March 2014
CIPA Journal
By Christine E. Lehman; Mareesa A. Frederick; Elizabeth D. Ferrill; Leythem A. Wall
Authored by Elizabeth D. Ferrill, Mareesa A. Frederick, Christine A. Lehman, and Leythem A. Wall
Diversification is key to a strong intellectual property (IP) portfolio. The recent smart phone and tablet IP disputes making their way through courts across the world have highlighted once again the importance of IP portfolio, that include design rights, as well as utility patents and trademarks. Where commercial products are sold worldwide, manufacturers often hold similar design rights in both the United States and the European Union (EU) to protect their product design. One potentially effective enforcement strategy is to stop infringing goods at a nation's border, before those goods ever hit the retail shelves.
But enforcement of design rights at the corresponding borders varies considerably. In the United States, design patent owners can ask the U.S. International Trade Commission (ITC) to stop importation of foreign-made goods that infringe their design rights and U.S. Customs and Border Protection agency to enforce those orders. Conversely, in the European Union, owners with registered designs can ask their local customs office to alert them to the importation of potentially infringing products, but the owners must still go the Community Design Courts to enforce their rights after the imported products are identified. On their own accord, however, customs in the EU can detain suspected infringing goods. More recently, Europe has extended their rights to detain and destroy these goods without a court order if no party objects. This article will compare the idiosyncrasies of enforcement against infringing imported goods in these two jurisdictions.
U.S. design patents secure intellectual property rights to the nonfunctional characteristics of a commercial product. Design patents can be obtained in the United States for "any new, original and ornamental design for an article of manufacture."1 To obtain a U.S. design patent, applicants file with the U.S. Patent and Trademark Office (USPTO). The USPTO then engages in an examination process to determine if the claimed design is novel, non-obvious, and clearly depicted. U.S. design patents are only permitted to have a single claim, so the USPTO will force applicants to divide applications with multiple inventive concepts into separate applications. On average, design patents issue about fourteen months from filing.2 U.S. design patents have a term of fourteen years from the date of issue and there are no maintenance or renewal fees after issue.3 An issued design patent confers on the holder the right to exclude others from making, selling, or offering for sale in the United States, or importing into the United States products that apply the patented design or any "colorable imitation" of that design during the term of the patent.4
Founded in 1916, the International Trade Commission is an independent agency of the U.S. federal government charged with administering U.S. trade remedy laws.5 The ITC handles IP cases involving imported goods under Section 337 of the Tariff Act of 1930. Section 337 declares the infringement of a U.S. IP right to be an unlawful practice in import trade. Ninety percent of Section 337 cases involve patent infringement disputes, and most of them concern infringement of utility patents. But, design patents rights holders have used the ITC to adjudicate their infringement claims as well. Under Section 337, the ITC can issue exclusion orders, keeping imported goods out of the U.S. market, or preserve an importer's continued access to U.S. consumers.
The ITC conducts an evidentiary hearing before an Administrative Law Judge (ALJ), which somewhat resembles a patent infringement trial in its breadth and required preparation. A panel of ITC Commissioners reviews the initial findings of the ALJ and if a "violation" is found, then the ITC may issue an order excluding importation of the infringing good.
The ITC is typically known for its speed. The entire case—from the complaint, discovery, pretrial hearings, trial, post-trial briefs, to subsequent review by the Commission—typically all happens within about 18 months. Decisions by the Commission can be appealed to a single U.S. federal appeals court, the U.S. Court of Appeals for the Federal Circuit. Once an exclusion order has issued, its falls on U.S. Customs and Border Protection, an agency of the U.S. Department of Homeland Security, to enforce the exclusion order at the U.S. borders.
While the ITC system is fast, it requires the IP rights holders, including design patent owners, to establish more than just infringement of a valid design patent, as would be required in U.S. federal courts. Indeed, to file a lawsuit in U.S. federal court, there is no requirement that a design patent holder actually make a product that embodies the claimed design, although the system is typically slower and does not involve border enforcement. But in the ITC, rights holders must also establish two additional requirements. First, the patentee must show that the infringing products are imported into the United States. Second, the holder must show what is known as a "domestic industry," meaning considerable economic activity in the United States involving an article protected by the patent(s) at issue. The rights holder can show economic activity three ways: "significant investments in plant and equipment;" "significant employment of labor or capital;" or "substantial investment" in the exploitation of the IP, typically through a licensing program or research and development efforts.6 The requirement to prove a domestic industry has proven to be the most challenging—especially for those rights holders who are not manufacturing a product in the United States that embodies the patented design. Notably, because U.S. design patents may only have a single claim, the domestic industry requirement means that the ITC might be the only forum open to design patent holders making a product embodying the claimed design who take action against parties involved in the importation of competing products. Although there is some indication that investments in research and development of the ornamental aspects of a claimed design might serve as the basis for the domestic industry showing.7
Recent ITC cases involving design patents have sought exclusion orders on a wide variety of imported products, and been filed by rights-holders using the patented design. On October 31, 2012, the Commission issued a general exclusion order prohibiting the unlicensed importation of certain protective cases for mobile phones. The original ITC complaint filed by Otter Products, LLC, the assignee of the patents in suit, in May 2011, included more than 25 accused infringers. But by the time the exclusion order was issued all but one party had settled or was found in default.
