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IP Bulletin - August 2013

12 August 2013


US Supreme Court rules that isolated naturally occurring DNA segment is a product of nature and not patentable – unlike the position in Europe

However, although isolated naturally occurring DNA may not be patented, the US Supreme Court ruled that complementary DNA (synthetically created to exclude introns (non-coding sections of DNA)) is patentable because it is not “naturally occurring” – whereas in the EU it is recognised ,that biological material isolated from its natural environment may be the subject of an invention even if it previously occurred in nature”.

Association for Molecular Pathology et al v Myriad Genetics, Inc. et al No 12-398 US Supreme Court 


The respondent, Myriad Genetics Inc. (“Myriad”), obtained several patents following discovery of the precise location and sequence of the BRCA1 and BRCA2 genes on human deoxyribonucleic acid (“DNA”). Mutation of the two genes can increase the risk of a patient developing breast and ovarian cancer. Myriad used this discovery to determine the nucleotide base sequence of these genes, enabling Myriad to develop medical tests for detecting mutations (a change in the base sequence) in the genes, thus assessing the patient’s cancer risk.

The petitioner, Association for Molecular Pathology (“AMP”), sought a declaration from the court that Myriad’s patents were invalid.

If valid, Myriad’s patents would give Myriad the exclusive right to isolate an individuals BRCA1 and BRCA2 genes and the exclusive right to create BRCA complementary DNA (“cDNA”), a synthetically created copy of the genomic DNA which excludes introns (sections of DNA which do not code for amino acids and therefore which are not used for protein synthesis in the body). Isolation of the genes enables genetic testing for mutations (and thus assessment of cancer risk) to take place. Since Myriad is in the business of developing and marketing diagnostic tests, having the exclusive right to isolate the genes is very important for Myriad’s business.

The District Court ruled that Myriad’s patent claims were invalid because they covered products of nature. The Circuit Court subsequently ruled in Myriad’s favour. AMP appealed to the US Supreme Court.


The US Supreme Court ruled that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated. However, complementary DNA is patent eligible because it is not naturally occurring.

Key points 

The US Supreme Court judges made the following key points in their Opinion:

  • Section 101 of the US Patent Act provides:
    “Whoever invents or discovers any new and useful … composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

    The US Supreme Court referred to the long held view that this provision of the US Patent Act “contains an important implicit exception. Laws of nature, natural phenomena, and abstract ideas are not patentable. Rather, they are the basic tools of scientific and technological work that lie beyond the domain of patent protection”.
  • Myriad did not create or alter any of the genetic information in the BRCA genes. The location and order of the nucleotide base sequences of the genes existed in nature before Myriad discovered their precise location and sequence.
  • Isolating DNA from the human genome (by severing chemical bonds thereby creating a molecule which is not natural) did not save Myriad’s patent claims since Myriad’s patent claims were not expressed in terms of chemical composition.
  • cDNA does not present the same obstacles to patentability as naturally occurring isolated DNA segments. This is because creation of a cDNA sequence results in an exons-only molecule that is not naturally occurring (the naturally occurring introns or non-coding sections are removed). Therefore, in creating cDNA, the lab technician creates something new which is not a product of nature and which is patent eligible under Section 101 “… except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA” (in such situation a short strand of DNA may be indistinguishable from natural DNA).

It is important to note that in its Opinion the US Supreme Court specifically states that it was “[merely holding] that genes and the information they encode are not patent eligible [under the US Patent Act] simply because they have been isolated from the surrounding material”. The Opinion also specifically sets down what is not implicated by the decision: (method claims; patents concerning new applications of knowledge about the BRCA1 and BRCA2 genes; and the patentability of DNA in which the order of the naturally occurring nucleotides has been altered.


Whilst the Court held merely isolating the genomic DNA from its surrounding genetic material does not make it eligible for patent protection in the US, since it is a discovery of a composition of matter that is already there (however much effort goes into finding it), this does not mean for example that genes in altered form are patentable; there will still be many areas of gene-related technology where patents will be obtainable.

Nevertheless, for biotech companies, concerns will be raised since the principle behind the Opinion is likely to be applied to other items found in nature, such as proteins and other molecules as well as other animal, plant and microbial genes.

So far as the situation is Europe is concerned, patent protection for biotechnological inventions is subject to the European Directive on the Patenting of Biotechnological Inventions. The Directive recognises that biological material isolated from its natural environment “… may be the subject of an invention even if it previously occurred in nature” [Article 3(2)]. The Guidelines in the European Patent Office make clear that “to find a previously unrecognised substance occurring in nature is also a mere discovery and therefore unpatentable. However, if a substance found in nature can be shown to produce a technical effect, it may be patentable…[and…a gene which is discovered to exist in nature may be patentable if a technical effect is revealed, eg its use in making a certain polypeptide or in gene therapy”. However, in practical terms, there may now be little difference between the position in the US, where genes and the information they encode are not patent eligible simply because they have been isolated from the surrounding material and that in Europe where, provided a technical effect is produced, such matter may be (ie is not specifically excluded from being) patentable. 

