05 International Enforcement of IP Rights

8/13/2019 05 International Enforcement of IP Rights

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05 International Enforcement of IP RightsIntroduction

Part III of TRIPS established detailed enforcement obligations on all WTO members to create judicial means that

permit an IP owner to enforce its rights through private action before judicial authorities

Before TRIPS, no Intl IP Treaty addressed the issue of effective IP Rights Enforcement

WTO Dispute Settlement Understanding

Sets forth the WTO dispute settlement process

Commercial Piracy

Note -- the reading here doesn't add much substance.. Basically, commercial piracy is costly

Overview of Problems Face by Businesses to Protect IP

Loss of revenue/sales

Costs for IP enforcement

Lawyers

Hiring external investigators/enforcers

Loss of jobs, even?

Detriment to good will?

Decrease in quality of products in marketplace

Magnitude of Commercial -- Industry Estimates

Copyright Piracy

Trademark Counterfeiting

Patent Infringements

How to limit commercial piracy

Part III of TRIPS

Enforcement obligations on all WTO members

Dispute settlement

Set forth in the WTO Dispute Settlement Understanding (DSU)

ACTA

Anti-Counterfeiting Trade Agreement

Enforcement Obligations Under TRIPSPart III of TRIPS is divided into five sections:

General obligations

Civil procedures and remedies

Provisional measures

Border controls, and

ternational Enforcement of IP Rights file:///C:/Users/lherard/SkyDrive/DePaul/Fall 2013/International

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Criminal sanctions

Introduction

Art. 41 TRIPS :

Membersshall ensurethat enforcement procedures ... so as topermit effective action against any act

of infringement of intellectual property rights .... including expeditious remedies to prevent

infringements and remedies which constitute a deterrent to further infringements. These procedures shallbe applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for

safeguards against their abuse.

Civil/Provisional Remedies

see p. 696

Artt. 42-50 TRIPS require WTO members to provide:

Tools for effective civil enforcement against commercial piracy i.e. possibility of civil litigation

Evidentiary presumptions

Injunctions

Damages adequate to compensate the right holder

Mechanisms for the disposal of infringing goods, materials, and implements used to create those

goods

Specifically, Art. 50 TRIPS provides for injunctive relief

Availability of ex parte injunctive relief is considered fundamental

Criminal Sanctions

see p. 699

Art. 61 TRIPS provides for criminal sanctions:

Membersshall provide for criminal procedures and penaltiesto be applied at least in cases of wilful

trademark counterfeiting or copyright piracy on a commercial scale. Remedies available shall include

imprisonment and/or monetary fines ... In appropriate cases, remedies ... shall also include the seizure,

forfeiture and destruction of the infringing goods and of any materials and implements the predominant

use of which has been in the commission of the offence. Members may provide for criminal procedures

and penalties to be applied in other cases of [IP] infringement ... in particular where they are committed

wilfully and on a commercial scale

China -- Measures Affecting the Protection and Enforcement of IP Rights (Criminal Procedures)

(WTO Panel Report 2009) (p. 700)

Facts

USA complained that China's laws violated Art 61 because they did not provide for criminal

sanctions for certain acts of piracy on a commercial scale

China's laws specified levels/tiers of activity.


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USA argued that "any commercial activity" should be considered "on a commercial scale"

i.e. some activities that fall below China's legal standards should still be considered "on a

commercial scale" to trigger TRIPS protection

Issue

Are China's threshold for criminal procedures and penalties consistent with Art 61 TRIPS?

i.e. what does piracy/counterfeiting "on a commercial scale" mean?

Held

Counterfeiting or piracy "on a commercial scale" refers to counterfeiting or piracy carried on at

the magnitude/extent of typical commercial activity w.r.t. a given product in a given market

i.e. compare against the size of the market for legitimate goods in the country where the

piracy/counterfeiting is taking place

Rule

What constitutes a commercial scale for counterfeiting

AnalysisThe TRIPS statute uses the word "scale", which refers to activities of a certain size

i.e. not ALL activities constitute activity on a commercial scale

i.e. the statute is not written to imply that any/all commercial activity is targeted

In this case, consider the following factors:

The items being pirated; the number of goods

Money -- the price of the goods

The period of time over which infringements can be added up to satisfy the thresholds

The US provided shoddy evidence: non-credible news articles

Anecdotal evidence

Taken from US sources, not Chinese sources (i.e. they do not establish the size of the

markets/scale of activities that constitute "a commercial scale" in China)

Notes

Note 1, p. 705 - The best sources of the size of counterfeiting in China are Multinational

Corporations (MNCs). But they don't. Why?

