Mexico – Amendments to Industrial Property Law

21 June 2018

Mexico

Intellectual property

Last 7 June, legislative decree no.63 of 11 May 2018 implementing EU Directive no.2016/943 of 8 June 2016 on “on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure”, was published in the Official Journal of the Republic of Italy, pursuant to article 15 of Delegated Law no. 163 of 25 October 2017.

The purpose of this act was twofold: on the one hand, it assisted in matching the already existing Italian legislation – in particular, articles 98 and 99 of the Italian Code of Industrial Property – with the new EU legislation; whilst, on the other hand, it implemented new and more effective provisions of law on the protection of trade secrets.

The European Union introduced Directive no. 943/2016 in order to harmonize and ensure consistent protection of know-how and trade secrets on European level: in fact, irrespective of article 39 of the TRIPs Agreement, Italy was the only EU member having a domestic definition and a specific protection of trade secrets and no EU law has been passed governing their unlawful acquisition, use or disclosure. This factor weakened the ability of several countries to protect one of the most prominent intangible assets for industry 4.0 and next-generation innovative businesses.

Amid this European scenario, Italy maintained a privileged position vis-à-vis most of the other Member States, since provisions for specific protection of business know-how and confidential information had already been laid down under articles 98 and 99 of the Italian Code of Industrial Property. This is why Italian lawmakers intervened in articles 98 and 99 of the Italian Code of Industrial Property to merely replace the former language “business information and expertise” with the notion of “trade secrets”, while basically leaving the protections envisaged in article 98 of the Italian Code of Industrial Property unchanged to its earlier version, which was already in line with the EU rules.

Apart from this, the legislative decree supplemented the applicable rules and improved the standards of protection of trade secrets, pursuant to EU Directive no. 2016/943, to enable judicial decisions in protection of trade secrets to be weighed against, inter alia, the significance of such information, its importance for the claimant, and the precautionary measures implemented by the owner thereof.

In the first instance, paragraph 1-bis of article 99 of the Italian Code of Industrial Property has been introduced to take negligent behaviours into consideration on the matters of infringement of trade secrets, so that the acquisition, use, or disclosure of trade secrets may be held unlawful even when, at the time of the challenged circumstances, the individual was, or should have been, aware, as the case may be, that the trade secrets had been directly or indirectly obtained by the party that unlawfully used or disclosed them.

Quite the reverse, article 9, paragraph I, of the Directive has been fully implemented in article 121-ter on the preservation of confidentiality of trade secrets in the course of legal proceedings, irrespective of these being for precautionary measures or on the merits of the unlawful acquisition, use or disclosure of such trade secrets. According to such new provision of law, any (ordinary, civil or criminal, administrative or accounting) court of law will be entitled to prevent the counterparties, their representatives and advisors, legal counsels, clerical staff, witnesses, any court-appointed or delegated experts, and any other persons having access to the decisions, briefs and documents included in the court file, from using or disclosing the trade secrets discussed in the proceedings that the court may classify as confidential. In addition, it is expressly provided that such a prohibition shall maintain full force and effect after the conclusion of the proceedings in which scope it was imposed, while vice versa its effectiveness will be forfeited (i) in the event that the lack of the requirements set out in article 98 of the Italian Code of Industrial Property in order to have a valid trade secret is assessed by ruling, or (ii) where the trade secrets fall in the public domain or become easily accessible to industry players and experts.

Furthermore, in the same article specific measures were laid down for the preservation of confidentiality of trade secrets in the course of legal proceedings: hence, subject to compliance with the principles of fair trial, the judge will be entitled to adopt the most appropriate measures to preserve the confidentiality of the trade secrets discussed in the trial. Besides, the article explicitly sets forth two of the measures available to the judge: i.e., restricting access to hearings, briefs and documents included in the court file; and ordering the clerks to conceal the specific parts containing the trade secrets from the documents filed in the proceeding. However, because policymakers did not deem it appropriate to enable the judicial authorities to impose such prohibitions and measures by operation of law, they preferred leaving any request in this respect to the parties’ initiative, owed to the apparent high technical expertise required to appraise the confidential nature of such trade secrets.

With a view to ensuring a more accurate and effective preservation of trade secrets, criteria have been laid down (in article 124, paragraph 6-bis, of the Italian Code of Industrial Property), which the Judge will be bound to uphold when establishing the remedies and civil sanctions – and assessing whether these are suitable – in the proceedings on the matters of unlawful acquisition, use or disclosure of trade secrets under article 98. For this purpose, the Court is required to take into consideration the material circumstances of the case at issue, among which:

the value and other specific features of the trade secrets;
the measures implemented by the legal holder to protect the trade secrets;
the actions carried out by the infringer to acquire, use or disclose the trade secrets;
the impact of the unlawful use or disclosure of the trade secrets;
the parties’ legitimate interest, and how this may be affected by the endorsement or rejection of the judge’s measures;
the legitimate interest of third parties;
the interests of the general public; and
the need to ensure protection of the fundamental rights.

Not only will the Judge be bound to take these circumstances into consideration in the course of the proceedings on the merits, but also upon issuance of the precautionary measures sought by the trade secrets holder, and upon appraisal of their suitability, based on the explicit warning contained in new paragraph 5-ter of article 132 of the Italian Code of Industrial Property. Consequently, the Judge will issue a preliminary injunction or another interim measure only if the requesting company proved having adopted all the necessary measures and internal protocols to keep a given trade secret confidential.

