Inside this Issue:
Intellectual Property
- German Supreme Court Rules on Music Sampling
- CFI Rules on the Conditions of Granting Interim Measures
- ECJ Rules on the Use of Trademarks in Comparative Advertising
- ECJ Clarifies Conditions of Protection for Trademarks with a Reputation
IT & Communications
- Round-Table Discussions Held for the Promotion of Online Distribution in Finland
Life Science
- Preliminary Report of the Commission's Pharma Sector Inquiry Published
In Brief
- Danish High Court Rules on the Prerequisites of Granting Injunctive Relief
- Pharma Regulatory: Finland Sees First Effects of the Sunset Clause
- EPO Rejects Stem Cell Patent Application
- Finland Signs Additional Protocol to the Convention on Human Rights and Biomedicine
- Swedish Ministry Proposal for Extended Rights to Appeal under the Electronic Communications Act
- Council of Telecoms Ministers Unanimous on the Contents of the Telecom Reform Package
- Amendments to the Privacy in Electronic Communications Act Get Green Light from the Parliament's Constitutional Law and Transport and Communications Committees
- Finnish Council of State Does Not Support Extension of Term for Performing Artists' Copyright Protection
Intellectual Property
German Supreme Court Rules on Music Sampling
Bundesgerichtshof ("BGH"), the highest civil court of Germany, ruled in a case concerning music sampling on 20 November 2008. BGH found that music sampling does not infringe copyrights to the original work from which the sample has been taken provided that the sampling has been made in the pursuit of creating a new work that is independent and different in relation to the original work. The ruling was issued in a case between German electronic music pioneers Kraftwerk as plaintiff against Moses Pelham, a German rap-music producer, as defendant concerning the alleged infringement of Kraftwerk's copyright based on a two-second extract from Kraftwerk's 1977 track "Metal on Metal" in the rhythm pattern of Sabrina Setlur's song "Nur Mir" published in 1997.
The BGH decision overturned the decision of Oberlandsgerichtshof ("OLG") Hamburg, an appellant court. OLG Hamburg had concluded that reusing even the smallest extract of a copyrighted work would have automatically amounted to infringement of said copyright.
BGH did not conclude that copyright does not limit sampling at all. According to the BGH's decision, in order for sampling to be permitted, the new work shall transform the elements of the original work from which sampling has taken place in such a manner that the new work can be considered independent and wholly different from the original work. Further, the outcome of the sampling should be such that the source of the sampled elements would be hardly recognizable.
In the ruling, BGH also set other limitations on the free use of earlier works under the sampling exception. The use of fragments of earlier sound recordings in new works is not allowed without permission if the sampler is capable of playing the portion in question himself. Further, as regards musical works, a sampled melody from an earlier work shall not be recognizable in the new work. In conclusion, BGH's ruling is groundbreaking in principle, but the scope of the sampling exception seems rather narrow in practical terms. The case will now be returned to OLG Hamburg to be decided upon in accordance with the principles set out in the BGH decision.
CFI Rules on the Conditions of Granting Interim Measures On 14 November 2008, the Court of First Instance of the European Communities ("CFI") rejected certain collecting societies' application for interim relief directed at suspending operative parts of a Commission decision having found infringement of the EC competition rules (Cases T-398/08 R, T-401/08 R, T-411/08 R and T-422/08 R). In its ruling the CFI decided on the conditions for the granting of interim measures applicable to the case: The applicant shall establish that serious and irreparable damage would be incurred in case the precautionary measure was not granted and the application must also be sufficiently detailed, containing the essential elements of facts and law relating to the matter.
Several national copyright collecting societies had applied for an interim relief at the CFI to suspend the enforcement of a decision of the European Commission establishing infringement of the EC Treaty. The Commission had found that the contracts and concerted practices between the members of International Confederation of Societies of Authors and Composers ("CISAC") infringed Article 81(1) of the EC Treaty by, e.g., including membership restrictions and exclusivity clauses. Five collecting societies, including Teosto of Finland, appealed the Commission decision and applied for interim relief seeking suspension of the measures required by the Commission to bring the infringement to an end.
