NEWS
ANTI-COMPETITION
Toy giant ordered to pay costs after UK disclosure fail
The LOL Surprise! doll maker MGA Entertainment has been accused of a “serious failure” to comply with its disclosure obligations during a case brought by smaller rival Cabo Concepts initially brought in 2020.
The claimant, maker of the Worldeez toy range, sued MGA for damages owing to an adjournment, after MGA allegedly missed more than 1 million documents during the disclosure process of an anti-competition suit.
While the parties are awaiting the full judgment, a hearing took place on July 20 this year in the UK High Court (Patents Court) in which Justice Joanna Smith ordered MGA to pay Cabo ‘thrown-away’ costs on an indemnity basis, and 45% on account (approximately £700,000), to cover expenses incurred due to the delay of the case caused by the missing documents.
Cabo said it had incurred legal costs of approximately £1.5 million in preparation for the trial.
The original case, which should have been heard this year, will now be heard in October 2024.
In its skeleton argument, the claimant asked the court to “appreciate the prejudice in human terms that Cabo has suffered as a result of that delay.
“Cabo is not a large corporation or experienced litigant, but a collaboration between the four individuals who tirelessly devoted their collective energies to bringing a new toy product to market—only to find themselves excluded from that market by MGA in 2017, just at the point when their product was on the verge of commercial success.”
Disclosure ‘errors’
Cabo claimed that MGA had informed the court on June 6, 2022, three weeks before the trial was set to commence, that it had missed almost 85,000 documents during the data collection process underlying its disclosure.
The claimant adds that while “the full extent of the errors is still continuing to emerge”, there appears to be approximately 900,000 documents not initially collected from custodians.
According to MGA, approximately 30,000 of these respond to agreed search terms and therefore require review. This brings the number to around 1.1 million documents originally captured by MGA, alleges Cabo.
Richard Spector, partner at Spector Constant Williams which is representing Cabo Concepts, told WIPR: “This case in court highlights the seriousness of what is a highly unusual and significant disclosure failure.
“This was not an instance of one or two missing documents in a disclosure before a case. Approximately 800,000 documents were not harvested for disclosure despite the fact that MGA’s lawyers, Fieldfisher, had represented to the court at the CMC in July 2021 that MGA had the requisite experience to carry out the task in-house, and that there would be supervision—including from Fieldfisher.
“The problem only came to light just before trial, and so significant was this oversight that the original case, a competition and intellectual property dispute between our client and the defendant, is delayed until October 2024—four years after proceedings began.”
He added that while SCW was “pleased” with the judge’s decision in July, “no client should have to wait that long for their dispute to be heard”.
“In this instance, that delay could have been easily avoided had MGA agreed to Cabo’s proposal before the CMC to have oversight from an independent e-disclosure provider.”
“This case in court highlights the seriousness of what is a highly unusual and significant disclosure failure.”
Richard Spector, Spector Constant Williams
Worldeez loses out to LOL Surprise!
Cabo Concepts issued pre-action correspondence in 2019 to MGA Entertainment (UK) and MGA Entertainment (based in the US), and began proceedings in 2020.
As explained in the court decision, handed down in March 2021 in the UK Patents Court, Cabo produced a similar toy range at a similar time as the LOL doll range, but accuses MGA of using its market dominance to monopolise toy retailers to stock their products.
It also alleges that MGA is claiming to have a non-existent patent in order to persuade retailers to only sell its toys, thereby excluding Cabo’s Worldeez products.
Cabo claims that orders for Worldeez products from UK retailers were cancelled, leading to the ultimate demise of the products in early 2018.
LOL Surprise! dolls, which the judge described as “an extremely successful product line”, were first presented to retailers in the US from June 2016, and made available for sale in the US from October 2016. They were launched in the UK from February 2017.
According to the court document, they are described by MGA as: “The LOL Surprise! product line comprises a range of dolls characterised by proportionately oversized and cartoon-like head and eyes, with a range of collectible and interchangeable accessories; contained in a surprise format requiring unwrapping of a spherical ball container wrapped with layers of tight plastic material, in a blue ‘cyan’ colour with a pastel palette, and a prominent speech bubble.”
