2019 IP Law Year in Review – European Issues

The last year of the 2010s has been prolific in terms of important new pieces of legislation and case law within the European Union, and in France and Germany in particular. Indeed, the European Parliament and the EU Council adopted in April 17, 2019, a controversial directive (Directive 2019/790 on copyright and related rights in the Digital Single Market) imposing on online content-sharing service providers—such as YouTube—a new liability system, based on popularity, time and turnover criteria. This directive was created to encourage these service providers to make greater efforts in fighting copyright counterfeiting on their platforms. In France, the PACTE law, which went into force on May 22, 2019, introduced new material changes—namely the strengthening of the French patent office granting procedure (extension of examination scope) and the introduction of patent opposition proceedings before the French patent office. These two legislations greatly influenced EU and French IP law across the year.

2019 EU case law also saw material clarifications and some daring rulings, including a December decision from the Court of Justice of the European Union (CJEU) setting important limitations on the scope of protection for Protected Geographical Indications (PGI), as well as a decision of the Munich Higher Regional Court confirming the validity of and the possibility to get anti-suit injunctions in patent litigation, at least in Germany, if not in all continental Europe countries. Both decisions are discussed in detail in this report.

Other decisions that marked 2019 include:

CJEU, May 2, 2019, Queso Manchego, C-614/17 (PGIs – A PGI may be evoked through the use of figurative signs);

CJEU, September 5, 2019, Heritage Audio, C-172/18 (Trademarks – Possible infringement action before the courts located in countries where consumers/merchants are targeted by advertisements or offers for sale);

CJEU, July 29, 2019, Pelham GmbH, C-476/17 (Copyright – Right for the phonogram’s producer to prohibit sound samples of its phonogram, unless unrecognizable to the ear);

CJEU, September 12, 2019, G-Star Raw, C683/17 (Copyright – Originality, sole criteria for copyright protection of designs, rejection of aesthetic character).

EU Directive on Copyright in the Digital Single Market: New Liability for Online Content-Sharing Service Providers

In seeking to protect the rights of copyright holders in their works shared online, the EU Directive on Copyright in the Digital Single Market presents a new liability mechanism for online content-sharing service providers.

IN DEPTH:

On 26 March 2019, the European Parliament adopted the new EU Directive on Copyright in the Digital Single Market (EU Directive 2019/790), to further harmonise EU copyright law, which shall be implemented by Member states into their national laws by 7 June 2021.

Below is a deeper dive into the debated Article 17 (former Article 13) on liability for online content-sharing service providers.

Aim of the EU Directive

The EU Directive states that online content-sharing service providers perform an act of communication to the public, or an act of making content available to the public, when they give the public access to copyright-protected works uploaded by their users. These service providers must obtain an authorisation from the relevant right holders, including via licensing agreements, to help right holders to receive appropriate and proportionate remuneration for the use of their works.

In addition, right holders will be free to grant or refuse authorisation for the use of their works in respect of uploads by users.

Scope of Article 17

Article 2(6) defines “online content‑sharing service provider” as a provider of a service of which “the main or one of the main purposes is to store and give the public access to a large amount of copyright‑protected works uploaded by its users, which it organizes and promotes for profitmaking purposes”. The EU Directive thus is likely to cover YouTube, Facebook, Instagram, Snapchat, Dailymotion, Twitter and other similar platforms.

The EU Directive explicitly excludes from the definition of “online content-sharing service provider” non-profit online encyclopaedias, online marketplaces, open source software‑developing and sharing platforms, cloud services, and more.

End of the Protective Liability Regime Specific to Hosting Providers

Article 17 expressly states that the limitation of liability established for hosting providers (e-Commerce Directive 2000/31/EC) shall not apply to content‑sharing service providers.

New Liability Mechanism in Case of Unlicensed Content

If no authorisation is granted, the EU Directive defines a liability mechanism for content‑sharing service providers that differs depending on three criteria:

1. A popularity criteria (where the average number of monthly unique visitors exceeds 5 million, calculated on the basis of the previous year)
2. A time criteria (where the services have been available to the public for three years or more)
3. A turnover criteria (where the annual turnover is of EUR 10 million or more)

A minimal mechanism will apply to content‑sharing service providers that meet none of the three criteria. This system responds to the concerns raised by medium-size enterprises and start‑ups.