Other recent investigations involving design patents have been directed to garbage disposals (Certain Food Waste Disposers, USITC Inv. No. 337-TA-838), paper shredders (Certain Paper Shredders, USITC Inv. No. 337-TA-863), and automobile tires (Certain Tires, USITC Inv. No. 337-TA-894).
Protection of designs in the EU can be obtained through registered or unregistered national or Community design rights. A Community design under the European Community Design Regulation (CDR) provides a single right giving uniform protection for designs throughout the entire territory of the EU. Registered Community designs (RCDs) are registered through the Office for Harmonization in the Internal Market (OHIM), based in Alicante, Spain. OHIM does not substantively examine RCDs like to the USPTO.
An RCD confers protection for five years from the filing date and can be renewed in blocks of five years up to a maximum of twenty-five years. The RCD provides absolute protection against use of the design, irrespective of whether or not there has been copying and grants its owner an exclusive right to prevent an unauthorized third party from making, offering, marketing, importing, exporting, or using a product in which the design is incorporated or to which it is applied, or holding stock of such a product for those purposes.
Unregistered Community Design (UCD) protection lasts three years from when made first publicly available within the Community. The UCD grants its owner the exclusive right to prevent unlicensed copying of the design or unauthorized dealing, with or without knowledge. The United States does not have a corresponding "unregistered" design right.
The owner of a UCD or RCD can seek to enforce its rights through a court action brought to Community Design Courts. Because Community Designs are valid in the EU as a whole it is not possible to limit the geographic scope of protection to certain Member States, a finding of infringement of a UCD or RCD applies to the entire territory of the EU. Each EU member state designates the relevant courts. The Community Design Court can award an injunction, seizure of products and other sanctions which are provided by the law of the Member State in which the acts of infringement or threatened infringement are committed, and so the remedy of damages or account of profits may also be available. The design owner may also seek to enforce its rights before the national courts of a Member State (i.e., a court not designated as a Community Design Court). In this case, the competence of the court, and any relief granted, is limited to the territory of that Member State.
The EU courts can however (at least initially) be avoided entirely by filing an application with Customs Authorities in the EU to detain suspected infringing goods. If action in only one EU Member State is desired, applicants can submit a "national application" by applying for action by the customs authorities of the Member State in which the application for action is lodged. A Community application permits the applicant to request assistance by the customs authorities in multiple Member States.
Starting in 2014, a new Customs Regulation (No. 608/2013) came into force in the EU, which replaces the prior Customs Regulation. This new regulation will give Customs authorities extended powers to detain suspected infringing goods at the borders of EU states and new powers to detain and destroy "small consignments" of such goods sent into the EU without the need for a judicial decision confirming a design right violation. Small consignments include those which contain three units or less, or which have a gross weight of less than two kilograms. The Border Force will, as under the old regulation, detain suspect consignments coming through seaports and airports and will notify IP rights owners. Rights owners will then need to seek the consent of the declarant or holder of the goods to the destruction of the goods. If consent is not received within 10 days, there is deemed a tacit consent to destruction. If the declarant or holder of the goods objects to destruction of the goods within time, Customs will detain the goods, disclose all the nominal information to the IP rights owner and allow the IP rights owner to consider whether to initiate court proceedings.
Customs authorities will also be able to take action even before the grant of an application to detain goods, or indeed even if there is no application in respect of any IP right. The New Regulation also provides that design rights holder reimburse the customs authorities for the costs incurred in carrying out enforcement activities.
Those authorized to submit an application to Customs have been extended to now include not just the design rights holder but also IP collective rights management bodies, professional representatives' bodies, groups of producers of products bearing geographical designations, representatives of such groups and businesses entitled to use a geographical designation, and control bodies or authorities for such a geographical designation. Additionally, to support the system, a new EU-wide centralized database was simultaneously introduced to handle and record all applications to Customs and hold data on all infringements including the overall quantities of goods seized and destroyed.
Customs enforcement in the United States first requires that the ITC find a violation, meaning that a valid design patent has been infringed and that the rights holder has proven a domestic industry, among other requirements. Only then would the ITC issue an exclusion order that would direct U.S. Customs to stop infringing products at the U.S. border. In contrast, the EU system is more flexible. While rights holders can apply for relief at the Community Design Courts or national courts of a Member state, rights holders can also initially register with the EU Customs Authorities, which under the New Regulations have some enhanced powers as explained above. Further, the EU system recognizes design rights even when the rights holder has not formally registered those rights with OHIM. Finally, the EU system does not have the domestic industry requirement of the U.S. system. Because many experienced design rights holders may wish to protect their designs from infringing, imported goods in both jurisdictions, an understanding of the differences as well as the similarities is crucial to effectively enforcing design rights in these important markets.
Endnotes
1 35 U.S.C. § 171.
2 See USPTO, Design Patents January 1988–December 2012, 1 (Mar. 2013).
3 See 35 U.S.C. § 173.
4 See 35 U.S.C. §§ 271, 289.
5 United States International Trade Commission, About the USITC, http://www.usitc.gov/press_room/about_usitc.htm (last accessed on March 7, 2014).
6 19 U.S.C. §1337(a)(3).
7 John Mezzalingua Associates, Inc. v. Int'l Trade Comm'n, 660 F.3d 1322, 1335-36 (Fed. Cir. 2011) (Reyna, J., dissenting-in-part).
Originally printed in CIPA Journal. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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