‘Unjustified threats of patent infringement’
Cabo’s toy range, Worldeez, was a series of small plastic collectible character toys and cards, and the flagship product was a globe, opened with a collectible key to reveal two Worldeez characters and collectors’ cards hidden inside.
Cabo attempted to launch its Worldeez product line in around April and May 2017. It had arranged a review on a YouTube channel presented by a 'child influencer' and set up three major UK specialist toy retailers to launch the Worldeez product line. It said discussions took place for in-store launch events and that orders were placed.
The defendants wrote a letter of complaint to the claimant dated 23 May, 2017, claiming that the Worldeez products were marketed in packaging which was confusingly similar to that of the LOL products.
The claimant alleged that, at around the same time, the defendants “embarked on a campaign to put pressure on UK toy traders not to buy, stock or supply Worldeez toys”. This course of conduct is alleged to include “unjustified threats of patent infringement”.
Cabo claims that the planned UK launch events in July 2017 were cancelled and that by September 2017, orders for its products from UK retailers were cancelled, leading to the demise of the products in 2018.
WIPR approached Fieldfisher, but it said it was unable to comment on the case at the time.
Image: Shutterstock.com / Warongdech Digital
TRADEMARKS
Luxury shoe designer wins two-decades-long China dispute
London-based shoe designer Manolo Blahnik has triumphed in a 22-year-long case, meaning the brand will now be able to use its name as a trademark in China.
The judgment from the Supreme People’s Court of China (SPC) was announced by the company on July 19.
The case may signal a turning point for foreign brands who wish to sell directly to the Chinese market.
Kristina Blahnik, CEO of the company and niece of the Spanish founder, said (as reported by “Jing Daily”): “We think the outcome in this matter is a strong precedent that should give global luxury brands confidence that their IP rights will be respected in the Chinese market.
“This, in turn, will allow more luxury brands to meet the demand of ever more discerning Chinese consumers.”
A long-running dispute
A trademark application for the name ‘Manolo & Blahnik’ was filed in 1999 by Chinese businessman Fang Yuzhou for use in the sale of footwear and was granted by the China Trade Mark Office (CTMO) in 2000.
Manolo Blahnik, the luxury British brand made famous by the popular “Sex and the City” TV series, subsequently filed an opposition to the CTMO and embarked on an expensive and difficult legal dispute.
The company had several appeals dismissed because it could not prove it had a reputation in China before 2000, and because Yuzhou had established use of the trademark for his shoe label, in accordance with Chinese IP law.
Edward Chatterton, DLA Piper partner and co-head of the firm’s Intellectual Property and Technology practice in Asia, led the team representing Manolo Blahnik.
He said: “We are delighted to have been able to assist Manolo Blahnik in achieving this significant victory. This is a landmark ruling which could pave the way for other foreign companies that find themselves in similar situations.
"Due to improved trademark legislation in China in recent years, and a willingness from Chinese courts to protect the interests of brand owners, we expect to see more foreign companies succeed in resolving intellectual property disputes.”
China’s trademark legislation
George Chan, partner and head of Simmons & Simmons’ (Beijing) Intellectual Property Agency, told WIPR that since the offending trademark application was filed in 1999 and therefore subject to an earlier version of the trademark law, Manolo Blahnik could not benefit from some provisional safeguards that were introduced in the most recent changes to the legislation.
“These added provisions specifically address the issue of trademark squatting, such as rejecting or invalidating trademark applications and registrations based on the bad faith of the applicant, and it is possible that under the [updated legislation], Manolo Blahnik could have prevailed more easily.”
But he believes Manolo Blahnik’s persistence was “critical” to its success.
“It is not uncommon to see brand owners abandon the China market due to the misappropriation of their trademarks by squatters,” said Chan.
Prior use and reputation
Evidencing the need to demonstrate the prior use and established reputation of a brand in Chinese trademark law, Kristina Blahnik said: “We spent a lot of time and effort collating as much evidence as possible so that the Supreme Court could see the strength and international renown of Manolo Blahnik.”