According to new paragraph 5-bis of article 132 of the Italian Code of Industrial Property all proceedings aimed at seeking protective measures for trade secrets, as an alternative to the application of the precautionary measures, the judge may authorise the defendant to continue to use the trade secrets, subject to providing an appropriate security for compensation of any damages suffered by their legitimate holder, in any event, without prejudice to the prohibition to disclose the trade secrets authorised for use.

The precautionary measures adopted in protection of the trade secrets may be forfeited either for failure to commence the proceedings on the merits within the mandatory deadline (set out in article 132, paragraph 2, of the Italian Code of Industrial Property), or as a result of the claimant’s actions or omissions. Where the unlawful acquisition, use or disclosure of the trade secrets are subsequently found to be groundless, the claimant will be sentenced to repay the damages caused by the adopted measures.

As a further novelty, Legislative Decree no. 63/2018 introduced a compensation, payable as an alternative to the application of the measures under article 124 of the Italian Code of Industrial Property, which may be granted upon the interested party’s application, provided that all of the following requirements laid down by new paragraph 6-ter of article 124 of the Italian Code of Industrial Property are met: at the time of the use or disclosure, the claimant was not, nor should have been, aware that the trade secrets had been obtained by the third party unlawfully using or disclosing them; the execution of these measures would be unduly burdensome for the claimant; the compensation is commensurate to the damages suffered by the party seeking the application of relieving measures and, in any event, it does not exceed the amount that would have been paid on account of royalties for the use of the trade secrets throughout the challenged period of time.

A statute of limitations has been established in 5 (five) years for rights and actions connected with such misconducts.

As a final provision, in line with the availability of progressive measures and enhanced accuracy and effectiveness of trade secrets protections, which are the EU Directive basic principles, a list of the items is provided which the judge ought to appraise to order the publication of his ruling, and to weigh the suitability of the claimed measures: the value of the trade secrets; the actions carried out by the infringer to acquire, use or disclose the trade secrets; the consequences of the use or disclosure of the trade secrets; the risk of the infringer carrying on with the unlawful use or disclosure of the trade secrets.

Furthermore, to make the above appraisal the Judge shall also consider whether, based on the available information, a natural person may be identified as the actual infringer and, in the affirmative, whether the publication of such information is justified in the light of any potential damages that may be caused to the infringer’s private life and reputation.

In conclusion, articles 388 (wilful failure to enforce a court decision) and 623 of the Italian Criminal Code (disclosure of trade or science secrets) have been amended to improve the criminal reliefs granted under the Italian legal system, so as to include breach of trade secrets, and the measures connected therewith, among the misconducts sanctioned under the above provisions.

All that considered, a new approach in adopting internal rules and compliance’s procedures is required to companies and trade secrets owners in order to protect their confidential information and to safeguard their judicial protection and new language shall be adopted in drafting non-disclosure agreements: as a matter of fact NDAs were in the past very often merely copied and/or downloaded from the web without any juridical care and the due attention.

On May 18, 2018, was published in the Federal Official Gazette a reform to the Industrial Property Law (“IPL”), which will become effective on August 10, 2018. Since some of the amendments are business relevant, we prepared the following note:

Statement of Use. Titleholders of trademarks are obliged to file a statement of use, within the three months following the third year in which the registration was granted. If the titleholder does not file the statement, the registration shall elapse.

Scope of the trademark protection. New elements can be protected with a trademark registration, including, among others:

Smell and sound marks. Distinctive smells and sounds can be protected with a trademark registration.
Holographic signs. Such signs can now be protected with a trademark registration.
Certification marks. These marks distinguish products and services, whose qualities or characteristics had been certified by the titleholder of the mark, e.g. components, manufacturing conditions, quality, etc.
Trade dress protection. The plurality of operative and image elements, e.g. the size, color, label, packaging, decoration and any other that when combined differentiates products and services in the market, can be protected as a trademark.

Obstacles trademark registration. The obstacles for trademark registration are amended and supplemented. It its worth highlighting the incorporation of the bad faith filing as an obstacle for the registration. In this case, the registration is requested against the good practices, traditions and customs or if it aims to obtain an undue benefit or advantage affecting its rightful owner.

Likewise, it is worth mentioning the acknowledgment that certain registration obstacles can be prevented by filing the written consent of the interested party, e.g. for the registration of similar trademarks to a confusing degree with respect to a prior registration which protects the same products or services.

Opposition System. The parties will be allowed to file evidence and subsequently their final pleadings, without interrupting the term of the registration proceeding.

Statute of limitation of annulment actions. The statute of limitation to apply for the annulment of a trademark due to prior use is extended (from 3 to 5 years).

As per the amendments of the LPI, it is necessary to update is Regulations in order to set forth practical aspects of the new provisions. For more information, do not hesitate to contact me through Legalmondo.

The fourth Industrial Revolution, currently experienced by global economy, displays a melting-pot of a wide range of new technologies combined one another, impacting on every aspect of economy, industry and society by progressively blurring the borders of the physical, digital and biological spheres.

The growth of robotics, of artificial and virtual intelligence, of connectivity among objects and of the latter with humans, is contributing to strengthening the virtual side of economy, made of its intangible assets. Even trade is tending more and more towards a trade of intellectual property rights rather than trade of physical objects.

In such a scenario, protection of intellectual property is becoming increasingly important: the value of innovation embedded in any product is likely to increase as compared to the value of the physical object itself. In other words, protection of intellectual property could significantly affect economic growth and trade and shall necessarily go forward as the economy becomes more and more virtual.