Competition law infringements - European Commission fines companies over “pay for delay” deals aimed at delaying competitors entry into the market

Following a lengthy investigation, the European Commission has fined Lundbeck and a number of generic companies more than €140 million for entering into “pay for delay” agreements with competitors. Such “pay for delay” deals, an infringement of competition law, are not aimed at protection of intellectual property rights. Instead, the Commission says they have the effect of delaying the entry of competitors onto the market, keeping expenses high for European citizens and compensating competitors for lack of business by giving competitors the equivalent of what they would have earned if they had entered the market.


In 2002, Lundbeck entered into agreements with several producers of generic medicines (Alpharma, Merck KGaA/Generics UK, Arrow and Ranbaxy) to delay the market entry of cheaper generic versions of Lundbeck's branded Citalopram product, an antidepressant. The agreements contravened rules that prohibit anticompetitive agreements (under Article 101 of the Treaty on the Functioning of the European Union (“TFEU”)).

After Lundbeck's basic patent for the Citalopram product expired, it was faced with relying on a number of related process patents which provided more limited protection. Producers of cheaper, generic versions of Citalopram therefore had the opportunity to enter the market. Generic competition generally drives prices down significantly, reducing the profits of the producer of the branded product and bringing commensurate pricing benefits to patients.

However, in this case, the generics producers agreed with Lundbeck not to enter the market in return for substantial payments and other inducements from Lundbeck amounting to tens of millions of euros. Internal documents examined by the European Commission refer to a "club" being formed and "a pile of $$$" to be shared among the participants. Lundbeck paid significant lump sums, purchased generics producers' stock for the sole purpose of destroying it, and offered the generics producers guaranteed profits in a distribution agreement. The overall agreements gave Lundbeck the certainty that the generics producers would stay out of the market for the duration of the agreements without giving the generics producers any guarantee of market entry thereafter. 


The Commission has ruled such agreements are an infringement of competition law and has fined Lundbeck €93,8 million and fines totalling € 52,2 million for the generics producers.


The Commission has been monitoring patent settlement agreements in the pharmaceutical sector for some time in order to identify those settlements which violate antitrust laws - namely those that limit generic entry whilst providing for a transfer of value from one party to a generics producer. The Commission’s latest report published in July 2012 concerning pay for delay agreements indicates that the proportion of such agreements has stabilised at the low level of 11% of settlement agreements generally.

It is not simply the level of fines that need to be taken into account. Any person or firm affected by anti-competitive behaviour such as pay for delay agreements may seek damages before the courts of Member States, and even though the Commission has fined the companies concerned, any damages awarded are unlikely to be reduced on account of the Commission fine.

Life is not likely to become easier for those found to be engaging in anti-competitive practices; in June 2013, the Commission adopted a proposal for a Directive that makes it easier for victims of anti-competitive practices to obtain damages (see IP/13/525 and MEMO/13/531).


Court of Appeal confirms use of “Fine” is passing off and trade mark infringement of “Fine & Country”

The Court of Appeal confirms that Okotoks’ use of “FINE” infringed Fine & Country’s trade marks and upheld the High Court ruling on passing off, confirming the trial judge’s approach concerning independent witness evidence and acquired distinctiveness.

Okotoks Ltd and others v Fine & Country Ltd and others [2013] EWCA Civ 672, 14 June 2013


The case between Fine & Country Ltd and others (“Fine & Country”) and Okotoks Ltd and others (“Okotoks”) concerned the use of marks by residential estate agents. Fine & Country’s registered national device mark and figurative Community Trade Mark were available to be used under licence by local firms of estate agents (Fine & Country did not operate as an estate agency itself).

Okotoks traded under the name “haart” and launched a premium sales business under the name “finehaart”, later changing the name to “FINE” (see below). Fine & Country alleged trade mark infringement and passing off.

At trial in the High Court in 2012, the judge ruled that Okotoks use of “FINE” with the strap line “selling fine homes throughout the country” was liable to confuse potential customers and that Fine & Country had established trade mark infringement and passing off. (See here for further information regarding the High Court ruling.) Okotoks appealed.


The Court of Appeal upheld the trial judge’s ruling and dismissed Okotoks’ appeal.

