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29 March 2010
A number of key developments in the reform of Italy's IP framework, implemented in the course of 2009, are likely to remain influential - and in some cases controversial - throughout 2010 and beyond.
After a lengthy passage through Parliament, which began in Summer 2008 and involved two readings in the Chamber of Deputies and two in the Senate, a long-awaited package of anti-infringement measures has finally become law. The package was the result of the activity of a working group established by the high commissioner for the fight against infringement shortly before this position was abolished. The provisions relating to intellectual property are in Articles 15 to 19 of Law 99/2009, which was published in the Official Gazette on July 31 2009 and entered into force on August 15 2009.
The final text differs significantly from the high commissioner's initial draft - and seldom for the better. However, the commitment to reform the Industrial Property Code has remained, albeit in a less precisely phrased text. The government was given one year in which to effect the review.
The code had always been intended to be revised. Article 2 of Law 306/2004 stated that:
"within a year of the legislative decrees [which had been issued on the basis of the mandate for drafting the code] entering into force, the government may adopt, subject to the opinion of the competent parliamentary commissions, provisions amending or adding to the said legislative decrees."
The idea was to introduce the code with a one-year 'running-in' period to see whether changes or adjustments were required. A commission of experts was assembled in July 2005 and before the end of the year had prepared a report. The report not only corrected the material errors in the code and restored a number of proposed provisions that had been omitted when it was introduced (including measures relating to internal priority and inventions by university researchers), but also radically re-examined the provisions of the code with a view to strengthening IP protection as a key factor in making Italian businesses more competitive. The committee advocated reinforcing the rights protection framework by more precisely defining infringement to cover all forms of IP rights abuse and by modifying and coordinating the civil, criminal and administrative remedies against such abuse. Although the commission's work was concluded within the agreed timeframe, the process of ministerial appointments and approvals delayed the process and the deadline expired on March 19 2006 without being renewed. The only commission provisions to enter into force were those linked to the implementation of the EU Enforcement Directive (48/2004/EC). Introduced by Legislative Decree 140/2006, these changes included the provision allowing the confiscation of infringers' profits.
The new mandate is less specific than that envisaged by the high commissioner, which expressly referred to:
"strengthening IP rights protection and making it more effective,... including at procedural level,... [and] inserting an express provision relating to the prerequisites for the protection of non-registered trademarks and the framework of measures applicable to them."
However, the new wording refers to the revision of substantive and procedural provisions. This should avoid the risk of unfavourable rulings on the grounds of unconstitutionality, which have previously been made against the code as a result of inconsistencies in this area.
The other notable measure is a proposal to reverse the position in respect of inventions by employees of universities and public research institutions, so that patent rights reside with the institution.
The measures will need to be consistent with the Regulation for Implementation of the Code, which is due to enter into force shortly. It is hoped that the legislative committee established by the new director general of the Patent and Trademark Office and the Fight against Infringement (known by its Italian acronym UIBM), which includes representatives of commercial and individual interests in intellectual property, will be involved in drafting the law.
Law 99/2009 has already directly introduced a series of new provisions, most derived from the high commissioner's reform proposals. Of particular importance from a civil law perspective is the introduction of internal priority (ie, the ability to claim priority for an Italian patent application in a subsequent patent application that is also filed in Italy). This was originally provided for in Article 4 of the code, which covers priority, but was removed at the Council of State's suggestion for schematic reasons - it was considered that internal priority is irrelevant to the principle of general priority claims covered by Article 4 and should instead be covered by a special principle applicable only to inventions and utility models (ie, intellectual creations with technological content). The new law places the internal priority provisions more appropriately in Article 47(4) of the code, with the express proviso that a subsequent application must relate to elements already contained in the application for which priority is being claimed. In this respect the change puts the Italian patent system on an equal footing with the main foreign systems that include such a right, allowing for equal competition at international level.
Lapses in IP rights
The abrogation of Article 3 of Ministerial Decree of October 3 2007 is equally significant. This decree, which was much criticized, provided that IP rights lapse in the event of "a delay in payment of the fifth-year tax for invention patents [or] of the second five-year period tax for utility model patents and for the registration of designs or models". Moreover, "non-presentation or late presentation of a petition for extension under Article 238 of Legislative Decree 30/2005 relating to the second five-year period of designs and models" was deemed to have retrospective effect - that is, the said lapse was deemed to have effect from the date on which the application in question was filed. However, the general principle governing lapses of IP rights and related matters - which distinguishes lapses from nullity - is that a right lapses when the situation causing the lapse occurs. The abrogation of the article has reaffirmed this general principle.
Amendments to Articles 120, 122 and 134 of the code have a particular impact. The new text of Article 120 states that a judge has the right to suspend nullity or infringement proceedings that are brought on the basis of pending rights until UIBM has granted (or refused) the application. Although the article already required UIBM to examine the application involved in the proceedings before previously submitted applications, a decision could be reached in the case before UIBM had done so.