Future growth of the 4.0 economy depends on maintaining policies that, on one hand allow connectivity among millions of objects and, on the other, provide for strong patent protection mechanisms, thus, encouraging large and risky investments in technology innovation.

Are SMEs, which represent the beating heart of the Italian economy, ready for all this? Has Italy adopted any policy aimed at boosting innovation and the relevant protection for SMEs?

After more than four years since the launch of the Startup Act (Decree Law No 179 of 18 October 2012), Italian legislation confirms being among the most internationally advanced programs for innovative business support strategies. If we look at the Start Up Manifesto Policy Tracker Startup Manifesto Policy Tracker (a manifesto for entrepreneurship and innovation to power growth in the European Union), published in March 2016, Italy is in second place among the 28 EU Member States, in terms of the take up rate of recommendations made by the European Commission on the innovative entrepreneurship issue.

The Annual Report to Parliament on the implementation of legislation in support of innovative startups and SMEs (Edition 2016) confirms the results of the Startup Manifesto Policy Tracker: Italian ecosystem has grown in terms of number of startups recorded (+41% on the previous year), of human resources involved (+47,5%), of average value of production (+33%) and, finally, of funding raising (+128%, considering access to credit via the SME Guarantee Fund).

This growth is the outcome of both the inventiveness and the attention to innovation that have always characterized Italian entrepreneurs as well as of the progress made by Italian legislation over the past years: changes were introduced in order to boost the national system for business startups and, in some cases, to promote innovative entrepreneurship as a whole.

Adopted measures include, for example: the implementing Ministerial decrees on tax credits for R&D investments; the ITA Service Card for innovative SMEs, the multimedia, bilingual online platform #ItalyFrontiers (the aim of which is to promote capital investment and encourage open innovation projects involving innovative Italian businesses); Italia Startup Visa and Italia Startup Hub (the renewal, under the 2016 Decree on Immigration Flows, of a preferential procedure for the granting of visas and the conversion of permits to stay for self-employed for non-EU citizens wanting to move to Italy or remain there to start up an innovative enterprise); the launch of a new simplified online company incorporation procedure that enables innovative startups to be opened as limited liability companies, granting significant time and cost reductions; the extension (until 2016) and the reinforcement of fiscal incentives available for investment in innovative startups; finally, the extension of the free, simplified access to the Guarantee Fund to include innovative SMEs in order to make it easier for them to obtain credit.

The importance of Intellectual Property in the modern economy

A national policy that has a target of incentivizing the use of Intellectual Property is a policy that will have beneficial effects on the entire national (and international) economy.

Proof of this, are the results of the studies carried out by the European Observatory on Infringements of Intellectual Property Rights and the European Patent Office (EPO) on the contribution of intellectual property rights (IPR) on the EU economy.

The study analyzed the effects of intellectual property on the EU in terms of gross domestic production, occupation, wages and trade. Here are some of the most interesting data:

– 42% of the total economic activity in the EU (approximately EUR 5.7 trillion) and 38% of occupation (approximately 82 million workplaces) is attributable to IPR-intensive industries;

– IPR-intensive industries pay significantly higher wages than other industries, with a wage premium of 46%;

– IPR-intensive industries tend to be more resilient against the economic crisis;

– IPR-intensive industries account for about 90% of EU trade with the rest of the world, generating a trade surplus for the EU of EUR 96 billion;

– about 40% of large companies own IPRs.

The data gathered by this study should raise social and political awareness as to the importance of stimulating not only large companies, SMEs and startups in general, but also those, which use intellectual property.

The innovation criteria

An interesting measure that is showing good results in relation to the dissemination of IPR companies in Italy is the introduction, thanks to the Startup Act, of the concept of innovative startup.

The Startup Act provides facilitating measures (e.g.: incorporation and following statutory modifications by means of a standard model with digital signature, cuts to red tape and fees, flexible corporate management, extension of terms for covering losses, exemption from regulations on dummy companies, exemption from the duty to affix the compliance visa for compensation of VAT credit) applicable to companies which have, as well as other requirements, at least one of the following requirements:

– at least 15% of the company’s expenses can be attributed to R&D activities;

– at least 1/3 of the total workforce are PhD students, the holders of a PhD or researchers; or, alternatively, 2/3 of the total workforce must hold a Master’s degree;

– the enterprise is the holder, depositary or licensee of a registered patent (industrial property), or the owner and author of a registered software.

The Startup Act is still having positive effects on the startups demographic trends. As a matter of fact, during the first six months of 2016 there has been a growth rate of 15,5% in the number of registered companies.

The success of the Startup Act brought the Italian legislator to extend with the Investment Compact (Decree Law No 3 of 24 January 2015) most of the benefits provided for innovative startups also to innovative SMEs.

By the Investment Compact the Italian Government recognized that innovative startups and innovative SMEs represent two sequential stages of the same continuous and coherent growth path. In a context as the Italian one, dominated by SMEs, it is fundamental to strengthen this kind of enterprises.

The measures in question apply only to SMEs, as defined by the European Commission Recommendation 361/2003 (companies with less than 250 employees and with a total turnover that does not exceed € 43 million), which have, as well as other requirements, at least two of the following requirements:

– at least 3% of either the company’s expenses or its turnover (the largest value is considered) can be attributed to R&D activities;

– at least 1/5 of the total workforce are PhD students, PhD holders or researchers; alternatively, 1/3 of the total workforce must hold a Master’s degree;

– the enterprise is the holder, depositary or licensee of a registered patent (industrial property) or the owner of a program for original registered computers.

