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Global Intellectual Property Newsletter IP Topics from around the Globe 12 th Edition

Global Intellectual Property Newsletter - Clifford Chance · 2019-12-30 · Welcome to the 12th edition of Clifford Chance’s Global IP Newsletter.With the New Year approaching,

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Global Intellectual Property NewsletterIP Topics from around the Globe

12th Edition

© Clifford Chance, December 2016

Global Intellectual Property Newsletter – IP Topics from around the GlobeIssue 12/16

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Sydney: Playtime is Over! Australian Court delivers landmark decision upholding rights of Australian trade mark owners against foreign manufacturers ....................................................................................................5The Federal Court of Australia has held a toy products manufacturer incorporated inHong Kong (with registered trade marks in Hong Kong and the People’s Republic of China)liable for trade mark infringement in respect of products bearing its mark sold to consumersin Australia by retailers having no corporate connection to the manufacturer.

Barcelona: Spain starts paving the way for the transposition of thenew European Trade Marks Directive ...........................................................................8In September 2016, the Spanish Patents and Trade Marks Office issued for publicconsultation a first draft bill intended to amend the current Trade Marks Law, for thepurpose of implementing the new Trade Marks Directive in Spain.

Milan: Italian defensive trade marks........................................................................... 10The defensive trade mark (marchio difensivo) is a uniquely Italian legal concept. The debatepersists as to whether it is compatible with European Union legislation.

Düsseldorf: Litigating EU trade marks – The geographical scope ofinjunctive relief in the EU – “Combit/Commit” ...........................................................12The scope of injunctive relief based on a European trade marks against the infringing use ofa sign liable to cause confusion or to free ride on the mark’s reputation can be restricted toonly certain areas of the EU.

Prague: The CJEU on the Interpretation of an Intermediary underDirective no. 2004/28/EC ......................................................................................................14The Court of Justice of the European Union held in Tommy Hilfiger and Others (July 2016)that any entity which sublets premises to third parties who infringe intellectual propertyrights by selling counterfeit products is considered an intermediary whose services are usedby third parties to infringe IPR within the meaning of Article 11 of Directive no. 2004/48/EC.

London: Intermediary liability: A new approach by brand owners in theonline environment? ......................................................................................................16IP rights-holders are focusing enforcement efforts higher up the supply chain to delivergreater value, increased efficacy and disrupt individual infringers’ access to market. Recentcases have established: (i) the practical circumstances in which intermediaries can rely on theeCommerce Directive exemptions from liability; and (ii) events which require intermediaryservice providers to limit access to their services to prevent third party infringement.

Amsterdam: Judgment of the CJEU – Hyperlinking to illegal sourcesinfringes copyright ........................................................................................................18The CJEU has recently concluded that hyperlinking to unauthorised content is an act ofcommunication to the public when the person posting the hyperlinks knows (or ought tohave known) that the contents have been published illegally.

cont

ents

London: The recent EU copyright proposals ..............................................................20On 14 September 2016 the European Commission published two draft copyright Directivesand two further draft copyright Regulations.

Barcelona: Judgment of the Court of justice of the European union dated12 October 2016 (c-166/15): the rule of exhaustion of the right-holder’sdistribution right and the back-up copy. .....................................................................22On 12 October 2016, the Court of Justice of the European Union issued a judgment definingthe parameters of the exhaustion of a right-holder’s distribution right and back-up copies.

Hong Kong: Mobile apps in China – new rules bring stricter regulationand enhanced user protection .....................................................................................24China has introduced new regulations specifically governing mobile apps, which puts theonus squarely on developers to ensure compliance with the law and to reassure userslooking for more security of their personal data.

Acknowledgements ......................................................................................................26

Contacts .........................................................................................................................27

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© Clifford Chance, December 2016

Welcome to the 12th edition of Clifford Chance’s Global IP Newsletter. With the New Yearapproaching, we would like to finish 2016 with some insights on current developments in the world ofIntellectual Property. This December issue will touch on a broad variety of IP topics such as recentcase law and important legislation. In particular, we will look at trade mark law and copyright law inEurope and other jurisdictions across the globe.

The newsletter will start with a recent decision by the Federal Court of Australia on trade markinfringement. The decision regards the liability of a foreign company who owned an infringing Chinesemark, but had no relation to the third parties in Australia which actually sold the goods bearing theinfringing sign.

We will then introduce the preliminary draft of the Spanish Trademark Act adapting the recentchanges in EU trade mark law. We will also shed some light on the peculiarities of the so called“defensive trade mark”, a uniquely Italian concept used to strengthen trade mark protection, and theircompliance with European law.

This newsletter will outline the significance of limiting the geographical scope of an EU-wide injunctionbased on a European trade mark where infringements do not occur across the EU, but only in certainMember States due to, for example, linguistic differences in the respective regions. In the context ofIP-rights infringements, the recent judgment of the CJEU in “Tommy Hilfiger and Others” on theinterpretation of the concept of “intermediary” under European IP-law is also considered in this edition.

The newsletter will then turn to copyright law and how the CJEU dealt with the question of whetherhyperlinking practices on the internet can be considered acts of communication (of copyright works)to the public and thus copyright infringements. Another case we examine relates to the potentialinfringement of reselling a back-up copy of copyright computer software.

Finally, we conclude our round-the-world trip by looking at a new regulation in China governing thedistribution and use of mobile apps with respect to the protection of user data.

We hope you enjoy this 12th edition of the newsletter and look forward to receiving your feedback.Season’s greetings and a Happy New Year!

Your global CC IP Team

12th Edition

BackgroundIn Australia, a registered trade mark willbe infringed if any of the three distincttests set out in section 120 of the TradeMarks Act 1995 (Cth) are satisfied.For the purposes of this article, only theprimary test under section 120(1) isconsidered. The primary test provides:“A person infringes a registered trademark if the person uses as a trade mark asign that is substantially identical with,or deceptively similar to, the trade mark inrelation to goods or services in respect ofwhich the trade mark is registered.”

Two companies incorporated inHong Kong, Playgo Art & CraftManufactory Limited (“Playgo Craft”) andPlaygo Toy Enterprises Limited (“PlaygoEnterprises”) (together, “Playgo”) aremembers of a group of corporationswhich designs, manufactures, distributesand wholesales children’s toys. PlaygoCraft is the registered owner of a trade

mark in Hong Kong and the People’sRepublic of China (“Playgo Mark”).

During 2013 and 2014, PlaygoEnterprises sold and delivered in thePeople’s Republic of China goodsbearing the Playgo Mark to an Australiandepartment store operator (“Myer”) andan Australian supermarket owner(“Woolworths”) for sale to consumers inAustralia. These goods were thenoffered for sale and sold to consumersin Australia by, among others, Myerand Woolworths.

Federal Court ofAustralia Proceedings(i) Introduction

On 4 May 2015, Playgro Pty Ltd (“Playgro”),the registered owner of six Australian-registered trade marks, commencedproceedings in the Federal Court of Australiaalleging, among other things, infringement ofits trade marks by Playgo.

Following a trial on liability in earlyDecember 2015, Moshinsky J publishedreasons for judgment (Playgro No 1) on22 March 2016, finding each of Playgo

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© Clifford Chance, December 2016

Sydney: Playtime is Over! Australian Court deliverslandmark decision upholding rights of Australian trademark owners against foreign manufacturersIn Playgro Pty Ltd v Playgo Art & Craft Manufactory Ltd [2016] FCA 280(“Playgro No 1”) and Playgro Pty Ltd v Playgo Art & Craft Manufactory Ltd (No 2)[2016] FCA 478 (“Playgro No 2”) (together, “the Playgro Decision”), a toyproducts manufacturer incorporated in Hong Kong (with registered trade marks inHong Kong and the People’s Republic of China) was held liable for trade markinfringement in respect of products bearing its mark sold to consumers in Australiaby retailers having no corporate connection to the manufacturer. This was despitethe manufacturer itself having no operations in Australia. These decisions byJustice Moshinsky of the Federal Court of Australia are a remarkable victory forAustralian trade mark owners, necessitating that foreign companies must exercisea high degree of caution if they are aware that their products may be imported intoand/or sold in Australia. In the absence of holding a Australian-registered trademark, this decision highlights that infringement can occur regardless of whether ornot the manufacturer holds a registered trade mark in its jurisdiction ofincorporation, manufacture and/or the primary product market.

“What the team is known for Experienced practice, regularlyengaged on high-profile mandates for market-leadingmultinationals in the resources and other key sectors and valuedby clients for its full connection to a worldwide organisation.”

Chambers & Partners 2016: Global Guide: Australia –Corporate/M&A

© Clifford Chance, December 2016

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Craft and Playgo Enterprises liable fortrade mark infringement in respect ofthree of Playgro’s Australian-registeredtrade marks (“Playgro Marks”).A further oral hearing and round ofwritten submissions was necessary afterthe parties could not agree on ordersgiving effect to the Playgro No 1decision. On 9 May 2016, Moshinsky Jpublished reasons for judgment (PlaygroNo 2) making declarations that thePlaygro Marks had been infringed andenjoining Playgo from infringing thePlaygro Marks, including by way ofsupplying for sale in Australia goodsbearing the Playgo Mark.

