Intellectual Property

CJEU Clarified the Requirements for Shape Trademarks and Acquiring Distinctiveness Through Use

The Court of Justice of the European Union (”CJEU”) gave on 16 September 2015 a preliminary ruling on what is required to prove that a trade mark has acquired distinctiveness through use. The CJEU also clarified certain requirements for registering shapes as trademarks. In its ruling in Société des Produits Nestlé SA v. Cadbury UK Ltd (C-215/14), the CJEU stated that it must be proven that the trademark alone identifies the relevant undertaking in order for the applicant to obtain registration for a trade mark that has acquired distinctiveness through use. Further, the CJEU clarified the interpretation of Article 3(1)(e) of the Trade Marks Directive when a registered shape consists of a combination of the different features mentioned in said article.

Nestlé had on 18 July 2010 in the United Kingdom filed an application for registration of a three-dimensional sign for the shape of the company's "Kit Kat" chocolate bar consisting of four chocolate fingers. The Trade Marks Registry of the United Kingdom Intellectual Property Office had accepted the application, but as a result of Cadbury UK Ltd filing a notice of opposition, the application was partially rejected through a re-examination procedure in 2013. Both parties appealed against the decision to the High Court of Justice of England & Wales, which then referred certain key questions regarding both the requirements for acquired distinctiveness and the interpretation of Article 3(1)(e) of the Trade Marks Directive to the CJEU for a preliminary ruling.

The CJEU firstly held that Article 3(1)(e) of the Directive 2008/95 precludes a registration of a mark consisting of the shape of the goods with three essential features, when one of the essential features results from the nature of the goods and the other two essential features are necessary to obtain a technical result, as long as at least one of these refusal grounds is fully applicable to the shape. Secondly, the CJEU held that Article 3(1)(e)(ii) of the Directive, which sets forth the refusal ground for registering signs consisting exclusively of the shape of goods which is necessary to obtain a technical result, refers only to the manner in which the goods function and not the manner in which they have been manufactured. Thirdly, the CJEU stated that to obtain registration for a trade mark that has acquired distinctiveness through use according to Article 3(3) of the Directive, the applicant must prove that the trade mark alone, without any additional marks which may be present, identifies the undertaking from which the goods originate.

CJEU Declared Safe Harbor Agreement Invalid Leading to Substantial Changes in Da-ta Transfers between EU and US 

The Court of Justice of the European Union ("CJEU") ruled in the case C-362/14 Maximillian Schrems vData Protection Commissioner that the Safe Harbor Agreement, on which a vast number of companies have based their EU-US transfers of personal data, is invalid with immediate effect. The judgment means that businesses that have relied on Safe Harbor in EU-US data transfers must immediately review how they ensure that data transfers over-seas comply with EU data protection laws.

The case was initiated by an Austrian law student, Max Schrems, who had challenged Facebook's cross-border data transfer practices under the Safe Harbor regime before the Irish data protection authority. Schrems argued that in light of the Snowden revelations on US government mass-surveillance programs, the US can no longer be considered to offer an ‘adequate’ level of protection for personal data. The Irish authority had refused to investigate Schrems' allegations due to the European Commission's decision on the adequacy of the protection provided by the safe harbor privacy principles issued by the US Department of Commerce.

The CJEU declared the European Commission's decision invalid and confirmed that national data protection authorities may investigate complaints alleging that a third country does not ensure an adequate level of personal data protection, even though the European Commission would have found such country to offer adequate protection of personal data.

The Article 29 Working Party has shortly after the judgment stated that a common position on the implementation of the judgment across Europe is absolutely essential. It also noted that it considers the Standard Contractual Clauses and Binding Corporate Rules viable during a transitional period ending at the end of January 2016. Thereafter, if no new solution has been found, such as a new Safe Harbor  decision by the Commission, the EU data protection authorities will take all necessary actions in accordance with the judgment. However, this does not prevent data protection authorities to investigate particular cases due to complaints during the transitional period.

In light of the above, companies should already now analyze their cross-border data flows to the US to check to what extent Safe Harbor has been relied upon in cross-border data transfers and if so, what an alternative basis for cross-border data transfers could be. In many cases, the most pragmatic means for companies to ensure lawful transfer of data outside the EEA, is to enter into so-called “Model Clauses” as approved by the European Commission.

