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14 March 2011
On January 27 2011 the European Court of Justice (ECJ) filed its decision in Flos SpA v Semeraro Casa e Famiglia SpA,(1) a reference for a preliminary ruling on the interpretation of the EU Design Directive (71/98/EC) with regard to the interim regime of design works formerly adopted in Italy.
The ECJ shared the opinion already expressed by the advocate general that the former Italian interim rules on copyright protection for industrial designs were inconsistent with the directive. However, the new Article 239 of the Code of Industrial Property, adopted in August 2010, is fully consistent with the ECJ's view. Therefore, it appears that the controversy surrounding this issue is finally over.
Interim rules on copyright protection for industrial designs
Italy's interim regime has changed four times since it was introduced by Legislative Decree 95/2001. In 2001, a few days after the rules implementing the directive came into force, the legislature added Article 25(b) to the legislative decree. The addition implicitly included within the right to protection works of industrial design created before the introduction of copyright, excepting - for a period of 10 years and on certain conditions - the rights of any party that had already started producing and selling copies of an original product before such introduction. Furthermore, under the terms of the legislative decree, the duration of copyright protection for such works was only 25 years from the end of the year of the creator's death. This was contrary to EU copyright law, which stipulated that such protection should last for 70 years from the end of the year of the creator's death. (Under Italian law, copyright protection for all other categories of work lasts for 70 years.) These two provisions gave rise to an infraction procedure by the European Commission against Italy.
Under pressure from the commission, the duration of design copyright protection was finally brought into line with the rule for other works by Legislative Decree 10/2007, which was converted into Law 46/2007. However, the new law also affected Article 239 of the code (ie, the interim rule into which Article 25(2) of Legislative Decree 95/2001 had been inserted). The new text, which was introduced in 2007, stated that:
"[t]he protection accorded to industrial designs and models under Article 2(1)(10) of [the Copyright Law] does not apply to products made according to designs or models which, prior to [Legislative Decree 95/2001] coming into force, were in or had entered the public domain."
The Court of Milan referred the question to the ECJ in the context of a case relating to the infringement of a classic lighting design, the Flos Arco lamp. Assoluce, the Italian trade association for the lighting industry, participated in the proceedings with the aim of obtaining a clear and binding ruling from the ECJ which would resolve the uncertainties on this matter in Italian case law and legislation.
In 2009 the relevant provision of the law was replaced by a new rule which expressly allowed protection for works before 2001, but stated that this protection could not be used against imitators that were already active before 2001 (ie, at a time when such works were not protected under Italian law) and which were thus allowed to continue this activity "within the limits of prior use". This provision was also clearly contrary to the directive.
Advocate general's opinion
On June 24 2010 Advocate General Bot delivered his opinion, which concluded:
"Article 17 of [the directive] must be interpreted as prohibiting the adoption of a national law which provides that designs and models entered in the public domain before the entry into force of the national rules implementing the directive do not benefit from the protection granted by copyright law."
The advocate general also asserted that:
"such a goal would not be attained if the member states were given the possibility to decide whether or not to apply copyright protection to the designs or models which had come into the public domain [before 2001]."
In this respect, the advocate general stated that the ECJ's solution in Butterfly Music (Case C-60/98) was the only one capable of guaranteeing the uniform application of the directive within the European Union, and that therefore third parties which legitimately manufactured and sold products based on industrial designs before 2001 may be granted only "a reasonable [transitional] period during which… they can keep selling the products". However, the advocate general specified that the 10-year period provided for under Italian law was "excessive".
In August 2010 the Italian legislature finally grasped the opportunity to remedy the situation directly, replacing the provision which gave rise to the ECJ referral with a provision in full compliance with the directive. A legislative decree to reform the code reworded Article 239 to state that copy products are illicit even if marketed by the same parties that had lawfully manufactured them before April 19 2001, when copyright protection of design creations came into force in Italy.