Ivy Liang, legal director at Gowling WLG based in Guangzhou, told WIPR that the SPC “appears to have rejected Manolo Blahnik’s opposition based on the brand’s reputation in mainland China prior to the pirate IP filing date, but accepted the argument based on Manolo Blahnik’s (personal) name rights”.
“This is a landmark ruling which could pave the way for other foreign companies that find themselves in similar situations.”
Edward Chatterton, DLA Piper
“Based on that, my guess is that Manolo Blahnik should have further supplemented substantial evidence to show the influence of the prior use of his name in mainland China,” she added.
“That said, prior use indeed can be evidenced from outside of China as long as one can show that the prior use influence reaches China, but it takes a delicate preparation to collect evidence to support the ’influence’ (or ‘popularity’), which is key to the case.”
Helen Xia, partner and head of the Intellectual Property, Media and Technology (IPMT) practice at Hogan Lovells in Beijing, agreed with Liang's point, adding that the case shows the significant difficulties many fashion (and other) brands face in meeting the applicable evidence thresholds in trademark invalidation procedures in China.
“Particularly, proving that a foreign fashion brand already had a reputation in China before the trademark squatter filed his earlier bad faith application proves to be very challenging,” she told WIPR. “This was especially applicable in this case, since in the administrative appeal procedure, Mr Blahnik had confirmed that he did not use ‘Manolo Blahnik’ as a trademark before the filing date of the hijacked mark, i.e. 28 January 1999.
“The fact that he lost all previous proceedings, including oppositions and invalidations, is likely a sign that the evidence of prior use and prior reputation in the current case may not meet the customary evidence thresholds in trademark prosecution and administrative appeal proceedings applied by the lower courts.
“In addition, obtaining the recognition of a personal name right in a brand is often also an uphill battle for fashion brands.”
‘Ex-officio’ refusals
Chan added that, more recently, the China National Intellectual Property Administration (CNIPA) has adopted multiple approaches to identify malicious filings at the outset during the preliminary examination of trademark applications, which has led to what appears to be a trend in an increasing number of ex officio refusals of malicious filings.
“We are also seeing more successful trademark opposition and invalidation actions that are decided by the CNIPA based on the bad faith of the applicant,” he said.
“Nevertheless, malicious filings have been and continue to be a very serious problem in China, and we really need to see a greater commitment by the authorities to rein in this type of behaviour.”
Liang, though, believes this commitment from the Chinese government already exists. “This retrial victory shows a strong signal that China puts effort into the protection of intellectual property rights, whether owned by domestic or foreign right holders,” she said.
“Foreign businesses have ’lessons to learn’ from this case, but the best practice remains for new entrants or potential entrants to file their trademarks in China as soon as possible, even before entering the Chinese market.”
Helen Xia agreed that the outcome in this case is particularly encouraging.
“It clearly shows that the Chinese IP system and courts have come a long way, and that persistence often pays off in China IP procedures,” she told WIPR.
First-to-file system
Yuzhou’s trademark registration was made possible by China’s ‘first-to-file’ trademark system, which means that any individual can register a trademark in the country, even if that mark is registered elsewhere by foreign entities.
The system has enabled ‘pirates’ to sell the trademarks of foreign businesses operating in mainland China, thus hindering their ability to trade in the Chinese market.
In particular, the luxury goods market in China has boomed over the past two decades, leaving the British-based Manolo Blahnik brand at a disadvantage by not being able to sell directly to, or within, the market.
It was only previously available to consumers in China via third-party e-commerce platforms such as Farfetch.
The case exemplifies how brands have faced difficulties in registering and protecting their trademarks within mainland China, such as basketball player Michael Jordan’s dispute with Chinese sportswear brand Qiaodan Sports.
In addition, IP crime has long stoked tension between China and its trade partners, especially the US.
Image: Shutterstock.com / Anrephoto
NFTs
Virtual trademark applications rise in EU
Applications for trademarks relating to non-fungible tokens (NFTs) and the metaverse have soared in Europe, but nosedived in the US, according to recent figures.
Data from IP research firm Clarivate shows that such applications to the EU Intellectual Property Office (EUIPO) have risen from fewer than 50 applications per month to almost 300 per month since autumn 2021.