The President of the CFI did not find sufficient ground to grant the interim relief due to lack of urgency. In order for a precautionary measure to be granted, the applicant needs to prove that he cannot wait for the outcome of the main proceedings without suffering serious and irreparable damage. Consequently, the application should specify "the seriousness of the alleged financial damage". Further, according to the President of the CFI, an application for an interim relief "must be sufficiently detailed in itself to enable the defendant to prepare his observations and the judge hearing the application to rule on it, where necessary, without other supporting information, and the essential elements of fact and law must be apparent from the application for interim measures itself." As the risk of serious and irreparable damage had not been sufficiently established in the matter, the application for interim relief was dismissed.
ECJ Rules on the Use of Trademarks in Comparative Advertising
The European Court of Justice ("ECJ") ruled on comparative advertising and trademarks in a dispute between mobile operators O2 and Hutchison 3G (Case C-533/06). The decision touches upon the inter-relationship between Directive 89/104/EEC ("Trademark Directive") and Directive 84/450/EEC ("Directive on Comparative Advertising"). In essence, the ECJ held that the concept of "confusion" in the two Directives must be given the same meaning. The Court found that the proprietor of a registered trademark is not entitled to rely on his trademark to prevent the use, in a comparative advertisement, of a sign similar to the trademark where such use does not give rise to a likelihood of confusion.
Based on the ruling, the ECJ finds that the use of a trademark in comparative advertising can amount to trademark infringement in circumstances where the comparative advertisement does not meet the conditions required for permissible comparative advertising under the Directive on Comparative Advertising. This may be the case, in particular, if there is a likelihood of confusion between the two competitors or their goods or trademarks. In those circumstances, it would then be for the courts to consider whether the trademark is infringed.
By the time of the ECJ's decision, the Directive on Comparative Advertising had already been replaced by the new Directive 2006/114/EC with effect from 12 December 2007. The purpose of the new Directive has been to codify the old Directive on Comparative Advertising which had been amended several times. The conditions for permissible comparative advertising under the new Directive are mostly the same as under the old one.
ECJ Clarifies Conditions of Protection for Trademarks with a Reputation
According to Article 4(4) of Directive 89/104/EEC ("Trademark Directive"), trademarks with a reputation may enjoy a wider form of protection than trademarks generally in relation to goods or services that are not similar to those for which the trademark is registered. In its ruling of 27 November 2008 in the Intel Corporation v. CPM United Kingdom Ltd case (C-252/07), the European Court of Justice ("ECJ") provides new guidance as to the conditions under which infringement of such trademarks may be found. The ruling imposes a significant burden on the owners of trademarks with a reputation seeking to benefit from the wider protection because it will now be on the owners of such trademarks to present evidence of actually suffered economic loss or of serious likelihood of the same due to the alleged infringement.
In order to enjoy the wider form of protection which is provided for under the Trademark Directive, it is necessary to establish that the use of the allegedly infringing trademark would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trademark. Based on the ruling, the ECJ takes the view that it will not be sufficient to show that the relevant public would establish a link between the two trademarks, but that it will also be necessary to present evidence of the harm to the trademark. The ECJ seems to go even further and holds that what must be shown for the infringement claim to succeed is proof of a change in the economic behavior of the average consumer due to the use of the allegedly infringing trademark or a serious danger of such change in the future.
As a reaction to the ECJ's decision, trademark owners say that dilution will now be very hard to prove in practice, especially as regards serious likelihood of actual damage in the foreseeable future. Therefore, trademark owners will in practice be required to wait for the damage to actually occur in order to be able to prohibit use of infringing trademarks. It remains to be seen whether this seemingly unlucky state of affairs is the unavoidable implication of the decision.
IT & Communications
Round-Table Discussions Held for the Promotion of Online Distribution in Finland
On the request of the Minister of Culture and Sport Stefan Wallin, the former chief executive of the Finnish Broadcasting Company, Mr. Arne Wessberg, has held round-table discussions to promote online distribution of creative content in Finland and to reduce illicit file sharing over the internet. These discussions were attended by some 70 experts representing the film, music and game industries, internet services providers as well as content users. One of the conclusions to be drawn from the discussion is that there is great potential in the electronic commerce in creative contents and this potential should be fully utilized though it would require modifying the legislation.
