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- L&rsquo;Oreal Decision Overturned by UK Court of Appeal</font></b></a></p></td> </tr> <tr> <td WIDTH="50%" VALIGN="TOP"><p align="left" ><a href="#2"><b><font face="verdana" size="2">The Copyright (Amendment) Ordinance 2007 </font></b></a></td> <td WIDTH="50%" VALIGN="TOP"><p align="left"><a href="#7"><b><font face="verdana" size="2">Unsolicited Electronic Messages Ordinance (&ldquo;UEMO&rdquo;)</font></b></a></p></td> </tr> <tr> <td WIDTH="50%" VALIGN="TOP"><p align="left" ><a href="#3"><b><font face="verdana" size="2">End of the road for &ldquo;Big Crook&rdquo; - Court of Final Appeal upholds conviction of BitTorrent Seeder</font></b></a></td> <td WIDTH="50%" VALIGN="TOP"><p align="left"><a href="#8"><b><font face="verdana" size="2">Macau - The Secret of Asia </font></b></a></p></td> </tr> <tr> <td width="50%" VALIGN="TOP"><a href="#4"><b><font face="verdana" size="2">Application to Register the Shape of Sony Play Station Refused - Court upholds Registrar&rsquo;s Decision </font></b></a></td> <td width="50%" VALIGN="TOP"><a href="#9"><b><font face="verdana" size="2">China - New Regulations for Franchises</font></b></a></td> </tr> <tr> <td width="50%" VALIGN="TOP"><a href="#5"><b><font face="verdana" size="2">The Patents (Amendment) Bill 2007 - Hong Kong to Implement the Doha Declaration but Controversy over Compulsory Licensing and Public Health Continues</font></b></a></td> <td width="50%" VALIGN="TOP"><a href="#10"><b><font face="verdana" size="2">Special Notice - Saturday Filings</font></b></a></td> </tr> </table> </div> <p ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="1"></a>REGAL CASE GOES TO THE HIGH COURT - TRANSSHIPMENT MAY NOT QUALIFY AS GENUINE USE - IS A CHANGE IN THE TRADE MARK LAW REQUIRED? </strong></font></p> <font face="Verdana, Arial, Helvetica, sans-serif" size="2"><p>In our last Asia IP Bulletin, we reported on a number of Hong Kong Registry decisions involving transshipment of goods through Hong Kong and whether this constituted genuine use for the purpose of revocation proceedings.</p> <p>The cases came to different conclusions on their facts. However, questions remained as to when use of a mark is to be regarded as internal only and, therefore, not sufficient to qualify as genuine use. This issue is especially important to trade mark owners whose goods are transshipped through Hong Kong but are not actually exposed to consumers or end-users in Hong Kong.</p> <p>The recent decision of the Hong Kong High Court in <em>Brands Inc Ltd v Kabushiki Kaisha Regal Corp [2007] 2 HKC 110</em> has now clarified the meaning of genuine use. The case was an appeal from the decision of the Registrar with regard to the application for revocation of the mark REGAL AND BOOT DEVICE in class 25 (which was one of the cases discussed in our last Bulletin). The Registrar had refused the application to revoke, holding that there had been genuine use.</p> <p>The Court disagreed with the decision of the Registrar and ordered the revocation of the REGAL AND BOOT DEVICE mark. The Court held it is essential that the mark should have been used by being exposed to third parties (<em>other than the trade mark owner or his licensees or agents</em>) in the market in Hong Kong for goods covered by the registration. The key factors are: </p> </font> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Badge of origin</strong></font></p> <ul> <li><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The mark must serve its essential function in that it must be used in such a way as to act as a badge of origin, or a guarantee of the source of the goods to which it is affixed. In this case, the owner of the mark, his licensees or agents did <u>not</u> rely on the mark for this purpose. The argument that the transactions had been at arm&rsquo;s length and that the goods had changed hands, did not assist the owner. The judge held that none of the parties involved in the relevant transactions could have been relying on the mark as a badge of origin. The manufacturers were producing the goods under licence and were themselves the source of the goods. As regards the owner, the judge stated &ldquo;it cannot seriously be suggested that it was relying on its own mark to inform itself of the origin of the goods which it had itself ordered&rdquo;. The use of the mark on the goods would only be seen by them and not by any third party purchaser or potential purchaser.</font></li> <li><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The mere fact that some third party might have seen the mark in the course of transshipment is not sufficient as they would not have done so in the context of a market for the goods in question, in which the mark would be serving its essential function.</font></li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The relevant market</strong></font></p> <ul> <li><font face="Verdana, Arial, Helvetica, sans-serif" size="2">It is essential that the mark has been used <u>in Hong Kong</u>. The protection conferred on trade mark owners by the Trade Marks Ordinance is territorial and is restricted to Hong Kong. Therefore, it is necessary to consider the position, as far as use is concerned, in relation to Hong Kong in isolation. The fact that the mark may have been applied with the purpose of enabling consumers or end users, whether in Hong Kong or otherwise, to distinguish the goods from others which came from a different trader, still did not amount to use (genuine or otherwise) of the mark in Hong Kong. <em>The goods must have actually been exposed in a market in Hong Kong in which third parties would or might rely on the mark as a badge of origin in respect of the goods.