Brexit - draft agreement and the effect on IP rights update - November 2018
The negotiation of the Brexit agreement has proved to be fraught with difficulty and uncertainty, but intellectual property owners and lawyers will be pleased to see that the draft agreement expressly deals with the effect of trade mark sand designs registered or applied for as EU trade marks and designs. Provided they have been registered or granted before the end of the 21 month transition period, they will become comparable registered and enforceable rights in the UK. At this stage this will occur automatically and without further fees having to be paid by the rights owners.
We wait to see what the final agreement will contain but the current draft would reflect a sensible outcome.
Impact of Brexit on European Union Trade Mark Registrations
European Union Trade Mark registrations, formerly known as Community Trade Marks, have long been used by New Zealand trade mark owners to obtain trade mark protection in all EU member states simply by filing one trade mark application. A EU trade mark takes effect in all EU member states.
What happens to these EU trade marks now that the United Kingdom has voted to leave the EU?
Two things are clear:
- Nothing will happen to the trade mark registrations (and pending applications) immediately. The UK has voted to leave the EU, but negotiations over when, how and on what basis will take time.
- No-one knows yet what will happen to the registrations after Brexit. However, presumably a UK registration will be effectively carved off an EU registration i.e. trade mark protection in the UK will not be lost once Brexit actually occurs.
Brexit will involve complex and time consuming negotiations and legislative amendments. We will all be watching developments with much interest.
Can old logos stay on the Trade Marks Register?
Many trade mark owners to update their logos from time to time. Keeping logos looking fresh and contemporary can be a key part of a trade mark owner’s branding strategy.
Many trade mark owners also register their logo as a trade mark, and some keep renewing a registration even if the logo is no longer used in that particular form.
The Trade Marks Act provides that a trade mark can be removed from the Trade Marks Register if it is not used for a period of three years from the date of actual registration. This means that a third party can challenge the registration and apply to revoke it if the mark hasn’t been used. At first this seems straightforward: if the mark hasn’t been used, it’s removed from the Register.
But, what if the original logo itself wasn’t used but a slightly different form of the logo was used instead? Does this amount to “use” for the purpose of the revocation provisions?
This was the issue addressed by the Court of Appeal in the decision Crocodile International Pte Limited v Lacoste CA607/2014 [2016] NZCA 111. Lacoste, the maker of a well-known range of clothing, registered a combined word and logo mark in the 1960s. This logo consisted of the word CROCODILE next to an image of a crocodile with a curved tail.
In 2008 Crocodile International Pte Limited applied to revoke this registration on the grounds that it had not been put to genuine use in New Zealand for a continuous period of three or more years.
Lacoste admitted it had never used this particular logo, although it said that it had used two other logos and the word mark CROCODILE. One of these logos was simply the image of a crocodile with a curved tail. The crocodile faced the opposite direction to the crocodile depicted in the original registration. The second logo used by Lacoste was of a very similar crocodile, combined with the words LACOSTE in standard font.
Was this use of similar logos enough to counter the revocation application, and therefore keep the original logo on the register?
The Trade Marks Act says that if a mark is not used as a trade mark, it may be removed from the Register. However, there is an extended definition of “use of trade mark” in the Act. It provides that “use” in relation to a trade mark includes “use in a form differing in elements that do not alter the distinctive character of the trade mark in the form in which it was registered …”.
This extended definition was the key issue in this case.
The Court of Appeal upheld the High Court’s analysis and decision in favour of Lacoste ie both courts ultimately considered that the use of the two other logos amounted to use of the original logo for the purposes of the Trade Marks Act. This was despite the logos being different. The Court of Appeal stated that the High Court had followed well established authority in formulating the test to be applied:
- first the Court must assess the points of difference between the mark as used and the mark as registered; and
- second, once the differences have been identified, the Court must ascertain if the differences alter the distinctive character of the mark.
The Court of Appeal stated that the High Court’s articulation of that two stage enquiry was correct. The Court of Appeal also stated that the High Court was not wrong when, after articulating that two stage test, it went on to say that the crucial issue is the likely impact that the mark in question has on the average consumer and that the analysis is undertaken by reference to the central message of the mark. That central message can be deduced from the visual, aural and/or conceptual qualities of the mark.