Because they don't want to anger the Chinese govt

Note 4, p. 706 - ACTA

FILL THIS IN!!

Note 2, p. 676 - Calculating Losses

This is just an informational example. But a flaw in the reasonsing is: the method

assumes that every counterfeit sale would be a sale of the legitimate product

Grey market

e.g. companies with valid IP rights (e.g. a subsidiary) selling a legitimately

manufactured/licensed good from a lower-price market and reselling that good in a


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higher-price market

Border Controls

TRIPS Minimum Standards

Artt 51-60 TRIPS provide for special border enforcement obligations on thecountry of importation

Members shall ... adopt proceduresto enable a right holder, who has valid grounds for

suspecting that the importation ofcounterfeit trademark or pirated copyright goodsmay take

place,to lodge an application ...for the suspension by the customs authoritiesof the release into

free circulation of such goods.

Members mayenable such an application to be made in respect of goods which involve other

infringements of intellectual property rights...

Members mayprovide for corresponding procedures ...[for] goods destined for exportation ...

China -- Measures Affecting the Protection and Enforcement of IP RIghts (Customs

Measures) (WTO Panel Report 2009) (p. 708)

Facts

USA args that Chinese authorities lack the authority to order the destruction or disposal

of infringing goods required by Art 59 of TRIPS

China law created a "compulsory scheme" so that Chinese Customs could not exercise

their discretion to destroy goods; instead, they must give priority to disposal options that

allow infringing goods to enter channels of commerce and harm the right holder

e.g. activities are: Donation to social welfare bodies, Sale to the right holder,

Auction

USA args that the measures treat auction and other disposal methods as "compulsory

pre-reqs" that renders auction mandatory in certain circumstances (where USA would want

destruction or disposal)

China args that the measures express a "preference" for certain disposition methods

For auction, the Chinese measures say that:

Where confiscated goods infringing on IPR cannot be used in social public

welfare (e.g. donations), and the IPR holder has no intention to buy them, then

Customs can auction them off, after eradicating infringing features

USA args that if none of the first 3 options (social public welfare, selling back to IPR

holder, and auction) are not available, then (and only then) can the Chinese Customs

authorities destroy the goods

Issue


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Does the Chinese meet TRIPS Art 59 standards for disposal/destruction?

Held

(1) The Chinese Customs laws/measures meet the standards of TRIPS Art 59 w.r.t.

disposal/destruction

USA loses - USA has not established that the Customs measures, on their face,

OBLIGE Customs to auction the infringing goods

(2) The Chinese Customs laws/measures DO NOT MEET the standards of TRIPS Art 59

w.r.t. re-selling the goods

USA Wins here

The simple removal of the TM is not enough (other than in "exceptional cases") to

permit release of goods into the channels of commerce

Rule

Analysis

The Chinese law DOES allow Customs to destroy goods before auction

The law only creates a PREFERENCE for other types of disposal/disposition

US Approach to Border Controls

see p. 712

Ross Cosmetics Distribution Centers Inc v. United States (Ct Intl Trade 1994) (p. 714)

Held

Ptf's products are not counterfeits

However, Ct sustains Customs' finding of likelihood of confusion w/ ptf's packaging for"gorgeous"

Packages identical to that of GORGEOUS shall be denied entry

EU Approach to Border Controls

see p.

Administration des Douanes et Droits Indirects v. Rioglass SA, Transremar SL (ECJ 2003) (p.

722)

Held

A measure of detention under customs control, such as that at issue in the main

proceedings, cannot be justified on the ground of protection of commercial and industrial

property w/in the meaning of Art 30 EC

Private Enforcement - Procedural and Substantive ConcernsRecognition and Enforcement of Foreign Court Judgments


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We did not discuss this in lecture.. Add notes if you can, but do the stuff we covered

first.