One of the challenges that the creative industries are facing is how to induce the majority of consumers who never buy content over the internet to begin using web-based services. For example, in Finland only approximately 5% of all music purchased is downloaded, whereas in Europe the figure is approximately 15% on average. As for films, downloaded films represent only approximately 0.1% of the total value of DVD-sales in Finland which clearly shows that the opportunities for the electronic distribution of films are still mostly unexploited.
The chairman of the round-table discussion, Mr. Wessberg, has, on the basis of the discussions, produced suggestions for the promotion of electronic commerce. The suggestions include enhancing supply and services, improving consumer-friendliness of the services and the review of current legislation applicable to electronic commerce, including copyright legislation. To fight illicit file sharing, Mr. Wessberg suggests delivering targeted messages to such connection owners whose IP addresses are used for illicit file sharing as well as increasing consumer awareness through media campaigns informing of the negative implications of illicit file sharing.
Minister Wallin will now evaluate the output from the round-table discussions and consider possible further actions with the other members of the Cabinet.
Life Science
Preliminary Report of the Commission's Pharma Sector Inquiry Published
The European Commission ("EC") launched a sector inquiry into the pharmaceutical sector on 15 January 2008. The EC justified such action on signs that competition in the pharmaceutical sector may be distorted. The Preliminary Report of the pharmaceutical sector inquiry was presented to the general public on 28 November 2008 in Brussels. The main findings of the Preliminary Report relate to competition between originator companies and generic companies, competition between originator companies and to the regulatory framework. The report does not address contingent inefficiencies between generic companies.
In the report, the EC acknowledges that the pharmaceutical sector is vital to the health of European citizens and that patents are key in this respect as they allow the originator companies to recoup their considerable investments into research and development. However, the EC finds that the originator companies have designed and implemented strategies – a "tool-box" of instruments – aimed at ensuring continued revenue streams for their medicines and which may have the effect of delaying or blocking generic entry.
The EC believes the strategies used by the originator companies include "patent clusters", i.e. filing for numerous patents for one single medicine in order to create uncertainty for generic companies as to whether and when they can develop a generic medicine without infringing any patents. Other strategies include intervening in national procedures for the approval of generic medicines, litigation as well as settlement agreements with generic companies which may delay generic entry. It is noted that litigation is often initiated in several different Member States with respect to the same medicine, which can result in conflicting final judgments and thereby difficulties for the generic companies. The EC also criticizes the launch of so-called second generation (follow-on) medicines with the aim of switching patients to the new medicine prior to the market entry of a generic version of the first generation product.
According to the report, originator companies compete with each other by, inter alia, developing and executing defensive patenting strategies with the aim of blocking the development of competing products as well as by using litigation and opposition proceedings regarding other originator companies' secondary patents. As regard the regulatory framework, the EC, the originator companies and the generic companies all agree that a Community patent as well as a specialized patent judiciary in Europe are needed, since this would reduce costs in and bring more legal certainty to the pharmaceutical sector.
All in all, the EC believes that delays to generic entry can have a very significant impact on the public health budgets and ultimately the consumer. The EC estimates that savings of 14 billion euros have been gained through generic entry and considers that the savings could, with undelayed generic entry, have amounted to 3 billion euros more.
The Preliminary Report has been severely criticized for failing to address real issues impeding patient access to innovative medicines by the European federation of Pharmaceutical Industries an Assoiations ("EFPIA"), i.e. the voice of the research-based industry in Europe. In EFPIA's view, the report does not substantiate the claim that the industry would be impeding innovation and further mischaracterizes as anticompetitive an industry that is rightly seeking to protect inventions in the highly competitive pharmaceutical sector. In a speech at the presentation of the Preliminary Report in Brussels, Lord Justice Jacob noted that it is the patent system which has made the advances in medicines possible and that it has been the pharmaceutical industry which has undertaken the risk of the considerable costs of development. The Preliminary Report has also been criticized for creating an unclear situation in the pharma sector as regards which actions are considered abusive.