Key points

The Court of Appeal said the following about Okotoks’ several grounds of appeal:

Passing off
  • Okotoks argued that since Fine & Country was not trading (its business model was that of a franchisor), there was no business to which the relevant goodwill may attach and thus Fine & Country could not maintain an action in passing off. However, the Court of Appeal said that following Dawnay Day & Co Ltd v Cantor Fitzgerald International [2000] RPC 669, a franchisor would accrue goodwill and be entitled to sue in passing off.
  • Okotoks argued that the trial judge made an error of principle in establishing passing off saying that Okotoks’ sign was descriptive and Fine & Country should expect some confusion and deception where the use of descriptive signs is concerned. However the court ruled that no error of principle was made, finding that the trial judge was persuaded that passing off was established because of the combination of the name “FINE”, the font, use of capital letters, underlining, gold ink, strap line and overall impression of the sign. The trial judge found there was a misrepresentation in consequence of the detailed design of Okotoks sign - Okotoks represented themselves as successors to or part of the network licensed by Fine & Country.
  • Okotoks argued that the trial judge adopted too wide a definition of class of person deceived saying the class should extend to licensed estate agents (on the evidence, they were not deceived) and possibly sellers of property but not buyers. The Court of Appeal rejected this argument saying that sellers and buyers fall into the class of person as ultimate consumers of Fine & Country’s services. The court said the judge made no error in including sellers and buyers in the class of person deceived: “if a potential buyer...is deflected from buying a property offered by a Fine & Country agent into buying a property marketed by Fine, then that is a potential sale lost”.
  • While Okotoks was critical of the trial judge’s evaluation of the evidence, the court said there was nothing wrong with his approach and that there was no error of principle. The judge was right to consider the evidence from two witnesses that they had been deceived by the “FINE” sign (the classic way in which passing off cases are decided). Following Interflora Inc v Marks & Spencer, evidence of real world confusion is of real value; there was no need for the judge to apply the standards applicable to surveys and witness collection programmes to a passing off case. The judge recognised the limitations of evidence from emails and witness statements and his approach could not be faulted.
  • Although no measurable damage had been suffered by Fine & Country the judge was correct to be concerned about future damage. The evidence of loss of a licensee was sufficient for the judge to make an assessment that damage had been caused.
Trade mark infringement

Although Okotoks argued that the trial judge should have revoked Fine & Country’s marks because they were devoid of distinctive character, the Court of Appeal said that the judge made no error of principle in his assessment of acquired distinctiveness; although he did not follow the Windsurfing structure precisely, all the factors mentioned were those that the CJEU referred to in the judgment. On
inherent distinctiveness, the court said there had been deficiencies in the trial judge’s reasoning and if the case had only concerned inherent distinctiveness, the appeal might have been allowed. The trial judge’s ruling on infringement was upheld.


Although it might generally be expected that the use of a common word such as “FINE” would not give to a party using it the right to prevent its use by a third party, that was not the position here. However it is important to note that the case was very fact specific; there was compelling evidence from witnesses who said that they had been deceived by Okotoks’ particular use of the “FINE” sign.

The case acts as a good example of the care that needs to be taken even when using a common word (or other identifying feature) as a trade mark to ensure that a third party’s rights are not infringed. Simply because that word (or other identifying feature) is in common use, that is not necessarily sufficient to prevent a party acquiring rights in or relating to the use of that word or feature in a particular style.

General or specific and UK or pan-European injunction appropriate in Interflora keywords dispute?

The High Court recently determined the form of an injunction sought by Interflora following the keywords ruling against Marks and Spencer PLC and concluded that a general injunction (rather than one specifying the particular acts restrained) was appropriate and that the injunction should be EU-wide rather than limited to the UK.

Interflora Inc and another v Marks and Spencer Plc and another [2013] EWHC 1484 (Ch), 12 June 2013


The claimants Interflora Inc and another (“Interflora”), recently successful in trade mark infringement proceedings against Marks and Spencer PLC and Flowers Direct Online Ltd (“M&S”) over M&S’s use of keywords (see Here for earlier report on the judgment), sought an injunction against M&S restraining M&S from further infringement of Interflora trade marks. In the present hearing, the court was asked to consider the form (specificity and geographical scope) of that injunction.

Interflora sought a general injunction restraining trade mark infringement; and a UK injunction in respect of its UK trade mark and an EU-wide injunction in respect of its Community Trade Mark (“CTM”). However, M&S argued that the injunction should specify the particular acts restrained and should only extend to the UK for both marks.


The court ruled that a general injunction would not be disproportionate or create a barrier to legitimate trade in the circumstances of the case. In the case of the CTM, the court ruled that the injunction should be EU-wide.

