19 March 2019 - Article
What do pop stars, designer handbags, pharmaceutical manufacturers and travel businesses have in common? They all need brand and image rights protection. Withers’ intellectual property (IP) team around the world highlights some of the key infringement risks – and how to be ready for them.
Brands and image rights create huge financial opportunities – and not just for their owners. Fuelled by e-commerce and the internet, counterfeiting and infringement have grown into massive global industries. Fast-moving and elusive, intellectual property theft is a problem that’s hard to keep track of, challenging to control and almost impossible to quantify because many companies are unwilling to go public about the scale of problem they face. According to the World Customs Organisation, European luxury brands alone lose an estimated £5 billion to counterfeiting each year.
So what can companies and individuals do to defend themselves? That depends on the class of IP they own – and where they’re seeking to protect it.
An image problem
Image rights (proprietary rights that individuals have in their image and in other unique factors linked to their personality) are a great example. Kenneth Mullen, who heads Withers’ London-based IP and technology team, has advised many clients on protecting these rights. It’s a lucrative market for infringers and one where the law is far from clear-cut, as he explains: “There are major differences between the UK, other continental European jurisdictions and states across the US. In the UK, there’s no legal image right, or personality right, as such. If a photographer snaps a picture, they own the copyright in that image, not the celebrity, and the photograph could end up being used on a product. So to protect these rights for clients who are in the public eye, we have to rely on other IP rights such as those under the law of trademarks, copyright and passing off instead.”
The law of passing off (that protects unregistered goodwill in a brand) has been a useful remedy for commercially active individuals. Since the racing driver Eddie Irvine used it to good effect back in 2002, it’s been successfully deployed by other celebrities to safeguard their image from unauthorised commercial exploitation. In 2013, the singer Rihanna relied on it in her action against Topshop’s parent company, Arcadia. T-shirts sold by Topshop featured a photo of Rihanna (taken by an independent photographer) and the case has arguably helped brand conscious personalities prevent their image being exploited in the UK – but only if there’s a real chance of the public being misled into thinking the celebrity has endorsed or is associated with the infringing products.
Kenneth continues: “Overall, celebrities and their management teams are more aware of the issue than they used to be. The commercial value of image rights has become a big feature in the UK sports and soccer industries, for example, with many leading players setting up contracts to ensure their image rights are recognised and managed through robust commercial arrangements.”
In practical terms, how celebrities look after their image rights will vary enormously and more proactive, forward-looking strategies can make sense. For example, Professor Stephen Hawking, David Beckham and Richard Branson have all registered their names as trademarks. Others have registered signatures, personal logos or even catchphrases for various goods and services, but whatever course is taken, Kenneth sums up: “The priority is to plan this protection in advance.”
Luxury brands at risk
Ida Palombella, who heads Withers’ Italian IP and IT practice, advises many leading luxury brands on IP protection. In her experience, there’s still too little awareness of this issue: “All too often we see fashion companies planning to enter new markets, but failing to recognise they need to protect their trademark in that market. Take China, a huge market for luxury brands with a massive infringement problem. Companies planning to enter mainland China must always file for trademark registration in the Central Trademark Registry in Beijing, and companies setting up in the Hong Kong or Macau markets must file with the relevant registers there too.”
She continues: “Registering a trademark provides improved protection against counterfeiters. Documents that testify to registration are also mandatory to licensing, franchising and/or distribution agreements. We have recently won a case after a five year legal battle for a client that lost control of its brand in China. A local company had registered it and was demanding millions of dollars for its release. Throughout this time, our client had been unable to open a shop in China…while the fake brand could!”
Europe can be easier to manage, as Ida concludes: “It’s quite straightforward and cost effective to obtain Europe-wide trademark and design rights through a one-stop registration process. That said, we see a lot of problems arising in Europe amongst mid- and small-sized fashion brands that fail to formalise trademark agreements and rely on verbal agreements instead. Should problems then arise, it is often hard to prove anything in court.”
Trademark and domain name scams
A continuing scourge in Asia-Pacific is scam invoices inviting recipients to register their trademarks, designs and patents in official-looking publications. Jim Lim, head of Withers KhattarWong’s IP and technology practice, cautions: “Many of our clients have received these kinds of invoices. It’s important to remember that the purported ‘registration’ of trademarks, designs and patents with ‘registers’ that are not administered by any national or international authority have absolutely no legal effect.”Invoices of this sort are typically dressed up to give an appearance of officialdom, usually with symbols and logos resembling state crests. They also tend to be pegged at a sufficiently low value, so clerical-level staff may be more likely to process and pay the invoice as a matter of course.
Jim continues: “Purported domain name registrars have also been sending unsolicited emails to trademark owners, ‘warning’ them that a ‘phantom’ third party is trying to register domain names containing various permutations of their brand names. A reply indicating interest will inevitably trigger an invitation to register the domain names with them to prevent ‘unauthorised parties’ from doing so. As there can be countless permutations of domain names, an unwary trademark owner can find itself saddled with a hefty bill for a portfolio of domain name registrations that are of little use commercially.”
The advice? Implement an internal protocol to ensure all issues related to brand management are directed to the legal counsel or a competent manager.
On the alert for patent extortionists
Steven Moore, a partner in Withers’ US IP group, has another perspective for patent owners in the US: “For years, the US press has been awash with stories of ‘patent trolls’ who stalk their unsuspecting prey by suing on low-quality patents. The perception arose that there are large numbers of patent extortionists waiting to threaten litigation at the drop of the hat.”
This perception pushed Congress to pass the America Invents Act (AIA) introducing a new mechanism for challenging patents known as the ‘Inter Partes Review’ (IPR). This quickly became the procedure of choice for companies seeking a rapid kill of weak patent claims. From then, it was only a matter of time until knowledge of the high rate of patent kill spawned a new type of patent extortionist who saw the IPR procedure as a quick mechanism for extorting significant sums from patent holders and the public at large. “Since then, we’ve seen the tactics employed by patent extortionists continue to evolve,” continues Steven.
“Most recently, they’ve focused on using selected IPRs to manipulate stock prices where the patents being challenged are key to the protection of a major product. Drug and biotech companies have found themselves in the firing line, and hedge fund managers and other financial players are seeking to challenge patents on drugs, while making a tidy profit on shorting the stock.”
At this point, says Steven, Congress is under mounting pressure to alter the IPR process to stop what companies see as abuse. But, he advises: “Until something is done, follow the adage ‘Patent owners beware’. Given the rush to the extortion goldfield, there’s no better time to review your patent portfolio against product sales to determine if there’s any gap in the armour that might be exploited by a patent extortionist and which forethought could have plugged.”