The United States Patent and Trademark Office (USPTO), meanwhile, saw a fall in applications from a record high in March of more than 1,000 applications per month to roughly half that in June.
These figures are set against a predicted drop in global trademark filing volume by up to 20% in 2022, according to Clarivate.
Robert Reading, head of content strategy in Clarivate’s IP group, said in a post on LinkedIn: “Filing volume for NFT/metaverse marks in Europe is still trending upwards, with the EUIPO on target to receive over 250 applications for each in July 2022.
“It remains to be seen if the decline seen first in the US will appear in Europe in the coming months.”
Key terms for virtual trademarks
In response to the influx it is experiencing, the EUIPO recently clarified its approach to trademark applications for virtual goods, NFTs and the metaverse for classification purposes.
“Virtual goods are proper to Class 9 because they are treated as digital content or images,” it said. “However, the term ‘virtual goods’ on its own lacks clarity and precision so must be further specified by stating the content to which the virtual goods relate (eg, downloadable virtual goods, namely, virtual clothing).”
“The term ‘virtual goods’ on its own lacks clarity and precision so must be further specified by stating the content to which the virtual goods relate.”
EUIPO
The term ‘downloadable digital files authenticated by non-fungible tokens’ will be incorporated in the 12th Edition of the Nice Classification in Class 9, effective from January 1, 2023.
“NFTs are treated as unique digital certificates registered in a blockchain, which authenticate digital items but are distinct from those digital items,” the office explained.
“However, the term ‘non-fungible tokens’ on its own is unacceptable,” it said, adding that the type of digital item authenticated by the NFT must be specified.
Finally, services relating to virtual goods and NFTs will be classified in line with the established principles of classification for services.
Stakeholders have until October 3, 2022 to comment on this approach, as set out in the Office’s 2023 draft guidelines.
Image: Shutterstock.com / Markus Pfaff
PATENTS
USPTO to revisit patent eligibility guidance
The US Patent and Trademark Office has decided to revisit its patent subject matter eligibility guidance and called for more public comments on the issue.
On July 25, USPTO director Kathi Vidal made the announcement in a blog post, stating that despite the progress that’s been made to achieve a more consistent examination under section 101, “there is more work to be done”.
The office has previously provided updates to its guidance on the patent examination process, including through the “2019 Revised Patent Subject Matter Eligibility Guidance”, the “October 2019 Patent Eligibility Guidance Update”, and the “Berkheimer Memo”, which is now integrated into the “Manual of Patent Examining Procedure” (MPEP).
The current guidance forms part of the MPEP section 2016, which sets out how patent examiners should evaluate claims for patent eligibility. The guidance has led to a “remarkable drop” in the office-wide eligibility rejection rate from about 25% in 2018 to about 8% today, said Vidal.
Additionally, at the urging of Senator Thom Tillis and Senator Tom Cotton in a March 2021 letter, the office launched the Deferred Subject Matter Eligibility Response (DSMER) pilot programme.
“The law on patent eligibility—like other areas of patent law—needs to be clear, predictable, and consistently applied.”
Kathi Vidal, USPTO
The DSMER programme is designed to “evaluate whether examination efficiency and patent quality can be improved by delaying the complete evaluation of subject matter eligibility until other patentability criteria are evaluated as opposed to addressing all requirements for patentability at the same time”, said Vital.
While the invitation period of the programme expired on July 30, 2022, the programme will continue for approximately one to two years as each of the participating applications reaches final disposition.
In June this year, the USPTO released its report “Patent eligible subject matter: Public views on the current jurisprudence in the United States".
Vidal said: “I explained that across the spectrum, stakeholders generally agreed that the law on patent eligibility—like other areas of patent law—needs to be clear, predictable, and consistently applied. This clarity and consistency will allow innovators to attract the investment and collaborations that bring more innovation to impact, in turn creating more jobs and solving world problems.”
The deadline for sending public comments to the USPTO was September 15, 2022.