An adjusted mechanism shall apply to content‑sharing service providers that do not meet the time and turnover criteria, but meet the popularity criteria. They shall be liable if they do not demonstrate that they have made their best efforts to prevent further uploads of the notified works for which right holders have provided the relevant and necessary information (notice and stay down).

Content‑sharing service providers that meet the popularity criteria likely will have to invest in fingerprinting technologies (software that generates a unique signature for digital content) to filter and block works for which the right holders provide fingerprints.

A strict mechanism shall apply to content‑sharing service providers that meet the time criteria and/or the turnover criteria. They shall be liable if they do not demonstrate that they have made their best efforts to ensure the unavailability of specific works for which the right holders have provided the relevant and necessary information.

One example of content‑sharing service that will be governed by the strict mechanism is Google’s YouTube service. Google has already developed a digital fingerprinting system, named Content ID. It will be instructive to see whether the Content ID system will be found sufficient to satisfy these new requirements.

Effectiveness of Copyright Exceptions and Limitations

Article 17 shall not affect legitimate uses of copyright‑protected works by preventing users from uploading non‑infringing content or content covered by copyright exceptions or limitations (quotation, criticism, review, use for the purpose of caricature, parody or pastiche) that guarantee freedom of expression.

Complaint and Redress Mechanism

Content‑sharing service providers shall operate an effective and expeditious complaint and redress mechanism (judicial and out‑of‑court mechanism) allowing users to contest decisions to remove or disable access to their uploaded content.

Comments

While the EU Directive addresses the legal uncertainty regarding whether content-sharing service providers engage in copyright-relevant acts and need to obtain authorisation from right holders for content uploaded by their users, a number of uncertainties remain. The assessment of certain criteria might vary from one Member state to another: for example, how to determine “the main or one of the main purposes” of a content‑sharing service provider, what is meant by “a large amount of copyright‑protected works”, and what should be considered as “best efforts”.

Several technical challenges will also have to be addressed, such as enabling fingerprinting and filtering technologies to differentiate legitimate uses.

New French PACTE Law – How Is It Affecting French IP Law?

The Action Plan for Business Growth and Transformation of Companies (PACTE) law, promulgated on 22 May 2019, includes provisions affecting several areas of French intellectual property law.

PATENT GRANT PROCEDURE

STRENGTHENING THE INPI GRANT PROCEDURE

One of the most important measures of the PACTE law is its extension of the scope of examination of patent applications by the French Industrial Property Office (INPI), which comes into force on 22 May 2020.

Before the PACTE law, the INPI’s examination was limited to a high-level assessment of certain substantive grounds (i.e., absence of patentability, lack of novelty) and the criteria of inventive step and industrial application were not considered.

A patent application can now be rejected for lack of novelty, lack of inventive step and/or lack of industrial application, among other grands.

These changes will provide stronger protection to the benefit of all patent owners seeking to enforce their patents in France.

INTRODUCING OPPOSITION PROCEEDINGS BEFORE THE INPI

Any third party with an interest will be able to question the validity of a granted patent via an opposition proceeding before the INPI. The conditions of this measure shall be implemented by a government ordinance before the end of August 2020.

This new procedure will make it possible to obtain either the amendment or the revocation of a French patent outside the courts and should constitute a simpler, faster and less costly alternative to a judicial invalidation action.

UTILITY MODEL SYSTEM

The utility model (certificat d’utilité) is an industrial property title issued by the INPI that confers a monopoly on the exploitation of an invention for a period of six years. The PACTE law, specified by French Decree No. 2020-15 of January 8, 2020, extends this period to 10 years.

The French utility model is now a more a credible alternative to patents (even though it will remain less reliable than patents since it is not subject to a substantive examination and a prior rights search report).

Until now, only patent applications could be converted into utility model applications. With the PACTE law, as specified by the aforementioned French Decree, the conversion of a utility model into a patent application is now possible.

STATUTE OF LIMITATIONS

INFRINGEMENT ACTIONS

As of 24 May 2019, the starting point of the statute of limitations for industrial property rights infringement actions changed from “5 years from the facts that caused the action” (i.e., from the infringement acts) to “5 years from the day on which a right holder knew or should have known the last fact enabling him/her to exercise this right”.

Previously, an infringement action could only concern facts that had occurred no earlier than five years before the introduction of a court action. Older facts were automatically disregarded by courts.