The primary issue at trial was whether aforeign company which had, at no point intime, manufactured, advertised or suppliedfor sale, goods or services in Australia couldbe held liable for trade mark infringement.

A subsidiary issue was whether a foreigncompany could be held liable as a joint

tortfeasor in an Australian company’soffering for sale and sale (in Australia) ofgoods or services which infringedAustralian-registered trade marks.

(ii) Infringement

As a threshold issue, Moshinsky Jneeded to consider whether the PlaygoMark was “substantially identical with, ordeceptively similar to” the Playgro Marks.On the facts of the case, Moshinsky Jheld that the Playgo Mark was not“substantially identical with” but was“deceptively similar to” the PlaygroMarks, chiefly on the basis that there wasa real, tangible danger of confusionbetween the marks, taking into account,among other things, the imperfectrecollection of the notional consumer.

The next question that needed to beconsidered was whether Playgo had‘used’ the Playgo Marks in Australia.Again, after careful consideration of the

applicable legislation and the authoritieson the subject matter, as well as theparties’ detailed submissions, Moshinsky Jheld that Playgo used the Playgo Mark asa trade mark in relation to goods inAustralia. The chain of reasoning can besummarised as follows:

1. The Playgo Mark was applied as a“badge of origin” to indicate aconnection in the course of tradebetween the goods and Playgo;

2. Playgo did not cease to use thePlaygo Mark upon sale or deliveryof the goods to Myer orWoolworths; and

3. The goods remained in the course oftrade until their ultimate sale tocustomers in Australia.

Moshinsky J rejected Playgo’ssubmission that such a finding wouldhave a ‘floodgates’ effect, necessitatingthat every foreign company throughout

the world would be liable for trade markinfringement in Australia if its markedgoods are present in Australia in thecourse of trade, no matter how farremoved the company might be fromthe point of sale to the consumer norhow long the chain of international tradeand commerce might extend. Animportant consideration for Moshinsky Jwas a finding that Playgo was awarethat its goods were to be offered for saleand sold to customers in Australia. HisHonour did not consider whether aforeign company would be liable forinfringement if this were not the case.

(iii) Joint Tortfeasorship

In light of Moshinsky J’s findings inrespect of infringement, it was notnecessary for his Honour to consider thealternate basis on which Playgro’s casewas put (which was only in relation toMyer, not Woolworths). Moshinsky Jnevertheless gave brief consideration tothe matter, ultimately deciding that Playgoand Myer did not engage in the necessary“common design” to offer for sale and sellinfringing goods bearing the Playgo Mark,chiefly on the basis that their relationshipwas merely that of vendor and purchaser.His Honour concluded that, unlike withrespect to his findings on infringement,Playgo’s knowledge that Myer would offerfor sale and sell infringing goods tocustomers in Australia was insufficient to

amount to a “common design”, notingthat at most this amounted to facilitationof infringement which was not enough toestablish joint tortfeasorship.

(iv) Appeal?

Extensions in respect of the time availablewithin which to lodge an appeal weresought and granted (including, on multipleoccasions, by consent) but it appearsfrom the court record that an appeal wasultimately not pursued.

TakeawaysThe main takeaway emerging from thePlaygro Decision is that foreigncompanies that manufacture goods orprovide services in the knowledge thatthose goods or services will be sold orprovided to consumers in Australia mustexercise caution that any marks used inthe course of selling goods or providing

services do not infringe Australia-registered trade marks. It remains to beseen whether a foreign company thatlacks that knowledge (or is wilfully blindto such matters) would be held liable fortrade mark infringement in Australia.

Link directory:1. Playgro No 1:

http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0280

2. Playgro No 2:http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0478

3. Trade Marks Act 1995 (Cth):https://www.legislation.gov.au/Details/C2016C01001

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© Clifford Chance, December 2016

Key issues:n Foreign manufacturers/service providers that are aware that their goods or

services are likely to be marketed or sold in Australia will be held liable for trademark infringement if their goods or services bear a mark which is substantiallyidentical with, or deceptively similar to, an Australian-registered trade mark, even ifthe manufacturer does not itself market or sell the goods or services in Australia.

n Mere facilitation of trade mark infringement (by way of the sale of infringing goodsor provision of infringing services) in the context of a standard vendor/purchaserrelationship with a standard sale/purchase agreement will be insufficient to satisfythe test of “common design” required to establish joint tortfeasorship.

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Key aspects of the newdraft law Below is a summary of some of the mostsignificant changes to the Spanish trademarks system set out in the draft bill preparedby the Spanish Patents and TrademarksOffice (“SPTO”).

(i) Broader entitlement to apply for aSpanish trade mark

While the current Spanish Trade Marks Actstates that non-national individuals or legalpersons of a Member of the World TradeOrganization and with no habitual residenceor real and effective industrial or commercialestablishment on Spanish territory may notobtain registration of trade marks in Spain(unless the reciprocity principle applies in

their countries), the new draft law removesthis restriction and entitles any individual orlegal person to apply for and obtain anational trade mark.

(ii) Signs that a trade mark may consist of

Currently, trade mark protection is onlygranted in Spain for signs that can berepresented graphically. The new draft lawintroduces a significant change by removingthe requirement of graphic representation.Thus, it will merely be required that the signcan be represented, regardless of themeans used to represent it, and providedthat said representation allows both theauthorities and the general public tounderstand the scope of protection grantedto the right holder in a clear, precise, self-sufficient, easily accessible, intelligible,

everlasting and objective way. By way ofexample, the draft law will make it possibleto use a video file to represent a movementtrade mark or an audio file to represent asound trade mark. Technologicalimprovements will set the limits for availablerepresentation means at each point of time.

(iii) The distinction between notoriousand well-known trade marks will nolonger exist

According to the current Spanish provisions,a notorious trade mark is a trade markgenerally known in the relevant public sectorfor which the goods, services or activitiesdistinguishing said trade mark are intended;and a well-known trade mark is one knownto the public in general. The new draft lawno longer upholds this distinction andestablishes one single category: trademarks well known in Spain. In practicalterms, this amendment may raise thethreshold for successfully challenging theregistration of trade marks on the grounds ofprevious trade marks registered for goodsand services different to those of theopposed trade mark (i.e., mere generalknowledge of the previous trade mark in therelevant sector may not be enough).

Barcelona: Spain starts paving the way for thetransposition of the new European Trade Marks Directive

Congratulations to our Spanish Team!

Clifford Chance “Spanish Firm of the Year:Intellectual Property Litigation”Managing Intellectual Property Awards 2016:Spain – Litigation

The Trade Marks Directive (Directive (EU) 2015/2436 of the European Parliament andof the Council of 16 December 2015 to approximate the laws of the Member Statesrelating to trade marks) was published in the “Official Journal of the European Union”on 23 December 2015. According to its Article 54.1, Member States are expected tobring into force the laws, regulations and administrative provisions necessary tocomply with it by 14 January 2019 (or by 14 January 2023, in case of the articlesproviding for the setting up of administrative proceedings for the revocation ordeclaration of invalidity of national trade marks).

Spain has recently taken a first step towards the transposition of this Directive bypublishing a preliminary draft of a law aimed at amending the current Trade Marks Act(Law 17/2001, of 7 December) for public consultation, in order to align it with theprovisions set forth by the Directive.

© Clifford Chance, December 2016

(iv) Procedure for trade mark revocationor declaration of invalidity

Unlike in the European Union Trade Marksregime, the Spanish legal framework does notallow for an administrative route to challengethe validity of a trade mark once the decisionto grant it has become final (either by theSPTO or following an appeal before theContentious-Administrative Courts). Thepower to declare the nullity of granted trademarks lies exclusively with the CommercialCourts. The new draft law provides for anadministrative procedure before the SPTO forthe revocation or declaration of invalidity of atrade mark. How efficient and expeditious thisnew procedure will be remains to be seen (butit will largely depend on how many additionalhuman, material and financial resources areallocated to the SPTO for carrying out thisnew task). Commercial Courts will retainjurisdiction to revoke or declare trade marksinvalid only in cases where an infringementaction is filed and the defendant brings acounterclaim. The administrative procedure forthe revocation or declaration of invalidity of atrade mark before the SPTO will not beavailable until 14 January 2023.

(v) Rights and limitations of trademark rights

The new draft law expressly provides that thetrade mark rights will extend to unauthoriseduses of the trade mark as a trade name or acorporate name. Thus, trade mark owners willonly be prevented from enforcing their rightsagainst the use of in financial transactions byindividuals of their names (provided that suchuse complies with fair industrial orcommercial practices).

(vi) Locus standi to bring infringementactions

The draft law amends the locus standi regimefor bringing infringement actions by aligning itwith that which governs the EU Trade Markssystem. In short, licensees will not be entitledto file actions without the right holder’sconsent, however, exclusive licensees will beallowed to do so if the right holder fails tobring an action after the licensee requested itto do so. Notwithstanding the foregoing, thedraft law clarifies that any licensee will beentitled to participate in infringementproceedings in order to claim its owndamages. In light of this last provision,

infringers will most likely refrain from raisingtheir typical defence consisting of challengingthe locus standi of non-exclusive licensees inorder to resist their damages claims.

