Technology Newsletter Issue 1/2014
Definition and Protection of Trade Secrets and Undisclosed Know-How to Be Harmonised Across Europe
To counteract the growing problem of trade secret theft and to provide a clear and uniformed level of protection across the EU, the Commission has approved a proposal for a Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use, and disclosure. The new Directive would cover, broadly speaking, two types of information, namely technical information, such as manufacturing processes, recipes, chemical compounds, etc., and commercial information, such as lists of customers, results of marketing studies, product launch data, etc. The proposed Directive also provides for remedies, including damages.
In 2013, 25% of European companies reported that they had experienced at least one case of information theft, compared to 2012, when the number was 18%. Trade secrets are, as the Commission reports, a key complementary instrument to traditional IPRs. Restrictions on the use of trade secrets can be justified in order to promote an economically efficient and competitive process when these trade secrets have been obtained from the holder against its will by dishonest means. The Commission recognises the risk that stolen trade secrets could be used to produce infringing goods. The current protection for trade secrets varies across the EU states, something that makes cross-border R&D and a unified approach to trade secrets in any Europe-wide organisation difficult to achieve. The remedies and compensation available also vary across the EU, as well as the protection of trade secrets and confidential information within litigation. The new Directive seeks to unify the approach to all these aspects.
If the proposals are adopted in their current form, an acquisition of a trade secret will consequently be unlawful whether carried out intentionally or with gross negligence. Furthermore, the use or disclosure of trade secrets will be unlawful if they are acquired unlawfully, or if the use or disclosure is in breach of a confidentiality agreement or any other duty of secrecy, or if it is in breach of a contractual or any other duty to limit the use of the trade secret. The use or disclosure of the secret will also be unlawful if the person disclosing the secret knows or should know under the circumstances that the trade secret is obtained from another person who is using or disclosing the trade secret unlawfully. Member States must set a limitation period for trade secret theft actions of a minimum of one year and a maximum of two years.
New IP Court - a Finnish Express?
As reported in our Technology Newsletter 09/2013, the settlement of IP disputes has been centralised to the Market Court as from 1 September 2013. The Chief Justice of the Market Court has set an ambitious goal to his colleagues by stating in public that the aim of the Market Court is to settle all IP disputes within one year from the institution of the proceedings – including patent disputes. Taking into account the fact that the Market Court is a special court, there is no automatic right to appeal. The losing party may appeal against the Market Court’s decision only if the Supreme Court grants a leave to appeal. Moreover, taking into account the fact that the latest patent-related precedent of the Supreme Court is from 2003, it is not very likely that we will see several patent-related precedents in the future, either. Hence, in case no leave to appeal is granted and the Market Court manages to settle a patent dispute within one year or so, it will quite likely be the fastest IP court in the EU and in any case in the Nordic countries. It remains to be seen whether the Market Court, the future Finnish Express, will become as legendary in legal circles as the Orient Express is in literature.
Proposal for a New Swedish IP Court
The establishment of a new court dealing exclusively with IP, marketing, and competition matters has been proposed in a memorandum released by the Swedish government (Ds 2014:2). The aim of the proposal is to increase the quality and effectiveness of judicial review in those areas of law. In the memorandum dated 10 January 2014, it is stated that the low number of IP, marketing, and competition cases submitted to the courts, combined with their complex nature, calls for a uniform application of the relevant law carried out by a specialised set of courts. The centralisation of courts into a single system is also expected to save time and to lead to decreased costs for both the public and litigants.
According to the proposal, the Stockholm District Court would act as the new Patent and Market Court adjudicating in the first instance, the Svea Court of Appeal would act as a second instance, and the Swedish Supreme Court would, as the court of last instance, be responsible for the setting of precedents. If the proposal is implemented, the current Court of Patent Appeals and the Market Court will be dissolved. The new regime is proposed to enter into force on 1 July 2015.
First Cases Heard by the Russian Court for Intellectual Property Rights
The Russian Court for Intellectual Property Rights (the “Court”) started its activity in July 2013. Since then the Court, as the court of first instance, has heard cases related to revocation of trademarks due to non-use (52% of all cases heard by the Court), appeals to the rulings by the Federal Service for Intellectual Property of Russia (Rospatent) related to trademarks (34%), and appeals to the rulings by Rospatent related to patents (14%).
The main trends in the Court’s case law have been:
- The Court has clearly defined the standards of proof in disputes related to the revocation of trademarks due to non-use. For example, a plaintiff should prove its interest in the outcome of a dispute. Proper evidence to prove a plaintiff’s interest is considered to include the plaintiff filing an application with Rospatent in order to have the disputed trademark registered; evidence confirming the existence of production capacity for producing goods marked by a disputed trademark; and preparatory work for the sale of goods marked by a disputed trademark. A defendant should provide evidence confirming the use of a disputed trademark, which can be done, for example, by providing the Court with consignment notes. However, the Court will not accept agreements that are not accompanied by documents confirming their execution as proper evidence.