The new rule was welcomed by Italian design industry associations. However, vigorous objections were voiced by companies that had profited from the previous regime by manufacturing or importing vast quantities of fake products at low prices. These companies argued their right to continue their activities and strongly criticised both the legislature and IP rights owners.
A case is pending before the Italian Antitrust and Advertising Authority, brought by an Italian furniture industry trade association against a small consortium of manufacturers of fake products. The consortium is accused of misleading advertising in connection with newspaper advertisements. Proposals to reinstate the old transitional regime have also been presented in Parliament. As such, the ECJ's decision has long been awaited as a definitive view on the issue.
The ECJ fully upheld the advocate general's conclusion, excluding the possibility of consistency between the directive and the earlier Italian interim rules on copyright protection of designs. It specifically indicated that the regime was inconsistent with the directive in permitting third parties that had started to manufacture and sell products based on industrial designs before 2001 to continue to do so for a period of 10 years until March 2011 (the rule having been introduced in 2001) or even indefinitely. The latter view was the interpretation adopted by manufacturers and importers of counterfeit products on the basis of the rule introduced in 2007, although this position was not supported by prevailing Italian case law.
With regard to the transitional period, the ECJ noted that:
"As regards... the legislative measure providing for a transitional period in relation to a specific category of third parties with a view to protecting their legitimate interests, it follows from the principle that acquired rights must be respected and from the principle of the protection of legitimate expectations that Article 17 of [the directive] does not preclude such a measure, provided that the measure does not have the effect of deferring for a substantial period the application of the new rules on copyright protection for designs so as to prevent them from applying on the date laid down by that directive (see, to that effect, Butterfly Music)."
It went on to state that:
"Unenforceability for a transitional period of 10 years does not appear to be justified by the need to safeguard the economic interests of third parties acting in good faith, since it is apparent that a shorter period would also allow the part of their business that is based on earlier use of those designs to be phased out and, even more so, their stock to be cleared."
Thus, the ECJ held that the activity of such third parties should have been permitted only for a period of less than 10 years, bringing the exemption to an end well before March 2011 (ie, the expiry date of the transitional period that was deemed excessive).
The ECJ also indicated the criteria that the national legislature should follow in order to establish a transitional regime in compliance with EU law:
"In that regard, the assessment of the compatibility of the length of that transitional period and of the category of third parties covered by the legislative measure must be carried out in the light of the principle of proportionality.
Accordingly, the legislative measure adopted by the member state concerned must be appropriate for attaining the objective pursued by the national law and necessary for that purpose – namely, ensuring that a balance is struck between, on the one hand, the acquired rights and legitimate expectations of the third parties concerned and, on the other, the interests of the rights holders. Care must also be taken to make sure that the measure does not go beyond what is needed to ensure that that balance is struck.
For that purpose, the measure may be regarded as appropriate only if it is directed at a category of third parties entitled to rely on the principle of protection of legitimate expectations – that is to say, persons who have already performed acts of exploitation in relation to designs within the public domain at the date of entry into force of the legislation transposing Article 17 of [the directive] into the domestic law of the member state concerned.
Furthermore, the legislative measure should ensure that the period of use of the designs by those third parties is limited to what is necessary for them to phase out the part of their business that is based on earlier use of those designs or to clear their stock."
The new Article 239 of the code, as adopted in August 2010 by Legislative Decree 131/2010, is inspired by the very criteria invoked by the ECJ, since it provides that:
"Third parties which manufactured or marketed, in the 12 months before April 19 2001, products realised in compliance with the industrial design creations already in the public domain, are not liable for the infringement of copyright in such an activity even after that date, in respect of products that they manufactured or purchased before April 19 2001 and those that they manufactured in the following five years, provided that such an activity has been kept within the prior (quantitative) limits."
Although the new rule has not yet been applied by the Italian courts, it clearly means that all copy products manufactured in Italy after April 19 2006 (and those imported after April 19 2001) are pursuable as counterfeit. This position clearly complies with the directive and appears to be fully consistent with the criteria laid down by the ECJ.
Thus, the ECJ decision has finally put the affair to rest, restoring due protection to Italian design.
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