The first line of defence

Intellectual property protection is an exciting and increasingly important area for many businesses. Martyn Cornell spoke with David Wilkinson of Stevens and Bolton Llp exclusively for European CEO

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It was one of the odder cases to come before the Court of Appeal in London during 2007, as a trio of senior judges solemnly studied two different trigger-operated plastic bottles of air freshener spray, to decide whether they were sufficiently different from each other.

However, it was also one of the most important cases of the year, the first time the UK Court of Appeal had given a ruling on the provisions at the heart of new European legislation on design rights, and the court’s detailed guidance, in its decision on the battle between the consumer goods giants Procter & Gamble and Reckitt Benckiser over their respective “Febreze” and “Airwick” trigger spray dispensers, on the key provisions of the new law are going to have huge implications not only for similar disputes in the UK, but right across the almost 30 countries in the European Union.

The attention given to the case, according to David Wilkinson, a partner in the Guildford, Surrey-based legal firm Stevens & Bolton, is a reflection of the increasing importance of “intellectual property rights” in general, including not only design rights, but trademarks, patents, copyright and so on.

Intellectual property disputes “are definitely on the increase,” Wilkinson says. “The reason is that the UK and Western economies generally, are much more knowledge-based than they used to be, with manufacturing having to be done in China and the Far East, which has meant that intellectual property has very much gone up the agenda in boardrooms. The IP rights are in many cases the most significant asset a company has, and therefore they’re keen to protect those rights and see they’re properly enforced.”

Stevens & Bolton employs about 150 people, with 100 or so fee earners, making it one of the largest “outside London” law firms in the South East of England. Much of the work it handles for clients covers intellectual property rights, including protection, infringements, disputes, licensing agreements, outsourcing and so on. Its clients come from all over the UK and internationally as well, including the United States, and their size ranges from largest multinationals to one-man businesses. Most of the lawyers working for the firm had previously worked for one or other of the big-name legal firms in London: “Essentially we’re doing the same kind of work as the City firms, but because of the location outside London, in Guildford, it’s considerably cheaper. That’s the premise on which the firm operates,” Wilkinson says.

Certainly Wilkinson and his colleagues are busy enough, with everything from helping to thwart manufacturers of pirated goods in the Far East to drawing up contracts between companies and their employees that will prevent departing staffers from walking out the door with a firm’s intellectual property “crown jewels”.

The commonest forms of intellectual property dispute “depend on the sector you’re talking about,” Wilkinson says. In the pharmaceutical sector, in electronics, mobile telephones, “that sort of thing the key right would be patents – we see a great number of disputes between companies involved in those areas. In other business sectors, different IP rights have greater importance, for example in what might be broadly called fast-moving consumer goods one, the things you might see in a supermarket, trade marks are particularly important.” Disputes involving design rights, like the one between P&G and Reckitt Benckiser over their room deodoriser sprays, are “increasingly” coming through the courts after the major revision of laws regarding design rights within Europe, Wilkinson says. In the media industries, television film and music, meanwhile, “the key concern is copyright, and if you’re a company in that area, copyright is going to be at the top of your agenda.”

Right now, “if you were to ask people involved in this area what has been the most active sector over the past 12 to 18 months it’d probably be in the field of mobile telephones,” Wilkinson says. That is not so much to do with law as to do with commerce: “It’s the new 3G mobile technology, new standards, new applications, you can do all sorts of new things on mobile telephones now. That has led to a real flood of litigation, not only in the UK but also in the United States, and other jurisdictions in Europe as the companies involved in that sector battle it out. People want to stake out their ground and protect their market position. Eventually it will settle down and people will get on with their lives, but there’s certainly a lot of activity in that area at the moment on the legal front.”

The trickiest disputes to sort out, Wilkinson says, are “where there is some form of personal animosity involved. Just as in a tricky divorce case, if the people don’t like each other that can make it difficult to resolve, and that can apply sometimes in intellectual property cases, for example if the people were former partners in business or shareholders – if they were on each other’s Christmas card list, if I can put it that way. When that sort of situation turns sour, it means that rather than being simply a commercial issue about commercial considerations, other factors come into play which can make it much more difficult to reach a sensible settlement.”

Guarding against people leaving with company “secrets” is “a big issue – I’ve definitely seen a lot of legal activity with regard to departing employees over the past few years and I think partly the reason why we’re seeing more cases litigated is because of the ease with which large quantities of information from a company can be downloaded onto a disk and someone walks out the door with it,” Wilkinson says. “Databases and so on can be absolutely key to a company’s financial performance. If an employee or a group of employees head off into the sunset and take that kind of information with them it can be very damaging indeed.”

There are, however, a number of steps that companies can take to help to ameliorate that kind of problem. “On a legal level it’s important to show that there are appropriate provisions in staff contracts concerning confidentiality,” Wilkinson says. “Also it may be appropriate to include non-compete covenants for limited periods so that people can’t engage in the same business activity for, say, six or 12 months after leaving. The point to make about non-compete covenants is that they can’t be unduly broad, because if they are the courts aren’t going to uphold them. Considerable care has to go into drafting them. So from a legal perspective it’s getting the contractual framework correct.