The EC has launched a public consultation by inviting all stakeholders to submit their comments on the Preliminary Report by 31 January 2009. The mistakes and unsubstantiated conclusions of the Preliminary Report are expected to be heavily commented by representatives of the innovative pharma sector. A final report of the sector inquiry is expected in spring/summer 2009. The EC has further noted that, in light of the findings set out in the report, it intends to take action where deemed appropriate independently from the report.
In Brief
Danish High Court Rules on the Prerequisites of Granting Injunctive Relief
On 18 November 2008, the Danish High Court ruled in a case between Novartis and Teva to grant injunctive relief against Teva's marketing of a generic pharmaceutical product containing valsartan as the active substance. Teva had obtained a marketing authorization for its pharmaceutical product but stated during the proceedings that it had no current plans to market the product in Denmark. Despite the fact that Teva stated its intention not to market the generic, the High Court found that the prerequisites for granting injunctive relief were at hand. The High Court emphasized that the fact that Teva had submitted an application for marketing authorization at a very early stage prior to the expiry of Novartis' patent rights and the fact that Teva had refused to state that it would respect Novartis' patent rights rendered it probable that Teva would undertake actions which would infringe Novartis' exclusive patent rights. Consequently, the requirement of an "actual threat of infringement" pursuant to the Danish Administration Act of Justice was fulfilled. The High Court granted the injunction and prohibited Teva from marketing its generic valsartan pharmaceutical.
No corresponding right to injunctive relief based on the threat of infringement presently exists in Sweden where the Enforcement Directive has not yet been implemented. According to current Swedish court practice, infringement must have taken place before an interim injunction may be granted. However, the Swedish Supreme Court has recently granted leave to appeal in a case which will address the question of whether an application for confirmation of reimbursement status for a generic pharmaceutical actually constitutes "offering" within the meaning of Swedish patent law. The Supreme Court's judgment which will clarify many unclear issues in this area is expected during spring 2009.
Pharma Regulatory: Finland Sees First Effects of the Sunset Clause
On 7 November 2008, the first marketing authorizations and registrations of pharmaceutical products lapsed under the Sunset Clause in Finland. The clause, which is implemented in Section 29 of the Medicines Act (395/1987, as amended), stipulates the cancelling of marketing authorizations and registrations if the product in question is not launched on the Finnish market within a period of three years from the date of grant of the marketing authorization or if a product is not marketed within three consecutive years.
On the first day of effect of the Clause, 250 marketing authorizations were lapsed. In addition, 441 marketing authorizations had already been cancelled by the marketing authorization holder before said date. These figures represent approximately two thirds of the total number of 996 marketing authorizations that had been under the threat of lapsing at the entry into force of the Sunset Clause. The list of lapsed marketing authorizations and registrations may be found at the website of the National Agency for Medicines.
EPO Rejects Stem Cell Patent Application
The European Patent Office ("EPO") has ruled not to grant patents on human stem cells that involve the destruction of a human embryo. The decision was rendered on 25 November 2008 by the Enlarged Board of Appeal of the EPO on an application for "primate embryonic stem cells" (G 2/06). According to the Enlarged Board of Appeal, Rule 28(c) of the European Patent Convention and the EU Biotechnology Directive (98/44/EC) bar the patenting of claims for products that "could be prepared exclusively by a method which necessarily involved the destruction of the human embryos from which the said products are derived". The Board also rejected the request for a preliminary ruling on the issue by the European Court of Justice on the grounds of lack of any legal and institutional link between the EPO boards of appeal and the EU. The decision does not, however, mean that stem cells would not be patentable as such and the biotech industry is still left in uncertainty in this regard.
Finland Signs Additional Protocol to the Convention on Human Rights and Biomedicine
Finland has signed the fourth Additional Protocol to the Convention on Human Rights and Biomedicine concerning Genetic Testing on Health Purposes on 27 November 2008. The possible ratification by Finland of this Additional Protocol of the Council of Europe will take place at a later stage.
The Protocol includes legal and ethical rules and principles on information concerning human genetics and genetic testing for the purposes of healthcare, information-based consent, necessary advice regarding genetic information and the quality of services. The Protocol does not apply to genetic tests carried out for the purposes of examining human embryos or fetuses. According to the Protocol, the interests of those participating in the tests shall weigh heavier than the benefits possibly gained by the society or research. Discrimination or labeling based on genotype is prohibited and genetic tests can be carried out only on the grounds of clinical benefit.