One can expect lively discussions before French courts on the starting point of this statute of limitations, including debate over identification of the last infringing fact, and when it should be considered that a right holder “should have known” about the last infringing fact.

The positive objective of this new provision is to prevent counterfeiting and to improve compensation of right holders.

INVALIDATION PROCEEDINGS

The PACTE law also provides that invalidation actions against industrial property titles are not time-barred. This provision came into force on 23 May 2019.

This absence of a statute of limitations applies to titles in force on the date of publication of the law, but will not affect final decisions having res judicata on that date.

The purpose of this provision is to put an end to the application by French courts of a five-year statute of limitations which worked against the public interest by preventing third parties from obtaining the revocation of invalid intellectual property rights through a direct invalidation action (even if it was still possible to do so via a counterclaim as part of an infringement action), and to the numerous disputes and contradictory case-law regarding the starting point of this period.

IMPLEMENTATION OF THE EU DIRECTIVE Under THE TRADEMARK REFORM PACKAGE

Finally, the PACTE law provides for the implementation by government ordinance of EU Directive 2015/2436 of the Trademark Reform Package, which took place on November 13, 2019 through the publication of French Ordinance No. 2019-1169, supplemented by French Decree No. 2019-1316 of December 9, 2019.

The key measures provided by this directive, now transposed into French law, are:

• The elimination of the graphical representation requirement for a valid trademark;

• The right to file oppositions before the INPI based on several prior rights;

• The right to file oppositions based not only on trademark registrations or applications, but also on new prior rights, such as company names, reputed well-known trademarks and protected geographical indications;

• The implementation of trademark revocation and invalidation actions before the INPI.

The Munich ‘Anti-Anti-Suit’ Injunction

On 11 July 2019, the Munich I District Court (Landgericht) issued an anti-suit injunction in patent litigation, preventing Continental, an automotive company, from further pursuing proceedings in the United States (see here). The Munich decision might become a landmark case because German courts have historically not been amenable to granting anti-suit injunctions.

The Munich I District Court ordered Continental to refrain from applying, before an US court, for an anti-suit injunction intended to directly or indirectly bar Nokia, the well-known mobile phone giant, from pursuing its German patent infringement lawsuits. The Munich court also ordered Continental to withdraw its existing motion for an anti-suit injunction before an US court.

The Munich court considered that if the anti-suit injunction sought by Continental before the US court were issued, it would interfere with Nokia’s interests in due protection of its patent rights, which interests are legally protected under § 823(1) German Civil Code (BGB). The granting of a US anti-suit injunction was sufficiently imminent to justify a Munich preliminary injunction against such US anti-suit injunction.

The mere grant of a US anti-suit injunction would not directly prevent Nokia from further pursuing its German patent infringement lawsuits, because a US anti-suit injunction would not have legal effect or be enforceable in Germany. However, if Nokia continued its German patent infringement lawsuit after a US anti-suit injunction had been granted, the injunction would likely have far-reaching consequences and economic disadvantages for Nokia in the United States. Hence, there could at least be an indirect prejudice to Nokia’s legal interests as protected in Germany.

Although the Munich court acknowledged that anti-suit injunctions are an admissible remedy under US law, the court still found that the particular anti-suit injunction Continental sought in the US would be unlawful under German and European law because it was intended to deprive Nokia of its right of action in Germany. The injunction would thus jeopardise the rule of law, the proper course of justice and the freedom of parties to file necessary motions without any restriction.

It is somewhat remarkable that the Munich court deemed the applied-for US anti-suit injunction unlawful because of its impact on German proceedings, only to then issue an anti-suit injunction of its own, with an impact on US proceedings. The Munich court did not expressly argue in this context that Nokia’s German patent infringement lawsuits, including the patent infringement lawsuits pending before the Munich court, were pending earlier than Continental’s US antitrust lawsuit.

Concluding its decision, the Munich court clarified that its preliminary “anti-anti-suit injunction” (in contrast to the anti-suit injunction Continental requested in the United States) was not intended to deprive Continental of its rights to bring an action. The Munich injunction was not directed against Continental’s main proceedings in the United States, only against the motion for an anti-suit injunction in the United States.

