17 July 2014

Birthday Train or Eurostar - German Copyright Law

German Federal Supreme Court
Source Wikipedia




















On one of the hottest days of the year so far members of the Intellectual Property Bar Associaiton gathered in the Pension Room of Gray's Inn to hear a presentation on German copyright law by Prof Ansgar Ohly.

The title of his talk was Birthday Train or Eurostar which cleverly summed up the subject matter in a nutshell. The  Birthday Train is the name of a case before the German Federal Supreme Court in which the Court relaxed the originality requirement for the subsistence of copyright in works that could be protected by design registration in order to give effect to the Designs Directive (Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs). The case reference is Urteil vom 13. November 2013 - I ZR 143/12 - Geburtstagszug and there is a summary of the case here. The reference to Eurostar was an allusion to that Directive and other European legislation as well as decisions of the Court of Justice of the European Union of which the German courts are beginning to take account.

The Birthday Train was on originality. Prof Ohly considered other aspects of German copyright law where European law had been, or in some cases perhaps should have been, taken into account. He called one of those cases "Metal on Metal", a claim by the band Kraftwerk against a rap artist who reproduced a few bars of their recording Autobahn. The band brought their claim for infringement of their mechanical copyright rather than their musical copyright because there is no originality requirement for the subsistence of mechanical copyright.  Another case was Pippi Logstocking where it was held that literary copyright could be infringed by making a carnival costume according to verbal description. Prof Ohly discussed the liability of third intermediaries, particularly ISPs. Rather surprisingly we learned that there was no equivalent of s.97A of the Copyright Designs and Patents Act 1988 in German law and that German courts would not grant blocking injunctions of the kind Mr Justice Arnold had ordered in Twentieth Century Fox Film Corporation and otherss v British Telecommunications Plc [2012] 1 All ER 869, [2012] Bus LR 1525, [2011] EWHC 2714 (Ch).

As I had dashed down to London in some haste I did not get an opportunity to grab a notebook from chambers so I took no notes. So far as I could see glancing at the rest of the audience neither did anyone else which was a pity. Some of the things that Prof. Ohler said were real eye openers. It was hard to believe at times that Germany and Britain were both signatories to TRIPs and the Berne Convention. I do hope his talk or its substance will be published somewhere because the legal reasoning in some of the cases is startling.

After the talk we trundled off to the extremities of Gray's Inn where we sipped champagne and munched mini fish and chips and Yorkshire puddings as well as the more usual finger food and canap├ęs.  The caterers must have heard that I was in town. It was good to see all my old chums again.

Further Reading

Axel Horns  "Germany: Copyright Protection More Easily Available For Works Of 'Applied Arts'” 14 Nov 2013 KSNH Law 

02 July 2014

Patents - Employees' Compensation: Shanks v Unilever

S.39 (1) of the Patents Act 1977 provides:
"Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer for the purposes of this Act and all other purposes if -
(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or
(b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of
his duties he had a special obligation to further the interests of the employer's undertaking."
S.39 (2) provides that any other invention made by an employee shall, as between him and his employer, be taken for those purposes to belong to the employee.

The reason for that provision is that the inventor in a university or commercial research and development establishment is paid a salary for his or her work whether the invention is a success or not. The inventor's employer takes the risk of making it a success and an any private inventor in an inventors' club will tell you the odds against success are considerable. Most private inventors don't want to be entrepreneurs. They simply want to create. If they can be paid a decent salary for doing what they want to do anyway, most of them would be as happy as Larry.

Nevertheless, there are times when an employee's invention is a runaway success and the idea that the monthly salary and company car is adequate compensation for the inventor somehow sticks in the gullet. For those rare cases, s.40 (1) of the Act now provides:
"Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that -
(a) the employee has made an invention belonging to the employer for which a patent has been granted,
(b) having regard among other things to the size and nature of the employer’s undertaking, the invention or the patent for it (or the combination of both) is of outstanding benefit to the employer, and
(c) by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer,
the court or the comptroller may award him such compensation of an amount determined under section 41 below."
S.40 (1) was amended by s.10 of the Patents Act 2004. Before that amendment that subsection provided:

"Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that the employee has made an invention belonging to the employer for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the employer's undertaking) of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 below."
Note the differences between the two provisions. The former provisions referred only to the patent and not the invention as is now the case when considering the benefit to the employer.

In Shanks v Unilever Plc and others  [2014] EWHC 1647 (Pat), [2014] WLR(D) 242 Prof, Ian Shanks OBE FRS FREng sought compensation under s.40 (1) from his former employers, Unilever Plc, Unilever NV and Unilever UK Central Resources Ltd. in respect of European Patent (UK) 0 170 375 ("EP375") and related patents ("the Shanks patents") for inventions that the professor had made between 1982 and 1984 when Unilever applied for its first patent. When he joined Unilever Prof. Shanks was paid £18,000 a year and a Volvo car which had risen to £29,000 and a BMW when he left in 1986. As a struggling intellectual property barrister then as now, I can attest that such remuneration was wealth beyond the dreams of Croesus. The Shanks patents were first licensed and then sold to third parties which generated considerable revenues for Unilever which the hearing officer assessed at £24.5 million.

Prof. Shanks applied to the Comptroller for compensation under s.40 (1) on the grounds that his patents had been of outstanding benefit to his employer. His application was heard by Mr Elbro who held in Shanks v Unlilver Plc and Others  BL 0/259/13 21 June 2013 that £24.5 million was not "outstanding" given the size and nature of Unilever's undertaking but, if contrary to his view the benefit was outstanding, 5% of that benefit would be an appropriate share.