</em></font> </li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Use for the purpose of infringement is not the same as &quot;genuine use&quot;</strong></font></p> <ul> <li><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The Court made clear that use that may amount to infringement is <u>not</u> the same as genuine use for the purpose of revocation (counsel in REGAL and previous cases had argued otherwise). Although what counts as genuine use in the course of trade should also count as the use of a sign for the purposes of infringement, the reverse is not necessarily true. Section 18(5) of the Trade Marks Ordinance defines a range of activities that constitute &ldquo;use&rdquo; for the purpose of infringement and section 52(3) defines a different range of activities that constitute &ldquo;use&rdquo; for the purpose of revocation. It is not permissible to treat the two definitions as interchangeable. If this was intended, the Court would have expected to see a common definition for both provisions.</font></li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Conclusion</strong></font></p> <font face="Verdana, Arial, Helvetica, sans-serif" size="2"> <p>The Court&rsquo;s decision is of great significance given the importance to Hong Kong of the trade practice of placing orders with Hong Kong companies for the manufacture of goods in Mainland China. Counsel for Regal argued that it would be undesirable for trade mark owners who had goods manufactured in this way, but did not actually have a market in Hong Kong for their goods, to be at risk of having their marks revoked for non-use. The Court rejected this and held that transshipment through Hong Kong in the course of finding a market for the goods is not genuine use in Hong Kong.</p> <p>To the extent that the concern is a valid one, the judge suggested that it should be addressed by an amendment to the law, bearing in mind that the Trade Marks Ordinance specifically provides that use of a trade mark in Hong Kong includes applying the mark to goods or their packaging <em>solely for export purposes</em>. </p> <p>Trade mark owners should take note of this development and consider whether to lobby government for a change in the law on this issue. There seems to be little practical difference between goods that have trade marks applied to them in Hong Kong, but are intended solely for export purposes, and goods that are transshipped through Hong Kong, for sale elsewhere. The goods are not exposed in any market in Hong Kong in either case.</p> </font><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade mark owners should also note the recent decision ordering the revocation of the BLAST trade mark. In this case, the Registrar considered the meaning of &ldquo;genuine use&rdquo; and held that whilst it is clear that section 52(3)(b) is intended to clarify that the application of a trade mark to goods or their packaging in Hong Kong, solely for export purposes, can constitute use, this is not an exception to the requirement that the mark has been put to genuine use. The use must still be intended for the preservation or creation of market share for the goods or services under the mark and the commercial exploitation of the mark must still be real.</font></p> <font face="Verdana, Arial, Helvetica, sans-serif" size="2"><p>The Registrar found that there was no evidence showing where the goods bearing the registered mark would go once exported. Neither was there evidence to show where the use was intended to find a market. </p> <p align="right"><a href="#contents"><font face="verdana" size="1">Back to Top</font></a></p> </font> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="2"></a>THE COPYRIGHT (AMENDMENT) ORDINANCE 2007</strong></font> </p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The controversial Copyright (Amendment) Ordinance 2007 was gazetted on 6 July 2007. The Ordinance makes important changes to the Copyright Law in Hong Kong and will have a significant impact on businesses in Hong Kong. Main Changes:</font></p> <ul> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The temporary criminal offence provisions relating to business end-user possession of computer programs, movies, television dramas and musical recordings will be made permanent</font>.</li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There will be a new criminal offence relating to the copying and distribution of <em>printed copyright works</em>, for the purpose of or in the course of trade, if this results in financial loss to the copyright owner and is done on a frequent or regular basis. The offence applies to books, magazines, periodicals and newspapers. There will be certain &ldquo;safe harbours&rdquo;, numerical limits for the number of copies that can be made without incurring criminal liability. These will be announced at a later date.</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Company directors and partners will be subject to criminal liability for the acts of the corporation or partnership attracting business end-user criminal liability.</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There will be new <em>civil</em> offences relating to the circumvention of technological measures and new <em>criminal</em> offences relating to circumvention activities.</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A new rental right for films and comic books will be introduced. Previously, only the unauthorised commercial rental of computer programs and sound recordings were prohibited. Infringement of the rental right attracts civil liability and will affect unauthorised commercial lending activities such as shops and private clubs renting out movies and comic books.</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Liberalisation of the provisions regarding parallel imports of copyright works.</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Supplementation and improvement of fair dealing provisions for education and public administration purposes.