The futureThe European Trade Marks Directive wasenacted to approximate both substantive lawand procedural rules in order to strengthentrade mark protection in the Member States,bringing them in line with the European UnionTrade Marks system.

The transposition process has just started inSpain. It is expected that when this processends, the new Spanish Trade Marks Actentering into force in January 2019 will helpto iron out some of the differences thatcurrently exist between the practice of theEuropean Union Intellectual Property Officeand the practice of the SPTO. In themeantime, it will be worth keeping an eye onhow the process progresses.

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© Clifford Chance, December 2016

Clifford Chance – Rank #1 (10 years in a row)“Miquel Montañá is a prolific patent litigator who is in highdemand on the innovator side of major pharmaceuticals cases.

Sources describe him as “thorough, analytical, rigorous andcomprehensive, “adding: “He is persistent up to the end of acase and doesn’t drop things.”

“Montserrat López-Bellosta focuses on IP litigation as part ofher broader disputes practice. She has significant experienceadvising life sciences companies on patent litigation.”

Strenghts (Quotes mainly from clients):“The lawyers are business-oriented, cost-conscious and usedto dealing with new issues in law. They are creative and are ableto look at the end goal and find a way to reach it.”

“I especially like the lawyers’ knowledge of our organisation andtheir availability to help with urgent matters.”

Chambers & Partners 2016: Europe Guide: Spain – Intellectual Property

Key issues:n The aim of the new European Trade Marks Directive is to approximate both

substantive law and procedural rules in order to strengthen trade mark protection inthe Member States. The transposition process has just started in Spain.

n The entitlement to apply for and obtain a Spanish trade mark will be broader.

n The new draft law no longer upholds the distinction between notorious and well-knowntrade marks.

n An administrative procedure for the revocation or declaration of invalidity of a trademark before the Spanish Patent and Trade Mark Office will be implemented and inforce in January 2023.

n The draft law clarifies that any licensee will be entitled to participate in infringementproceedings in order to claim its own damages.

© Clifford Chance, December 2016

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General overviewUnder Italian law a “principal” trade markis one which an owner has a directcommercial interest in. A defensive trademark is a mark similar to the principaltrade mark and registered to strengthenthe protection of that principal trade mark.

A defensive trade mark, also called a“protective” trade mark, never expiresfor lack of use as long as (i) the maintrade mark is effective; (ii) the defensivetrade mark is registered for the sameclasses of goods or services as theprincipal trade mark; and (iii) thedefensive trade mark and the principal

trade mark are registered in the name ofthe same owner.

A substantial number of Italian Courtdecisions have held that the defensivetrade mark offers a sphere of protectionthat is independent from or reinforcesthe protection available to the principaltrade mark. For example, OP-LA’, LOLA’,OILA’ have been regarded as defensivetrade marks of OLA’ and Farmotal hasbeen regarded as a defensive trade markof Farmitalia.

Although certain opposing minorityopinions exist, the leading position is thata defensive trade mark must be similar to

the principal trade mark. However, therequirement for similarity does not meanthat there must be a likelihood ofconfusion between the defensive trademark and the principal trade mark. If therewas, the role of a defensive trade markwould cease to exist. A defensive trademark is what prevents third parties from“coming near” the main trade mark “evento an extent that would otherwise belawful” (VANZETTI-DI CATALDO).

The use of a defensive trade mark isdifferent to the use of a principal trademark in a form with differing elementswhich do not alter its distinctivecharacter. The latter does not imply theuse of an entirely different trade mark,but rather reflects a different form of thesame mark by the same owner(“Equivalent Direct Use”).

The European position ondefensive trade marks The concept of Equivalent Direct Use isenvisaged in European Union legislation(Article 10(1)(a) of the Trade MarkDirective), while the concept of adefensive trade mark is not.

In European jurisprudence, the leadingcase is Il Ponte Finanziaria SpA v OHIM(C- 234/06, 13 September 2007). Herethe Court of Justice of the EuropeanUnion (“CJEU”) held that: “The argument

Milan: Italian defensive trade marksThe defensive trade mark (marchio difensivo) is a uniquely Italian legal concept. Thedebate persists as to whether it is compatible with European Union legislation.Another open question within the Italian legislative framework regards the degree towhich the defensive trade mark is compatible with (i) the prohibition against registrationin bad faith and the principle that prohibits appropriation of “ghost trade marks” in theabsence of a true intent to use the trade mark; and (ii) the more general prohibitionagainst the unlawful retention of a trade mark for anti-competitive aims.

that the holder of a national registrationwho opposes a Community trade markapplication can rely on an earlier trademark the use of which has not beenestablished on the ground that, undernational legislation, that earlier markconstitutes a ‘defensive trade mark’ isincompatible with Article 43(2) and (3) ofRegulation No 40/94”.

More recently, the CJEU delivered anotherdecision in Bernard Rintisch v Klaus Eder(C-553/11, 25 October 2012). Thereference was made in proceedingsbetween Mr Rintisch and Mr Eder“concerning the genuine use of a trademark, used in a form differing in elementswhich do not alter its distinctive characterfrom the form in which that trade markwas registered, the form used beingitself registered as a trade mark”.

Without any contradiction to its previousdecision, the CJEU held that “theproprietor of a registered trade mark isnot precluded from relying, in order toestablish use of the trade mark for thepurposes of (Article 10(2)(a)), on the factthat it is used in a form which differs fromthe form in which it was registered,without the differences between the twoforms altering the distinctive character ofthat trade mark, even though thatdifferent form is itself registered as atrade mark.”

Reading the two decisions together, it maybe argued that Italian law is not fullycompatible with EU law. A Europeanregistration cannot be invalidated, neitherby opposition nor by a nullity claim, bynational Italian trade marks for whichserious use has not been proven.Conversely, a national registration can beinvalidated in a nullity claim by a defensive

trade mark, for which use is not required.In opposition proceedings, the ItalianIntellectual Property Code expresslyrequires proving that the trade mark beingopposed is used. Given this verycomplicated situation, the owner of adefensive trade mark may prefer to waitfor the Italian registration. Defensive trademarks that do not alter the distinctivecharacter of the principal trade mark arecompatible with European Union law (seethe Rintisch case). In these circumstances,registration of the defensive trade markmay not be strictly necessary.

Registration in bad faithUnder Italian law, registration of a trademark in bad faith is prohibited. According toItalian Scholars and case law, there is a lackof clear criteria for what constitutes badfaith. However, opinions suggest that trade

marks may be considered to be made inbad faith if they are not used but obstructthe registration of a third party trade mark.Therefore, defensive trade marks cannot beconstrued as exceptions to the prohibitionof registering trade marks in bad faith.

ConclusionsThe concept of a defensive trade mark isarguably obsolete and potentiallydangerous as it is not fully compatiblewith EU, although it is not expresslyprohibited as such.

Defensive trade marks must also beassessed in light of the prohibitionagainst speculative registrations,especially because defensive trademarks must be aligned to the finalspecifications of a principal mark forwhich exclusivity is granted.

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© Clifford Chance, December 2016

Key issues:n If certain requirements are met, defensive trade marks do not ever expire for lack

of use

n A substantial number of Italian Court decisions have held that the defensive trademark offers a sphere of protection that is independent from or ancillary to orreinforces the protection available to the principal trade mark

n A later European registration cannot be invalidated, neither by opposition nor bynullity claim, by Italian trade marks for which genuine use has not been proven.

IP department head Monica Riva of Clifford Chance LLP islauded for the “commercial orientation of her strategies, herability to communicate clearly and her efficiency.” She is alsopraised for her cross-border capabilities and described as a“promising lawyer.”

Chambers & Partners 2016: Global Guide: Italy – Intellectual Property

© Clifford Chance, December 2016

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IntroductionA core aspect of EUTMs is their EU-wideprotective effect. Once the EUIPO grants aregistration, the owner may invoke trademark rights in all 27 Member States withoutrequiring trade mark offices to confirm theprotective effect of the mark at a nationallevel. The advantages of this unitary system(such as cost reduction, streamlining ofprocedures and legal certainty) are reflectedby the growing numbers of EUTMapplications in recent years.

However, although the EUTM’s unitarycharacter stipulated by Article 1(2) ofCouncil Regulation No. 207/2009 on theEuropean Trademark (“EUTMRegulation”) is quite clear in regards tothe mark’s general scope of protection,the legal enforcement of an EUTMmight be an issue if the alleged act isnot considered to be infringing in allMember States. Does the principle ofuniformity bind the court to grant an EU-wide injunction? Or must the courtdismiss the claim entirely because a “true”uniform enforcement would otherwise notbe possible due to territorial differences?Both options would be highly unsatisfyingfor EUTM owners as well as competitors.Unfortunately, the EUTM Regulation doesnot provide clear guidance in this respect.Thus, the CJEU had to find a compromisein order to take into account the interestsof both sides involved.