Key points

The judge, Arnold J, made the following points in his judgment:

General or specific injunction
  • The conventional form of injunction granted by the High Court is a general injunction “…not to infringe Trade Mark No. …..” and it is not usual to specify the particular acts which are restrained.
  • Remedies for trade mark infringement must comply with Article 3(2) of the Directive on enforcement of intellectual property rights (2004/48/EC) which provides that remedies should be “effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse” (following DHL Express France SAS v Chronopost SA [2011] Case C-235/09).
  • It is not necessarily the case that a general injunction is disproportionate, although there may be specific circumstances in which a general injunction would be disproportionate.
  • M&S argued that general injunctions were always disproportionate because they had a chilling effect (the risk of contempt of court meant that the defendant had to be cautious when deciding how to comply with the injunction) but the judge said that following Hotel Cipriani Srl v Fred 250 Ltd [2013] EWHC 70 (Ch), there was a procedural solution to this problem – the availability of declaratory relief on application to the court.
  • Although the court has a discretion to impose a specific injunction, the cases in which such discretion is exercised are mainly cases about parallel imports. In such cases the courts have recognised that a general injunction may be disproportionate because the defendant is dealing in genuine trade marked goods and it may be difficult to be certain whether the goods are in free circulation within the EEA. Therefore a general injunction may operate as a barrier to trade. However, those considerations did not apply in the present case.
Geographical scope
  • In the case of DHL above the CJEU ruled that a prohibition against further infringement or threatened infringement of a CTM “must as a rule extend to the entire area of the European Union”. However, the court recognised that there are exceptions to this general rule: where a trade mark proprietor complains about acts of infringement or threatened infringement in part of the EU or where the defendant proves that use of the sign in question does not affect and is not liable to affect the functions of the trade mark in certain member states other than the state(s) in respect of which the mark is registered. In the case of both exceptions territorial scope of an injunction must be limited.
  • The first exception did not apply in the present case and since M&S did not prove that use of the sign doesn’t affect and is not liable to affect the functions of the CTM in Member States other than the UK, the judge concluded that the general rule stated by the CJEU should be applied and therefore an EU-wide injunction should be granted.
Negative matching

The judge also considered the role of negative matching in the Google Adwords process. In the earlier judgment, the court ruled that keyword advertising by M&S infringed Interflora’s trade marks. In the present ruling, the judge said that the CJEU’s keyword advertising decisions all refer to the advertiser selecting a keyword which is identical or similar to the trade mark. Interflora said that M&S not only selected keywords identical or similar to Interflora’s trade marks; but also selected keywords which were not identical or even similar to Interflora’s marks. As a result of Google’s advanced broad matching algorithm, if an internet user searched for “interflora” an M&S advert was displayed because M&S had bid on the keyword “flower delivery”. In the present case, it appeared to the judge from M&S’s counsel’s skeleton argument that M&S disputed that it used an identical or similar mark when it was bidding on other flower related keywords by broad matching without negative matching “interflora”. However, the judge said M&S did use the sign but in an indirect way; it was immaterial that that this was achieved by technical means which did not involve selecting “interflora” as a keyword. M&S’s actions (a failure to negative match) still amounted to trade mark infringement. The judge said that his reasoning was not inconsistent with the CJEU’s ruling in Interflora


From time to time questions are raised as to whether it is correct, in intellectual property cases, that the normal form of an injunction should be that it should prevent any future infringement of the intellectual property right, rather than one limited to the specific issues before the court at the time. This case gave the court the perfect opportunity to review that position, which it did, and left the position unchanged. The judge’s comments concerning negative matching will be welcomed by brand owners but will be of concern to keyword advertisers.


Obscure disclosures exception considered as the “Trunki” ride-on children’s suitcase Community registered design is held infringed by the “Kiddee Case”

Although Dragons Den investors decided not to invest in the Trunki, the product later achieved success. Now in the High Court, Trunki has successfully claimed infringement of (i) its Community registered design; (ii) design rights in a number of design drawings; and (iii) copyright in a product safety notice on the packaging of the Trunki. The judgment provides useful guidance on the extent of prior disclosures and the applicability of the obscure disclosures exception under Article 7 of the Community Designs Regulation. As in the Trunki case, designs which are not sufficiently obscure as to be excluded by the obscure disclosures exception (and which may therefore be cited as prior art), may not form part of the design corpus when assessing the overall impression created by other designs under Article 10 of the Regulation. 

Magmatic Ltd v PMS International Ltd [2013] EWHC 1925 (Pat)


The claimant Magmatic Ltd (Magmatic) was the manufacturer and seller of a popular children’s ride-on suitcase sold under the Trunki trade mark. The Trunki was designed by Magmatic’s founder and director Mr Robert Law who studied product design at university. As a student, Mr Law entered a competition to produce a design for luggage. His competition design was entitled the Rodeo, a ride-on product made from injection moulding which had a large internal space for storage. Mr Law won the competition, was presented with an award at an awards ceremony and went on to develop his design further following university. The product was renamed Trunki and was first sold in 2004.