</font></li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new criminal provisions regarding printed material and the introduction of criminal liability for directors and partners are likely to be of great concern to businesses in Hong Kong. It is important to note that these provisions are not yet in force. However, it is advisable for businesses to start reviewing their copying practices and copyright policies in light of the new law. </font></p> <p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="#contents"><font face="verdana" size="1">Back to Top</font></a><br> </font></p> <p align="left"><strong><font size="2" face="Verdana"><a name="3"></a>END OF THE ROAD FOR &quot;BIG CROOK&quot; - COURT OF FINAL APPEAL UPHOLDS CONVICTION OF BITTORRENT SEEDER</font> </strong></p> <font face="Verdana, Arial, Helvetica, sans-serif" size="2"> <p>On 18 May 2007, the Hong Kong Court of Final Appeal (&ldquo;CFA&rdquo;) confirmed the ground-breaking conviction of Chan Nai-Ming (nicknamed &ldquo;Big Crook&rdquo;) for the unlicensed dissemination of three copyright films via the internet using the popular file-sharing software &ldquo;BitTorrent&rdquo;.</p> <p> Chan had originally been convicted of attempting to commit an offence under Section 118(1)(f) of the Copyright Ordinance in the world&rsquo;s first criminal conviction involving BitTorrent file-sharing. He appealed both the conviction and his sentence but these were upheld by the Court of First Instance. Chan obtained leave to appeal to appeal to the CFA which was asked to consider 1) what constitutes a &ldquo;copy&rdquo; capable of distribution under the Copyright Ordinance and 2) whether Chan&rsquo;s conduct amounted to &ldquo;distribution&rdquo;. The CFA&rsquo;s decision confirms how seriously Hong Kong Courts are taking the use of the internet to facilitate copyright infringement. This is in line with the tough stance taken by the Government which proposed criminal liability for illegal downloading in its Consultation Paper at the end of last year, amongst other measures for strengthening copyright protection in the digital environment.</p> <p><strong><font size="2" face="Verdana">What does the Copyright Ordinance say?</font> </strong></p> </font> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 118(1)(f) of the Copyright Ordinance (Cap 528) provides that a person commits a criminal offence if he, without the licence of the copyright owner ... distributes an infringing copy of a copyright work (otherwise than for the purpose of, in the course of, or in connection with, any trade or business) to such an extent as to affect prejudicially the owner of the copyright.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>How does BitTorrent work? </strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Use of the BitTorrent program is not illegal in itself. The software simply provides high-speed downloads of large digital files which allow Internet users to share music, movie and software files easily. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A movie, when reduced to digital form, represents a very large quantity of data. Traditional client-server technology requires those wishing to download a movie to gain access to it from one centralised server. This can result in a serious bottleneck in the flow of data, making the downloading process so slow as to be impracticable. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The BitTorrent system, which is a variant of a &ldquo;peer-to-peer&rdquo; file sharing system, avoids such a bottleneck. It does not use a centralised server but is designed so that individual computers &ldquo;share&rdquo; the material they have downloaded from a source. Large files are broken into smaller packets of digital information which are transferred as required between all computers linked through a tracker server until a downloader has a complete file. One computer is the original source of the files and acts as the initial &ldquo;seeder&rdquo;. A different computer acts as a &ldquo;tracker server&rdquo; to coordinate the ensuing data flows between the seeder and the downloading computers, as well as the flows of data re-transmitted between the peer computers.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What did the Appellant do?</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Appellant had stored on his computer&rsquo;s hard disk, copies of the files making up each of the three films. It was not in dispute that the copies on his hard disk were infringing copies. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Appellant then posted computer files in relation to the three films to six different newsgroups, one of which was accessed by a Customs Officer. The files contained information on the Appellant&rsquo;s seeder computer, the IP addresses of the tracker server and the files to be downloaded. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Appellant had taken digital still pictures of images from the legitimate VCDs and had copied those images onto his computer. He had then sent the images embedded in emails to the newsgroups to advertise the availability of the films. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The court felt it was clear that the Appellant&rsquo;s computer acted as the initial seeder and a number of downloaders had obtained infringing copies of the films which were duplicates of the infringing copies residing on the Appellant&rsquo;s computer. The question was whether this process amounted to <em>distribution</em> by the Appellant of infringing copies of the films in law.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Appellant&rsquo;s argument</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u>Distribution requires a physical copy</u></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was accepted that Chan had incurred civil liability for making the infringing copies on his hard disk and also for &ldquo;making them available to the public&rdquo; contrary to section 26 of the Copyright Ordinance. However, he did not commit a criminal offence under Section 118(1)(f) because he did not distribute a physical &ldquo;copy&rdquo;. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Counsel argued that the requirement in the Copyright Ordinance that an infringing copy be a reproduction of a work &ldquo;in a material form&rdquo; means that a digital or electronic copy must be contained or stored in some &ldquo;tangible physical object&rdquo;, such as a disc or other suitable storage medium. It was further argued that the &ldquo;distribution of copies&rdquo; is only meant for acts involving the <em><u>physical transfer</u></em> of material objects. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CFA acknowledged that this was an ingenious argument but rejected it. It agreed that an electronic copy must exist in some physical medium and not in a vacuum. However, the evidence and everyday experience indicates that electronic data, constituting a digital copy of a work, can plainly be transmitted via the internet without first being stored in a tangible article, such as a CD. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CFA gave as an example the online purchase of software paid for by a credit card. A copy of the program, in electronic form, is transmitted to the purchaser via the internet to be downloaded onto his computer without anyone delivering a disc or other storage medium.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u>Passive conduct</u></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Appellant argued that the word &ldquo;distribute&rdquo; should be construed as requiring active conduct on the distributor&rsquo;s part throughout the process. Here, the copies were obtained by the actions of the downloaders at a stage when the Appellant&rsquo;s conduct was purely passive. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was rejected by the CFA which held that &ldquo;distribution&rdquo; in its ordinary meaning, is clearly capable of encompassing a process by which the distributor first takes necessary steps to make the item available and the recipient then takes steps of his own to obtain it. The judge gave as an example the distribution of soft drinks by vending machines. The CFA did not regard the Appellant&rsquo;s conduct to be &ldquo;passive&rdquo;. After having taken the numerous preparatory steps, he kept his computer connected with the network and continued to run the software to ensure that entire copies of the films would be transferred to the downloaders.</font> </p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u>No transfer</u></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Lastly, the Appellant argued that he did not transfer any infringing copy away from his computer. Rather, copies were created by the actions of the downloaders who wished to obtain the files. He merely enabled them to make copies of their own. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CFA found that the Appellant did create and did have possession of such copies (transiently or otherwise) for distribution which were then sent to the downloaders as a stream of digital packets designed to be reconstituted as entire, viewable films. However, it expressly left open the question of whether &ldquo;distribution&rdquo; necessitates the transfer of a copy which was first in the distributor&rsquo;s possession.</font> </p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prejudice to the copyright owner</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The case shows that limited or small scale distribution of infringing works, for no commercial gain, may be regarded as prejudicial. In the original judgment, the Magistrate made clear that prejudice should not be restricted to economic prejudice and unauthorised distribution of infringing works would cause prejudice even if the actual lost sales were small. The Court of First Instance noted that the offence has no commercial element and the legislation makes no distinction in gravity between commercial or non-commercial activities which both attract a maximum sentence of four years&rsquo; imprisonment. The conclusion was that the gravity of the offence was measured by the harm caused to the victim, rather than by any gain made by the offender.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Conclusion</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Although the decision is likely to be welcomed by copyright owners, some questions remain. The CFA commented that &ldquo;distribution&rdquo; could encompass situations in which the &ldquo;distributor&rdquo; takes the necessary steps to make an item available but the recipient then takes steps of his own to obtain it. It gave a vending machine as an example of &ldquo;distribution&rdquo;. This makes it difficult to distinguish between acts of distribution and making available copies of a work to the public. However, one is only a civil offence and the other attracts up to 4 years&rsquo; imprisonment.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From a technical perspective, although the files would not have been available without the acts of the original uploader, the BitTorrent program works by breaking large files into smaller packets of digital information which are sent from one computer to another. Anyone who downloads from a BitTorrent file then becomes a source for others and the packets of information are transferred as required between all computers linked through the tracker server until a downloader has a complete file. Therefore, it has been argued that each downloader is also distributing and potentially subject to criminal liability. Query then, whether a particular downloader would be distributing a substantial part of the copyright work?</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CFA deliberately left open the question of whether distribution necessitates the transfer of a copy. The CFA itself queried what would happen if the evidence had been different and had shown that that the Appellant had simply enabled the recipients to create infringing electronic copies of the films on their own computers, but no further electronic copy was created and transmitted by the Appellant&rsquo;s computer; would this constitute the &ldquo;distribution of infringing copies&rdquo;?