The professor challenged the hearing officer's finding as to the size of the benefit and his conclusion that it was not outstanding and also to his view that 5% was an appropriate share. By a respondent's notice Unilever contended that the hearing officer's assessment of the benefit of the patents and the 5% would have been too high. In the words of Mr Justice Arnold at paragraph [31]:
"Both sides challenge the hearing officer's conclusion that the benefit which Unilever derived from the Shanks Patents was £24.5 million. Prof Shanks contends that the hearing officer ought to have included an additional sum to reflect the time value of the money to Unilever. Unilever contend that the hearing officer ought to have reduced the total to reflect (i) the incidence of tax, (ii) research and development costs and (iii) a greater percentage of the licensing income being attributable to the Birch Patents. The contentions with regard to the time value of money and tax raise issues of principle which do not appear to have been considered in this context before this case."
The judge rejected Professor Shanks's  argument that the "time value of the money" should have been taken into account:
"[39] In my judgment the time value of the money which Unilever have received is not a "benefit … derived … from" the Shanks Patents within the meaning of section 41(1). My reasons are as follows. First, the fact that having money for a period of time is of an economic value which can be quantified does not compel the conclusion that it constitutes "money's worth" within the meaning of the definition of "benefit" in section 43(7). On the contrary, when read together with section 41(1), the definition points to the benefit being assessed when the "money or money's worth" is received by the employer.
[40] Secondly, even if the time value of the money is a "benefit", it is not a benefit "derived from" the Shanks Patents. The benefits derived from the Shanks Patents were the licence fees and the attributable part of the purchase price of Unipath. The time value of the money is a benefit derived from those benefits. This point can be illustrated in two ways. The first is by imagining that a patent is sold by £1 which the employer invests in a lottery ticket that wins a prize of £10 million. Can the employee claim the £10 million as a benefit derived from the patent? The second is by imagining that a patent is sold for £100 million which the employer invests in setting up a new company which crashes disastrously, resulting in the loss of the entire sum. Can the employer say that it has received no benefit from the patent? Surely the answer to both questions is no.
[41] Thirdly, if the time value of money received is treated as a benefit derived from the patent, the inquiry under section 41(1) would have no temporal end, particularly where the employer was able to get a better rate of return on investing its share of the money in its own business than the employee could get from a market interest rate on his share (or perhaps even from investing his share in the stock market). It would also complicate the inquiry in other ways which Parliament is unlikely to have envisaged, not least in determining which of the available methods of quantifying the time value is the most appropriate.
[42] Fourthly, Prof Shanks could have brought his claim earlier than he did. Why should the "benefit … derived from … the patent" increase as a result of a delay by the employee in bringing his claim? Furthermore, it took a regrettably long time for the Comptroller-General to determine the claim. Again, why should the "benefit … derived from … the patent" increase as a result? Yet further, this appeal has taken a year to come on. Again, why should the "benefit … derived from … the patent" increase as a result? Surely the answer to these questions is that such delays do not alter the benefit to the employer.
[43] Fifthly, it is common ground that the Comptroller has no power to award interest. In my judgment it would be inconsistent with the statutory scheme for the benefit to be increased to reflect the time value of money effectively as a substitute for an award of interest. It is not necessary to try to decide what the position with regard to interest would have been if Prof Shanks had brought his claim in this Court."
On the other hand his lordship accepted Unilever's contention that the incidence of tax and the prosecution costs should have been taken into account. After taking account of the deductions Mr Justice Arnold found that the value of the benefit of the Shanks patents to Unilever was £17 million.

Mr Elbro had concluded at paragraph [222] of his decision that
"The benefit provided by the Shanks patents was a substantial and significant one in money terms – the sort of sum Unilever would, on the evidence, worry about (cf. Project Hyacinth). Furthermore, in comparison to the benefit from other patents to Unilever, from the evidence before me it does, in Mr Emanuel's words 'stand out'."
However, after taking account of the size and nature of Unilever's business, he concluded that the benefit provided by the Shanks patents fell "short of being outstanding." Professor Shanks attacked that finding on no less than 7 grounds each of which was dismissed by the judge. He affirmed the hearing officer's finding and dismissed the appeal.

For completeness the judge also considered the parties' arguments as to what should be an appropriate share for Prof. Shanks had the patents been of outstanding benefit to Unilever.  Having regard to Mr Justice Floyd's decision in Kelly and another v GE Healthcare Ltd [2010] Bus LR D28, (2009) 32(5) IPD 32035, [2009] EWHC 181 (Pat), [2009] RPC 12 where the claimants were awarded 3% of the benefit Mr Justice Arnold could see no reason why Prof, Shanks should receive more.

Both Kelly and Shanks were decided under a provision that has now been amended so it has to be asked whether those judgments would be relevant to any cases that may be decided under s.40 (1) as it stands now.  In my view they would. The computation of the benefit exercise would be broader because the invention has to be considered as well as the patent under s.40 (1) (b) but the tribunal still has to consider the licensing revenue, tax and prosecution costs and there is nothing in the language of the new section that compels the court to consider time value. Secondly, exactly the same considerations will arise under the amended section for deciding whether the benefit to the inventor's employer was "outstanding". For an example of something that is "outstanding" see Kelly and for one that is not see Shanks.

Further Reading
Jane Lambert "Patents: Unilever Plc and Others v Shanks" 27 Nov 2010 NIPCLaw
Jane Lambert "Employees' Compnsation: Kelly and Another v GE Healthcare Ltd [2009] EWHC 181 (Pat) (11 February 2009)"