“Combit” vs. “Commit”In the case Combit/Commit, the Germanowner of an EUTM (and a German mark)for the word “combit” for IT-related goodsand services brought an action for trademark infringement against an Israelicompany who marketed their softwareunder the sign “commit” in its onlineGerman shop. On the basis of its EUTMthe plaintiff sought an order that thedefendant refrain from using the sign“commit” for software across the EU.However, the German court held that thealleged likelihood of confusion (Article 9(1)of the EUTM Regulation) due to the signs’phonetic similarities to the average-German consumer would not apply toEnglish-speaking consumers in other

parts of the EU. The court hesitated tocomply with the plaintiffs request for anEU-wide injunction and referred the caseto the CJEU for a final decision.

Confirming a previous decision (Case C-235/09, Decision from 12 April 2011 –DHL/Chronopost), the CJEU reiteratedthat, in principle, “in order to guaranteethe uniform protection which EU trademarks are afforded throughout the entirearea of the European Union, theprohibition on proceeding with actswhich infringe an EU trade mark must,as a rule, extend to the whole of thatarea”. However, the court must limit thescope of the injunction in regards tothose areas where the functioning of themark as an indicator of origin is not

Düsseldorf: Litigating EU trade marks – The geographicalscope of injunctive relief in the EU – “Combit/Commit”In a recent decision, the Court of Justice of the European Union (“CJEU”) made clearthat although European trade marks (“EUTM”) generally take effect in all EU MemberStates from the date of registration at the European Union Intellectual Property Office(“EUIPO”), the scope of injunctions against the use of a sign likely to cause confusionor free ride on the mark’s reputation may be limited to certain territories (CaseC-223/15, Decision from 22 September 2016 – Combit/Commit). In light of theCJEU’s decision, this article highlights the many legal challenges parties to such a“fragmented” infringement action might face and provides useful guidance on how toovercome them.

“Claudia Milbradt of Clifford Chance is best known for patentlitigation, most notably regarding infringement, counterfeitsand licensing.”

Chambers & Partners 2016: Global Guide: Germany –Intellectual Property: Patent Litigation

Claudia Milbradt is ranked as Trade mark star and Patent starin Managing Intellectual Property – IP Stars: Germany

Claudia Milbradt is highly recommended by JUVE Handbook2016/2017 Germany in the category Patent Law

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© Clifford Chance, December 2016

affected (Case C-223/15, Decision from22 September 2016 recitals 30 and31 – Combit/Commit). The burden torebut the plaintiff’s claims then lies onthe defendant.

Practical considerationsThere are several practical issues toconsider when filing suit for injunctiverelief on the basis of an EUTM.

1. Competent court

In order to receive EU-wide injunctiverelief, the plaintiff must file suit at anational court with exclusive jurisdiction inEUTM matters (“EUTM Court”; Article 95of the Regulation). Germany, for example,provides over 30 EUTM Courts of first andsecond instance. However, the suit mustalso be filed at a court of the defendant’sdomicile. For EU-wide injunctive relief toapply, the trade mark owner may file inthe EU Member State where the allegedinfringement occurred only if thedefendant is located outside the EU (likein Combit/Commit).

While the trade mark owner is free to turnimmediately to an EUTM Court in theMember State where the infringementoccurred, that court’s jurisdiction is limitedto the territory of that Member State if thedefendant’s domicile is elsewhere in the EU.

2. Necessity to limit the scope ofthe suit

There exist several scenarios in which alimitation of the scope of the injunctionmight be necessary, for example:

n The relevant public of one or moreMember States does not perceive thesign to be used “as a trade mark”(e.g. in the language of a MemberState, the sign is perceived to be

descriptive). Thus, the used sign doesnot interfere with the EUTM’s functionas indication of origin.

n The relevant public of one or moreMember States does not have thenecessary foreign language skills tocorrectly comprehend the meaningof the used foreign word ordifferentiate between phoneticnuances (like in Combit/Commit).Hence, a likelihood of confusionbetween the signs is impossible.

n The EUTM is famous in only some butnot all Member States. Thus, freeriding on the reputation of the mark isnot possible in all parts of the EU.

3. Court litigation

Trade mark owners are free to limit thescope of their request for injunctionregarding certain Member States in orderto avoid additional costs (e.g. due to apartial dismissal of the suit) and to speedup proceedings (e.g. to avoid the lengthytaking of evidence). The plaintiff must thenexplicitly define the area in which theinjunction should take effect. In addition,the plaintiff should provide evidence ofinfringement in the defined territory. If hechooses a broad approach without limitingthe scope of the injunction, evidence of aninfringement in at least one Member Statecan, in some jurisdictions, trigger a legalassumption for an EU-wide infringement.In addition to the suit’s main proceedings,plaintiffs should also consider filing apreliminary injunction to stop the infringingacts as soon as possible.

However, trade mark owners should alsokeep in mind that the defendant mayprovide evidence of a different perceptionheld by the relevant public with differentlinguistic capabilities (e.g. Spanish native

speakers) or in another Member State.Further, the defendant might raise a pleaof non-use of the EUTM in the respectiveterritory (Article 99(3) of the Regulation) ortry to pursue cancellation proceedingsagainst the EUTM in dispute.

ConclusionThe unitary effect does not only have animpact on the general scope ofprotection of EUTMs, but also on thepossible scope of injunctive relief.However, since infringements do notnecessarily occur across the entirety ofthe EU, the CJEU requires courts andplaintiffs to limit the scope of a grantedinjunction. Defendants will need to moreactively assert their rights and provideevidence to try and limit the scope of aninjunction. Therefore, a coordinatedlitigation strategy that takes into accountall facts of the particular case (e.g. theextent of the use of the mark in the EUand linguistic differences betweenterritories) is of the utmost importance.

Key issues:n European trade marks have EU-

wide effect. However,infringements do not always occuracross the entirety of the EU.

n In consequence, the CJEU hasallowed national courts to limit thescope of injunctive relief to certainterritories.

n A trade mark owner/plaintiff mayseek injunctive relief across theEU or only a defined area.However, a defendant will want toprovide evidence that the sign atissue is non-infringing or onlyused in certain parts of the EU.

© Clifford Chance, December 2016

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Legal BackgroundThe Directive enables IP owners to applyfor an injunction not only against infringersbut also intermediaries. The conditionsand procedures relating to theseinjunctions are left to the national laws ofEU member states. In principle, however,an injunction should prevent anyinfringements of IPR. All measures,procedures and remedies adopted mustbe fair and equitable and must not beunnecessarily complicated or costly, orentail unreasonable time-limits orunwarranted delays.

L’Oréal (Online Marketplace)

In L’Oréal and Others, the CJEUconsidered intermediaries whoseservices are used by third parties toinfringe IPR. In this case, some of thesellers operating on eBay, an onlinemarketplace, infringed the trade markrights of L’Oréal, a company whichproduces cosmetics, perfumes and hair-care products. The High Court of Justice(England and Wales) referred the case tothe CJEU for a preliminary ruling, askingwhether the Directive requires EUmember states to ensure that, regardlessof any liability of its own, the operator ofan online marketplace could be orderedto take measures aimed at preventingfurther infringements.

The CJEU confirmed that eBay was anintermediary and was obliged to takeactual and preventative measures tobring an end IPR infringementscommitted through its onlinemarketplace. However, the CJEU alsoheld that these measures could notconsist of the active monitoring of thedata of each of its customers in order toprevent any future infringement of IPR via

that provider’s website. Furthermore, itheld that an injunction against theprovider of an online marketplace cannothave as its object or effect a general andpermanent prohibition on the selling ofgoods bearing the infringed trade marksand must be effective, proportionate anddissuasive and must not create barriersto legitimate trade.

Prague: The CJEU on the Interpretation of anIntermediary under Directive no. 2004/28/ECThe Court of Justice of the European Union (the “CJEU”) held in Tommy Hilfigerand Others (July 2016) that any entity which sublets premises to third parties whoinfringe intellectual property rights (“IPR”) by selling counterfeit products isconsidered an intermediary whose services are used by third parties to infringe IPR(“intermediaries”) within the meaning of Article 11 of Directive no. 2004/48/EC onthe enforcement of intellectual property rights (the “Directive”). Such an entity maybe ordered to bring to an end current infringements and take steps to preventfuture infringements.

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Tommy Hilfiger and Others (PhysicalMarketplace)

In 2015, the Czech courts dealt with asimilar question to the CJEU in L’Oréaland Others. However, in this case theIPR infringement took place in a physicalmarketplace. DELTA CENTER wassubletting marketplace premises to thirdparties who infringed IPR by sellingcounterfeit products of brands includingTommy Hilfiger, Burberry and Lacoste.The Czech Supreme Court referred apreliminary question to the CJEU, askingwhether DELTA CENTER should beclassified as an intermediary. The CzechSupreme Court deemed it necessary torequest a preliminary ruling in this casebecause, in its opinion, the judgmenthanded down in L’Oréal and Others onlyconcerned infringements in an onlinemarketplace, which is operated underdifferent principles from a physicalmarketplace. The Czech courts arguedthat the interpretation of “intermediary”in L’Oréal and Others was too broad andcould lead to absurd situations inwhich a supplier of electricity or thegrantor of a commercial license to amarket-trader could also be consideredas intermediaries.