Image: Shutterstock.com / Jayjune69
TRADITIONAL KNOWLEDGE
Plans to protect design and traditional knowledge escalate
The World Intellectual Property Organization (WIPO) has decided to shift two key international agreements to diplomatic conferences following “years of negotiations”.
The agreements affected are a proposed Design Law Treaty, under which the protection of designs could ease cross-border trade; and a pact concerning intellectual property, genetic resources and traditional knowledge associated with genetic resources.
The approval to convene the diplomatic conferences (dedicated negotiating rounds in which agreements may be concluded) for both agreements will be held no later than 2024 for each of the draft accords.
The decision, announced at a meeting held at WIPO headquarters in Geneva in July this year, elicited tears from delegates, and signals an acceleration of the process that may lead to the protections being adopted.
An ‘emotional breakthrough’
In an interview with WIPR, WIPO director general Daren Tang said the move is “really significant” and marks what feels like the “end of a marathon”.
“It’s very exciting. People were really emotional when the breakthrough was revealed. Some colleagues and departments had been working on this for 10 to 15 years.
“I could see tears and it was really quite amazing. I didn’t expect this—no one expected it.”
He added that the detailed timeline is yet to be worked out, but that the secretariat’s role will be to facilitate and support the process.
“We think we can play a very constructive role, as we did last week, by creating the best atmosphere for people to come together and talk.”
Such talks, he said, can result in outcomes “that can change the whole global IP landscape”.
“We’re going to continue to bring our expertise and support to all the member states, because these are going to be complex negotiations,” he added.
“It is as if we have been running a marathon for 22 years. And we finally got approval last week so we can start jogging towards the stadium. And we can enter the final lap in that stadium and hopefully, from there we can cross the finishing line together.”
Potential impact
On July 21, Tang addressed the 900 delegates who attended the assembly—the largest number of registrants since before the COVID-19 pandemic.
Describing the decision as a “triumph of multilateralism”, he said: “Of course there are disagreements, there will be divergences—this is just the beginning of a whole new set of conversations…
“All I ask is that you give this your full attention and care because in the end, these proposed treaties are not mere pieces of paper—they could really have an impact on people around the world.”
“It is as if we have been running a marathon for 22 years. And we finally got approval last week so we can start jogging towards the stadium”
Daren Tang, WIPO
Design Law Treaty
If adopted, the Design Law Treaty (DLT) could make protecting designs easier, faster and cheaper, both in home and international markets, by eliminating red tape and streamlining the system, said WIPO.
If approved, the new treaty would benefit the design community, especially smaller-scale designers with less access to legal support for registering their designs.
In particular, the DLT would make it “significantly easier” for SMEs in low and medium-income countries to obtain design protection overseas.
The treaty would “harmonise design practices across IP offices and make it easier for designers to file applications across the world,” Tang told WIPR.
The WIPO’s work to improve procedures for the protection of industrial designs commenced in 2006 and evolved into a set of draft Articles and draft Regulations for a treaty.
Similar treaties already exist for patents (Patent Law Treaty of 2000) and trademarks (Trademark Law Treaty of 1994 and Singapore Treaty on the Law of Trademarks of 2006).
IP, traditional knowledge and genetic resources
The other key agreement proposed by WIPO aims to improve the protection of IP, genetic resources (GR) and associated traditional knowledge (TK), as well as the protection of TK in itself, traditional cultural expressions (TCEs) and expressions of folklore.
If passed, this pact would address certain IP questions related to accessing, using and sharing these resources and knowledge systems.
For example, WIPO said there is widespread support among member states for a new ‘patent disclosure requirement’, which would obligate applicants for patents whose inventions use genetic resources and associated TK to disclose that fact and other related information in their patent applications.
Other ideas include more extensive use of databases of information about genetic resources and TK, which would help patent examiners to avoid granting erroneous patents.
Proponents for this new pact argue that it would “harmonise diverse national systems, foster the sustainable development of indigenous and local communities, provide legal certainty and predictability for businesses, and improve the quality, effectiveness and transparency of the patent system”.
The WIPO Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore has been working on a legal instrument covering these areas since 2010.
Image: Shutterstock.com / Andrii Yalanskyi
