The Philosophical Premises Behind Property Rights - Case Study Example

LLM The Of Liverpool School Of Law TRADE MARKES 2007-2008 Assessed work Nabil Sheikh This scenario discusses whether the following trademark owned by Georgio currently registered as a Class 15 trademark for the past decade can be protected from infringement and advertised in a particular way.The essay begins with an understanding of the philosophical premises behind Property rights are necessary in the understanding of the tug of war between the owners and the users of intangible information. Then there is a discussion of the applicable law and the applicability of the recent Yahoo and Arsenal Cases.Possible defences for Donald and Bernard pertaining to their potential liability under the Trade Marks Act 194 and the tort of Passing off are accordingly discussed followed by an in-depth discussion of the rationale and scope of Georgio being able to protect his economic rights in the virtual world i.e. Second life. Introduction This scenario discusses whether the following trademark owned by Georgio currently registered as a Class 15 trademark for the past decade can be protected from infringement and potentially "passing off" by Donald and Bernard and /or Trade Mark Infringement under section 10 of the Trade Marks Act 1994. It is stated in the question that Georgio has traded under this trademark as world renowned producer of the finest musical instruments in the world and is currently a favourite brand with the high and mighty of tinsel town and it is also stated that his trademark is used to convey luxury. Therefore the question has been divided into two scenarios: A&B. Scenario A I have been asked to advise Georgio as to the likelihood of the actions of Barnard being construed under the law as trademark infringement as he has launched an advertising campaign on billboards aiming to sell expensive chocolate by depicting a 'Georgio' piano dripping with liquid chocolate and in which the logo is clearly visible.The Question would also like me to consider the legalities of such a scenario in the virtual world like second life. Scenario B In this part of the question I have been asked to advise in the event of another business person ,Donald is marketing cheap jewellery under the mark and also mention the implications of such an infringement happening in the Virtual world. The theoretical premise of Property rights and trademarks An understanding of the philosophical premises behind Property rights are necessary in the understanding of the tug of war between the owners and the users of intangible information.1 Legal Commentators have often expressed their doubts as to whether these rights are actually rights or privileges as Machlup and Penrose have noted:2 " ... those who started to use the word property in connection with inventions had a very definite purpose in mind they wanted to substitute a word with a respectable connotation, 'property', for a word that had an unpleasant ring, 'privilege'." Intellectual property as a "property" thus is an intangible category of property with boundaries that are not always clear cut and which must be actively defended by the holder against infringements. 3 Tangible property is however visible and documented, and the boundaries are more easily given than for intellectual property.4The law has developed to protect a person who holds certain intellectual property will be able to defend this property only if he/she is granted a particular right over this property. For example in relation to patents the rights are defined by the patent authorities based on what is defined in the patent claims.Like other property (tangible) one has to pay certain fees in order to have their "intellectual" property claim examined and determined and also of continuance fees paid.5 The concept of property rights thus stems from the ideas of John Locke.6Furthermore the notions of property rights developed in the 18th century as one of the core civil rights parallel to-and mutually reinforcing-the right to liberty.7However, most philosophers have put forward the notion that property is not a natural right but rather a deliberate construction by society in order to secure protection against pressure from the collective.8 Subscribing to the view that property is justified as a foundation for liberty and personal security which provides incentives for long-term investments.Also that if these rights are not balanced or protected they will affect economic growth and poverty reduction.as unpredictable property relationships always impeded impede economic growth.9 Trademarks Trademarks are defined as signs or symbols allowing the customers to distinguish a product from a company's competitors and has led to a plethora of interesting case law in interesting situations before the courts. The Law at present provides that to be a recognised trademark the sign has to be distinctive, lawful and not violating moral codes .Thus once an owner or company has registered its trademark this debars others from using registered trade marks, permits the applicant to