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WIPO/IP/JU/RYD/04/13
ORIGINAL: English
DATE: October 2004
KINGDOM OF SAUDI ARABIA
WORLD INTELLECTUAL
PROPERTY ORGANIZATION
WIPO NATIONAL WORKSHOP FOR JUDGES
organized by
the World Intellectual Property Organization (WIPO)
in cooperation with
the Government of the Kingdom of Saudi Arabia
Riyadh, December 13 to 15, 2004
SELECTED COURT CASES IN THE FIELD OF INDUSTRIAL PROPERTY
prepared by Mr. Nuno Pires de Carvalho, Deputy Director and Head,
Economic Development Sector, Industrial Property Law Section, WIPO
Two Cases in the Field of Industrial Property
The first case: a fair decision
The YKK trademark case in Brazil
(TA CrimSP - HC 114.846-SP - 5a Câm. J. on 29.06.1982 - Rel. Adauto Suannes)
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Two Cases in the Field of Industrial Property
YKK Corporation, a Japanese company specialized
in manufacturing fastening products.
The accronym YKK comes from Yoshida Kogyo
Kabushiki Kaisha. The Trademark YKK was first
registered in Japan in 1946. In 1982 it was
registered in 116 countries worlwide.
In Brazil, YKK opened its first plant in 1975, but
exports of zippers to Brazil and other South
American countries started in 1936.
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Two Cases in the Field of Industrial Property
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Two Cases in the Field of Industrial Property
The facts:
(i)
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– on December 29, 1967, the company Yoshida Kogyo
Kabushiki Kaisha applied for the registration of its
trademark YKK for designating zippers
(under the Brazilian national classification of goods and
services for the purposes of trademark registration,
zippers and other accessories corresponded to class 26)
[As of 2001, Brazil adopted the Nice Classification]
Two Cases in the Field of Industrial Property
(N.B. the purpose of trademark classification is to facilitate the
examination of registrability only; that is, the classification
may not be used as a relevant factor for solving conflicts
between trademarks; actually, there may be conflicting
trademarks even where registered for similar goods or
services in different classes; besides, trademarks may coexist even when they are registered for different goods or
services in the same class; the only relevant point for
comparing trademarks is the possibility of creating
confusion to consumers)
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Two Cases in the Field of Industrial Property
(ii) – Due to a mistaken translation, the term “slide
fasteners” was translated by the Brazilian
trademark attorney as “slides fotográficos”
(“photo slides”) and registered by the Trademark
Office on November 19, 1974 under class 8,
instead of class 26.
(iii) – Having noticed the mistake, the company
requested the Brazilian Trademark Office to
correct it.
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Two Cases in the Field of Industrial Property
(iv) – However, in 1969, a Brazilian firm (Metalúrgica
Brasileira Ultra S/A), which manufactured
fasteners as well (thus competing with YKK),
somehow informed of the administrative mistake
of the Japanese company, applied for the
registration of the accronym YKK under the
correct class, and obtained it on May 16, 1969.
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Two Cases in the Field of Industrial Property
(v) – The Brazilian firm put the Japanese company under
notice in 1977, and requested it to cease the use of the
trademark YKK.
(vi) – Because the Japanese firm did not comply with the
notice, the Brazilian company sued the three
representatives of YKK in Brazil (Messrs. Iwao Kamiichi,
Yukata Ikegami and Norio Miyaguchi) in a criminal court,
alleging violation of paragraphs I, II and IV(a) of Article 175
of the Brazilian Criminal Code (the remedies for voluntary
counterfeit consist of fines and emprisonment, up to five
years).
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Two Cases in the Field of Industrial Property
(vii) – YKK’s lawyer filed a request in the Court of
Criminal Appeals of São Paulo for an habeas
corpus (a measure that seeks to obtain the
immediate release of an emprisoned person or
the ceasing of any harassment by criminal
prosecution, based on a clear violation or abuse
of the law). The lawyer alleged that the lawsuit
should be dismissed because it was groundless,
for the true owner of the trademark was the
defendant, not the plaintiff.