The Court of Appeal noted that there was some visual differences between the various marks in question. However, it considered that these differences did not alter the distinctive character of the original trade mark. That logo was dominated by the image of the crocodile. If one looked at the overall impression created by the trade marks, the differences between them were insignificant. The Court noted that it was important that the various images of the crocodile were similar.
As a result, the Court of Appeal upheld the original registration and would not agree to remove it from the Register.
This decision may provide some comfort to trade mark owners who modify their logos over time yet wish to maintain the protection given by registration of an earlier version of the logo. Provided that the new version of the logo does not alter the distinctive character of the original trade mark, then it appears that there are strong prospects that the earlier version will not be removed from the Register even if it hasn’t been used for a number of years.
Crocodile International Pte Limited v Lacoste CA607/2014 [2016] NZCA 111
Damages for copyright infringement
Working out the amount of damages payable when copyright has been infringed is not always an easy task. Adding to the calculation difficulties faced by a copyright owner is the harsh reality that the amount of damages awarded by the courts is generally much less than the perceived cost of the infringement. A 2015 Court of Appeal decision has provided some hope for copyright owners, a warning to copyright infringers, and clarity for both.
The decision related to G-Star Raw’s claim against Jeanswest Corporation (New Zealand) Limited for copyright infringement. G-Star claimed that it owned the copyright relating to a particular design of women’s jeans, and that Jeanswest had infringed that copyright by importing and selling 63 pairs of very similar looking jeans. The High Court agreed with this claim but awarded G-Star Raw only $325. Justice Heath said “As to damages, they are minimal. In the context of a proceeding of this type, brought primarily to protect the reputation of G-Star and the interests of its distributor in Australasia, no more than a nominal order for damages can be justified. The evidence points to loss of between $216.65 and $433.30. A detailed analysis is unnecessary, in the context of this case. I take an approximate midpoint for damages of $325.00.”
Both parties appealed to the Court of Appeal on a number of grounds, including the nature and amount of damages – if any – Jeanswest should pay.
The Copyright Act contains a number of provisions regarding damages.
- If the defendant didn’t know, and had no reason to be believe, that copyright existed, the defendant is only obliged to pay an account of profits ie the profits attributable to the infringement.
- If the infringement was not innocent, the copyright owner can choose between requiring the defendant to pay an account of profits or paying general damages.
- If the infringement was not innocent, the copyright owner can also ask the Court to award “additional damages”, taking into account “the flagrancy of the infringement and any benefit accruing to the infringer by reason of the infringement”. These damages are awarded on top of general damages and can have a punitive element.
G-Star Raw thought that Jeanswest’s infringement was so flagrant and so deliberate that it should pay additional damages. The Court of Appeal agreed. It said that “[w]e consider this was a flagrant infringement in that this was blatant copying by Jeanswest”.
It then went on to consider the benefit that accrued to Jeanswest from this infringement. It said:
“There was no direct evidence about the benefit accruing to Jeanswest from the copying. But these three points emerge from evidence given [on behalf of G-Star Raw]:
(a) A fashion business which simply copies the designs of other labels does not incur the significant design costs incurred by a business like G-Star, which spends significant amounts designing its original and new garments.
(b) A business which copies can also quite easily find out which designs have sold well, and copy those.
(c) When G-Star’s original designs are copied “the kudos of owning an original G-Star design is lost”. The damage is exacerbated because the copies tend to be produced and distributed in large volumes, diminishing the uniqueness of the G-Star brand. The copies are also sold (as in this case) at cheaper prices.”
The Court noted that even though only a small number of jeans were sold – just 63 – these were designed to test the market and presumably more would have been sold if things had gone well. In addition, the Court commented that it would have been relatively straightforward for Jeanswest to obtain legal advice about whether importing the jeans would have infringed copyright.
Ultimately the Court of Appeal held that Jeanswest should pay $50,000 in additional damages, plus interest from July 2010 to February 2015. This is one of the highest awards of additional damages ever made in New Zealand. It’s a reminder to potential infringers that even though general damages for copyright infringement may be relatively low, additional damages can significantly increase the financial cost of infringement.
Jeanswest Corporation (New Zealand) Limited v G-Star Raw C.V. [2015] NZCA 14 (17 February 2015)