take legal action against trademark violators and Trading Standards Officers or Police to bring criminal charges against counterfeiters. The process of registration confers legal validity and recognition on the product and criminal action could be bought against any offender who has done trademark infringement.10 The Applicable law Currently the law in the UK offering Trade mark protection is regulated under the rights acquired by a) If the Claimant has registered under the UK Trade Marks Act 1994 (much of which stems from the European Trade Marks Directive) and the European legislation providing for Community Trade Marks ("CTMs").Georgio has done this already as mentioned above. b) Use of the mark under the offence of passing off (a type of unfair competition). 11 It is worth pointing out that before the passing of the recent Trade Marks Act in 1994, there was no particular protection for a claimant under the law of trademarks. Scenario A-Bernard The applicable law to both the scenario's above originates therefore from the UK common and domestic statute.There is a potential liability under the tort of "Passing off" for Bernard and under the Trademarks Act 1994, Section 9 therefore Giorgio would have an exclusive right under the Act as the registered proprietor to use the registered mark. Thus Georgio would have a Case against anyone who would use the mark without his consent and this should include Barnard and Donald both. Section 10 describes the circumstances where there will be infringement, namely use of an identical mark in relation to identical goods or services (Section 10(1))(This can be seen here but Donald is marking cheap Jewellery not musical instruments so this section cannot apply here. Same goes for Bernard as he is marketing chocolate not musical instruments) use of the same or a same or similar mark in relation to the same or similar goods or services where there is a likelihood of confusion (Section 10(2)) (It is hardly possible to see the likelihood of confusion between Musical instruments and Cheap Jewellery, or Musical Instruments or Chocolate as in Bernard's Case) The applicable section here will be 10(3) where the use of the same or a similar mark in relation to the same, similar or dissimilar goods where the mark has a reputation and the defendant's use is "without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark" (Section 10(3)).This section should apply here as even though the goods in dispute are similar but Georgio has a certain reputation under this Act.However this has been the subject of recent debate by the European Court of Justice ("ECJ").12 In Bernard's Case we are looking at expensive chocolate being sold. The question here that would arise under the Arsenal Case13 would be whether Bernard is trying to exploit the "Guarantee Function" of the trademark Guarantee is not used in the sense as it is found in the sales of law context but rather indicates that the trademark operates to reassure the customer about the quality of the goods. Furthermore the guarantee function of the "Georgio" trademark in this sense can interpreted to say that it extends to passing off as he is trying to sell something classy and expensive in that way by using that trademark on the Piano which is infact a musical instrument. Could it be that he is trying to suggest a clever psychological affiliation or more seriously a business affiliation with Georgio to "Pass off" The same view was taken in the cases of Spalding v Gamage 14and in United Biscuits (UK)Ltd v. Asda Stores Ltd 15where Robert J Walker Held that the adoption of the claimants famous PENGUIN biscuits would lead shoppers to think that these Biscuits although cheaper had been made for Asda by the claimants and the same quality would be expected.There is indeed a case against Bernard under the tort of Passing off then.It can be seen how the role of the trademark in guaranteeing quality is referred to in the ruling in the Arsenal case abive.The guarantee of quality is said by the ECJ to be an aspect of the trade marks in enabling customers to choose between competing brands. The recognition of the guarantee function raises the query whether this may be seen as an aspect of consumer protection aswell.But here what we are we are concerned both in the case of Donald and Bernard is that whether their infringements come with in the ambit of the Advertising function ,that is should the selling power of this "Georgio" brand should be protected against free riding by who wish to take advantage of its situation. Apart from this can form a statutory basis of action since recent statute law shows that taking advantage of two optional provisions in the Trademarks Directive the United Kingdom ,two sections were enacted i.e 5(3) and 10(3) of the Act where as these two subsections confer protection on trademarks which have a reputation enabling their owners to oppose the registration of the any object to the use of identical or similar marks which seek to take unfair advantage of or try to cause detriment to the position of the earlier mark. Transatlantic authors