- The Court has unified the court practice regarding the number of violations of the right to a trademark when placing a trademark on the counterfeit products. The Court has ruled that the illegal use of a trademark of counterfeit products constitutes a single violation. At the same time, the Court has decided that placing several trademarks on a single counterfeit good constitutes a breach of the rights to each trademark.
- The judges still often rely on their own opinion (not on the results of public surveys) in defining the identity of goods and designations of origin.
Protection of a Community Design Slightly Strengthened
According to a recent judgment of the Court of Justice of the European Union (the “CJEU”), it is possible that an unregistered design may reasonably have become known to relevant circles in the ordinary course of business, if images of the design have been distributed broadly enough. In practice, this means that the images should have been distributed to several traders. In principle, the holder of the design bears the burden of proof in an alleged infringement case. However, the CJEU stated that if a Community design court, i.e. the Market Court in Finland, finds that the burden of proof is likely to make it impossible or excessively difficult for the holder to prove that the contested use results from copying the design in question, that court is required, in order to ensure observance of the principle of effectiveness, to use all procedures available to it under national law to counter the difficulty, including, where appropriate, rules of national law which provide for the burden of proof to be adjusted or lightened. Although the reasoning of the CJEU is based on the Community Designs Regulation, this precedent seems to also be in line with the goals of the Enforcement Directive, and may possibly provide further guidance on how the said directive should be applied on a national level.
Patent Disputes - You Cannot Entirely Hide Behind Your Trade Secret
The Helsinki Court of Appeal (the “HCA”) has clarified the burden of proof in patent disputes in its recent judgments. Firstly, the HCA stated that although the special provision of the Patent Act concerning the reversed burden of proof in relation to an alleged infringement of a method patent does not apply to precautionary measure proceedings as such, it has relevance when assessing the level of proof required from the applicant (i.e. from the patentee). Hence, the very high threshold may be lower in such cases. Secondly, the HCA stated in another judgment that the party who had been a defendant in an infringement case and a plaintiff in an action for a declaratory judgment (non-infringement) could have met its burden of proof by disclosing at least a certain portion of its manufacturing method. However, said party had rejected the lower court’s proposal that an external expert assess the method. Thus, although a party is entitled to protect its trade secrets, it cannot refuse to disclose any portion of its own manufacturing method. The HCA was of the opinion that the party in question had not provided sufficient evidence within the meaning of the Patent Act and the Code of Judicial Procedure and came to the conclusion that the manufacturing method of the party in question did infringe the method patent of the patentee.
Placement of Buttons on Stuffed Toy Animals Lacks Distinctive Character, Says General Court
On 16 January 2014, the General Court decided that the German toy manufacturer Steiff could not register the placement of a metal button in the ear of stuffed toy animals as a Community trademark (CTM). Prior to the ruling, Steiff’s application to the Office for Harmonization in the Internal Market (OHIM) concerning the registration of the CTM had been refused.
In its examination of whether the trademark applied for had a distinctive character, the Court stated that consumers, being used to a very large variety of the products in question, would not see the placement of a metal button as anything exceptional or consider it different from the norm in the industry. As an example, the Court pointed out that buttons are often used to represent eyes in stuffed animals and that it was not uncommon for buttons to appear on the clothing of such toys. Therefore, reasonably well-informed and observant customers would not see the placement of the metal button in the ear as an indication of the commercial origin of the goods. The Court drew parallels to an earlier case concerning the application for a CTM of the orange colouring of the toe of a sock.
The ruling, case number T 433/12, is currently only available in French and German.
Clickable Hyperlinks Not Infringing
On 13 February 2014, the Court of Justice of the European Union (the “CJEU”), delivered a judgment in Case C-466/12 establishing that the posting of clickable hyperlinks on websites does not violate copyright law. A website operator, Retriever Sverige, had provided its clients with lists of clickable Internet links leading to news articles published by other websites. The authors of the articles brought an action against Retriever Sverige in order to obtain compensation on the ground that the company had made use of their articles by making them available to its clients without prior authorisation.
The referring Swedish court asked e.g. whether the provision of a clickable link on a website constitutes ”communication to the public” within the meaning of Article 3(1) of Directive 2001/29. According to that provision, every act of communication of a work to the public has to be authorised by the copyright holder.