Sarl Louis Feraud Intl v. Viewfinder Inc (2d Cir 2007) (p. 738)

Held

Analysis

The fair use doctrine balances the competing interests of the copyright laws and the First

Amendment

Exhaustion of Rights and Gray Market GoodsWhat are Gray Market Goods?

Gray Market Goods a.k.a. Parallel Imports are different than commercial piracy

They are authentic goods that are intended for a foreign market, but are diverted or imported, without

permission of the IP owner, into a country where the IP owner has valid IP Rights.

The problem is: whether the IP owner has the right to prevent the importation of gray market goodsby parties who do not have the consent of the IP owner (since the goods themselves may not actually be

illegal)

Owners' rights often depend on the country's approach to "exhaustion"

Exhaustion of IP Rights

Generally refers to exhaustion of the distribution right (right of IP owners to prohibit distribution)

International Exhaustion: A first sale of a good anywhere in the world exhausts distribution right (i.e.

after importation)

National Exhaustion: Exhaustion occurs only if the first sale of the goods occurs within the country of

importation

Regional Exhaustion: Exhaustion occurs if the first-sale occurs within a particular region (e.g. the EU)

Exhaustion of Trademarks

Intro

Countries have adopted different approaches. Even TRIPS Art 6 says "nothing in this Agreement

shall be used to address the issue of exhaustion of IP rights

Complex issues arise in connection with gray market importation of TMed goods

Main problem: to determine exhaustion when a TM is simultaneously used by the

registered TM owner and other affiliated and unaffiliated entities


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In Both the US and EU, an authorized first sale by related companies leads to exhaustion

Distinguish

EU - Regional Exhaustion

If there is economic link (broader std than US approach)

Licensees and exclusive distributors --> economic link

US - International ExhaustionIf there is "common control" btwn owner and subject (e.g. parent / subsidiary)

Licensees and exclusive distributors --> no "common control"

But in both EU and US, an authorized first sale by a "related company" constitutes an

exhaustion of distribution rights under TM law

(More on this follows)

EU Approach to TM Exhaustion

EU adoptsRegional exhaustionof TMs

Exhaustion applies where the owner of a TM in the importing state and the owner of the TM in

the exporting state are (1) the same; or (2) if they are not the same, but they are "economically

linked"

Does not require affiliation (e.g. parent/sub relship not required)

Only needs license to use TM, or exclusive distributorship

IHT Internationale v. Ideal Standard GmbH (ECJ 1994) (p. 746)

Facts

American Std (AS) is a an American company

A French subsidiary of AS had the French TM, "Ideal Standard"

French subsidiary sold TM to SGF (a French Company)

SGF assigned the TM to another French company, CICh (so now CICh has the

French TM for Ideal Standard)

AS also had German subsidiary, Ideal-Standard GmbH

Another Germany co, IHT, was a subsidiary of CICh (therefore imported goods in

France, using the French Ideal Standard TM), and sold the goods in Germany

Ideal Standard GmbH sought to enjoin IHT from marketing goods in Germany

under the Ideal Standard TM (because of likelihood of confusion btwn the IHT-owned

French Ideal Standard tm in Germany and the Ideal Standard GmbH-owned Ideal

Standard tm in Germany)

Claimed consumer confusion


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Issue

Is there exhaustion of rts where TM has been assigned for one or several Member

States ONLY and there is NO ECONOMIC LINK btwn assignor and assignee?

Held

No -- no exhaution of rights

Rule

Art 30 EEC

NO Quantitative restrictions on products traveling btwn the EU countries

ART 36 EEC

Exceptions are OK when necessary to protect IP Rights

Analysis

This holding illustrates the "economic link" standard.. I think

Also, there is no unlawful restriction on trade btwn Member States w/in the

Meaning of Articles 30 and 36 where a subsidiary operating in Member State A, of a

manufacturer established in Member State B, is to be enjoined from using a particular

name (as a trade mark) because of the risk of confusion with a device having the same

origin

The holding remains true even if (a) the manufacturer is lawfully using the

disputed name in his country of origin under a trademark protected there, (b) he

acquired that trademark by assignment, and (c) the trade mark originally belonged to a

company affiliated to the undertaking which, in Member State A, opposes the

importation of goods bearing the disputed trademark

US Approach to TM Exhaustion

USA adoptsInternational exhaustionof TMs (broader scope than EU)