In 2006, Mr Law appeared on the television programme Dragons Den, seeking investment for his product but was turned down by the Dragons. However, he subsequently signed an agreement with the John Lewis department store chain and the product became successful. Different versions of the Trunki have been sold including versions with animal and insect prints (for example, cow, bee, lion).

The Trunki: 


The defendant PMS International Ltd (PMS) imported and sold a similar product called the Kiddee Case. There was no dispute that the design of the Kiddee case was inspired by the Trunki to some extent. Magmatic claimed that the Kiddee Case infringed several of Magmatic’s intellectual property rights: Community Registered Design (“CRD”) No. 43427-0001; design rights in a number of designs relating to the Trunki; copyright in the artwork for the packaging of the Trunki; and copyright in a safety notice which appeared on Trunki’s packaging.

The Kiddee Case: 

kiddie case.jpg


Arnold J ruled that PMS infringed Magmatic’s CRD, infringed the design rights in certain of Magmatic’s designs, infringed copyright in the Trunki safety notice but did not infringe copyright in the Trunki artwork.

Key Points
  • One issue raised in the case was whether the disclosure of the earlier concept design, the Rodeo, at the time of the award competition and ceremony fell within the obscure disclosures exception in Article 7(1) of the Community Designs Regulation (6/2002/EC). For a design to be protected by a Community design, it must be new and have individual character. Under Article 6, a design is considered to have individual character if the overall impression it produces on the informed user differs from the overall impression produced on such a user by any design which has been made available to the public before the filing or priority date of the design for which protection is sought; and under Article 7, for the purposes of Articles 5 (novelty) and 6 (individual character), a design shall be deemed to have been made available to the public if it has been “…published following registration or otherwise, or exhibited, used in trade or otherwise disclosed, before the date [of filing of the application for the registered Community design], except where these events could not reasonably have become known in the normal course of business to the circles specialised in the sector concerned, operating within the Community”.
  • Magmatic’s Rodeo design was publicised at the awards ceremony attended by Mr Law and Magmatic argued that this disclosure of Rodeo fell within the obscure disclosures exception in Article 7 of the Community Designs Regulation, and as such could not be cited as prior art because it would not have become known in the normal course of business to those specialising in the sector concerned. The judge however concluded that the Rodeo was a prior disclosure. He said that the competition was well-known in the field of product design in the UK at that time and because the theme of the competition was luggage, it was possible that people connected with the luggage trade could have attended the award ceremony and seen the Rodeo design.
  • However, even though the Rodeo was considered to be a prior disclosure, the judge concluded that there could be designs which were not quite obscure enough to be excluded by the obscure designs exception and could therefore be cited as prior art but which did not form part of the design corpus when assessing the overall impression created by other designs. The judge recognised that the only prior design to the Trunki was the Rodeo, which was relatively obscure, and he did not consider that the Rodeo formed part of the design corpus of which the informed user would be aware. Because of this, the design corpus consisted of clamshell suitcases for adults and not those for children. The Trunki was therefore very different from the design corpus and the overall impression given by the Trunki CRD was quite different. The Trunki CRD was thus entitled to a broad scope of protection.
  • The judge concluded that, although there were difference between the Kiddee Case and the Trunki CRD such as rounded corners, side covers over wheels and fabric handles, the Kiddee Case produced the same overall impression as the CRD and therefore infringed the CRD. He said: “If it were not for the Rodeo, I would have little hesitation in saying that the Kiddee case produced the same overall impression on the informed user having regard to the broad scope of protection to which the CRD would otherwise be entitled…the overall impression the Kiddee case creates shares the slimmer, sculpted, sophisticated, modern appearance, prominent ridge and horn-like handles and clasps looking like the nose and tail of an animal which are present in the CRD but which are absent from the Rodeo…PMS has infringed the CRD”.

The decision provides useful guidance on the extent of prior disclosures and the applicability of the obscure disclosures exception under Article 7 of the Community Designs Regulation. The case demonstrates that designs which are not sufficiently obscure as to be excluded by the obscure disclosures exception may still not form part of the design corpus when assessing the overall impression created by other designs under Article 10 of the Regulation; and (the party seeking to rely upon the obscure disclosures exception has the burden of proving that the exception applies.


Modernising copyright legislation - IPO launches review concerning new exceptions to infringement

In 2012 the UK Intellectual Property Office (“IPO”) consulted on changes concerning copyright exceptions so that the UK's copyright framework moves with the times and remains relevant to the digital world. The consultation asked whether the UK ought to adopt the full list of copyright exceptions outlined in the EU Copyright Directive. Now, following that consultation and the responses received, the IPO has launched a public review of two proposed sets of amendments to copyright legislation.