However, the CJEU held that there is nodifference between an online and aphysical marketplace and that theconclusions made in L’Oréal and Othersapply to this situation as well.

UPC (Provision of Internet Services)

The term “intermediary” in relation to theprotection of IPR is also incorporated indirective no. 2011/29/EC, on theharmonisation of certain aspects ofcopyright and related rights in theinformation society. This was interpretedin UPC Telekabel Wien (C-314/12). TheCJEU held that an injunction that bringsto an end and prevents further IPRinfringements may be imposed on aninternet service provider (UPC Telekabel)which provides internet to its customers,some of whom infringe IPR (copyrightsof certain film production companies).Furthermore, the CJEU stated that nospecific relationship between the personinfringing IPR and the intermediary isrequired for the services to be used toinfringe IPR.

ConclusionThe case law of the CJEU provides acoherent and extensive interpretation of an“intermediary whose services are used bya third party to infringe IPR”. Nevertheless,regardless of how extensive thisinterpretation may appear, the protectionof IPR is not unlimited and the CJEUclearly held the opinion that intermediariescannot be asked to control the thirdparties which use their services. Aninjunction will always pertain to specificcustomers and specific infringements.Furthermore, injunctions have logicallybeen issued in relation to operators of

large standalone platforms (providers ofinternet services, operators of onlinemarketplaces and lessors of physicalmarketplaces). In these cases, injunctionswere an effective way of addressing IPRinfringements. All service providers shouldnote that they could face similarinjunctions if they provide services to thirdparties which commit IPR infringements.

Key issues:n Under Directive 2004/48/EC,

injunctions may be granted againstintermediaries whose services areused by third parties to infringe IPR.

n New case law provides that serviceproviders, such as lessors ofphysical marketplaces, fall withinthe scope of such intermediaries.

n Service providers could be orderedto bring to an end and/or prevent theIPR infringements of third parties.

© Clifford Chance, December 2016

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Under the Ecommerce directive2, anintermediary information society serviceprovider is not liable for a third party’sinfringement using those services, if it isan intermediary offering a hosting service,caching data or acting as a conduit andhas no notice of the relevant wrongdoing.

Rights-holders have therefore:

n adapted strategies used originallyto prevent an internet serviceprovider (‘ISP’) allowing access towebsites displaying material whichinfringes copyright to the counterfeitproduct context;

n challenged the ability of users to accessthe internet anonymously (requiring awireless network operator to apply apassword to secure a wireless network,where there was evidence that thenetwork had previously been used todownload a sound recording in breachof copyright); and

n applied concepts developed in respectof intermediaries offering onlinemarketplaces to offline marketplaces.

The CJEU gave judgment inSeptember 20163, in a case brought by

Sony (relating to copyright infringement)establishing that:

n an individual offering the public freeaccess to a wireless network wasoperating an information societyservice, within the course of hiseconomic activity;

n although he was able to benefit froman intermediary exemption, his rightsto operate his business had to bebalanced against the rights of theIPR holder. The court thereforebalanced the freedom of access toinformation/ability of service provider toconduct his economic activity againstthe rights of the IPR holder.

The options available to end theinfringement were tested against theimpact on each stakeholder. Theseincluded requiring the service provider to:(i) monitor all communications passingthrough the network; (ii) terminate theinternet connection; or (iii) insist onpassword protected access. Use of apassword was held not to damage theessence of the right to freedom to conductbusiness (as the measure is limited tomarginally adjusting one of the technical

options open to provider) or the right tofreedom of information.

The CJEU also recently confirmed thatthere was no difference between an onlinemarketplace and a physical marketplacefor purposes of the Enforcement Directive.4

Tommy Hilfiger5 sought an injunctionpreventing the Delta Center (a tenant of areal world marketplace, which sub-let retailspace to market traders) from:(i) sub-letting/extending contracts withinfringers; and (ii) concluding contracts withsub-lessees which did not include aprohibition on the sub-lessee infringingthird party IPR. The CJEU referred to theL’Oreal6 case law that an intermediary canbe ordered to take measures aimed atbringing infringement to an end/seeking toprevent further infringement. This analysisrequires a court to consider whether aninjunction would be effective anddissuasive. An injunction must also beequitable and proportionate and cannot beexcessively costly or create barriers totrade. As a general principle, anintermediary is not expected to exercisegeneral and permanent oversight over itscustomers. However, it can be required totake measures which prevent newinfringements of the same nature. This

London: Intermediary liability: A new approach bybrand owners in the online environment?The sheer amount of infringing activity online means brand owners need to monitor themarket so consumers can identify (and acquire) branded products from legitimate sources.For example, the claimant in the Cartier case1, discussed below, claimed that it hadidentified nearly 240,000 websites offering potentially counterfeit products. Existingenforcement tools (recovery of domain names, the use of online reporting tools such aseBay’s VeRO and EU customs authorities notification programs) target individual infringers.IP rights-holders have now focused on the involvement of intermediaries.

1 Cartier International AG v BSkyB Ltd [2016] EWCA Civ 658.2 Directive 2000/31/EC.3 Tobias McFadden v Sony Music Entertainment Germany GmbH C-484/14.4 Directive 2004/48.5 Tommy Hilfiger Licensing LLC v Delta Center a.s. C-494/15.6 L’Oréal v eBay, C-324/09.

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© Clifford Chance, December 2016

approach offers a fair balance betweenprotection of IP and the prevention ofbarriers to legitimate trade. The courtconsidered that the objective of providinghigh level of protection for IP would besubstantially weakened if an intermediaryoffering a ‘real world’ marketplace couldnot be the subject of an injunction.

The cases discussed above relate to theEnforcement directive and the Ecommercedirective (as implemented in each case intonational law). In Cartier, the Richemontgroup (a luxury goods multinational) soughta so-called ‘blocking’ injunction against theUK’s largest ISPs, requiring them to preventcontinued access to certain websites whichhad been identified as offering counterfeitproducts. In July 2016, the English Court ofAppeal affirmed the first instance injunctiongranted to Richemont.

The ISPs argued that it was conceptuallyharder to impose intermediary liability onservice providers offering access to websitesfrom which a consumer would have to take aseries of steps to acquire the counterfeitproduct. This was, they argued, differentfrom the scenario where an ISP hostscontent that infringes copyright, where theinfringement is the unlawful communicationto the public of the copyright work on thewebsite (without any further steps beingtaken by the host of the website or thewebsite user). This was rejected by the Courtas: (i) the ISPs were seen as essential actorsin all of the communications between usersand the operators of the target website; and(ii) the Enforcement Directive is intended toensure that holders of rights other thancopyright should be able to apply forinjunctions against intermediaries whoseservices are being used by third parties toinfringe those rights.

The Court of Appeal then considered eachelement of the test in L’Oreal. First, theperson seeking an injunction needs toidentify the relevant intermediary, the

particular instance of trade markinfringement and have given the ISP noticeof the infringing content / products. TheCourt then assesses whether an injunctionwould be an effective remedy. It concludedthat, even if the terms of an injunction didnot offer complete relief, or the prescribedmeasures were capable of circumvention,it could still be granted if it makes accessto websites difficult to achieve ordiscourages access.

The Court considered:

(i) the comparative importance of therights engaged and the justification forinterfering with the exercise of thoserights (the availability of alternativeenforcement measures, impact onlawful internet users);

(ii) whether the likely costs burden on theISPs was justified by the likely efficacy ofblocking measures (and consequentbenefit to rights-holders). The ISPs hadincurred legal costs of over £600,000resisting the application for injunctive reliefand argued that it would cost asubstantial sum per website to blockaccess. As a comparator, the ISPs said itcost £14,000 per website to blockaccess to websites which infringecopyright. The Court said these werecosts of carrying on business as an ISP,noting that these were relatively modest

for a single order. The Court also notedthat the ISPs already had technology toblock access to images of child abuse, topermit parental control of content viewedby children and to implement s.97ACopyright, Designs and Patents Act 1988orders relating to copyright infringementand that this existing technology couldpresumably be adapted for use in thecounterfeit product scenario;

(iii) the impact on innocent third parties(who might share a server with awebsite offering counterfeit products)and the adequacy of safeguardsagainst abuse by rights-holders.

These decisions show rights-holdersattacking the supply chain at a differentpoint and attempting to reduce theinfringing products/content available forconsumers to view.

Key issues:n Interplay between the online and ‘real

world’ marketplaces

n Balancing of fundamental freedomsto operate a business againstprotection for IP rights

n Scope of exemptions from liabilityfor intermediaries

BackgroundIn 2011, GS Media BV (“GS Media”)published an article and a hyperlink on theinternet, directing viewers to an Australianwebsite where certain photos which hadbeen taken for Playboy magazine weremade available without the consent oftheir copyright holder, Sanoma MediaNetherlands BV (“Sanoma”). DespiteSanoma’s demands, GS Media refused toremove the hyperlinks.