</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the issue of prejudice to the copyright owner, the Court&rsquo;s decision was clearly affected by concern over the potential of the internet for distributing infringing works, but query whether some further guidance/clarification may be helpful, given the severity of the consequences. In the original case, the Magistrate stated &ldquo;<em>this was not a distribution of an infringing copy amongst a few friends. It was a distribution in a public open forum where anyone with the appropriate equipment could obtain an infringing copy from the defendant. The technology has developed to such a point that the prejudice to the copyright owners when their films are distributed in this fashion is, in my judgment, manifest.</em>&rdquo; </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, is it arguable that the non-commercial distribution of copies of a magazine article, or a bootleg DVD, among a few friends is not &ldquo;prejudicial&rdquo; for the purposes of the offence, even though there is clearly harm to the copyright owner?</font><font face="Verdana, Arial, Helvetica, sans-serif" size="2"></font> </p> <p align="right"><a href="#contents"><font face="verdana" size="1">Back to Top</font></a></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="4"></a>APPLICATION TO REGISTER THE SHAPE OF SONY PLAYSTATION REFUSED - COURT UPHOLDS REGISTRAR'S DECISION</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> In 2001, Sony applied to register as 3-dimensional marks the shape of the consoles, controllers and memory cards of its PlayStation product. The Registrar refused registration in all cases on 2 broad grounds:</font></p> <ul> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the relevant shapes were &ldquo;necessary to obtain a technical result&rdquo; and were not registrable by reason of TMO s.12(3)(b).</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the shapes were neither &ldquo;distinctive&rdquo; nor &ldquo;capable of distinguishing&rdquo; as respectively required by TMO ss. 9 (for Part A of the Register) and 10 (for Part B of the Register).</font></li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The applications were dealt with under the old law since the new Trade Marks Ordinance (&ldquo;TMO&rdquo;) did not come into force until 4 April 2003. However, the provisions on &ldquo;obtaining a technical result&rdquo; are the same.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sony appealed to the Court against the Registrar&rsquo;s decision. The High Court agreed with the Registrar and dismissed Sony&rsquo;s appeal.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font> </p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Court&rsquo;s Reasoning</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u>&ldquo;Necessary to obtain a technical result&rdquo; </u></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The rationale behind this rule is to prevent a person from obtaining a monopoly over a technical solution to a functional problem in the manufacture of a product which could stifle competition.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In deciding whether a particular shape is &ldquo;necessary to achieve a technical result&rdquo;, one must determine what are the essential features of the shape . This requires considering the visual impact of the shape on the perception of the reasonable and informed average customer of the type of goods in question. Not every feature carries the same visual impact. The essential features of the relevant product are those which contribute most to the overall impression of the customer. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The next step is to assess whether the shape (given its essential elements) is &ldquo;necessary&rdquo; to achieve a technical result. The Court referred to <em>Mega Bloks Inc. v. Kirkbi A/S [2005] EMTR 87 (OHIM) and Philips Electronics Ltd. v. Remington Consumer Products Ltd. [1999] RPC 809 (CA)</em> which discussed whether the achievement of a technical result dictates or constrains the shape which is sought to be registered as a mark. Once it is established that a shape is necessary to obtain a technical result, it is irrelevant that the same technical result can be achieved through other shapes, or that the shape consists of certain aesthetic or non-functional features, if these are not the essential features, or they are merely part of the essential features the totality of which performs a technical function. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Applying <em>Mega Bloks</em>, the Court found that the shape of the consoles, controllers and memory cards were all dictated by their technical function. The PlayStation console is, in essence, a rectangular box which functions as a container. The flatness and right-angularity is necessary to provide stability to the console when resting on a surface, whether in the console&rsquo;s purpose-built stand or any other surface.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the case of the controllers, the shape of &ldquo;two short round legs connected by a rung&rdquo;, with or without two toggles, is a shape which enables a user to hold a unit securely and comfortably with both hands while enabling him to control a game with the fingers of both hands, thus resolving a functional problem.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As regards the memory cards, the Court found that the card is designed in order to enable smooth placement within a rectangular opening in the console which, in turn, enables the storage device within the card to be connected to the console which is plainly a technical function. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since a change in shape could significantly affect or impair functionality, the Court was unable to divorce the essential features of the shapes from the technical results which they are meant to serve.