For further analysis on the impacts of the judgment, please see our briefing note on the subject:

The Swedish Market Court's Judgment on the Marketing of Baby Carriers 

The Swedish Market Court decided in case MD 2015:14 that ReiRei AB ("ReiRei") should be prohibited from using certain statements when marketing their baby carrier, following a lawsuit initiated byBabyBjörn AB ("BabyBjörn").

ReiRei was prohibited from using "revolution", "for the first time ever", "the only baby carrier on the market", "the first and only baby carrier on the market", "unique", "an ergonomic baby carrier is a baby carrier where the baby is sitting in the frog position" and "so the newborn child does not put weight on its pelvis wrongly, it is important that the child can maintain this natural position when it is carried" and any other similar statements in its marketing.

The court ruled that a baby carrier is a product that is recognized as a durable consumer product and, accordingly, the average consumer is more thorough and seeks more information before making a purchase compared to when the customer buys cheaper and more ordinary products.

The court held that the statement "a natural frog position" was not misleading since the statement did not compare other positions or claim that this was the only natural position. ReiRei had evidence that the frog position was a natural position for newborn children, but, according to the court, did not claim that it was the only natural position and, as a result, the statement was not misleading. However, when a statement implies that any other position could be harmful to the child, but there is no proof of that, the court concluded that it is misleading according to the Swedish Marketing Act (2008:486). Since such an implication could most likely affect the average consumer, the statement was considered in breach of the Marketing Act.

To summarize, companies should be cautious in their marketing activities and not imply that other similar products are not as good as the own product if there is no proof supporting such statement. On the other hand, describing the product is perfectly fine as long as the description is accurate and there is supporting evidence.

The CJU: Member State's Data Protection Legislation May be Applied to a Foreign Company 

The Court of Justice of the European Union ("CJEU") rendered a preliminary ruling (C-230/14) where it was established that the data protection legislation of a Member State may be applied to a foreign company, which exercises a real and effective activity through stable arrangements in that Member State.

Weltimmo, a company registered in Slovakia runs a property dealing website concerning Hungarian properties. The service is free for advertisers for one month but thereafter subject to a fee. Many advertisers stopped using the service after the one month free trial period and asked the company to delete the advertisements as well as the advertiser's personal data which was processed within the context of the service. However, Weltimmo did not delete the personal data and started charging the advertisers. As the charged amounts were not paid, Weltimmo forwarded the advertiser's personal data to debt collection agencies.

The legal question arose when the advertisers lodged complaints with the Hungarian authority. The CJEU was asked to establish whether the Data Protection Directive enabled the Hungarian authority to apply Hungarian data protection legislation when imposing a fine on the Slovakian company.

The CJEU held that the Member State must apply provisions of the state where the activity that includes data processing is carried out. The activities pursued by the company are sufficient when they are real and effective, even if minimal, and this activity is exercised through stable arrangements. Weltimmo's activities met these requirements and the company was therefore subject to Hungarian legislation on data protection. It was furthermore particularly noted that stable arrangements are constituted even when a company only has one representative in the Member State.

The ruling can lead to uncertainties of applicable law as companies that exercise data processing in a different Member State than where the company is registered, might be subject to foreign legislation.

Helsinki Court of Appeals Ruled on Compensation for Damages Regarding Atorvastatin in Finland

Helsinki Court of Appeals passed judgment on 30 September in the matter S 14/2532 Warner-Lambert Company LCC and Pfizer Oy (Pfizer) v Ranbaxy Laboratories Limited, Ranbaxy UK Limited andRanbaxy Pharma AB (Ranbaxy) regarding compensation for damages allegedly caused by preliminary injunctions granted to Pfizer on the basis of its Finnish process patent relating to the manufacturing of atorvastatin, the active ingredient of blockbuster pharmaceutical Lipitor.