Swedish Ministry Proposal for Extended Rights to Appeal under the Electronic Communications Act
The Swedish Ministry of Enterprise, Energy and Communications has proposed changes to the Swedish Electronic Communications Act in order to further harmonize the Act with the Directive on Electronic Communications Networks and Services (2002/21/EC, "Directive") and case law of the ECJ (e.g. C-426/05 Tele2 Telecommunications Gmbh v. Telecom-Control-Kommission). Under Article 4(1) of the Directive, a member state is under an obligation to establish a functioning system under which a user of or company providing electronic communications networks or services has the right to appeal a decision rendered by a national regulatory authority if the user or company is concerned by the decision. An operator does not have such right in Sweden in cases where it is affected by a decision concerning another operator, e.g. a decision taken by the Swedish Post and Telecom Agency under the Electronic Communications Act imposing obligations on another operator. The proposed right to appeal concerns such decisions that are directed at another operator and that impose, change or cancel obligations falling upon the concerned operators or that relate to the compliance with such obligations. Decisions concerned by the proposed amendment are, e.g., decisions rendered by the Swedish Post and Telecom Agency based on the Swedish Electronic Communications Act against companies with significant market power.
Council of Telecoms Ministers Unanimous on the Contents of the Telecom Reform Package
The Council of Telecoms Ministers of the European Union has decided to unanimously endorse the Commission's proposal on the reform of the EU's telecoms rules. The telecoms reform which aims at strengthening the single market for telecoms operators and consumers, has been subject to discussion between the European Parliament, the Council and the Commission since 13 November 2007. Negotiations on the final contents of the reform package will commence before Christmas 2008.
Amendments to the Privacy in Electronic Communications Act Get Green Light from the Parliament's Constitutional Law and Transport and Communications Committees
The Parliament's Constitutional Law Committee and the Transport and Communications Committees have issued their statements on the proposed amendment of the Act on the Protection of Privacy in Electronic Communications (517/2004, as amended). Both committees concluded in favor of the adoption of the proposed amendments, although both in slightly revised form.
The Constitutional Law Committee concluded in its statement that was published on 13 November 2008 that the proposed amendments may be passed through the normal legislative process with some minor changes. The Transport and Communications Committee that issued its statement on 12 December 2008 took a positive, yet critical, stance on the amendments, emphasizing that the enhanced possibilities that the amendments would provide to employers to monitor email communications shall remain a last resort. According to the proposed amendments, employers would be allowed, in certain restrictive circumstances, to process the log data of employees' emails in order to investigate possible disclosure of trade secrets or misuse of communications or service networks. The amendments would not allow employers to look into the actual content of employees' messages, however. The amendments would bring the content of the Finnish law in this respect closer to the law in other European member states.
According to Minister of Communications Suvi Lindén, the legislative proposal combines old legal, new technical and global commercial demands. The Parliament is expected to vote on the adoption of the amendments in February 2009.
Finnish Council of State Does Not Support Extension of Term for Performing Artists' Copyright Protection
The European Commission plans to extend the term of copyright protection for performing artists from 50 to 95 years. The Finnish Council of State has submitted a letter to the Parliament manifesting the stance taken by Finland. According to letter, the Commission's proposal is technically too complex and insufficiently reasoned. A shorter extension of protection is considered possible, should Commission propose such at a later stage.
The debate around the topic has become heated and different EU Member States have taken varying views thereupon. The matter has also induced discussion within Finland leading to, inter alia, a petition by hundreds of artists having been published in a daily newspaper quite recently with the aim of convincing the Finnish Government to accept the Commission Proposal. In contrast, a group of international professors has opposed the proposal and pleaded to Member States to not accept the proposed extension. The proposal is claimed to benefit recording artists and companies, without additional costs to consumers and users of such recordings. The critics have pointed out that the proposed extension is not likely to achieve any of its alleged benefits and would in fact only be beneficial to record companies and the heirs of very few well-known artists.
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