But USA int'l exhaustion applies only to goods sold by an entity under the "Common

control"of the US Trademark Owner

What DOES trigger International Exhaution

Sales of TMed goods ANYWHERE, by an entity under the "common control" of the USTM owner will trigger exhaustion

e.g. In US, an authorized first sale by "related companies" constitutes exhaustion of

distribution rts under TM law

What DOES NOT trigger International Exhaustion

Sales of goods by independent third parties will NOT trigger exhaustion of TM

distribution rights in those goods

Standard = "Common Control"


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e.g. a subsidiary of a parent co, or e.g. 2 separate subsidiaries of the same parent -->

under the "common control" of the parent TM owner

a mere licensee or an exclusive distributor would NOT be under the "common control"

of the TM owner

K Mart Corp v. Cartier, Inc (US 1988) (p. 751)

Facts

526 of 1930 Tariff Act prohibits importing "into the US of any merchandise offoreign manufacture, if such merchandise bears a TM owned by a US citizen/entity,

unless with written consent"

"Common Control Exception" -- the ban does NOT apply IF:

Goods mfg'd abroad by the TM owner or its affiliate, i.e. IF:

Foreign AND US TM owners are the same person or entity, OR

Foreign and US TM owners are parent / subsidiaries, or subject

to common ownership or control, OR

The goods manufactured abroad bear the TM with the

AUTHORIZATION of the mark's US owner

Respondents (an association of US tm holders and two of its members) brought

suit in Fed Dist Ct seeking (1) delcaration that the Customs Service regulation is

invalid and (2) injunction against its enforcement

Issue

Is the "common control exception" valid?

Rule

526 of 1930 Tariff Act prohibits importing "into the US of any merchandise of

foreign manufacture, if such merchandise bears a TM owned by a US citizen/entity,

unless with written consent"

"Common Control Exception" -- The restrictions do not apply to imported articles

when: (Goods mfg'd abroad by the TM owner or its affiliate), IF:

(1) Both the Foreign AND US trademark/trade name are owned by the same

person/entity, OR

(2) The Foreign and US TM owners are parent / subsidiaries, or subject to common

ownership or control, OR

(3) The goods manufactured abroad bear the TM with the AUTHORIZATION of the

mark's US owner

Held

Court held that the "common-control" exception is consistent with 526

Court struck down the "authorized-use" exception of the Tariff Act, but left

the other 2 provisions intact

Provisions (c)(1) and (c)(2) are CONSISTENT with 526 (i.e., they

comply with ..)

BUT Provision (c)(3) is NOT CONSISTENT with the statute, and


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cannot stand

The "authorized use" exception denies a domestic trademark holder the

power to prohibit importantion of goods made by an indep foreign manuf where

the domestic tm holder has authorized the foreign manuf to use the mark

Analysis

The gray market arises in any of three general contexts:

Case 1 -- A US firm purchases from an independent foreign firm the

rights to register and use the independent foreign firm's TM as a US

TM, and to sell its foreign-manufactured products in the US

Issues that arise:

Parallel importation

Foreign firm may also import goods to US --

competes w/ the US firm that has the TM to sell the

goods

Foreign mfcr sells its goods outside US, and a 3rd

party who purchases them abroad could legally import

them back to US

Intra-brand competition (i.e. US firm competing with the

Foreign firm that legally imports in the US)

This type of gray market is banned by 526 -- US firm can

prevent importation of these goods

Case 2 -- US firm registers the US TM for goods that are mfg'd abroad

by an affiliated manufacturer

Case 2a: The US firm is a subsidiary of a foreign manufacturer

-- the subsidiary registers, under its own name (or the mfcr assigns

to the subsidiary's name) a US TM that is identical to the parent's

foreign TM

Issues that arise: Parallel importation by a 3rd party who

buys the goods overseas) creates a gray market

Case 2b: The US firm is the parent company, and the foreign

mfcr is a subsidiary manufacturing company

Case 2c: The US firm is the parent company, and the foreign

mfcr is an unincorporated manufacturing division of the US co

Issues that arise: Parallel importation

This type of gray market is banned by 526. BUT, the "common

control" exception lifts the ban..