Sanoma brought the issue before theDutch Courts, claiming, amongst othersissues, copyright infringement. Afterseveral decisions and appeals, the casewas referred to the Supreme Court of theNetherlands, which decided to stay theproceedings and refer questions to theCourt of Justice of the European Union(“CJEU”) for a preliminary ruling.

In essence, the questions can besummarized as follows: in what possiblecircumstances does posting a hyperlinkon a website to protected works, that arefreely available on another websitewithout the consent of the copyrightholder, constitute a ‘communication tothe public’ within the meaning of Article3(1) of the InfoSoc Directive1. This isimportant as communications of works tothe public require authorization from therelevant rightholders.

Decision of the CJEUIn a ruling issued on 8 September 20162,the CJEU deviated from the opinion of theAdvocate General3 and decided that theposting of hyperlinks to protected worksfreely available on another websitewithout the consent of the copyrightholder may, indeed, constitute an act ofcommunication to the public. Although asuperficial consideration of the mattercould lead to the conclusion that thisruling contravenes previous decisions

reached by the CJEU in similarhyperlinking cases4, there is an essentialdifference that cannot be disregarded.

In Svensson and BestWater, the relevanthyperlinks gave access to content thathad been made available with theconsent of the rightholders on freelyaccessible websites. By giving theirconsent, the copyright holders hadaccepted and assumed that their workscould be viewed by all internet users.Consequently, the posting of the

Amsterdam: Judgment of the CJEU – Hyperlinking toillegal sources infringes copyright

1 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in theinformation society.

2 ECJ 8 September 2016, C-160/15 (GS Media BV v Sanoma Media Netherlands BV and others).3 Opinion of Advocate General Wathelet 7 April 2016, C-160/15 (GS Media BV v Sanoma Media Netherlands BV and others).4 ECJ 13 February 2014, C-466/12 (Svensson and Others) and Order of the ECJ 21 October 2014, C-348/13 (BestWater International).

© Clifford Chance, December 2016

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The CJEU has recently concluded that hyperlinking to unauthorised content is an actof communication to the public when the person posting the hyperlinks knows (orought to have known) that the contents have been published illegally.

hyperlinks did not add a ‘new public’ tothe audience already taken into accountby the rightholders.

Nevertheless, this rationale cannot beapplied to the present case. As Sanomanever gave consent to the publication ofthe pictures at issue on the internet, thehyperlinks posted by GS Media gaveaccess to a new public neitherconsidered, nor accepted by theircopyright holder.

Whilst the lack of consent is animportant step to assess whether ahyperlinking practice entails an act ofcommunication to the public, it is notsufficient. As explained by the CJEU, italso necessary that the person postingthe relevant hyperlinks was actingdeliberately, in knowledge of theconsequences of his actions. Taking thatinto account, the CJEU mentions threecircumstances under which it shall be

understood that hyperlinking to unlawfulsources constitutes an act ofcommunication to the public.

First, when the person posting therelevant hyperlinks knew or ought to haveknown that he was providing access toworks unlawfully published on theinternet, for example if he was notifiedthereof by the copyright holders.

Second, when the hyperlinks were postedfor profit. In these events, full knowledgeis presumed to exist, as it can beexpected that the person who posted thelinks carried out the necessary checks toensure that the concerned works werenot illegally published.

Last, when the hyperlinks allow users tocircumvent restrictive measures taken bya site where protected works arepublished, such as limiting access to thesite’s subscribers. It states that these are

acts of communication to the public, asposting the hyperlinks constitutes adeliberate intervention necessary toaccess the unlawful works.

ConclusionIn the CJEU’s words, the interpretationgiven by the judgment to Article 3.1 ofthe InfoSoc Directive provides the highlevel of protection authors sought in thatpiece of law.

From now on, copyright holders in the EUmay act not only against the initialpublications of their works on a website.Under certain circumstances, they willalso have strong arguments to denouncehyperlinking practices.

Strenghts (Quotes mainly from clients):“We like to work with Clifford Chance for its lawyers’ ability tolisten, ask the right questions, get all of the relevant informationand build up a very good defence in order to win the case.”

“The lawyers have handled the case very well. They arevery responsive, knowledgeable and proactive, andcommunicate clearly.”

Chambers & Partners 2016: Europe Guide – Dispute Resolution

Key issues:n Communications of copyright

protected works to the publicrequire authorization of thecopyright holders.

n The CJEU concludes that somehyperlinking practices on theinternet may be considered acts ofcommunication to the public.

n For hyperlinking to qualify as an actof communication to the public,hyperlinks must direct users toillegal sources and be posted bysomeone aware of the illegality.

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© Clifford Chance, December 2016

© Clifford Chance, December 2016

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The proposals are driven in part by therecognition that the way we consumecopyright content has changeddramatically over the last decade. TheCommission’s previous major foray into thisarea, the Information Society Directive, wasadopted in 2001, prior to the massadoption of the internet. 

Online retransmission oftelevision and radioprogrammesOne of the draft Regulations governscopyright and related rights for onlinetransmissions and retransmissions oftelevision and radio programmes, and isdesigned to facilitate rights clearanceacross the EU. Following theCommission’s review of the Satellite andCable Directive, the draft Regulationadopts the approach taken in thatDirective i.e. that rights are cleared on a“country of origin” basis for transmissionacross the EU, and rightsholders otherthan broadcasting organisations mustexercise their retransmission rights throughcollecting societies.

Importantly, this draft Regulation only appliesto simulcasts of broadcasts and to catch-upservices available for a limited period of timefollowing the original broadcast; it will notintroduce pan-EU rights clearance for“video-on-demand” services. For theseservices, the Commission proposes, via thedraft Directive on Copyright in the DigitalSingle Market, to require Member States tonominate an impartial body with relevantexperience to assist would-be licensees withnegotiation if they experience difficulties indoing so directly. Some will argue that theCommission has not gone far enough in

respect of VoD services, as theseincreasingly supplement and ultimatelyreplace broadcast media for consumers, butthe Commission concluded it was too earlyin the evolution of the VoD market toattempt this.

Out-of-Commerce works,exemptions and addressingthe “value-gap”As well as requiring Member States to ensurethere is an impartial body to facilitate VoDlicence negotiation, the draft Directive onCopyright in the Digital Single Market containsother measures aiming to bring Europeancopyright law into the digital age. 

First, the Directive contains a regime forcollective licensing in respect of “out-of-commerce” works for cultural heritageinstitutions, such as libraries and museums.Out-of-commerce works are works stillprotected by copyright but no longeravailable to the public, for example where abook is no longer in print. The collectivelicensing regime will allow cultural heritageinstitutions who have agreed a licence todigitise, distribute and communicate to thepublic out of commerce works or othersubject matter in their permanent collectionswith a collecting society to apply this licenceto similar works whose rightsholders havenot mandated the collecting society(although non-mandating rightsholders willhave an opt out right). This measure is notlimited to books and journals, but would alsocover other content including audio andaudiovisual content. The Directive alsoproposes a blanket exception for culturalheritage organisations to make copies ofworks in their permanent collections forpreservation purposes.

Other initiatives aim to ensure there is aconsistent approach across the MemberStates to the exceptions and limitations tocopyright under EU law as applied to thedigital environment. For example, theproposal requires Member States to providea mandatory exception with cross bordereffect for online teaching (provided this is viaa secure network with access limited topupils, students or teaching staff), but withsome flexibility depending on the availabilityof adequate licences.

Exceptions for automated data and textmining in the digital environment have been acontroversial area for some years. On the onehand, scientific and other commercialpublishers fear that data mining willundermine the market for their own enhancedofferings. On the other hand, commercialresearch organisations say that they need theright to mine data for commercial purposes,arguing that it is an “accident” of intellectualproperty law that use in digital form is requiresa licence, whereas reading a book or anarticle does not.

The proposal introduces a text and data-mining exception for non-commercial

London: The recent EU copyright proposalsOn 14 September 2016 the European Commission published two draft copyrightDirectives and two further draft copyright Regulations. Together with the December 2015draft Regulation on cross border portability of online content services, these cover muchof the ground set out in its December 2015 communication “towards a modern, moreEuropean copyright framework”, as part of the wider Digital Single Market initiative.

Talking Tech

This article was originallypublished onwww.cliffordchance.com/TalkingTech.

The Talking Tech websiteprovides information andupdates on the latest trends andinnovations in the digital world.

scientific research as well as for organisationswhose primary goal is to conduct scientificresearch (or scientific research combined witheducational services) (a) on a not-for profitbasis or by re-investing all profits in itsscientific research or (b) pursuant to a publicinterest mission recognised by a MemberState. The proposed exception requires thataccess to the results is not available on apreferential basis to any organisationexercising a decisive influence upon theresearch organisation.

Scientific and technical publishers will benervous about the impact of the data miningexception. Press publishers across the EUshould however welcome a new 20 year presspublication right, in recognition of the fact thatin the transition from print to digital they arefacing problems in licensing online use of theirpublications and recouping their investments.