have argued that this might be the case of Dilution (an American legal term) which would indicate that a trade mark can be diluted if it is watered down by use on non-competing goods which have an unsavoury or unwholesome connotation. The Best example of tarnishing can be found in the Benelux case of Claeryn/klarein16(where the owner of Clareryn Dutch gin was able to prevent Colgate using Klarein for a toilet cleaning liquid.Both marks had an identical pronunciation in the Dutch language and it was held to be infringement as the court held that the consumers would not wish to be reminded of a cleaning agent while drinking a glass of high quality gin. It is clear that Bernard should be liable under the classical tort 17of passing of as well since the law related to passing off envisages "classical" passing off to include dissimilar goods and it does not matter if the trademark is descriptive of the product as long as it has acquired a secondary meaning that is it has become factually distinctive of the claimant's products (Reddaway v Banham 18.The potential ambit of this liability has been extended to as noted in Scenario B as well,the situation where the claimant of a strong Trade Mark like Georgio will be able to obtain protection against use on dissimilar goods like Chocolates .This has been stated to be then a kind of "Dilution" and based on the cases of Eastman Photographic Materials Co v John Griffiths Cycle Co19 (where the use of KODAK already well known for camera's was enjoined in respect of bicycles) and Lego System AB v Lego M Lemelstrich20 ( (where the owner of the lego for toys was able to prevent its use on plastic irrigation equipment). Scenario B-Donald Under the law of passing off it is possible that Georgio will have a case against Donald and Bernard then based on the proposition that no man has the right to state falsely that his goods are the goods of someone else. Such false statements can be made in any number of differing ways.In this case Georgio will have to prove the trinity rule21 against them both , and in this case Donald for marketing cheap jewellery.It is worth mentioning here that Donald cannot argue that he was not infringing or passing off as there is "no confusion" being created here.Conventionally the UK domestic courts were initially unreceptive to the nature of the protection found in sections 5(3) and 10(3) as mentioned in Scenario A.For example in the case in of Baywatch Production Company Limited v The Home Video Channel22 it was held that the proof of likelihood of confusion was required.But the ECJ case law clarified this position where as in the case of Case C-251/95 Sabel BV v Puma AG23 there is no need to prove that there was a confusion with in the trademarks but the aim is much rather to protect the reputation of trademarks banking on their high quality reputation like "Georgio"This view has been affirmed in the case of Case C-375/97 General Motors Corporation v Yplon SA24.The view of the ECJ has been since then to broaden the scope of protection accorded to marks with a reputation by holding that the two similar provisions are not confined to the use of the Identical or similar mark on dissimilar goods.(But apply equally to the use of competing marks on similar goods aswell (Case C 292/00 Davidoff & Cie SA and Zino Davidoff v Gofkid Ltd (2003).) Finally there is a strong chance of Donald being liable under the Trade Marks Act 10(3) and alternatively under 10(2) as in according protection to the trademarks with a reputation the Trade Marks Directive and the Trade Marks Act 1994 have gone far beyond preventing consumer confusion .Instead Georgio's investment in his trademark will be treated like his major financial investment which should be protected against the likes of Donald and Bernard who would like to or seem to like to misappropriate its selling power. Possible Defences for Donald and Bernard Under this framework it is worth assessing at the outset whether Donald or Bernard will be able to apply for a defence under Section 11 to limit to an extent the exclusivity of Georgio's rights. Donald has a possible defence like he was using his s own name and/or is using the mark to indicate the nature of the goods or to indicate that the goods are an accessory to the trade mark owner's goods .(like for eg-My Shirts are bought by the Queen").Donald will indeed have to prove Just and Fair use to escape liability under Section 10 and it should also be noted that the more a trademark causes confusion25 the less likely it is to be used in an honest and fair way to support the defence as such.26 The issue of Second Life or virtual infringement Trademark infringement in the Cyberworld has become a serious issue in the recent years.While the internet provides suitable redressal to domain name disputes this is not the case for all the Virtual Trademark disputes.For domain names there is available the policy of resolution system of ICANN27, responsible for the management of the generic top-level domain names (e.g., .biz, .com, .info, .name, .net, .org), has instituted the Policy for the