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Distinctiveness</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court found that the shape of the consoles, controllers and memory cards were common shapes and inherently lacked distinctiveness or the capability of distinguishing. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The shapes by their nature could not be the badge of a Sony product. Evidence that the products have been marketed extensively for over 10 years did not, of itself, establish that the shapes had become distinctive of Sony. The Court was unable to deduce from the mere fact that infringers had manufactured their goods to look like Sony products, that the shape of such Sony products had become distinctive.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The pertinent question was whether, on the material adduced by Sony, it was possible to conclude that the shape mark had acquired a distinctiveness of its own as a matter of fact. Given that the Sony products bore other Sony trade marks, it was not clear whether it was the trade marks or the shapes of the products which distinguished the products in the mind of the public. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Conclusion</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Although 3-dimensional shape marks have been registrable in Hong Kong since 1996, achieving registration for such marks has not been easy. It is necessary to convince the Registry that the shape has the ability to indicate a particular trade source. As can be seen in the Sony case, the Registry will not accept the generic or basic shape of the goods covered in the application. Also, once it is established that a shape is necessary to obtain a technical result, the shape will not be accepted and it is irrelevant that the same technical result can be achieved through other shapes.</font></p> <p align="right"><a href="#contents"><font face="verdana" size="1">Back to Top</font></a></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="5"></a>THE PATENTS (AMENDMENT) BILL 2007 - HONG KONG TO IMPLEMENT THE DOHA DECLARATION BUT CONTROVERSY OVER COMPULSORY LICENSING AND PUBLIC HEALTH CONTINUES </strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Patents (Amendment) Bill 2007 gazetted on 30 March proposes to amend the compulsory licensing provisions of the Patents Ordinance to implement a Protocol for amending the TRIPs Agreement. The intention is to make it easier to obtain access to generic versions of patented drugs when public health issues are at stake. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Most patent laws have provisions for &ldquo;compulsory licensing&rdquo; and &ldquo;government use&rdquo;. The relevant sections of the Hong Kong Patents Ordinance are based on Article 31 of the TRIPs Agreement. The purpose of compulsory licensing provisions is to discourage patentees from owning patents without doing anything to exploit the invention and to allow governments to use patented inventions in situations of national emergency, which is particularly important for products such as pharmaceuticals. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">International patent law and world trade rules allow governments to issue compulsory licences to enable a local company to produce a patented drug, if this is judged to be in the public interest and reasonable terms cannot be negotiated with the patent owner. Hong Kong&rsquo;s current patent law is in line with this. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Doha Declaration</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the past few decades, the emergence of new diseases such as HIV/Aids, SARS, Avian Flu and drug resistant strains of old ones such as tuberculosis or malaria, have meant that, increasingly, the most effective drugs tend to be protected by patents. Activists and health groups have clashed with the big pharmaceutical companies over better access to essential drugs for developing countries. Pressure from developing countries placed the issue of public health on the agenda of the Doha WTO Ministerial Conference in 2001 which resulted in the &ldquo;Doha Declaration on the TRIPS Agreement and Public Health&rdquo; of 2001. This was followed by the WTO Decision on Doha in 2003.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Doha declaration acknowledged that WTO members with insufficient or no manufacturing capabilities in the pharmaceutical sector, could face difficulties in making effective use of the existing compulsory licensing system under TRIPS. The main problem is that Article 31(f) of the TRIPS Agreement requires products made under compulsory licences to be &ldquo;predominantly for the supply of the domestic market&rdquo;. This makes it difficult for countries which cannot make pharmaceutical products themselves, to import cheaper generics since the manufacturing countries are limited in the amount they can export. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The 2003 Decision agreed to waive this requirement and on 6 December 2005 the General Council of the WTO approved a Protocol to amend TRIPS to make this waiver permanent. The waiver will be formally built into the TRIPS Agreement when two thirds of the WTO&rsquo;s members have ratified the change. They have until 1 December 2007 to do this. The waiver remains in force until then. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Protocol allows pharmaceutical products to be manufactured under compulsory licences in one WTO member to be exported to another WTO member in a period of extreme emergency, if the importing country has insufficient or no manufacturing capacity to make a certain drug. