(2)(b) of Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society, which provides that Member States may provide for exceptions or limitations to the exclusive right to authorise or prohibit the reproduction of protected works for reproductions made by private individuals on any medium on a non-profit-making basis, subject to the requirement that the rightholders pay fair compensation. The first question concerns the enforceability of that fair compensation by the holders of copyright or related rights against providers of cloud storage space for private users, while the second concerns the quantification of that fair compensation.

According to the Advocate General, in response to the first question, the terminology ‚reproductions on any medium‘ used by the European legislature does not limit the private copying exception to physical media (CD/DVD, etc.) owned by individual private users, but also covers intangible media, such as cloud storage space or capacity, made available by a third party such as an internet service provider and used by private users to obtain and store copies of protected works. That conclusion is based on the assumption that, in itself, any reproduction of protected works constitutes an act adversely affecting the rights of the rightholder, of which the private copying exception is a limitation; consequently, according to the Advocate General, there can be no discrimination between categories of media which do not also include those resulting from technological progress. Obviously, the limit to the applicability of the compensation for private copying would be represented by the legitimacy of the acquisition of the protected work by the private individual, all forms of reproduction/abusive making available which would in themselves constitute an infringement of the rights of the owner being therefore extraneous.

Having determined that fair compensation for private copying is also payable by the rightholder to the third-party provider of cloud storage services, it is not possible, however, to quantify the exact amount of that fair compensation. Hence, the Advocate General’s conclusion, in response to the second question referred for a preliminary ruling, that no additional compensation is payable by the third-party cloud service provider, since there is a risk of imbalance between the rights of rightholders and the rights granted to private users. Only if the rightholder can show that the payment of fair compensation made by the providers of the media (i.e. smartphones, tablets, etc.) may be considered inadequate to the actual prejudice suffered by private uses, will the referring court have to verify and quantify any additional amounts due to rightholders as fair compensation.

Alessandro Bura