The CJEU, referring to previous case-law, stated that the term “communication” must be construed broadly in order to ensure a high level of protection for copyright holders and that the term “public” refers to an indeterminate number of potential recipients and implies a fairly large number of persons. The CJEU went on to find that while the provision of clickable links on a website could indeed be considered communication to the public, the communication in the case at hand was not covered by Article 3(1) of Directive 2001/29 since that provision requires the communication to be directed at a “new public”, which had not been taken into account by the copyright holders when they had authorised the initial communication to the public. In such cases, the CJEU held that the authorisation of the copyright holders is not required.
The CJEU went on to address the situation where a hyperlink makes it possible for users of the site to circumvent restrictions put in place by the site on which the work originally appeared in order to restrict public access to its subscribers only. Since this would enable the copyrighted work to be viewed by a wider audience than it was originally intended to and as such a ”new public”, it would fall under the scope of Article 3(1) and require authorisation by the copyright holder. According to the CJEU, this is particularly the case when the work is no longer available to the public on the original website, or when it is available only to a restricted public.
The referring court also asked whether the Member States could provide more extensive protection to copyright holders, which question the CJEU answered in the negative.
Svensson (C-466/12) - A Finnish Perspective
The ruling of the Court of Justice of the European Union (the “CJEU”) in the hyperlinking case Svensson (C-466/12), well summarised above by Henrik Bergström, is interesting from the Finnish perspective, too. The interpretation of hyperlinks in Finland has largely been based on legal literature, so the ruling not only brings much needed clarity into this field, but also calls into question some of the views previously expressed in Finland.
Firstly, Directive 2001/29/EC has been regarded as establishing only minimum standards, e.g. in government proposal HE 28/2004 it is expressly stated that the Member States may choose to provide for more extensive protection. This view is now challenged by the CJEU’s finding that Article 3(1) in fact precludes Member States from expanding the concept of a “communication to the public” to also include activities other than those referred to in Article 3(1).
Secondly, the ruling seems to alter the premise on which linking is assessed. One of the key factors in assessing the legality of hyperlinks is the copyright holder’s consent. Recently, the Copyright Council, functioning under the Finnish Ministry of Education and Culture, addressed the doctrine of implied licence in its statement 2013:22 of 18 December 2013, according to which a copyright holder who makes his protected works available online, also consents to other parties placing links to those works. However, there are limits to this rule, and certain types of links have generally been seen as falling outside the scope of the copyright holder’s implied consent, especially framing.
The CJEU does not refer to the doctrine of implied licence, but rather finds, firstly, that the provision of hyperlinks can be considered a “communication to the public”, and secondly emphasises, the question of whether the hyperlinks communicate the works to a “new public”, compared to the initial communication. The CJEU’s conclusion seems more absolute than the doctrine of implied licence. The CJEU even states that, when it comes to links making material from another site appear as part of the site on which that link is found, i.e. framing, the conclusion still holds true.
The idea that the communication does not require the right holder’s consent, unless it reaches a “new public”, is not new in itself and has been discussed in Finnish legal literature before. The critique expressed in legal literature is that it does not sufficiently consider the effects the linking has on the reasonable interests of the copyright holder. The copyright holder might lose out if the material made available on one website can be accessed through other sites without ever having to visit the original website. The Copyright Counsel points towards a more nuanced assessment of the permissibility of linking, and also considers how the linking affects the interests of the copyright holder. In light of the Svensson case, however, it seems that the question of the new public is more important in the assessment of the permissibility of links.
Information Society Code to Parliament
The complete reform of legislation applicable to electronic communications is progressing, as the Finnish Government submitted its proposal for the Information Society Code to Parliament on 30 January 2014.
The Finnish Ministry of Transport and Communications has been preparing a comprehensive reform of the legislation on electronic communications. The Information Society Code, which consolidates several different acts, aims to update and harmonise the provisions on electronic communications.
The purpose of the Information Society Code is to ensure that electronic communications services are available throughout Finland. The code introduces several improvements on e.g. the protection of privacy, consumer protection, and information security and safety. Attention has been paid, for example, to the protection of privacy and information security, the provisions of which would be extended to cover all operators conveying communication. Improvements in the consumer protection would mean, for example, that in addition to a seller or service provider, consumers could turn to their telecommunications operator if the service or product is faulty or the consumer never receives it or is unable to discontinue a service order. In addition, media sector will also face major changes due to the proposed new operating license system.
According to the press release of the Ministry of Transport and Communications, the Information Society Code is scheduled to enter into force on 1 January 2015.
E-Commerce to Face New Legal Requirements
The Directive on Consumer Rights 2011/83/EU – harmonizing consumer protection in the EU in relation to off-premises and distance sale such as e-commerce – is in the process of being implemented into the Finnish Consumer Protection Act (38/1978).