Unfortunately to this day the Investment Compact has not produced the expected results: on one hand, there is a problem connected to the not well-defined concept of “innovative SMEs”, differently from what happened with startups; on the other hand, there are structural shortcomings in the communication of government incentives: these communication issues are particularly significant if we consider that the policy on innovative SMEs is a series of self-selecting, non-automatic incentives.

Patent Box

Another important measure related to the IP exploitation is the Patent Box, the optional tax rule applicable to income derived from the exploitation of intellectual property rights.

The Patent Box rules were introduced by the 2015 Stability Act and give to businesses, from 2015 onwards, the option of tax-exempting up to 50% of the income derived from the commercial exploitation of software protected by copyright, industrial patents for inventions, utility models and complementary protection certificates, designs, models, company information and technical/industrial know-how, provided that they can be protected as secret information according to the Italian Code of Industrial Property: meaning patented intangibles or assets that have been registered and are awaiting a patent.

Originally, also the exploitation of trademarks allowed entrepreneurs to choose the Patent Box optional tax rule, but a very recent Decree erased that provision by excluding trademarks from the Patent Box regime. This exclusion has just been introduced in order to align the Italian Patent Box to the prescriptions of the Organization for Economy Co-operation and Development (OECD).

Said policy has a dual purpose: on one hand, it seeks to encourage Italian entrepreneurs to develop, protect and use intellectual property; on the other hand, it intends to make the Italian market more attractive for national and foreign long-term investment, while protecting the Italian tax base. The incentive encourages the placement, and preservation in Italy, of intangibles that are currently held abroad by Italian or foreign companies and also fosters investments in R&D.

The Patent Box is certainly of great importance for Italian economy and has relevant merits, but it can be further improved. During the convention held on the 8th of May 2017 in Milan entitled “Fiscal levers for business development: the patent box example”, organized by Indicam, the institute for fight against counterfeiting established by Centromarca, it was highlighted that one aspect to improve is that of the Patent Box’s appeal to SMEs: there is a need for this policy, which was thought mainly for large companies, to be really effective. One solution, proposed by the Vice-Minister of Finance and Economy Luigi Casero, guest of the convention, is to «introduce some statistical clusters, a kind of sector studies, an intervention of analysis and evaluation of the fiscal indicators of a specific type of company».

UPC

The last matter that deserves to be mentioned is that of the Unified Patent Court: Italy has ratified the United Patent Court Agreement on the 10th of February 2017.

As it is known, in order to start its operations the Unified Patent Court needs the ratification also of United Kingdom. Moreover, one of UPC central division should be located in London in addition to the ones in Paris, Munich. After Brexit this maintaining of the London Court appears inappropriate both under a juridical and an EU opportunistic point of view.

As provided for the UPC Convention a section of the central division should be in Italy because it is the fourth EU member state (after France, Germany and the UK) as to the number of validated European patents in its territory: the London Court should be therefore relocated to Milan.

Moreover Italy is one of the main countries in the EU applying for not only European patents but also trademarks and designs (and so contributes substantial fees) yet it does not host any European IP institutions.

An Italian section of the UPC would certainly bring a higher awareness, also of smaller enterprises, in relation to the importance of IP protection.

Conclusion

A disruptive and unprecedented transformation is taking place, involving industry, economy and society, with its main whose main driver being the relentless ascent of its intangible component.

What we have to do, as a society, is follow this transformation by changing our way of thinking and working, abandoning the old paradigms of the analogic era.

Policy measures as the Startup Act, the Investment Compact and the Patent Box are surely important initial steps that are bringing certain positive effects, but they are not enough and they have not yet achieved the maximum results.

As pointed out by the #StartupSurvey, the first national statistical survey of innovative startups, launched by the Italian National Institute of Statistics and the Ministry of Economic Development (the data were gathered by a mass mailing to all the innovative startups listed in the special section on 31 December 2015), the majority of Italian startups and SMEs (52,3%) have not adopted any formal mechanism, as the ownership of an industrial patent, to protect their innovation. Only 16,1% of the respondents owned a patent and only 11,8% owned a registered software.

Among the reasons that bring startups to not adopt protection mechanisms, the majority of the entrepreneurs (48,4%) claimed to be convinced that the innovation of their enterprise could not be taken away by third parties. On the other hand, a considerable number (25,5%) said that they were not aware of the necessary strategies.

The data gathered by the survey confirm that there is a communication and information issue, as noted in the paragraph above, to be solved.

An interesting initiative relating to this problem is the new questionnaire realized by the Head Office for the fight against counterfeiting of the Ministry of Economic Development. This new and free service has been conceived, in particular, for startups and SMEs, allowing them to carry out an online self-assessment in relation to intellectual property.

The aim of the questionnaire is to make the enterprises aware of their intellectual property range and to direct them towards the adoption of appropriate strategies for the valorization of their intangible assets.

Poland has recently become quite famous for its skilled and resourceful IT specialists. Each year thousands of new computer engineers (programmers, developers, testers, designers etc.) enter into the market, warmly welcomed by domestic and multinational companies. A big part of these young talents open their own firm or business as free lancers developing software for clients from European countries as well as from US, Canada, Japan, China, etc.

