What can exclusive licensees of design rights do?

A substantial number of intellectual property (IP) cases to do with product shape have involved cleaning products. Whether it is Hauck and a three dimensional trade mark for a dishwasher tablet, the prior design for laundry balls in Green Lane, or the shape of an air freshener in Procter & Gamble v Reckitt Benckiser, there is no doubt that the shape of cleaning products is something valuable which there is a particular desire to protect.

In Case C-419/15 Thomas Philipps GmbH & Co KG v Gr__üne Welle Vertriebs GmbH, the Court of Justice was referred a question by the Oberlandesgericht Düsseldorf in relation to RCD 877030-0001, owned by a Swiss entity EMKER SA which was indicated for laundry balls:

 

Exclusive Licensees

Under Article 32(3) of the Design Regulation,

"the holder of an exclusive licence may bring [proceedings for infringement of an RCD] if the right holder in the Community design, having been given notice to do so, does not himself bring infringement proceedings within an appropriate period."

However, according to Article 33(2), which is entitled “Effects vis-à-vis third parties”:

"However, as regards [RCDs], legal acts referred to in Articles 28, 29 and 32 shall only have effect vis-à-vis third parties in all the Member States after entry in the register"

Article 32(4) provides for the recovery of damages caused to a licensee:

"A licensee shall, for the purpose of obtaining compensation suffered by him, be entitled to intervene in an infringement action brought by the right holder in a Community design."

EMKER had granted an exclusive licence of the RCD to Grüne Welle, although that licence had not been noted on the Register held by the European Union Intellectual Property Office (the EUIPO).

Grüne Welle wrote to Thomas Philipps alleging infringement of the RCD in suit and seeking damages for the past infringement. As a result of this letter, Thomas Philipps undertook to cease selling the infringing product, but the question of damages for prior actions was not resolved. Proceedings were therefore started in Grüne Welle’s name to determine the damages due to it.

At first instance, the court held that Thomas Philipps was liable for damages, and that Grüne Welle was able to bring the action in its own name - that is, it was not necessary for EMKER, the RCD owner, to bring the action it its own name. On appeal, the Oberlandesgericht referred two questions to the Court of Justice:

• "Does the first sentence of Article 33(2) of [the Design Regulation] preclude a licensee who has not been entered in the [Register] from bringing claims for the infringement of [an RCD]?"

• "In the event that the first question is answered in the negative: may the exclusive licensee of a Community design, with the consent of the rightholder, bring an action on its own claiming damages for its own loss under Article 32(3) of [the Design Regulation] or can the licensee only intervene in an action brought by the rightholder for an infringement of its Community design under Article 32(4) of [the Design Regulation]?"

Right of an Exclusive Licensee to bring an infringement action

On the one hand, the Court noted that in Article 32(3), read on its own, the right of an exclusive licensee to bring proceedings against an alleged infringer is only limited by the right holder giving its consent, without reference to whether the licence was recorded on the Register or not. The question for the Court of Justice to determine was whether Article 33(2) provided a further restraint on the rights of an exclusive licensee.

The Court responded that Article 33(2) did not add any further restriction on Article 32(3). Even if an exclusive licensee was not recorded on the Register, it still had the right to bring proceedings for infringement. Article 33(2) protects people who have an interest in the design as an object of property, especially when ownership of or interests in that design are transferred. Article 33(2) was not intended to have an effect on third parties who did not have a property interest in the design. Since third party infringers do not have a property interest in the design, Article 33(2) does not apply to them.

The Court of Justice consequently found that Grüne Welle was entitled to bring an infringement action in its own name against Thomas Philipps, since it had the consent of EMKER, and notwithstanding that it was not listed on the Register.

Right to claim damages for injury caused to an Exclusive Licensee

If one were to be a strict textualist - the law means just what it says and no more – it would seem that, according to Article 32(4), damages for injury to a licensee can only be claimed if the licensee intervenes in an action brought by the design holder. This is not how EU laws are interpreted, however; rather, they are to be given a teleological or purposive construction, that is, the context and intention of the legislature is to be consulted.

In this case, the Court of Justice decided that Article 32(4) is not to be read on its own, but rather is to be read in conjunction with Article 32(3). It makes sense that a non-exclusive licensee, which cannot initiate its own proceedings, must wait to intervene in proceedings brought by the right owner if it is to claim damages for injury it has suffered.

For the case of an exclusive licensee, however, requiring the exclusive licensee to wait for the right owner to start an action to recover its damages makes no sense whatsoever. This is because, if this were the case, any action started by an exclusive licensee under Article 32(3) would be limited to the exclusive licensee recovering damages caused to the right owner. Yet these damages are likely to be minimal – the right owner is highly unlikely to be commercialising its design as it has granted another party an exclusive licence to do so! Further, the right owner may not have any financial incentive to bring such an action, as it is no longer their problem, but rather the exclusive licensee’s. The damage will be almost entirely the exclusive licensee’s. For this reason, to read Article 32(4) as requiring an exclusive licensee to wait is to remove one of the main reasons (other than perhaps an injunction) why an exclusive licensee would ever think to bring an action under Article 32(3).

Consequently, the Court of Justice decided that exclusive licensees do not have to wait to intervene in an action brought by the right owner, but can claim for damage it has suffered in an action brought under Article 32(3).

Conclusion

It remains important to register an exclusive licence (and indeed, non-exclusive licences) on the Register. If this is not done rights against third parties acquiring the right, or with some sort of interest in the right, may extinguish or limit a valuable licence.

What this judgment does clear up, however, is some confusion over the extent of an exclusive licensee’s power to bring an action: standing is not determined by what is noted on the Register.