The exceptions set out in the first set of amendments are:

  • private copying (permitted private copying of copyright works for non-commercial purposes thus allowing an individual to copy content they own, and which they acquired lawfully, to another medium or device for their own personal use, eg allowing individuals to copy CDs from their own music library onto a mobile device such as MP3 player),
  • parody (a fair dealing exception to allow creators to make minor uses of other people’s copyright material for the purposes of parody, caricature or pastiche, without first asking for permission),
  • quotation (an amendment to the current fair dealing exception for criticism and review, reframing it as a quotation exception for purposes such as, but not limited to, criticism and review), and
  • public administration (to allow public bodies to make material that is open to public inspection or on an official register, including unpublished third party material such as letters and emails, available to the public through online services thus allowing the public to obtain copies of relevant information easily and conveniently).

Those in the second set of amendments are:

  • data analysis for non-commercial research (to allow a person who already has a right to access a copyright work (whether under a licence or otherwise) to copy the work as part of a technological process of analysis and synthesis of the content of the work for the sole purpose of non- commercial research)
  • educational purposes (to allow a fair dealing provision for the purpose of instruction, enabling teachers to make reasonable use of copyright materials without infringing copyright, as long as such use is minimal, non-commercial, and fair to copyright owners), and
  • research libraries and archives (to permit fair dealing with any type of copyright work for the purposes of non-commercial research and private study. The change expands an existing fair dealing exception which applies to literary, dramatic, musical, artistic works or typographical arrangements, but does not currently apply to sound recordings, films or broadcasts).

New EU Regulation on enforcement of intellectual property rights grants customs authorities greater powers to deal with counterfeit goods

The European parliament has voted on new rules to enable customs organisations to better enforce intellectual property rights (“IPRs”). Although existing rules permit customs authorities to detain counterfeit goods, the new rules will strengthen existing powers and be of benefit to brand owners

From January 2014, broader powers include:

  • the list of possible IPR infringements to be controlled by customs at borders will be broader because the new regulation will include infringements such as the use of a confusingly similar mark to a trade mark (such that there exists a likelihood of confusion on the part of the public between the sign and the trade mark).
  • the list of protected rights is extended to include trade names, topographies of semiconductor products, utility models, devices to circumvent technological measures and non-agricultural geographical indications. This means that customs would be able to take actions against goods falling into these new categories which are found to be infringing IPR rules.
  • the existing procedure for the early destruction of goods infringing IPRs will also be made mandatory in all Member States. Up until now, the early destruction of goods (applied in 50% of all detentions in 2009) was not compulsory in all EU Member States.
  • an alternative simple procedure is proposed for the destruction of small consignments of counterfeit or pirated goods transported in postal and courier traffic. The person receiving the goods would be offered the possibility to agree to their destruction, without having to pay costs.

Note, however, that the Regulation specifically excludes goods of a non-commercial nature contained in travellers' personal luggage: the Regulation will not give power to customs to detain goods carried by travellers for their own personal use.


On 21 May 2013, Interflora obtained judgment in the High Court in London against Marks & Spencer (“M&S”) for use of Interflora’s registered trade marks as a Google AdWord.

In essence the judgment says that M&S infringed Interflora’s trade marks because, having purchased from Google certain keywords containing “interflora”, in its advertisements which came up on a Google search using those keywords, M&S failed to make clear to internet users that the M&S flower delivery service had no connection with Interflora. A significant proportion of internet users were led to believe that M&S’s flower delivery service was part of the Interflora network.

A further hearing on the level of damages payable by M&S will take place. This may not be the end of this long running dispute between the parties; M&S may well decide to appeal the decision. The effect of the ruling is that, if a third party’s trade mark is used as an AdWord, the advertisement must make clear that it does not originate from (nor is it economically connected with) the trade mark owner, and the onus is on the advertiser to do this.

How this will work in practice remains to be seen. It should be noted that the judgement does not prevent the use of third parties’ trade marks as Google AdWords in the UK (and, since M&S did not attempt to defend the claim by contending that its advertisements were comparative advertising, does not deal with the issue of trade mark use in comparative advertising, whether on the internet or otherwise). The issue of the use of trade marks as keywords still varies considerably between jurisdictions, even within the European Union.


The claimants, Interflora Inc and Interflora British Unit (together “Interflora”), operate the well known online flower delivery service which enables orders for flowers to be placed over the Internet. Interflora Inc. is the registered proprietor of two registered trade marks:

  • UK registered trade mark INTERFLORA (UK No. 1329840) in respect of various goods and services relating to plants and flowers, including advertising services for florists, information services for sale of flowers and transportation of flowers, and
  • Community Trade Mark INTERFLORA (CTM No. 909838) for various goods and services including for plants and flowers, advertising services for florists, transportation of flowers and information services for the sale of flowers (both the “Trade Marks”).