However, companies who want to cooperate with these partners and assign software development to a Polish IT company or freelancer should be aware that the copyright law in Poland is very strict, as it mainly protects the creator and not the client. Therefore, to be on a safe side, it is better to follow these 7 basic rules:

Never start cooperation with an IT specialist or an IT company without a formal agreement. And I mean a real agreement, in a written form, with signatures of persons who can validly contract on behalf of the companies. The form is very important because – under Polish law – copyrights transfer and exclusive license agreements not fulfilling form conditions are null and void. Moreover, if there is no agreement, Polish copyright rules will apply to all intellectual property matters.
Please remember that software is a creation protected by copyright law. Therefore you should consider whether you want to acquire the entire intellectual property rights or you just need a license. If you need a full IP transfer, you need to put it expressly in the agreement; otherwise you will only get a non-exclusive licence. And these, in several cases, will not be useful from a business point of view. If a license is enough, it is advisable to agree if it will be exclusive or non-exclusive.
When drafting an IP clause, be detailed and clear. If you want to be able to decompile and disassembly the binary code, specify it in the IP clause. If you want to be able to introduce modifications to the source code, specify it in the IP clause. If you want to sublicense the software, specify it in the IP clause. The IP clause shall contain the description of any way you want to use the software, whether on mobile devices or on personal computers, any other electronic device or via internet (e.g. cloud computing). And believe me, when I write “specify it in the IP clause” it means that you really, really have to put it there. Otherwise it will be null and void and you may face a situation where your smart IT engineer, after getting paid, will sue you for the IP infringement.
Remember that you should indicate the timeframe and the geographical scope of the license or IP transfer. If you do not specify it expressly in the agreement, you will only be entitled to a 5-year license, automatically expiring afterwards.
Draft carefully a clause related to termination of the agreement. Under Polish law the licensor may terminate the license agreement granted for an indefinite period of time upon 1-year notice. If you do not want to find yourself in a situation where you lose the software IP rights in the middle of a big project, make sure that from the very beginning you are on a safe side.
Make sure that your partner is obliged to transfer you upon request all software documentation and the source code.
Make sure that you have a good indemnification clause with no limitation of liability. Often Polish IT companies subcontract some part of the development work to free lancers. You never know if they will conclude proper agreements with their subcontractors and if they will legally acquire the IP of the software that they will later sell you. There is always the risk that in the future some Polish IT engineer you never met will raise IP infringement claims against you, trying to prove that he/she actually developed the software. In such a situation an indemnification clause will help you recovering the costs from your partner.

Talking to clients five years ago the trend was clear, application was to be filed for the EU Trademark only, as it was faster, broader, in relation to the geographical scope cheaper and easier to handle. However as we experience now the EU trade mark has some downsides for which reason it is advisable to apply for a national trademark alongside the EU trade mark. And these are the reasons why:

Genuine Use

One of the main risks with trade marks is the fact that they must be used five years after registration. That use however must be genuine. According to the ECJ (C 149/11) “there is ‘genuine use’ of a trade mark where the mark is used in accordance with its essential function, which is to guarantee the identity of the origin of the goods or services for which it is registered, in order to create or preserve an outlet for those goods or services; genuine use does not include token use for the sole purpose of preserving the rights conferred by the mark. When assessing whether use of the trade mark is genuine, regard must be had to all the facts and circumstances relevant to establishing whether there is real commercial exploitation of the mark in the course of trade, particularly the usages regarded as warranted in the economic sector concerned as a means of maintaining or creating market share for the goods or services protected by the mark, the nature of those goods or services, the characteristics of the market and the scale and frequency of use of the mark.“

The problem which occurs from time to time is whether a trade mark used only in one member state or in a specific part of that member state is to be regarded as genuine use in the meaning of these ECJ findings. Whilst the ECJ (C 149/11) has not denied genuine use because of a territorial restricted use within one member state per se it still has not excluded that possibility and what is more has even given the national courts the decision making authority to assess “whether the mark in question is used in accordance with its essential function and for the purpose of creating or maintaining market share for the goods or services protected.“ Consequently a French court could decide that a use of a mark in Germany is insufficient for upholding a EU trade mark and thereby decide that the mark has to be deregistered. This reason alone provides for the necessity to have a national trade mark as plan B.

Counterclaim

When the plaintiff’s trade mark is a German trade mark, there is no possibility for the defendant to raise a counterclaim calling for a revocation of that plaintiff’s trade mark. The defendant has to file for an additional cancellation order before the German Patent and Trademark office. That additional cancellation proceeding however in general does not even bar the violation proceedings. So these will often be decided long before the cancellation proceedings in the last instance.

That is different when it comes to the EU trade mark. The EU trade mark can be declared void during (!) the violation proceedings by filing a counterclaim. Alternatively, the EU trade mark court hearing a counterclaim for revocation or for a declaration of invalidity may stay the proceedings on application by the proprietor of the EU trade mark and after hearing the other parties and may request the defendant to submit an application for revocation or for a declaration of invalidity to the Office. With the consequences that the violation proceeding is dead for ten years which it takes to pursue the cancellation proceedings through all instances.

Place of jurisdiction

The place of jurisdiction of a EU trade mark is limited to the place where the event which gave rise to the harm occurred (“Handlungsort”). The German trade mark however also provides for the place where the harm arose (‘Erfolgsort’) as place of jurisdiction. That however gives the plaintiff much more possibility to forum shop.