resolution of disputes between trademark owners and domain name holders over disputes concerning a trademark registered as a domain name.28 Considering the lack of this procedure it is worth pointing out that the more that the virtual world like Second Life with their virtual stores are creating serious trademark violations and there seems to be a new dimension to counterfeit products.Currently over a million people and businesses are showing their online virtual existence in the Second Life and have their own news channel and according to Adamczyk( 2006) "Companies such as Reebok, American Apparel, Warner Music, Adidas, Toyota, Nissan, and IBM have also set up virtual stores in Second Life. The Second Life economy runs on Linden dollars, convertible to U.S. dollars, and, according to one estimate, has an annual GDP of 64 million USD." I will now discuss whether the alleged infringers of the trademark should be liable for their actions in the virtual world whereas Bernard has launched an advertising campaign on billboards aiming to sell expensive chocolate by depicting a 'Georgio' piano dripping with liquid chocolate and in which the logo is clearly visible and Donald is marketing cheap Jewellery in the cyber world.In this regard it is worth looking at the case of Victor Andrew Wilson V (1) Yahoo! Uk Ltd And (2) Overture Services Ltd29 where it was held that Yahoo! did not infringe a businessman's rights by displaying adverts for other companies when users entered his trade marks as search terms. and the case was dismissed as "totally without merit."Therefore Georgio will not be able to sue Secondlife or any search engine which Bernard or Donald use while using the infringing trademark.In this case Yahoo! UK and its sister company, Overture, were sued by Victor Wilson, who was the owner who had a London-based catering business for some food and hospitality-related goods and services.When he discovered that typing 'Mr Spicy' into Yahoo!'s UK search engine triggered sponsored links for Sainsbury's supermarket and price comparison site PriceGrabber.co.uk. He said this infringed his trade mark rights. According to Lord Justice Morgan in this case "The trade mark in this case is not used by anyone other than the browser who enters the phrase 'Mr Spicy' as a search query in the defendants' search engine. In particular, the trade mark is not used by the defendants. The response of the defendants to the use of the trade mark by the browser is not use of the trade mark by the defendants and that is enough to decide the case in the defendants' favour. But the matter does not stop there. If, by some process of reasoning, one were to hold that the search engine's response to the words used by the browser was, itself, use by the defendants, in my judgment, it is not use of the mark 'Mr Spicy'. What, instead, is being used is the English word 'spicy' as it appears in that phrase." In the other case of Arsenal Football Club plc v. Matthew Reed,30 which was also referred in the case above by Mr Justice Morgan,and this case has discussed the meaning of 'trade mark use' at length.The Facts were that the Arsenal Football Club sued a street vendor called Matthew Reed, over Reed's sales of unofficial Arsenal-branded merchandise.The court in this case stated that, "The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark having regard to its functions." If we reconcile the Yahoo and Arsenal case then it seems that there is little chance of suing Donald or Bernard in the cyber space.In this vein the preceding sections explore the rationales and other possibilities for virtual liability of these actors. Would trade mark law apply in virtual worlds It is worth noting the actors who can possibly be affected by a virtual trademark infringement actions or law suits and these would include designers of the world, or platform owners,players/subscribers, third parties and the state.How do we then determine the trademark of "Georgio" as capable of online infringement .This will involve three considerations .Firstly where a sign falls short of statutory definition of trade mark; where marks are non-distinctive, descriptive or generic; and where they are contrary to the public policy or principles of good faith.31 It has also been stated that the last two categories should not be different for for virtual trade marks compared to their real-world counterparts as whether or not a trade mark is non-distinctive,32 or in bad faith, does not really depend on the location of business, as long as we agree that all the worlds should be a proper scale to measure trade mark issues against.33Over all this view has been strongly endorsed that virtual trademarks are as registrable as their real-world counterparts and therefore Georgio will be able to register his "Piano Advertisement.34For example if we take the example of the Second Life's Aimee Weber (Alyssa LaRoche) who acquired the the first avatar registered as a trade mark.35It can be seen that the virtual worlds like Second Life have embarked upon a rather " unchartered territory"36 and recent case law shows that