The new legislation extends the scope of the mandatory information the seller is obliged to provide to the consumer prior to a purchase, and also sets forth certain sanctions if the seller has failed to comply with such an obligation. For example, if the seller has not ensured that the consumer explicitly acknowledges that entering into a distance contract concluded by electronic means implies an obligation to pay, the consumer may not be bound by the contract. As such, the seller needs to acquire the consumer’s express approval to all costs relating to an order.
The reform also brings changes to the consumer’s right to withdraw from a distance or off-premises contract. The consumer has the same 14-day withdrawal period as currently, but the right to withdraw will be extended to also cover e.g. situations where the performance of services has already commenced. In such cases, the consumer may, however, be obliged to pay for services already performed. The consumer’s right to withdraw will also apply if the consumer has already taken ordered goods into use, but the consumer may be required to compensate for the diminished value of the goods.
The consumer has to inform the seller of the decision to withdraw from the contract by using the new model withdrawal form or by making some other unequivocal statement regarding the withdrawal. At present, e.g. the return of goods is considered a decision to withdraw from a contract. However, if the seller has not provided the consumer with the information on the right of withdrawal as required by the amended legislation, the withdrawal period will expire after 12 months from the end of the initial withdrawal period or 14 days after the day on which the consumer receives that information.
The new legislation also sets forth various other new or amended legal requirements to the sellers. For example, where the seller operates a customer service or other telephone line in relation to the concluded contract, the consumer may not be obliged to pay more than the basic rate when calling to such a line.
The reform of the Finnish Consumer Protection Act will enter into force on 13 June 2014.
Danish Court Defined Sufficient Documentation for Factual Statements in Marketing
By Mette Vestergaard Huss
In a recent judgment from the Maritime and Commercial Court in Copenhagen, the court stated that the requirement for the “documentation of factual statements” in the Danish Marketing Act could be satisfied with in vitro documentation.
The Danish subsidiary of the Colgate-Palmolive Company brought an action against the Danish subsidiary of the Unilever Group for falsely and misleadingly labelling its toothpastes as “Zendium syreforsvar” and “Zendium emalje protect” (in English: “Zendium acid defence” and “Zendium enamel protect”, respectively).
Colgate claimed that the factual statements “acid defence” and “enamel protect” had not been documented as proven facts and that the factual statements were false and misleading as a consequence. Unilever, on the other hand, claimed that the requirement for the documentation of factual statements in the Danish Marketing Act could be satisfied with documentation indicating that factual statements were merely “probable” but not “proven”.
Unilever presented in vitro studies to evidence the factual statements made and claimed that the documentation requirement in the Danish Marketing Act had been satisfied since the act did not require in vivo or in situ documentation.
The court found that, under the circumstances and in the particular incident in which ethical and practical problems may exist as regards the completion of the in vivo studies, the in vitro documentation presented by Unilever was sufficient to support the factual statements.
The court especially pointed out that the experts’ statements according to which, while the presented in vitro studies did not scientifically prove the claimed effects of the toothpaste, they did, however, show that the toothpastes could have the claimed effects, served as sufficient documentation.
The Finnish Market Court: Promotional Game Did Not Use Aggressive Methods to Influence Consumers
The Finnish Market Court has dismissed the Consumer Ombudsman’s request concerning a promotional game organised by SCA Tissue Finland Oy.
In the summer of 2012, SCA Tissue Finland Oy, which manufactures Lotus brand kitchen towels, paper handkerchiefs, and toilet paper, organised a promotional game to promote the sales of its kitchen towels, etc. The main prize for the promotional game was 100,000 euros, and the likelihood of winning this prize was one in 2.4 billion. For instance, the odds of hitting the main jackpot in Lotto, organised by Finnish lottery company Veikkaus, are about one in 15 million. Consumers were not told how small the odds of winning the main prize in fact were.
In the opinion of the Consumer Ombudsman, the way in which the main prize had been presented, the size of the prize, and the poor odds of winning led to a situation in which the promotional game unduly influenced the discretion and decision-making of a consumer. According to the Consumer Ombudsman, this type of marketing can be considered aggressive.
The Finnish Market Court found that the campaign did not aggressively influence consumers nor did the methods used go against generally accepted good business practices in a way that would have impaired the consumer’s ability to make a sound purchase decision.
The Consumer Ombudsman is currently contemplating whether to request the right to appeal to the Finnish Supreme Court. The deadline for submitting the appeal is 1 April 2014.
The Market Court rendered its decision (decision 55/14) on 31 January 2014.
Disclaimer: Hannes Snellman Technology Newsletter is intended for information purposes only. It should not be relied upon as legal advice nor should it be used as a basis for any action or final decision without specifically verifying the applicability and relevant issues on their merits in each individual case.