The defendant, “M&S”, operates an online flower delivery service through the M&S website.


Google operates the well-known internet search engine google.co.uk, one of the most popular websites in the UK. Google’s main source of revenue is from advertising and the principal way in which Google provides advertising is via its AdWords service. This works as follows:

  • An advertiser can purchase (or “bid on”) certain keywords, which are known as AdWords.
  • When an internet user carries out a search using Google and that search includes a keyword, on the search engine results page (“SERP”), in addition to the (reproduced) search term and the natural or “organic” results of the search, a shaded box appears.
  • The shaded box is currently headed “Ads” although it was previously headed “Sponsored Links” (Google’s AdWords service has evolved since 2008), and the box usually promotes three advertisements.
  • More than one advertiser may purchase an AdWord - the advertiser appearing in the shaded box pays to Google an amount (known as “cost per click”) whenever a user clicks through to the advertiser’s website.
  • Google will also give a ‘quality score’ to each advertisement and this will also influence where the advertisement is ranked in the ‘Ads’ box. Factors that are considered include the relevance of promotional text, the ‘click through rate’ and the relevance of the landing page.
  • Subject to the quality score, the advertiser who bids to pay the highest cost per click will have its advertisement appear highest in the shaded box. Therefore, popular keywords are more expensive than unpopular ones.
  • Advertisers also have the ability to match a keyword to the user’s search in different ways. There may be an ‘exact match’ (where the search term entered by the user must be the same as the selected keyword) or a ‘phrase match’ (where the search term must contain the same words as the selected keyword, in the same order – but it may include additional words before or after the phrase) or a ‘broad match’ (where the search term can be matched to different variations of the selected keyword). There is also an ‘advanced broad match’ which allows a search term to be linked to different keywords which are not the same but still relevant.

It is also worth noting the following factors, mentioned in the judgment, which can also affect both the positioning of advertisements with Google AdWords and how users are influenced by advertisements:

  • The appearance of the SERP can vary depending on the device being used, eg personal computer, laptop, tablet or smartphone. It can also vary depending on software and the browser which is used.
  • The appearance of the SERP can be affected by the user’s browsing history, in particular where there are cookies on the user’s device.
  • A study commissioned by Google in 2011 shows that 71% of users look at advertisements at the top of a desktop SERP compared to 70% at the natural results above the ‘fold’ (ie where the user needs to scroll down) and just 21% below the fold. On average users look at the advertisements for 2.5 seconds, the natural results above the fold for 2.2 seconds and the natural results below the fold for 0.2 seconds.

M&S purchased from Google several AdWords containing the name “interflora”. This meant that advertisements for M&S’s flower delivery service would be displayed on the SERP whenever an internet user entered the search term “interflora” (or similar terms) on the Google search engine.

Prior to May 2008, Google would block a keyword from being purchased as an AdWord by a third party if the trade mark owner notified Google that the keyword had been registered as a trade mark. On 5 May 2008, Google changed its policy for the UK and Ireland and ceased to block keywords registered as trade marks.

On 6 May 2008, M&S started bidding on “interflora” and other keywords relating to “interflora” - this had the effect of triggering the display of advertisements for M&S’s Flowers Online service on the SERP. Notably, the advertising text in the M&S advertisement did not incorporate or reference the Trade Marks - there was no reference to Interflora.

In January 2012, Interflora implemented a “golden box” brand defence strategy - ensuring that all Interflora related sites appeared in the shaded box and ensuring that M&S’s advertisements were excluded. This meant that Interflora incurred additional bidding costs payable to Google, but as a result M&S’s share of internet traffic declined.


In 2008, Interflora brought proceedings against M&S alleging infringement of the Trade Marks under Article 5(1)(a) and Article 5(2) of the Trade Mark Directive1. Article 5(1)(a) of the Trade Marks Directive (89/104/EC) confers on a trade mark proprietor the right to prevent third parties using (without consent) in the course of trade “any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered”.

Article 5(2) provides that a proprietor may prevent all third parties not having his consent from using in the course of trade “any sign which is identical with or similar to the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark”.

There was no dispute between the parties concerning the validity of the Trade Marks nor did M&S dispute that Interflora had acquired a substantial reputation in the UK and elsewhere in the European Union in relation to flower delivery and the operation of a flower delivery network.


Case law of the Court of Justice of the European Union (“CJEU”) has established that a trade mark proprietor can only succeed in a claim under Article 5(1)(a) of the Directive if six conditions are satisfied:

  1. there must be use of a sign by a third party within the relevant territory
  2. the use must be in the course of trade
  3. use must be without the consent of the proprietor of the trade mark
  4. it must be of a sign which is identical to the trade mark
  5. it must be in relation to goods or services which are identical to those for which the trade mark is registered, and
  6. it must affect or be liable to affect the functions of the trade mark (following Case C-206/01Arsenal Football plc v Reed [2002] ECR I-10273, Anheuser-Busch, Case C-48/05 Adam Opel AG v Autec AG [2007] ECR I-1017, Case C-17/06 Céline SARL v Céline SA [2007] ECR I-7041 and Case C-62/08 UDV North America Inc v Brandtraders NV [2009] ECR I-1279).