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Two Cases in the Field of Industrial Property
(viii) – The prosecutor was of the opinion that the
lawsuit should not be dismissed because it was
based on a civil property right: under civil law, the
plaintiff was the actual owner of the registered
trademark. In his view, the defendants should
first invalidate the plaintiff’s registration before
being allowed to use such a defense.
(The problem is that argument is that the defendants were under the risk of
spending sometime in jail until they were able to amend the wrongful
registration of the trademark — amendment which could take several
months, if not years).
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Two Cases in the Field of Industrial Property
– The Court opinion (issued on June 29, 1982)
a) The Court agreed with the defendants and
dismissed the criminal action.
b) The Court said that this case involved two
fundamental principles of Law:
the Law does not exist to reward malice
mistakes do not give rise to rights
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Two Cases in the Field of Industrial Property
The Court’s opinion (cont.)
c) the Brazilian company had the sole intent
of benefitting from the worldwide prestige of
YKK, which it could not ignore, because it also
manufactured zippers; besides the accronym
YKK has two letters that do not exist in the
Portuguese alphabet
d) therefore, its registration was immoral.
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Two Cases in the Field of Industrial Property
The Court opinion (cont.)
e) However, to the surprise of honest people, the
defendants in this case were not those who inscrupulously,
and benefitting from an administrative mistake, tried to
obtain an advantage from a long-established and wellknown trademark, but the legitimate representatives of YKK
in Brazil.
f) The defendants committed no crime. The criminals
are the plaintiffs, who are cheating consumers “with the
customary approval of our impotent authorities,” by using a
name that have done nothing to build so as to be able to
use.
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Two Cases in the Field of Industrial Property
The Court opinion (cont.)
g) “That the plaintiff would not respect his
competitor, we can understand. That he would
not respect consumers, it is reprehensible. But
that he does not respect the Judicial authorities,
and attempts to use them as an instrument of
piracy, is simply appalling.”
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Two Cases in the Field of Industrial Property
The second case: an equitable
decision
The Georgia-Pacific case (United States)
Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Suppl. 1116 (S.D.N.Y. 1970)
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Two Cases in the Field of Industrial Property
Donald Deskey, considered the founder of modern
industrial design, in 1940 invented striated
plywood. He filed for a patent and assigned the
application to United States Plywood Corp. (USP).
USP obtained the patent in 1942. Straited
plywood was commercialized under the brand
WELDTEX, registered by USP. USP
commercialized Weldtex since 1946.
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Glorious walls of
wood...
Pattern is “cut in”
Does not paint out
Impervious to water
Safe outdoors
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Two Cases in the Field of Industrial Property
Weldtex was enormously successful, due to two factors:
a) its technical features (it would not check, grain, swell,
crack or separate)
b) its decorative aspect
During the patent term, USP enjoyed a virtual monopoly
even though there were some competing (but not as
much commercially successful) products
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Two Cases in the Field of Industrial Property
The Court of Appeals of the 2nd Circuit held that between
February 1955 and 1958, Georgia-Pacific (GP)
infringed USP’s patent Claim 1.
The infringement was deliberate. GP believed it could
challenge the validity of the patent if sued.
The case was remanded to the Court of the Southern
District of New York for determining the amount of
damages (1970).
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Two Cases in the Field of Industrial Property
“35 USC 284. Damages.
Upon finding for the claimant the court shall award the
claimant damages adequate to compensate for the
infringement, but in no event less than a reasonable
royalty for the use made of the invention by the
infringer, together with interest and costs as fixed by the
court. [...].”
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Two Cases in the Field of Industrial Property
According to the statute, the first criterion (“Damages
adequate to compensate”) is the lost profits of the
patent owner.
If the claimant is unable to prove those profits, the Court
must determine the reasonable royalty.