Statute of limitation

The EU trade mark does not provide a uniform statute of limitation. The ECJ (C 479/12) has decided that claims for injunctive reliefs become time-bared under the regulations of the national law. However in some case it can be very unclear which national law applies and therefore the same case can be seen differently in the different countries. When the plaintiff’s trade mark is a national trade mark the scope of application of the national statutes of limitation is clear and there are no further insecurities which are never to relish when have court proceedings.

The author of this post is Ilja Czernik.

The eSports sector is growing rapidly as illustrated by the following figures:

In 2017, the eSports economy grew to US-$696 million, a year-on-year growth of 41.3%.

Brands invested $517 million in 2017, which is expected to double by 2020.

Worldwide, the global eSports audience reached 385 million in 2017, with 191 million regular viewers.

(cf. https://newzoo.com/insights/trend-reports/global-esports-market-report-2017-light/)

North America continues to be the largest eSports market with revenues of US-$257 million. There is also continual development of eSports in Germany, however. The professional soccer teams of VfL Wolfsburg and FC Schalke 04 have their own eSports teams (http://www.gameswirtschaft.de/sport/esports-fussball-bundesliga/), and the German eSports Federation Deutschland has recently been founded, with the Federal Association of Interactive Entertainment Software (BIU) as a founding member (http://www.horizont.net/marketing/nachrichten/ESBD-E-Sport-Bund-Deutschland-geht-an-den-Start-162957).

In areas where such a lot of money can be made, legal obstacles are never far away. Here, they comprise a wide range of all kinds of different topics.

The initial focus is on copyrights and ancillary copyrights. Soccer stadiums, buildings, and avatars may enjoy copyright protection just as much as the computer program on which the games are based. Another item of discussion is whether eAthletes are to be classified as “performing artists” in accordance with Section 73 German Copyright Act. In addition, the question arises as to who enjoys ancillary copyrights under Section 81 Copyright Act as organizer of eSports events and whether such organizers have the same domiciliary rights as the organizers of a regular sports event.

In terms of trademark and design law, it will have to be discussed to what extent products and brand images represent infringements of the Trademark Act and the Design Act. In the case of brands and trademarks in particular, the question will be to what extent they are design objects or indications of origin.
Finally, there will also be regulatory issues that need to be observed. In addition to the use of cheatbots and doping substances, the main focus will be on the protection of minors and the Interstate Broadcasting Treaty with its advertising restrictions.
In conclusion, one suggestion: keep an eye on the eSports movement! Companies that want to stay ahead of the curve, should deal with the aforementioned issues and all further questions in timely manner.

The author of this post is Ilja Czernik.

How are piracy and/or counterfeiting defined?

Under the existing legal framework piracy and counterfeiting are not identical terms. Piracy on the one hand, is used in order to describe the infringement of copyright protected works such as music, audiovisual works, computer programs, publications and radio/television broadcasts, literary works, etc., through acts such as the unauthorized reproduction, broadcasting, distribution and sale of non-authorized copies of such works.

Counterfeiting on the other hand, is defined as the practice of manufacturing, importing/ exporting, distributing, selling or otherwise dealing in goods, which are often of inferior quality, on which a trademark, that is identical to a registered trademark, has been placed without the authorization of the rightful trademark owner. Genuine products, on which the trademark of the right holder is placed, contrary to his intention to place them on the market as no-name products, also qualify as counterfeits. Counterfeits are most commonly called “fake goods” or “knock-offs.”

Counterfeiting is also used in order to describe the copying, imitating or using of a registered industrial design.

What is the legal framework against piracy and counterfeiting?

Anti-piracy and anti-counterfeiting provisions are to be found dispersed in various bodies of law, the most important of which are the following:

Trademark Law 4072/2012, articles 121-183 of which regulate the use of registered trademarks and sets out the conditions on which a rightful owner may take action against counterfeiters. The Law also contains special criminal provisions.
Copyright Law 2121/1993 which protects works such as music, audiovisual works, computer programs, publications and radio/television broadcasts, literary works. Special criminal provisions are included as well.
Presidential Decree 259/1997 on Industrial Designs along with Law 2417/1996 on the implementation of The Hague Convention regarding the international registration of industrial designs
The Unfair Competition Law 146/1914 which prohibits any use by an undertaking of a competitor’s trade names, company names, distinctive titles, unregistered trademarks, in the course of trade.
Regulation 608/2013, concerning customs enforcement of intellectual property rights.
Law 3377/2005 on the Sanitation of Trade which regulates the seizure and destruction of pirated or counterfeit goods.

What is the protection afforded to rights holders?

For a copyright protected work, its creator/author has the absolute discretion, power and control to decide how to commercially exploit it but also to prohibit any act that infringes such rights.

A trademark owner enjoys the exclusive right to affix the sign to the goods and/or their packaging, to place the goods on the market, to import or export the goods etc. At the same time, he is entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical to his registered trademark and also to prohibit the mere transit through Greek territory of counterfeit products that have another country as their final destination or the mere import for the purpose of re-export of such products.

In turn, the owner of a registered design has the exclusive right to use it and to prevent all third parties not having his consent from using it. The construction, manufacturing, placing on the market, import, export or use of the product on which the design has been placed or applied, as well as the storing of the product are all acts that fall under the prohibition.

What is the recourse available against counterfeiting and piracy?

Both, piracy and counterfeiting are prohibited and punishable by both civil and criminal law. Generally, copyright holders and trademark /design owners can sue pirates and counterfeiters in civil courts and seek provisional injunctions, whereas the authorities can use the respective criminal provisions in order to sue counterfeiters in criminal courts.