“But there’s also a lot that companies can do at the practical level, such as ensuring that databases can’t be downloaded onto disks without express permissions, ensuring that there’s password protection in place, regularly changing means of access to a company’s IT system, ensuring that when employees leave they hand over all relevant company information. All those sort of practical steps can help to ensure that they don’t take the crown jewels with them when they walk out the door.”

When it comes to protecting a company’s intellectual property rights from outsiders, Wilkinson says, “a lot of intellectual property rights are susceptible to registration – one thinks of patents, trademarks, design rights – and therefore a company that’s managing its IP well will consider in every case what should they be applying to register, a trademark or a design and so on.

“Once the registration is secured, it can not only act as a deterrent to third parties, they may well decide to go off and infringe someone else’s rights if they know that you’ve taken the time and trouble to secure registered protection. But also it generally means that when it comes to taking action it’s normally easier to do so on the basis of a registered right rather than an unregistered one. If one thinks of trademarks, for example, it’s possible to sue on a registered trademark, it’s also possible to protect a name which has been used in a business context even if it hasn’t been registered but it’s generally more difficult and more expensive to do so.”

On piracy, Wilkinson says, “at this end we work closely with customs and private investigators to ensure that where there is a suspicion of counterfeit products coming in, Customs are alerted and there’s a potentially very effective procedure in place here in the UK, and elsewhere in Europe, whereby offending goods can be seized at the point of entry into the European Community.

“There’s no doubt that organised crime is definitely involved in the field of counterfeits and piracy, and the police recognise that. The same people involved in the drugs trade can also be involved in dealing with counterfeit CDs or DVDs or whatever. Some things have potentially more serious effects than others. A counterfeit DVD you might be disappointed with the quality of the picture. But if it’s a pharmaceutical product, the consequences might be rather more far-reaching.

“We’ve been involved in the garment sector in the importation of counterfeit brand label products. Cigarette lighters is another one which is again potentially dangerous – the evidence was that if the counterfeit product was dropped it might explode, and there had been injuries to children and so on

“Wherever possible, companies who are concerned about potentially taking action in China should try to ensure that they have appropriate Chinese registered protection in place – if it’s a trademark, in other words, try to get it registered in China. Try to obtain a Chinese patent. Because the Chinese courts take Chinese intellectual property rights rather more seriously than they do foreign intellectual property rights.”

While in Europe companies can rely on a European Community-wide system of design and trademark registration, despite much effort there is still a long way to go for a community-wide system of patent protection. ” There’s no doubt that industry generally in principle would favour the idea of a single patent that would cover the whole of Europe because it would be cheaper that obtaining a patent in all the various territories and also potentially cheaper and easier to enforce,” Wilkinson says. “But there are a lot of practical difficulties surrounding the proposals, such as where’s the court going to be to decide Community-wide patents, how’s it going to be staffed, are Community patents going to be translated into all the national languages of the EC, and if so that will be hugely expensive, or will it just be into some languages, in which case some people could be sued for infringing a patent that’s not in their home language, and that could be conceived as unfair.

“I think it may well come along some day but I don’t think it’s necessarily imminent. The language difficulty alone makes it very difficult to create a supernational, Community-wide right in the patents sphere. That’s not to say it’s impossible, we can have Community trademarks, we do have a Community design system, but so far a Community patent has eluded us. There’s a working group which is reported to have made ‘some progress’ towards a Community patent and some specific results are expected in 2008. We’ll have to wait and see. But I don’t think anyone is expecting to see a Community patent up and running imminently.”

One area where there might be legislation, Wilkinson thinks, is in copyright, over the issue of “fair use”. In the United States, he says, “they have a ‘fair use’ doctrine that is quite a broad, vague and fuzzy round the edges concept, but it means that if someone is using someone else’s copyrighted work in a way that is deemed to be ‘fair’, that will not amount to infringement Here in the UK we’ve taken a different approach: we’ve provided literally dozens of specific exceptions to copyright infringement in the statutes, rather than having one general concept of fair use.

“What that has tended to mean is that the exceptions can’t really keep pace with technological change – the issue of ‘user-generated content’ for example, where people upload clips onto, say, YouTube that are seen as infringing copyright. It also means that the statute is very long and very unwieldy. That’s one area where there has been comment from the judiciary that the situation is so complex this is something that legislators might want to consider.”

The problem, Wilkinson says, is already being thrashed out in the courts as, for example, organisations such as the Premier League in England try to prevent people posting clips on sites such as YouTube of scenes from football matches that the League says are its copyright. “User-generated copy, in particular, is seen as the future by media companies, they want to make money from it by advertising to the communities that user-generated content builds up, but it’s a future fraught with legal risk. Because the moment you give people the freedom to post whatever they want on a website that you’re running, you tun the risk that they’re going to post infringing clips, or defamatory material, or who knows what, and you could be potentially held liable for it.” One more headache for companies – one more area for Stevens & Bolton to apply its expertise to.