(i.e. the US company could not stop the importation of

products made under Case 2)

Case 3 -- The US company holds a US TM; authorizes an


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independent, foreign manufacturer to use the TM (usually the US holder

sells to the foreign manufacturer an exclusive rt to use the TM in a

foreign place, but contracts w/ the foreign manufacturer to prevent the

foreign manufacturer from importing its TMed goods into the US)

Issues that arise: Gray market -- if the foreign mfcr, or a 3rd

party, imports into the US, the foreign-made goods will compete on

the gray mkt w/ the holder's goods

This type of import is NOT banned by 526 -- i.e. a US firm

could not stop parallel importation in this case (and it should be

able to)

Prof's Notes

The Common control exception is provided by an agency regulation

( 19 CFR) => it cannot be inconsistent with federal law i.e. with 526 of

the 1930 Tariff Act

Source of ambiguity 526 of the 1930 Tariff Act => meaning of:

Manufactured abroad, and

Owned by

Case 1 => clearly within the ban

Case 2(a) => possibly outside the ban ... is there a TM

owned by a US subject?

Case 2(b) => possibly outside the ban... are the goods

merchandise of foreign manufacture?

Case 2(c) => possibly outside the ban... are the goods

merchandise of foreign manufacture?

Case 3 => clearly within the ban

NOTE: consider Lever Brothers

42 of the Lanham Act => No importation of foreign goods

with identical (legitimate) TMs, but physically different

independently from the affiliation issue

Lever Brothers v. United States (DC Cir 1993) (p. 755)

FP

Lever US (LUS) is American co

Lever UK (LUK) is LUS' British Affiliate

Both LUS and LUK make deodorant soap under the "Shield" TM, and hand

dishwashing liquid under the "Sunlight" TM. The marks are registered in each

country

The US and UK versions of the products are formulated differently, for

regional preferences

US and UK also both have slightly different packaging


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Issue

Held

42 of Lanham Act bars the importation of goods that bearing a trademark

identical to a valid US trademark, but which are physically different from the

US goods (even though the use of the TM is valid

ANALYSIS

Consumer confusion is an issue. i.e. if the goods were formulated the same,then there likely wouldn't be an issue. However, in this case, the goods are

formulated differently, AND packaged differently.. But had the same marks

Exhaustion of Copyrights

EU Approach to Copyright Exhaustion

Regional exhaustion- same as TM and patents

Consent approach

US Approach to Copyright Exhaustion

At first, national exhaustion (the first-sale doctrine used to apply a "National Exhaustion"

standard

BUT NOW, the Supreme Court has decided that the US follows International Exhaustion

(based on Kirtsaeng)

Quality King Distributors v. L'anza Research International (US 1998) (p. 760)Facts

L'anza (L) manufactured shampoos and other products, in the US

L also sold product in foreign markets (where they are cheaper)

L copyrighted the labels it put on bottles

L shipped products to UK; UK shipped to Malta; from Malta, products came back

through Quality King (QK) to the US (parallel import)

L only sold through authorized retailers; advertised at trade shows; through trade

magazines, and stuff

QK sold products through any ol' stores

602(a) of Copyright Act --> right to prohibit the unauthorized importation of

copies

Issue

Is 602(a) limited by the provision of 109(a)?

Held

109(a) does not apply to parallel importation -- only applies to goods made in


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USA

Rule

602(a) of Copyright Act --> right to prohibit the unauthorized importation of

copies

"Importation into the US, without the authority of the owner of the copyright

under this title, of copies or phonorecords of a work that have been acquired

outside the US is an infringement of the exclusive right to distribute copies or

phonorecords under 106, actionable under 501

Act 106 = exclusive rights (e.g. right to distribute, right to copy, right

to make derivative works, etc)

Act 106 specifies that 106 is limited by 107 - 120

109(a) = First Sale Doctrine --> Copyright exhausts upon first sale;

i.e. legit purchaser of (C)ed works are

"Notwithstanding the provisions of 106(d), the owner of a

particular copy or phonorecord lawfully made under this title, or

any person authorized by such owner, is entitled, without the

authority of the owner, to sell or otherwise dispose of the

possession of that copy or phonorecord

Analysis

Court interpreted "lawfully made under this title" to mean only goods made in the