What measures are available prior to the counterfeit/pirated goods entering the country?

Counterfeit/pirated goods’ seizures by the customs authorities are the result of either random, routine, sampling checks or of targeted actions initiated by the customs authorities in case valid suspicions regarding the infringement of IP rights exists.

If an application for intervention has been filed prior to the identification of infringing goods, the appointed representative of the rights holder will be contacted (in the context of the Customs monitoring process laid out by Regulation 608/2013), once suspicious goods have been found. If no application has been filed, then the authorities will contact any person or entity (e.g. rightsholder) entitled to submit such an application and inform them of the alleged infringement.

How does the process work?

Once the customs authorities have identified goods suspected of infringing an IPR covered by a decision granting an application, they shall suspend the release of the goods or detain them and inform the declarant or the holder of the goods, about the suspension of the release of the goods within one working day. At the same time they shall notify the rights holder. If no application has yet been filed then the customs authorities shall notify persons or entities entitled to submit an application concerning the alleged infringement of the IPRs.

Do customs authorities have the power to destroy counterfeit/pirated goods?

The customs authorities may proceed to the destruction of the goods, without the need to determine whether they infringe an IPR, under the condition that the rightsholder confirms within 10 days (3 days in the case of perishable goods), in writing that he believes an IPR is being infringed and that he agrees to the destruction of the goods. If such confirmations are not submitted, then the goods will be released, unless a procedure for the determination if an IPR has been infringed has been initiated. Moreover, the declarant or the holder of the goods has to confirm within 10 days, his agreement to the destruction of the goods. The goods will be destroyed provided that both the rights holder and the declarant or the holder of the goods, grant their consents. In case such consent is not given, then the holder of the decision must initiate proceedings in order to ascertain whether an IPR has been infringed.

What remedies are available once the counterfeit/pirated goods have been put on the market?

Counterfeit/pirated goods that have already been put on the market may be seized and destroyed by the Customs authorities, the Police, the Municipal Police, the Financial and Economic Crime Unit (SDOE) of the Ministry of Finance, or the Coastguard. In practice this occurs either following the respective request by a rights holder or as a result of random checks conducted on the markets. The authorities have extensive powers and may carry out random on-site inspections in open-air markets, warehouses, stores and storage facilities. For example, they may seize and destroy on the spot, goods that are suspected of being counterfeits/pirated by any means available (e.g. by disposing them in a garbage truck or tainting them with spray paint) provided that the holder of the goods does not object.

What is the process in order to destroy on the spot, counterfeit goods?

In order for the goods to be destroyed on the spot, the main requirement is that the holder of the goods does not object. Should this be the case, then he has the right to file a written objection, while being granted a deadline in order to prove that the goods are genuine/non-infringing. In the meantime, the authorities will also inform the rightsholder who will have 10 days in order to confirm that the products are indeed counterfeit/pirated. If such a positive statement is given then the alleged infringer will be given an additional period of 3 days in order to oppose such statement, following which the rights holder will have an additional 10-day term in order to file a claim with the competent courts whereas if he fails to do so, the seizure will be lifted and the goods will be released.

Are there more specific rules for copyright infringements?

Especially for copyright protected works, the Financial Police (SDOE), the Police, the Coastguard and the Customs authorities are empowered to fine any person who illegally reproduces, sells or otherwise distributes to the public or possesses with the purpose of distributing a computer program. This includes street vendors, standing persons (outside of shops), or vendors inside of shops.

What legal actions can the right holder take against the infringer?

Rights holders have civil remedies against the infringers if they wish to initiate legal proceedings before the courts in order to claim damages or to obtain judgments in order to prevent future infringements by the same infringers. In fact, for infringements that concern identical marks being used for identical products, the plaintiff only has to provide the Court with the registration certificate of the trademark which will be sufficient to prove the infringement.

Other remedies include:

cessation of the infringement
its omission in the future
the payment of damages
the seizure of the goods and their removal from the market (at the expense of the infringer),
the removal of materials and implements principally used in the creation or for the manufacturing of the said goods
the destruction of the infringing goods
the publication of the court’s decision in the media

These remedies may also be ordered against intermediaries whose services are used in order to infringe the plaintiff’s rights.

Is provisional judicial protection available?

In urgent cases where expedited action is called for, interim injunctions (injunctive relief), is also available. It is also possible to seek a provisional court order, in order to proceed with the provisional seizure of the infringing goods prior to them being distributed. In cases where any delay could cause irreparable damage to the interests of the rights holder (trademarks as well as copyright) then the interim injunction may be obtained ex parte.

Can damages be claimed and how are they calculated?

In trademark infringement matters, rightsholders may indeed seek damages and may claim the amount that the infringer would have paid for royalties, had he been granted a license. If damages are not calculated on this basis then, the factors that are taken into account by the court, include among other things, the negative economic effects the infringement has for the rights holder, the loss of profits and any benefits enjoyed by the infringer. If it is established that the infringer had no liability (i.e., if it was not for him possible or he could not have known that he was committing an infringement) the profits or benefits gained by the infringer, are payable to the rights holder.

For copyright infringements, damages cannot be less than twice of the legally required or normally payable remuneration the rights holder would have received if a license had been granted. Damages can be claimed irrespective of whether the infringement has been made intentionally or by negligence.