By the time of the trial, there was no dispute as to the first five conditions and it was common ground between Interflora and M&S that the signs used by M&S were identical to the Trade Marks. The sixth condition is satisfied if the use of the sign affects or is liable to affect one of the functions of the trade mark, the functions being:

  • origin
  • advertising
  • investment, and
  • communication

following Case C-487/07 L’Oréal SA v Bellure NV [2009] ECR I-5185 at [58]-[64].


The Judge, Mr Justice Arnold, concluded that, as at the relevant date of 6 May 2008:

  • M&S’s advertisements did not enable reasonably well-informed and reasonably attentive internet users to ascertain whether the service referred to in the advertisements originated from Interflora; an undertaking economically connected with Interflora; or a third party. Therefore such users would not know that M&S flower delivery service was in competition with, rather than part of the Interflora network; there was nothing in Marks and Spencer’s advertisements to inform the user that Marks and Spencer’s flower delivery service is not part of the Interflora network.
  • The nature of the Interflora network made it difficult for the reasonably well-informed and reasonably observant internet user to determine whether M&S’s service is part of the Interflora network.
  • A significant proportion of internet consumers (who carried out a Google search for “interflora” and then clicked on M&S’s advertisements) were led to believe that M&S’s flower delivery service was part of the Interflora network.
  • As a result, M&S’s use of the purchased AdWords had an adverse effect on the origin function of the Interflora trade marks.

The judge made the following points of note in his judgment:

  • Third party keyword advertising is not inherently or inevitably objectionable from a trade mark perspective. On the contrary, CJEU case law recognises that keyword advertising promotes competition.
  • M&S’s advertisements must be considered from the perspective of the reasonably well-informed and reasonably observant internet user, initially as at 6 May 2008.
  • The average reasonably well-informed and reasonably observant internet user is not particularly technically literate, does not know precisely how AdWords operate and is not aware of the issues.
  • In considering what constitutes a reasonably well-informed and reasonably observant internet user, the judge said that although internet literacy has steadily increased in recent years, even now a significant proportion of internet users in the UK do not appreciate that, unlike the natural search results, the advertisements appear on the SERP because the advertisers have paid for the advertisements to be triggered by a keyword consisting of or related to the search term entered by the user.
  • It is the responsibility of the advertiser to ensure that the advertisement is designed and presented in a manner which does enable the reasonably informed and reasonably observant internet user without difficulty to ascertain the origin of the goods or services advertised.
  • M&S made no attempt to adduce any direct evidence of consumer reaction to its keyword advertising. This did not mean that it should be inferred that the evidence would have assisted Interflora’s case but it did mean that M&S could not rely upon such evidence to rebut the conclusions drawn from the evidence before the court.

This ruling does not mean the end of services offering cost per click advertising. Although Google no longer operates a trade mark complaints procedure in the UK by which trade mark owners can apply to block their trade marks being chosen as keywords, other search engines, such as Microsoft’s Bing and Yahoo!, do offer such services. Thus the decision will not be of current practical relevance to all search engines.

There were several points of law that were not raised by M&S, in particular the issue of comparative advertising that could have an impact on any future case.

The overall “take” is that there is nothing in the judgment that appears detrimental to the interests of trade mark owners wishing to protect their rights, and the judgment certainly does not give a blanket right to third parties to use another’s trade mark as a keyword. Nor does it prohibit the use of trade marks as keywords.

Rather the judgment indicates that if a third party’s trade mark is used as a key word, any content appearing on the screen of the person conducting the search (other than the natural results of that search) must make it clear that such content does not originate from (or is not economically connected with) the trade mark owner.

This will have marketeers scratching their heads before any purchase, trying to ensure that there could be no implication of connection. For some brands, with obvious public rivalry like Coca Cola and Pepsi, the argument may be harder to run simply because they are so publicly not connected.

For more borderline cases, the choice of advertising text becomes key, especially balancing the desire for snappy creative with the need to make clear there is no connection. How this will work in practice remains to be seen. Interesting times may still be ahead!

It is clear that the use of keywords in advertising on the internet should be properly controlled, and any policy in this respect carefully reviewed and adhered to. This is particularly the case where it may be expected that the advertisements shown as a result of the use of keywords will be seen in more than one jurisdiction.

For more information please contact Ian Wood, Partner

T: +44 (0)20 7203 5124