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Proposed amendments </strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Patents (Amendment) Bill 2007 proposes to amend the Patents Ordinance to implement the 2005 Protocol. The existing mechanisms for compulsory licensing and government use will remain. There will be two additional scenarios where compulsory licences may be granted: </font></p> <ul> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where the Chief Executive in Council has declared a period of extreme urgency in Hong Kong, if the Director of Health is satisfied that Hong Kong has insufficient or no manufacturing capacity to manufacture certain drugs needed to contain a public health problem, Hong Kong may import and use that drug without the patentee&rsquo;s consent. </font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In response to a request from another WTO member, any local manufacturer who has the capacity to manufacture the required drug may be granted a compulsory licence to manufacture the drug for export to the requesting WTO member.</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where a compulsory licence is granted by an Exporting Member, adequate remuneration will be paid to the patent holder. The Bill provides that remuneration will be determined on a case by case basis but will not exceed a level equivalent to 4% of the total price to be paid by the Importing Member for the product. </font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any party aggrieved by the decision of the Director in relation to the grant of a compulsory licence, including the remuneration, may appeal to the Court of First Instance.</font> </li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Conclusion</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bill is currently before the Bills Committee. However, the controversy over compulsory licensing and public health continues. Pharmaceutical companies argue that compulsory licensing acts as a disincentive to research and development. The question of how to improve affordability and access to essential drugs for developing countries, while maintaining incentives to support the development of new medicines, is a fraught one. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Compulsory licensing could be used as a negotiating tool by Governments to encourage pharmaceutical companies to lower their prices. US company Abbott Laboratories recently announced its decision to cut the price for its HIV drug Kaletra<sup>&reg;</sup> in 40 low and middle income countries following the Thai Ministry of Health's decision to issue compulsory licences for Kaletra<sup>&reg;</sup>, efavirenz (another HIV treatment marketed by Merck) and Plavix<sup>&reg;</sup>, a blood-thinning medicine developed by Sanofi-Aventis and Bristol-Meyers Squibb to treat heart disease. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sanofi-Aventis has queried what constitutes a &ldquo;national state of emergency&rdquo; saying that &ldquo;Plavix<sup>&reg;</sup> is a life-saving cardiovascular drug but we don't think that cardiovascular disease can be described as an emergency situation or an epidemic. A major public health concern is one thing, a national emergency is quite another.&rdquo; </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The impact in Hong Kong of the proposed changes to the law remains to be seen. </font></p> <p align="right"><a href="#contents"><font face="verdana" size="1">Back to Top</font></a></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="6"></a>&ldquo;Two Bites of the Cherry&rdquo; - L&rsquo;Oreal Decision Overturned by UK Court of Appeal </strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a landmark decision last year, the UK High Court found that L&rsquo;Oreal, the opponent in an unsuccessful opposition, was prevented by &quot;cause of action estoppel&quot; and &quot;issue estoppel&quot; from applying to invalidate the resulting registration later, or raising invalidity in a counterclaim to an infringement action brought by the registered proprietor. The case was appealed. The issue was regarded as being of such importance that the INTA (&quot;The International Trademark Association&quot;) joined in the case as an Intervener and the UKInstitute of Trade Mark Attorneys also made a written submission to the Court of Appeal. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To the relief of many trade mark owners, this decision has now been overturned by the Court of Appeal. Although the Hong Kong Registry and Courts are not bound by UK decisions, they are of persuasive value and tend to be followed, especially given the similarity in the legislation and procedure. Therefore, Hong Kong trade mark owners should take note.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Court of Appeal found that in an administrative proceeding, such as an opposition before the Patent Office, neither the applicant nor the opponent could be said to have a &ldquo;cause of action&rdquo; to register a mark, nor to have it refused. Therefore, there was no &ldquo;cause of action&rdquo; which could form the basis of a cause of action estoppel.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As regards &quot;issue estoppel&quot;, this required a <u>final</u> decision to have been taken on an issue. The Court found that the co-existence of the provisions for opposition and declaration of invalidity in the legislation meant that the opposition proceedings are inherently <u>not final</u>; the provisions allowing for a declaration of invalidity &quot;show a clear intention to exclude that principle&quot;. Issue estoppel did not apply as a decision in an opposition did not finally and conclusively decide the validity of a mark. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As to abuse of process, the Court said one needs to consider what is at stake at each stage. The consequence of failure in an opposition is that the mark will be registered. It does not, as in infringement proceedings, lead to financial liability and injunction. In such circumstances, the opponent could reasonably take the view that more limited resources should be deployed on opposition proceedings than court proceedings for infringement with a counterclaim. This is in keeping with the attitude that proceedings at the Registry are designed to be economical, with limited costs recovery for both parties.