In the case at bar, because Weldtex was so successful,
USP’s sales were not diminished by GP’s competition
(even though GP sold infringed Weldtex at the same
prices!), and therefore it did not lose profits.
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Two Cases in the Field of Industrial Property
Therefore, and because USP was not able to prove lost
profits, the Court scrutinized the amount of reasonable
royalties.
GP stated that a reasonable royalty would amount to
between $1 ½ to 3 per 1,000 sq. f.
USP submitted that a minimum reasonable royalty should
be the rate of $50 per 1,000 sq. f.
GP’s sales of Weldtex totalled 15,899,000 square feet and
amounted to sales proceeds of $2,547,393.
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Two Cases in the Field of Industrial Property
Because there was no evidence of lost profits, the Court
identified the reasonable royalty rate taking into account
six factors.
The essential inquiry is what the parties would have
agreed upon if both were reasonably trying to reach an
agreement. The Court said that it “must take into
account the realities of the bargaining table and subject
the (mosaic of) proofs to a dissective scrutiny.”
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Two Cases in the Field of Industrial Property
1st factor: USP’s policy to maintain and its actual
maintenance of a valuable monopoly.
(The Court found that “Weldtex was relatively insulated
from competition” and that any negotiation on licensing
“would be strongly influenced by the then dominant
market position of Weldtex;” moreover USP could have
produced and sold additional quantities of Weldtex,
which means that negotiations would not be affected by
the eventual lack of USP’s capacity to manufacture and
sell, which could have reduced the royalty rate)
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Two Cases in the Field of Industrial Property
2nd factor: the profitability of Weldtex
(The Court found that at the time of the infringement, the
average rate of USP’s profit (calculated on an
absorption cost basis) was approximately $48 per 1,000
sq. ft.; the yearly USP’s average sales of Weldtex
amounted to approximately $6,000,000)
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Two Cases in the Field of Industrial Property
3rd factor: the increased potential profitability via
operations of other plants (additional production)
(The Court found that this factor was rather speculative
and not sufficiently reliable and persuasive)
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Two Cases in the Field of Industrial Property
4th factor: USP’s profits via collateral or convoyed sales
(The Court found that this factor would have tended to
increase significantly the amount of the royalty; but
USP was not able to prove the loss of collateral or
convoyed sales and thus the factor was not sufficiently
reliable and persuasive)
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Two Cases in the Field of Industrial Property
5th factor: substantial profits GP would reasonably have
expected to earn on its production and sale of the
infringed product
(The Court found that the infringer could indeed expect to
have at the least the same profit as the patent owner, or
even higher, because GP would produce Weldtex at its
own mills.)
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Two Cases in the Field of Industrial Property
6th factor: profits that GP would reasonably have expected
to earn on collateral or convoyed sales
(The Court found that at the time of the infringement GP
could indeed expect to derive substantial profits from
collateral or convoyed sales but there was no evidence
permitting an inference as to the quantum.)
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Two Cases in the Field of Industrial Property
7th factor: the amount of the reasonable royalty
a) Was Weldtex success due to factors other than the patent (such as
unpatented parts)
Answer: no; the invention was a an entirety, an entity in itself
b) Was Weldtex success due to its decorative appearance?
Answer: the decorative effect was a consequence of the invention’s
functionality; it was not an independent element
c) Absence of a prevailing royalty in generally comparable
circumstances
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In the absence of such a factor, the Court relied on testimony of
experts
Two Cases in the Field of Industrial Property
Conclusion: the Court concluded that $50 per 1,000 sq. f.
of the patented product made and sold by GP
represented a fair reasonable royalty, in a total of
$800,000 (15,899 x $50 = $794,950), i.e. more than the
average profit of USP and exactly the same amount
asked by USP.
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Two Cases in the Field of Industrial Property
Thank you!
If you have any questions as regards this presentation, please do
not hesitate to contact
nuno.carvalho@wipo.int
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