Virtual Giants like Google and YouTube, Second Life have been shielded from liability for copyright infringemen under the notice and take down policy of the Digital Millennium Copyright Act (DMCA). Third party /ISP liability of Second life Under the current law if engines like Second Life enact the necessary policies for "notice-and-takedown, banning repeat infringers, and registering a copyright agent, they may be from the trademark copyright infringement of their users.In the European Union under Article 14 of the E-commerce Directive, where an ISP stores ('hosts') information on its server at the request of the customer, e.g. storing the user's website or comments in a newsgroup, the ISP is not liable for illegal material stored on its servers if two conditions are fulfilled: a)the service provider did not actually know that the material was illegal37 or was not aware of facts or circumstances which would make it apparent that the material was illegal38 and b).once the service provider becomes aware of illegal material it acts expeditiously to remove or disable such material from its server. Under the UK's version of the adopted E-commerce directive then there has to be a "take down on notice" approach39. This approach has been criticised as it will allow these virtual giants to enjoy the benefit of doubt as the law does not make clear what exactly constitutes the requisite actual knowledge or awareness of facts and circumstances from which the illegality is apparent.40 The second criticism is that ISPs will be forced to take down material as soon as they receive notice, regardless of whether the material is in fact unlawful as they will not be prepared to take the risk of liability. This can have serious implications for the person making the material available (the customer), restricting his freedom of speech and/or causing serious harm to his business. This approach has its similar counterpart in the US Digital Millenium Copyright Act (DMCA)41 .However the problem with the DMCA is that it does not like the Ecommerce directive apply to trademark violations and while most service providers merely host trademark infringing material that would not be considered "in commerce" but the sale of " knockoff goods in Second Life" can be held under the US version of the notice and take down law to be constituting business commerce which is precisely what Donald and Bernard might be doing (in a commercial sense right now). Enforcement of the possible infringement Generally trademark infringement under section 10 is an issue to be dealt with by the civil courts but there are criminal law options available for the counterfeiters and the Trade Marks Act(1994) itself contains criminal provisions which enable the law enforcement authorities to take action in the public interest. Also the application of the Trade Descriptions Act can be used to launch an action against certain categories of trademark infringement (eg counterfeiting) as the offence of deceiving the public and will constitute offences under both the Trade Marks Act and the Trade Descriptions Act. Towards some conclusions of the virtual liability of Donald and Bernard This question has mainly pertained to the liability and legalities under the trade mark law and virtual worlds, and a perusal of the case law has shown that the applicability of trade mark law may easily be established here under the current law.At the beginning of the essay I have discussed the theory of "property-like" theories upon which IP law is based and how this allows for some of the activities to be easily brought with in the ambit of the virtual world.Whether or not this situation is desirable can be seen as " challenge of balancing competing interests" in the context of Intellectual property Law. It is worth noting at the outset that things get complicated when the problem of IP infringement crosses borders and it is at this point that the international legal framework comes into play.So when there is a mention of IP law there is a discussion of the international and EU based legal frame work as well as the local laws of England.It is worth evaluating shortly the merits of allowing the trademark theory to take into account the special features of virtual worlds in this respect. It can be seen from the controversy created by SIM's online in the yesteryears where MC Donald protested against its food stands in the virtual world. We can adopt the "economic interests"42 argument here which will mean that if Georgio is not able to stop the use of the "Giorgio" mark in the virtual world he being the owner of branded merchandise would have his economic interests damaged.But if we start taking this too seriously it would reveal that it would become ridiculous if a game player selling "Pepsi" tissues in one virtual world moves to another only to find that he is a trademark infringer.Furthermore there is not much to be achieved by preventing the sale of cheap jewellery in the virtual world which may just be for fun or a meagre commercial purpose.In this vein it can be said that both players and platform-owners