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Given the preliminary nature of opposition proceedings and the manner in which they are generally conducted, it would be wrong to regard it as an abuse of process for L'Oreal to seek to raise by way of counterclaim the grounds of invalidity that it had relied on before. L&rsquo;Oreal was just taking advantage of the second opportunity provided by the legislation. <em>However, this may <u>not</u> always be the case. The Court could imagine a scenario where it would not be acceptable to fight the same issues in court again. Some opposition cases may be fought as though they were litigation, with disclosure and cross-examination. In those particular cases, re-litigating the same issues in the same way in new proceedings might be thought to amount to an abuse. </em></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Conclusion</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Opposition actions have traditionally been a relatively informal and cost-effective procedure whereby a trade mark application could be refused on the basis of a theoretical risk of confusion. Opponents still had the option of court proceedings in the event of any actual damage being sustained as a result of the use or registration of a potentially infringing trade mark.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court of Appeal's decision means that trade mark owners do not need to worry that they could be tying their hands as regards possible future action if they fail at opposition level. However, opponents should consider dealing with all issues as fully as possible to ensure success in an opposition. Subsequent invalidation proceedings would potentially be more expensive and may be coupled with the risk of an injunction for infringement.</font></p> <p align="right"><a href="#contents"><font face="verdana" size="1">Back to Top</font></a></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="7"></a>Unsolicited Electronic Messages Ordinance (&ldquo;UEMO&rdquo;) </strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e-Marketing has been a revolution for the marketing industry but, as many of us know, can also be a great nuisance. The (&ldquo;UEMO&rdquo;) which came into operation on 1 June 2007, is Hong Kong&rsquo;s first dedicated piece of anti-spamming legislation and aims to strike a balance between allowing electronic marketing and the rights of recipients to refuse further unsolicited electronic messages (&quot;UEMs&quot;). The legislation was introduced in light of an industry estimate that over 60% of all emails received in Hong Kong are UEMs that cause inconvenience and lost productivity to businesses.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Scope of the UEMO</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The UEMO regulates the sending of unsolicited commercial electronic messages with a <u>Hong Kong</u> link. It is aimed at stemming spam emails, text messages, pre-recorded calls, faxes and video and audio messages from businesses advertising, promoting or sponsoring goods or services. <em>It should be noted that the Ordinance applies only to messages that are sent from registered addresses or numbers in Hong Kong to a Hong Kong number. </em></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, in spite of lobbying to include &ldquo;cold-calling&rdquo; in the legislation, the UEMO does not cover person-to-person telemarketing calls. With commercial activities involving person-to-person telesales amounting to an estimated HK$7.2 billion, the Government has estimated that the exemption could save tens of thousands of jobs. However, future regulation has not been ruled out. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Phase I</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Phase I came into effect on 1 June 2007 and is aimed at professional spammers and related illicit activities including ; using address harvesting software to capture email addresses without owners&rsquo; consent and selling harvested address lists for sending commercial electronic messages, falsifying header information in sent emails and hacking into computers to send multiple commercial electronic messages. Offenders will be liable to an unlimited fine and/or imprisonment up to 10 years, depending on the offence. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Phase II</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Phase II is of more concern to the general public as it governs the sending of commercial electronic messages. This will come into effect later in 2007 to allow businesses time to adapt to the new practices. Prohibited activities include -</font></p> <ul> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Pre-recorded voice messages to telephones with calling line identification withheld;</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fax advertisements that do not allow recipients to decline receiving further faxes;</font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Continuing to send commercial electronic messages to a recipient despite his/her unsubscribe request; </font></li> <li><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Sending to electronic addresses registered in &quot;do-not-call registers&quot; without the registered users&rsquo; consent.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></li> </ul> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> OFTA has the power to investigate and issue enforcement notices to offenders. Contravention of a notice attracts a fine of up to HK$100,000 on the first conviction. On subsequent contravention, OFTA may take prosecution action. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> A person who suffers loss or damage as a result of contravention of the UEMO may bring his/her own civil action against the person who committed the contravention. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Steps that the public can take</strong> </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When Phase II becomes effective, the public will be