Further proposals seek to address the“value-gap” in the digital environmentbetween the rightsholder and the contentprovider. The proposed Directive includesprovisions aimed specifically at platformswhich allow users to upload content to beenjoyed by other users. Currently, theplatform benefits from the advertising revenuethe content generates, but the rightsholdersmay not share the benefit (especially where itis uploaded without their consent). MemberStates will be required to ensure thatrightsholders receive sufficient information onthe exploitation of their works to ensure theyare fairly remunerated or can preventavailability of their works on the service. Thiswill include appropriate and proportionate useof measures such as effective contentrecognition technologies, and the availabilityof complaints and redress mechanisms.

The proposal also includes provisions toincrease transparency of informationprovided to authors and performers aboutthe exploitation of their works, and formechanisms for adjustment of remunerationwhere contracts with authors or performersleave them disproportionately poorlyremunerated compared to the revenues andbenefits generated from the exploitation oftheir works.

Implementing the MarrakeshTreaty to Facilitate Access toPublished Works for Personswho Are Blind, VisuallyImpaired, or OtherwisePrint DisabledThe remaining draft Directive and Regulationconcern the implementation of the MarrakeshTreaty to Facilitate Access to PublishedWorks for Persons who Are Blind, Visually

Impaired, or Otherwise Print Disabled. TheMarrakesh Treaty, adopted in 2013, requiressignatories to introduce exemptions andlimitations to copyright to facilitate access toprint materials to those with visualimpairments or conditions such as dyslexia.The combination of a draft Directive andRegulation aims to facilitate sharing ofaccessible formats both within the singlemarket and with countries outside of the EU.

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© Clifford Chance, December 2016

Key issues:Proposals aim to:

n simplify rights clearance for simulcasts and short term TV catch-up services

n facilitate VoD rights clearance negotiations

n enable exploitation of out of commerce works by libraries and museums

n increase harmonisation of exceptions to copyright

n introduce a text and data mining exception

n address the “value gap” between rightholders and content providers and improvetransparency for rightholders about use of their works

n implement the Marrakesh Treaty for access to works for those who are blind, visuallyimpaired or otherwise print disabled

Vanessa Marsland is one of Managing IP’s “IP Stars” and “Top 250women in IP”.

Managing Intellectual Property – IP Stars: United Kingdom

Vanessa Marsland of Clifford Chance LLP is best known for herhandling of contentious matters, especially copyright, licensing andtrade mark disputes. A source describes her as “one of the brainiestsolicitors in London.”

Chambers & Partners 2016: Global Guide: UK – Intellectual Property

Stephen Reese awarded for his IP/Life Sciences practice:

“extremely smart, very detail-oriented and makes sure everything isthought through and works.”

Chambers & Partners 2016: UK Guide: UK – Life Sciences:Transactional — UK-wide, Band 2

Stephen Reese is also ranked in IAM’s Top 250 Patent Licensingspecialists, a top rated attorney in Super Lawyers and a Legal 500Leading Individual.

© Clifford Chance, December 2016

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Background of theJudgmentIn 2004, Aleksandrs Ranks and JurijsVasiļevičs sold more than 3,000 copiesof copyright protected programspublished by Microsoft in Lativa. Thecopies sold were back-up copies of theMicrosoft programs. Both Ranks andVasiļevičs were declared guilty of severalcrimes, including intellectualproperty infringement.

After multiple appeals, the Rīgasapgabaltiesas Krimināllietu tiesu kolēģija(Criminal Law Division of the RigaRegional Court) posed two questions tothe CJEU for a preliminary ruling. Thesequestions referred to the interpretation of

Articles 4.2, 5.1 and 5.2 of Directive2009/24 on the legal protection ofcomputer programs (the “Directive”).

Specifically, the Latvian court asked theCJEU whether a person who hasacquired a computer program with anunlimited user licence is entitled, providedthat the copy of the program wasdamaged, destroyed or lost, to distributethe back-up copy of the program to anew acquirer without the authorisation ofthe right-holder.

The response to this question requiredthe CJEU to analyse the two followinglegal concepts: (i) the exhaustion of aright-holder’s distribution right, and(ii) the back-up copy.

Exhaustion of a right-holder’sdistribution rightBy virtue of the Judgment, the CJEU,following the doctrine commenced inUsedSoft (C-128/11, dated 3 July 2012),declared that the holder of the copyrightin a computer program, who has sold,within the European Union, a copy of thatprogram on a material medium (forinstance, a CD-ROM) with an unlimiteduser licence, cannot prevent the acquirerof that material medium to resell thatcopy. This is extended to the subsequentacquirers and to the subsequent resalesof the copy.

Therefore, the distribution right of theright-holder ends with the first sale in theterritory of the European Union when itcomes to copies provided on the originalmaterial medium. The difference with thecurrent case lies in the fact that the copiesof the computer program that were resoldwere back-up copies, and not copiesstored on the original material medium.This leads to the second legal conceptsexamined by the CJEU: the back-up copy.

Back-up copyAfter analysing the exhaustion of aright-holder’s distribution right, theCJEU stated that the right to resellcopies of a computer program after itsfirst sale in the European Union is notabsolute and has certain limits. One of

Barcelona: Judgment of the Court of justice of the Europeanunion dated 12 October 2016 (c-166/15): the rule of exhaustionof the right-holder’s distribution right and the back-up copyOn 12 October 2016, the Court of Justice of the European Union (“CJEU”) issued ajudgment defining the parameters of the exhaustion of a right-holder’s distribution rightand back-up copies (the “Judgment”). In particular, the CJEU confirmed that aperson who acquires a copy of a computer program with an unlimited user licence isnot entitled to provide a back-up copy of that program to a new acquirer without theauthorisation of the right-holder, even in the event that the first acquirer’s copy hasbeen damaged, destroyed or lost.

these limits is that reproduction rightsand their exceptions outlined in theDirective are respected.

In this regard, the CJEU establishedthat, pursuant to Article 5.2 of theDirective, a person who has the right touse a computer program can make aback-up copy of the same “in so far as itis necessary for that use”. In addition,the CJEU stated that this rule, as it is anexception to the reproduction right ofthe holder of the copyright, must beinterpreted in a restrictive manner.

Consequently, a back-up copy of acomputer program can only be made tosatisfy the needs of the person who isentitled to use such computer program,and not for the resale of the program toa third party.

ConclusionThe CJEU has confirmed that in thosecases where the original material mediumof the copy of a computer program isdamaged, destroyed or lost, the acquirerof such a copy cannot resell the back-upcopy of the program to a new acquirerwithout the authorisation of the right-holder. The trigger to determine the legality

of the resale of the computer program willbe the material medium in which thecomputer program is stored. If it is theoriginal material medium, the resale of thecomputer program should be legal.Conversely, the resale of a back-up copycannot find shelter in the exhaustion of theright-holder’s distribution right.

This decision highlights the importance ofthe original material medium when it comesto the resale of computer programs.

Link directory:1. Judgment of the Court of Justice of

the European Union dated 12 October2016 (C-166/15):http://curia.europa.eu/juris/document/document.jsf?text=&docid=184446&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=156910

2. Judgment of the Court of Justice ofthe European Union dated 3 July2012 (C-128/11):http://curia.europa.eu/juris/document/document.jsf;jsessionid=9ea7d0f130d62397a73d0c8f43a89c14939866cc83fb.e34KaxiLc3eQc40LaxqMbN4Pah4Te0?text=&docid=124564&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=156816

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© Clifford Chance, December 2016

Key issues:n The CJEU has confirmed the

“UsedSoft’s doctrine” (C-128/11,dated 3 July 2012) regarding theexhaustion of a right-holder’sdistribution right.

�n The CJEU has further defined therights to a back-up copy andconcluded that this has to beinterpreted restrictively.

© Clifford Chance, December 2016

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Definitions and ScopeThe Provisions apply to both “App Stores”and “App Providers”.

Article 2 of the Provisions defines anapp as “a piece of applicationsoftware…that runs on a smart mobileterminal and provides informationservices to users”. App Stores aredefined as platforms that provide “via theinternet, browsing, search or downloadservices for application software orpublication services.”

App Providers are defined as the ownersor operators of apps that provideinformation services.

Only App Providers who provide“information services” are subject to theProvisions. However, the term“information services” itself is not defined(despite appearing in the title). Bycontrast, App Stores will be subject tothe Provisions whether they provideinformation services or not.

As such, in a case where the owner andoperator of an app are different, it isunclear whether it should be the owner orthe operator who has the obligation tocomply with the Provisions.

Obligations – App ProvidersAccording to Article 7 of the Provisions,all App Providers must, amongstother obligations:

n verify the basic identification details oftheir registered users;

n establish a suitable mechanism toprotect personal data of the users;

n create a robust content monitoringsystem to filter out illegal contentwith features including suspensionand restriction of an individualuser’s account;

n protect users’ rights to be informed ifthe app needs to gain access to theuser’s details (such as contact lists orlocation, etc.);

n respect and protect IP rights; and

n record users’ login information andkeep it on file for at least sixty days.