have the freedom to use branded merchandise and there has to be a good reason to prevent this activity.I as a fan of Manchester United might find that their shirt is too expensive for me in the real world.43So everytime I try to wear their shirt or sell its online version in the virtual world should I be sued by the football associate for doing thatThis was one of the themes the Yahoo and Arsenal Cases were trying to explain above. Take the other side of the story.What if Georgio has an online virtual world presenceNow this is a new presumption which needs to be discussed.What if he opened a business within Second Life.This would strengthen his right then to be able to protect his trademark Georgio and the economic justification for this would be simple.His virtual instruments would be bought on the basis of his virtual design and repute . Thus Georgio will be able to argue that Donald should be stopped from using his trademark to market cheap jewellery and this shows that to bring an action or to take advantage of online advertising Georgio must fulfil the requirement of presence to justify his merchandising rights.44 Last but not the least if we look Lawrence Lessig's famous thesis that "code is law"; he envisaged the regulation of cyberspace where everything could be regulated by code, more efficiently and cost-effectively but then he also criticised it as the "law of the horse". It has yet to be seen how the courts will respond to the ongoing spate of virtual worlds legistlation.Although there is no doubt that in the future the likes of Georgio will be chasing alleged infringers in the virtual world but it will become a question of how this happens under legal and litigatory experiments and this is particularly true for the Arsenal and Yahoo situations where there is the issue of the sale of branded merchandise by those not authorised to do so. .So on a concluding note the courts and the parliament have been involved in balancing the economic rights of the owners of "intellectual" property as well as the public interest of fair access and us to retain the incentives for the creation of useful industrial and cultural products at the same time not allowing "corporate vampirism" to take over fair use especially in the field of trademark use and fair enjoyment. Final conclusion This essay has discussed the liability of Donald and Bernard in the physical world under the various subsections of Section 10 Trade Marks Act 1994 whereas it has been stated that they can be possibly made liable as they are trying to use the reputation of the trademarks, and they cannot argue that they are marketing dissimilar goods or that there is not prima facie confusion as the recent case law has rejected both these defences.The liability of Donald and Bernard alternatively under the tort of passing off along with the relevant case law has been discussed accordingly to conclude a strong chance of their liability under this Act aswell.Furthermore the second section of the Essay as been devoted to whether or not there would be virtual liability of these infringers under the Yahoo and Arsenal cases and whether or not academic opinion and commonsense would endorse such a view of virtual liability in the light of recent academic views of various scholars. _____________________________________________________________ References 1. http://secondlife.com/ http://pub.bna.com/eclr/00cv549.htm 2. Sarah Adamczyk, Samuelson Law, Technology and Public Policy Clinic, UC Berkeley, October 27, 2006 3. Intellectual Property-Rights or Privileges Hans Morten Haugen,Intellectual Property-Rights or Privileges The Journal of World Intellectual Property 10:1, 53-69 .The Journal of World Intellectual Property, Volume 8, Issue 4, Page 445-458, Jul 2005, doi: 10.1111/j.1747-1796.2005.tb00262.x 4. F. Machlup and E. Penrose, The Patent Controversy cf the Nineteenth Century, Journal of Economic History, Vol. 10, 1950, p. 2 5. D. Campbell and P. Thomas (eds.), Fundamental Legal Conceptions QS Applied injudicial Reasoning by Wesley Newcomb Hohfld, Ashgate, Aldershot, U.K., 2001 (original edition: Yale University Press, New Haven, 1919); 6. Intellectual Property-Rights or Privileges Hans Morten Haugen,Intellectual Property-Rights or Privileges The Journal of World Intellectual Property 10:1, 53-69 .The Journal of World Intellectual Property, Volume 8, Issue 4, Page 445-458, Jul 2005, doi: 10.1111/j.1747-1796.2005.tb00262.x 7. Neal Feigenson, "Too Real The Future of Virtual Reality Evidence" (2006) 28 Law & Policy 271. 8. Castronova, Synthetic Worlds: the Business and Culture of Online Games (2005). 9. . Edward Castronova, Virtual Worlds: a First-hand Account of Market and Society on the Cyberian Frontier (December 2001). CESifo Working Paper Series No.618, available at SSRN: http://ssrn.com/abstract=294828 [Accessed January 5, 2008] 10. Gregory Lastowka and DanHunter, "Virtual Crime", New York Law School Law Review, forthcoming. Available at SSRN: http://ssrn.com/abstract=564801 [Accessed January 5, 2008]. 11. 9. Jack M. 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