The Munich Higher Regional Court has recently confirmed the decision and rejected an appeal by Continental (see here). It remains to be seen whether anti-suit injunctions will become an accepted remedy under German and European law. At least in view of proceedings before other European courts, anti-suit injunctions may still be inadmissible, under the European “Brussels Ia” Regulation on procedural law.

German Balsamico

The European Unions Protected Designations of Origin (PDO) and Protected Geographical Indications (PGI) are intended to protect regional products in the European Union against counterfeiting and at the same time serve as a safe and binding quality mark for consumers.

In its decision in Case C-432/18, Consorzio Tutela Aceto Balsamico di Modena v. Balema GmbH, the Court of Justice of the European Union (CJEU) ruled the on the scope of protection for PGIs, and decided that there can be German balsamico.

The German company Belama GmbH produces balsamic vinegar, which it promotes inter alia as “German balsamico”. The Italian Protection Association for Modena balsamic vinegar (Consorzio Tutela Aceto Balsamico di Modena) considers this to be an infringement of Article 13 of Regulation (EEC) No 1151/2012 of the PGI “Aceto Balsamico di Modena”. According to Article 13, the registered names shall be protected, amongst other things, against any misuse, imitation or evocation and even if the true origin of the products or services is indicated or if the protected name is translated or accompanied by an expression such as “style”, “type”, “method”, “as produced in”, “imitation” or similar.

The PGI “Aceto Balsamico di Modena” was registered by the Granting Regulation 583/2009. This Regulation actually deals with objections to the registration which sought to ensure that the individual words “Balsamico” and “Aceto” do not enjoy protection. With regard to these objections, the 10th recital of the Granting Regulation 583/2009 states: “However, protection has been granted to the composite name ‘Aceto Balsamico di Modena’. The individual non-geographical terms […] may be used throughout the territory of the Community in compliance with the principles and rules of Community law”.

The CJEU clarifies in this case that not all elements of a Protected Geographical Indication necessarily enjoy protection and that in this case the protection is not extended to the non-geographical terms of the PGI “Aceto Balsamico di Modena”. Whether individual elements of a PGI are protected must be assessed by the national courts based on the facts submitted by the parties.

As far as can be seen, this is the first time the CJEU has dealt with parallel registrations with similar terms. Here, the terms “aceto” and “balsamico” appear on the registered PDOs “Aceto balsamico tradizionale di Modena” and “Aceto balsamico tradizionale di Reggio Emilia“. The fact that “Aceto” and “Balsamico” are not protected thus ensures that these three protected names can coexist peacefully.

Brexit has dominated European headlines over the past year and will be a development to look out for in 2020. The United Kingdom left the European Union on January 31, 2020, and entered a transition period, which will last through the end of 2020. There is a lot of uncertainty connected with Brexit for all IP owners as the details of the relationship between the United Kingdom and the European Union still need to be negotiated. Starting with the end of this transition period, it will no longer be possible to obtain IP protection in the United Kingdom through an EU Trademark or a Registered Community Design, and it is uncertain whether Britain will participate in the UPC system. We offer in greater detail an analysis of the impact of Brexit on IP rights here.

Talking of the UPC: The German Federal Constitutional Court (Bundesverfassungsgericht) may deliver its long-awaited decision in 2020. While the United Kingdom’s participation depends on Brexit negotiations and questions of European law, Germany will likely ratify the UPC agreement, if the Court has no objection.

Another important court decision will be the trademark case of Sky vs. Skykick, where the Court of Justice of the European Union is expected to deliver its decision in next six months. It concerns the question of whether a trademark registration may be invalidated on the grounds that terms within the specification are not defined with sufficient clarity or precision. The EU Advocate General has already stated his opinion that while a lack of clarity and precision in the specification of the goods and services is, on its own, not a ground for invalidity of a trademark, the use of a term such as “computer software” is too broad, and therefore contrary to the public interest. Filing strategies might therefore be impacted by this outcome.

And, finally, there are two important judgments concerning questions on FRAND expected in the Unwired Planet vs. Huawei cases of the UK Supreme Court and the German Federal Court of Justice (Bundesgerichtshof). The UK Supreme Court will decide on questions of jurisdiction in FRAND cases while the Bundesgerichtshof has its first opportunity to further clarify questions concerning FRAND and the antitrust defence against the assertion of SEPs after its famous Orange Book Standard decision (BGH KZR 39/06) and the later CJEU decision in Huawei vs. ZTE (C-170/13).