In addition to the above, Article 5 of theProvisions also sets a qualificationthreshold, stating that “relevantqualifications specified in laws andregulations” must be demonstrated beforean operator can provide mobile app-relatedservices. It remains unclear what exactlythese qualifications are. Reference has tobe made to other pieces of legislation,

some of which imply the need for operatorsto apply for specific licences. The pieces oflegislation are as follows:

Catalogue of TelecommunicationsBusiness (MIIT) 2015.12.28(Telecom Catalogue)

Telecom Catalogue contains a categorycalled “information service business”which is listed as a Type II value-addedtelecom service (“VATS”). These servicesinclude social media, instant messaging,voice and video calling, anti-virus softwareand spam filtering services.

Given that VATS providers are required toapply for licences according to Article 4 ofthe Administrative Measures for theLicensing of Telecommunications BusinessOperations (MIIT) 2009.3.1, it seems thatApp Providers will need to do the same.Furthermore, licence applications will onlybe accepted from companies instead ofindividuals, severely restricting individualsfrom owning or operating apps.

Provisions on the Administration ofOnline Publishing Services(SAPPRFT & MIIT) 2016.2.14(Online Publishing Provisions)

The broad definition included within theOnline Publishing Provisions published bySAPPRFT and MIIT comprises all digital

Hong Kong: Mobile apps in China – new rules bringstricter regulation and enhanced user protectionThe Provisions for the Administration of the Information Services of Mobile InternetApplication (the “Provisions”), issued by the Cyberspace Administration of China(“CAC”), took effect on 1 August 2016. The key concepts introduced by the Provisionsare set out in more detail below. More clarity will, however, be required from theauthorities, especially as there is some overlap between the Provisions and other PRClaws which, to a varying extent, may be applicable to mobile apps (including but notlimited to existing guidelines and rules issued by the Ministry of Industry andInformation Technology (“MIIT”), the State Administration of Press, Publication, Radio,Film and Television (“SAPPRFT”) and the Ministry of Culture).

works that (i) include features such asediting, producing and processing, and(ii) are offered to the public over informationnetworks. As a consequence, a largeproportion of the information provided byapp providers would likely qualify as anonline publication and require a licence.

Administrative Measures on InternetInformation Services of the PRC(State Council) 2000.9.25 (InternetInformation Services Measures)

Under the Internet Information ServicesMeasures, internet information services aredivided into profitable and non-profitableservices. “Profitable” internet informationservice providers are required to apply forVATS licences, whereas “non-profitable”providers are only required to be registeredwith the relevant local authorities, with nolicensing requirement.

Obligations – App StoresAccording to Articles 5 and 8 of theProvisions, all App Stores must:

n register with their local CAC withinthirty days of going online;

n verify the identity of App Providers ontheir platforms;

n make sure that App Providers protectusers’ personal information andrespect relevant IP rights; and

n remove non-compliant apps fromthe store.

Foreign Service ProvidersThe Provisions apply to App Providersand App Stores operating within the PRC.It is unclear whether foreign serviceproviders operating offshore are allowedto engage in app-related businesses or, ifthey are allowed to do so, whether theyare likely to face any additional obligationsor compliance burdens.

Notably, Apple’s App Store is technicallyoutside the scope of the Provisions as it isan offshore platform. In any event, Applecomplies voluntarily with PRC standardsand its popularity with consumers hasmeant the authorities have largelytolerated its presence in the market.

ConclusionThe new app regulations follow swiftly onfrom the new strict regulations for mobilegames that took effect on 1 June 2016.The Circular Regarding the Administrationof Mobile Game Publication Servicesmakes it clear that games that are notsubmitted for approval will be deemedillegal publications and their publishersliable to penalties. In serious cases, thepublisher’s licence will be revoked.

As for apps under the new regime, theuser experience is likely to be mixed: if theProvisions are properly enforced, appusers can expect their favourite apps tobe of higher quality and at the same timeenjoy greater security of their personalinformation. Conversely, the range ofcontent app users can enjoy may bemore limited in the future and therequirement to track and keep records ofuser behaviour may limit the app user’sfreedom of expression.

Despite the increased regulation, theopportunity for businesses remainssignificant. According to the mediaresearch group iiMedia, the first quarterof 2016 saw 444 million active usersof third party mobile app stores.China Internet Watch counted 33,000mobile apps with categories such asphotography, health and fitness,travel and navigation, lifestyle,shopping and social/messaging appsall proving popular.

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© Clifford Chance, December 2016

Ling Ho attracts praise for her wealth of experience andcommitment to her clients. She heads both the Asia-Pacificintellectual property group and the China litigation and disputeresolution practice. She has particular expertise in trade markinfringement and unfair competition, as well as global portfoliomanagement. Work highlights include managing the brandportfolio of Aston Martin Lagonda.

Chambers & Partners 2016: Global Guide: China – Intellectual Property (International Firms)

Key issues:n New laws in China aim to regulate

the internet mobile app industry byimposing certain requirements andobligations on App Providers andApp Stores including licensequalification requirement for AppProviders and a new set ofobligations on App Stores, notablythe registration requirements withthe local CAC.

n Although it is unclear whether theProvisions apply to foreign AppProviders, it may be expected thatthere will be increased regulatorycontrol in this area.

© Clifford Chance, December 2016

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Giulia Abbagnale

Rais Amils

Petra Belova

Anna Blest

Alexander Cappel

Marcin Czarnecki

Luciano Di Via

Fabio Guastadisegni

Krzysztof Hajdamowicz

Ling Ho

Nicolas Hohn-Hein

Nadia Jagusiak

Michal Jasek

James Jeffries-Chung

Matthieu Juglar

Alvin Khodabaks

Sunny Kumar

Diego de Lammerville

Emmanuelle Levy

Montserrat Lopez-Bellosta

Vanessa Marsland

Sonia Masco

Andrei Mikes

Claudia Milbradt

Miquel Montana

Josep Montefusco

Sara van Mourik

Jack Oakley

Tim Grave

Stephen Reese

Florian Reiling

Monica Riva

Konrad Rominkiewicz

Ashwin van Rooijen

Shila Ruff

Ludvik Ruzicka

Manel Santiliari

Anja Schwarz

Sybille Sculy-Logotheti

Leigh Smith

Eugenia Tonello

Tina Wu

AcknowledgementsWe would like to thank the following people for their contributions to this publication:

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© Clifford Chance, December 2016

Mihaela Mindru Counsel, Bucharest

T: +40 21 6666 137E: mihaela.mindru

@cliffordchance.com

Romania

Thomas Vinje Partner, Brussels

T: +32 2 533 5929E: thomas.vinje

@cliffordchance.com

Belgium

Ling Ho Partner, Hong Kong

T: +852 2826 3479E: ling.ho

@cliffordchance.com

China

Diego de Lammerville Partner, Paris

T: +31 1 4405 2448E: diego.delammerville

@cliffordchance.com

France

Florian Reiling Senior Associate, Düsseldorf

T: +49 211 4355 5964E: florian.reiling

@cliffordchance.com

Emmanuelle Levy Senior Associate, Paris

T: +31 1 4405 2439E: emmanuelle.levy

@cliffordchance.com

Claudia Milbradt Partner, Düsseldorf

T: +49 211 4355 5962E: claudia.milbradt

@cliffordchance.com

Germany

Fabio Guastadisegni Partner, Milan

T: +39 02 8063 4353E: fabio.guastadisegni

@cliffordchance.com

Italy

Krzysztof Hajdamowicz Counsel, Warsaw

T: +48 22 429 9620E: krzysztof.hajdamowicz

@cliffordchance.com

Poland

Monica Riva Counsel, Milan

T: +39 02 8063 4383E: monica.riva

@cliffordchance.com

Hidehiko Suzuki Partner, Tokyo

T: +81 3 5561 6662E: hidehiko.suzuki

@cliffordchance.com

Japan

Contacts

Tim Grave Partner, Sydney

T: +61 28922 8028E: tim.grave

@cliffordchance.com

Australia

© Clifford Chance, December 2016

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Alvin Khodabaks Partner, Amsterdam

T: +31 20 711 9374E: alvin.khodabaks

@cliffordchance.com

The Netherlands

Stephen ReesePartner, London

T: +44 20 7006 2810E: stephen.reese

@cliffordchance.com

Miquel Montañá Partner, Barcelona

T: +34 93 344 2223E: miquel.montana

@cliffordchance.com

Spain

Montserrat López-Bellosta Of Counsel, Barcelona

T: +34 93 344 2255E: montserrat.lopez-bellosta

@cliffordchance.com

Vanessa Marsland Partner, London

T: +44 20 7006 4503E: vanessa.marsland

@cliffordchance.com

UK

Daryl Fairbairn Counsel, New York

T: +1 212 878 4960E: daryl.fairbairn

@cliffordchance.com

US

Torsten Syrbe Partner, Moscow

T: +7 49 5725 6400 E: torsten.syrbe

@cliffordchance.com

Russia

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© Clifford Chance, December 2016

Notes

© Clifford Chance, December 2016

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Notes

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© Clifford Chance, December 2016

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