US

Act, a US law, can only affect US goods

Therefore, First-Sale doctrine does not apply to foreign-made goods

Notes

The court only specified that the FSD applies only to goods made in the US; not

where they were first sold

Omega S.A. v. Costco Wholesale Corporation (US 2010) (p. 764)

Facts

Omega made watches in Switzerland, and sells them globally

Engraved on the watches is a U.S. copyrighted "Omega Globe Design"

Issues

Held

First-Sale Doctrine is unavailable as a defense to the claims under 106(3)

(exclusive rights) and 602(a) (imports) because there is no genuine dispute that

Omega manufactured the watches bearing the Omega Globe Design in Switzerland

Rule

Analysis

Notes


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Based on Quality King, the first-sale doctrine should not have applied in this case,

because the watches were not made in the United States

Issue =

Goods manufactured abroad

First sold abroad, then imported abroad, and RESOLD by Costco

So, First-Sale does not apply here. i.e. Copyright holder still

See the Circuit Split notes at left

Kirtsaeng (2d Cir 2013) (Print-out)

Facts

Entity in US had for textbooks

Gave authorization to print/publish the textbooks abroad

Goal was to segment the market

Textbooks were sold cheaper abroad than in the US

Some foreign-made books were imported into US; other books were published in

the US and sold here

owner

Issue

Does first-sale doctrine apply to imported copies of U.S.-copyrighted works

manufactured abroad, i.e. do the words "lawfully made under this title" restrict the

scop of th 109(a) first-sale doctrine geographically?

Held

Analysis

109(a) says nothing about geography -- no geographic restriction

It doesn't matter where the goods are MANUFACTURED or First-Sold

First-sale doctrine applies internationally

i.e. if first sale occurs overseas, then owner in the US cannot

prevent parallel import of genuine products

"Lawfully made under this title" means:

Lawfully made --> only authorized copies

Under this title --> copies made "in accordance with" or "in

compliance with" the Copyright Act

Notes

Kirtsaeng (2nd Circuit) held: Goods produced abroad, First sold in US --> No

exhaustion of ; i.e. owner can stop the importation of the goods if they are not

authorized

This decision allows the "off-shoring loophole" that Omega prevented.

"International Exhaustion" -- if the first sale occurs abroad, it exhausts


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copyright

BUT THE SUPREME COURT OVERRULED OMEGA

If goods produced abroad, then independently of whether they are first sold

in the US or abroad, the rights are still exhausted

Kirtsaeng is the law

US follows International Exhaustion

Exhaustion of Patents

EU Approach to Patent Exhaustion

Regional Exhaustion (same as TMs and Copyrights)

US Approach to Patent Exhaustion

National Exhaustion

Merck & Co v. Primecrown Ltd (ECJ 1996) (p. 769)

Facts

Merck claims that Primecrown infringed its UK patents for a hypertension drug

M Claims that PC carried out parallel imports of the drugs into the UK

(i.e. from Spain & Portugal)

Note: At the time, those drugs were not patentable subject matter in Portugal and

Spain

Issue

Do Art 30 and 36 of the EEC Treaty preclude the application of national legislation

which grants the holder of a patent for a pharma product the right to oppose

importation by a 3rd party of that product from another Member State, in

circumstances where the holder

1st put the product on the market in that state after that state's accession to

the EC, but before the subject matter could be protected by patent in that State?

Held

Yes

Analysis

Merck entered the Spanish and Portuguese markets voluntarily; i.e. they weren't

forced to by a compulsory license

Jazz Photo Corp v. International Trade Commission (Fed Cir 2001) (p. 772)

Facts

Fuji film made single-use disposable cameras

Some cameras were First sold in US; others were first-sold abroad

Appellant Jazz Photo imports to the US used cameras that were refurbished by

various overseas "re-manufacturers


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EC said JP's actions constituted banned reconstruction of goods

Issue

Did appellant's actions constitute patent infringement?

Held

No patent infringement for cameras that Fuji first sold abroad; but patent

infringement for cameras first sold in the US

i.e. Fuji could prevent importation of cameras first-sold abroad, but could not stop

the importation of cameras that were first-sold in the US

Analysis

"imported articles of solely foreign provenance are not immunized from

infringement of US patents"

Articles of "solely foreign provenance" means authorized international first

sales


05 International Enforcement of IP Rights

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