The patent in question had later been found to be invalid. Ranbaxy therefore claimed compensation for damage caused by the preliminary injunctions including lost profits for not being able to release its generic product to the Finnish market before patent expiry. Ranbaxy's claim was approximately MEUR 23, of which the District Court had accepted approximately MEUR 16.The Court of Appeals drastically lowered the amount of compensation to be paid by Pfizer; the amount of compensation awarded by the Court amounted to about EUR 230,000. The huge difference between the damages awarded is directly reflected by how the courts have viewed (a) the regulatory environment (no mandatory generic substitution for atorvastatin during the relevant time period in 2007-2009), b) the hypothetical market share of generic atorvastatin and (c) Ranbaxy´s lost profits.

As the damages are so much smaller than Ranbaxy´s claims, the Court of Appeals has orderedRanbaxy to compensate a portion of Pfizer´s legal fees in both the District Court and the Court of Appeals. Both parties can apply for a leave of appeal to the Supreme Court by the end of November.

IT & Communications

The District Court of Helsinki: The Legality of an nPVR-service Depends on its Technical Implementation in Finland

The District Court of Helsinki gave its decision in a criminal matter concerning copyright issues of network private video recorder (nPVR) services on 30 September 2015. TVkaista (an nPVR service provider), two of its directors, and TVkaista's external counsel were accused of copyright offense and certain other offenses. The copyright holders had also claimed substantial damages from the defendants for unauthorized use of their copyrights.

TVkaista had offered an nPVR service, which enabled its subscribers to watch television broadcasts over the internet at the time and place of their convenience. The nPVR service had been technically implemented in such a way that TVkaista – independently from its subscribers' actions – produced a master copy of the television broadcast signal. The master copy was subsequently converted into copies in several other file formats, which were distributed to the subscribers. Further, the subscribers did not have personal recording devices and all the copies were stored on TVkaista's servers. No licenses had been acquired from copyright-holders or television channels for the nPVR service.

TVkaista and the defendants claimed that licenses were not required, as the nPVR service was covered by the private copying exception of the Finnish Copyright Act, permitting individuals to manufacture a few copies of works to be used within their private sphere of life. The external counsel stated that he had only provided legal advice to the company. The prosecutors and right holders contested the applicability of the private copying exception and claimed that all defendants were culpable, regardless of their role in the scheme.

The court reasoned that the private copying exception of the Copyright Act could not be applied, because TVkaista had independently manufactured the copies of the television broadcasts without any contribution from its subscribers. TVkaista's external counsel was deemed to not have been involved in the operations of the company, and for that reason was acquitted from charges. The main defendants,TVkaista's directors, were sentenced to 11 and 7 months of conditional imprisonment. Additionally, they were prohibited from infringing the right-holders' copyrights and were ordered to pay, in addition to court costs, approximately EUR 270,000 to the right holders as a compensation for damages.

Marketing & Consumer

The Swedish Market Court's Ruling on the Marketing of Tobacco Products and Comparative Marketing

In a case involving a dispute between Swedish Match North Europe AB ("Swedish Match") and Skruf Snus AB ("Skruf"), MD 2015:13, the Swedish Market Court has assessed, firstly, comparative marketing and, secondly, the marketing of tobacco. The court held that a company that compares its products with another party's products should be able to provide proof that ensures the reliability of the comparison and the statements, especially when the statements are powerful and emotive. The court also found that market surveys conducted during a stand up-comedy event, which typically creates a positive mood amongst the audience, where there is no admission fee and where the participants are offered free (non-smoking) tobacco should be considered marketing and not in compliance with the Swedish Tobacco Act's (1993:581) requirement for particular moderation. As a result, the marketing was considered in breach of the Swedish Marketing Act (2008:486).

The court held that general unqualified marketing claims such as "a product tastes just as good as or better than", "is more affordable than", "is overall as good as or better than (implied a different product)", are powerful and emotive statements that need to be especially objective, accurate and reliable. Skrufhad conducted several market surveys before their marketing campaign, but, since the results from the surveys could not be considered representative of the opinion of the average consumer, the results did not support the broad claims Skruf had presented in their marketing.

Conclusions from the ruling in this case are that if a company is about to launch a marketing campaign, it should have some evidence that supports its claims. This is particularly important in relation to powerful and emotive statements. Tobacco companies need to be very careful. Even when an event is not organized as a pure marketing activity and on closed premises, it might qualify as unfair marketing if tobacco is supplied free of charge or if activities are offered that could foster a positive attitude towards tobacco.