Is it possible to ask the court to order the infringers to provide more information on the network?

Indeed, it is possible, either in the process of an ongoing trial or following a petition for an interim injunction, for the court to order the infringer to provide information regarding the origin of the products and the distribution networks used. The same may be ordered also against anyone:

found to illegally possess the infringing goods,
found to possess such goods on a commercial scale,
found to provide services that facilitate the infringement of a trademark
or anyone who was indicated by one of the aforementioned persons as being actively involved in the production, manufacturing or distribution of counterfeit goods.

The information to be disclosed include, the full names and the addresses of the producers, manufacturers, distributors, suppliers and other previous possessors of the goods, as well as recipients, wholesale traders etc, information on the quantities of the counterfeit goods and their price.

Is criminal prosecution available?

Both piracy and counterfeiting (designs excluded) are criminal offenses and the respective laws contain provisions that make their prosecution possible. Other, general criminal law provisions, such as those for forgery or fraud may also be applicable depending on the facts of each case. However, in order for the authorities to initiate an investigation regarding counterfeiting (trademark infringement), a criminal complaint has to be filed by the rightsholder, within three (3) months from the day on which he became aware of the infringement. In contrast, in cases of piracy (copyright infringement) authorities can launch the investigation without the need for a criminal complaint having been filed by the rights holder. In both cases however, in order for the infringer to be prosecuted the investigation will have to establish that the infringement was indeed intentional.

What sentences do the infringers face?

Counterfeiters face strict criminal penalties for trademark infringement, which includes a minimum imprisonment term of six months and a minimum fine of 6.000 €. In instances where profits arise or damages occur, on a commercial or professional scale, stricter penalties which include a minimum of two years’ imprisonment and a fine between 6.000 to 30.000 € are applicable. Intermediaries, such as distributors, importers, holders or exporters of infringing goods, also face criminal prosecution.

Copyright infringers face imprisonment of up to one year and a fine ranging from 2.900 to 15.000 €. Provided that aggravating factors exist, imprisonment may be increased to 10 years and the fine to 34.075 €.

Is it possible to take action against counterfeiting and piracy over the Internet?

For infringements that occur through the internet, rightsholders have the right to request the blocking of access to websites that promote illegal content. Copyright holders in particular, may also apply for an injunction against intermediaries (ISPs) who facilitate access to third party infringers such as websites that are used for the dissemination of music and films.

Trademark or design holders may also take action against on-line marketplaces offering counterfeit goods, requesting for instance the blocking of the website’s accessibility in Greece.

This post is the last of three small articles on the protection of IP rights in Germany. In the first we have already seen how the German Copyright Act protects creative and artistic works and how Design Patents protects achievements in the aesthetic field. In the second we focused the attention on Trademarks, Patents and Utility Patents, in order to verify how to best protect names, signs and technical inventions.

In this post we will concentrate on how the Act against Unfair Competition grants protection against unfair practices in the course of the business and the main procedural aspects of the IP claims in Germany.

Unfair Competition Law

The Act against Unfair Competition outlaws unfair practices in the course of business by a respective general clause. A number of specific practices are explicitly listed in the Act, in particular misleading advertising and other deceptive practices, psychological pressure, destructive competition and the unfair exploitation of work results (but only under special circumstances). The breach of law can also constitute an unfair practice, provided that the practice is aimed at gaining an unlawful advantage over competitors.

Unfair practices are not controlled by a state authority, but can be prosecuted by any competitor. In addition, private associations which exist for the promotion of commercial or of independent professional interests and qualified entities that are entered on a list of the Injunctions Act or on a list of the EU Commission for the protection of consumer interests may prosecute unfair practices.

Unfair Competition Law is partly harmonized within the EU by a Directive dealing with unfair practices against customers.

Procedural aspects

In German practice, most of the unfair competition and intellectual property claims follow the same pattern:

In case of a suspected infringement, the claimant usually sends a warning letter to the violating party, asking for a cease and desist statement that must be enforceable by a contractual penalty. If the allegation is true, the violating party has to bear the lawyer’s costs for the warning letter.

If the violating party refuses such a statement, the claimant can apply for a temporary injunction. Such an injunction will be granted by the court if the claimant can establish the claim and the urgency of the matter. In practice, the urgency is assumed, if the application has been filed within a short time frame after the applicant became aware of all relevant facts. However, there is no statutory time limit. Some courts deny urgency after more than one month, while other courts consider two months or even more as acceptable.

The addressee of a warning letter should always check the legal allegations and react within the time limit given, otherwise the risk of a temporary injunction without oral hearing is comparatively high. Such a court decision can be very detrimental, as most of unfair competition and intellectual property claims are finally decided or settled in injunctive proceedings.

If a temporary injunction is granted and the violating party does not appeal against the judgement, the claimant usually asks for a termination letter. During this stage, the matter can be settled, otherwise a regular lawsuit will follow.

While a temporary injunction is usually raised to prevent further infringements or the repetition of an unfair practice, the main proceedings can also cover remedy, damage, disclosure and account claims.

An important advantage for the plaintiff is his right to choose the venue. Usually he has the choice between the domicile or seat of the defendant and all places where the infringement or unfair practice has been committed. In particular in internet cases, this can be all over Germany.

Most of the German member states have established special courts and chambers for Intellectual Property and unfair Competition Law. Therefore the quality of decisions in this field of law is usually comparatively high.

Joaquin Rodriguez

Practice areas

Corporate
Intellectual property
International trade
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