Article 122 states that writs of summons and rulings in proceedings relating to IP rights must be submitted to UIBM only if such rights arise from an administrative act of registration or patenting. Thus, there is no such obligation in respect of proceedings concerning other rights (eg, unregistered trademarks and designs, trade secrets and appellations of origin), in respect of which submission would be irrelevant.
The provision of Article 134 on the competence of specialist IP divisions has been reworded to take into account Constitutional Court Decision 170/2007, in which the Company Law procedure was found to be inapplicable to IP cases.(1)
Effects on constitutionality and competence
Although apparently minor, these procedural changes are significant because they have allowed the legislature to provide an interim regime which makes the amended provisions applicable to pending proceedings. This has removed the risk of such provisions being declared unconstitutional on the grounds that they were introduced into the code without a mandate for their adoption, which was the approach taken by the Constitutional Court in a 2008 case.(2) This would have had serious consequences, particularly for cases brought before the specialist IP divisions for reasons of connection and for appeal proceedings - the latter would have been remitted to the court of first instance. Law 99/2009 rephrased the provisions to which the Constitutional Court had objected. It states that:
"The specialist IP divisions, established in accordance with Legislative Decree 168/2003, retain competence over disputes at appeal stage, on issues covered by Article 134, that began after this code entered into force, even if the first instance or arbitration proceedings had begun or were conducted according to provisions previously in force, unless a ruling on competence has already been issued within the ambit of these proceedings."(3)
Thus, in such appeal proceedings the court to which application is made cannot be held to lack competence and parties cannot be required to recommence appeal proceedings before the courts that would have been competent under the ordinary rules of competence before the establishment of the specialist IP divisions. This has great advantages in terms of the cost and speed of proceedings.
Copyright in industrial design works
The rewriting of the interim provisions on copyright in industrial design works is controversial. The new Article 239 amends the previous rule, expressly extending copyright protection to works created before April 19 2001 (ie, the date on which the first provisions on copyright protection for designs with artistic value came into force). However, it also allows imitators to continue to copy such works if they can demonstrate that they began their activity before that date. The article states that the imitator's activity may continue only "within the limits of prior use", thereby limiting exploitation to the level of activity on April 19 2001. It could be argued that the onus is on the imitator to prove both prior use - that is, the basis of its right to continue to copy - and the prior quantitative level that determines the extent of this right.
The new article is under judicial consideration, as the Court of Milan has asked the European Court of Justice to interpret whether the interim regime for copyright protection for designs is compatible with the EU Design Right Directive (98/71/EC).
Law 99/2009 amended the system of criminal and administrative penalties for infringement, but the results have not been well received. The consistent and coordinated provisions of the high commissioner's anti-infringement package were adopted almost to the letter in the initial text of the bill, but were radically altered during the first reading in the Senate.
What has been preserved, at least in part, is an overall increase in penalties, which now range from six months' to three years' imprisonment for trademark infringement and from one year's to four years' imprisonment for infringement of patents and models. However, the rationale behind this disparity is unclear. A specific aggravating circumstance - large-scale infringement or continuous and organized infringement - raises the minimum sentence to two years and the maximum to six.(4) A similar penalty is included in Article 517(4) of the Criminal Code for infringing denominations of origin of agricultural foodstuffs.
A number of the provisions do not apply unless the perpetrator "was able to be aware of the existence of the IP right". Apart from again raising the problem of disparate treatment in the handling of analogous situations and the potential violation of the constitutional principle of equality, this condition could seriously limit the application of the provisions, as it is unclear whether the phrase will be interpreted as referring to a hypothetical possibility of awareness (which exists from the moment at which the right becomes accessible to the public) or a material and specific possibility of awareness (which would have to be assessed on a case-by-case basis and would almost invariably be open to question). It is likewise unclear whether the term 'rights' refers only patent, design and trademark registrations that have already been granted. If it is intended to apply to rights that have been published at the application stage, this would explain the reference to the possibility of awareness and would strengthen the first interpretation. This was the view taken in decisions on the previous corresponding provisions and it seems logical to apply the same interpretation.
Confiscation and other measures
Although the law provides for the confiscation of infringing goods, it does not provide for a pre-trial procedure for the prompt destruction of such goods, which would reduce holding costs and the risk of such goods finding their way back into circulation. The possibility of recourse to delayed seizure and controlled delivery in investigations - which had been proposed by the high commissioner's working group - does not feature in the final version. These measures have proved effective in countering other criminal activity, such as drug trafficking, which is why the high commissioner's proposal (and the initial text of the bill) advocated their extension to IP infringement. However, the position remains essentially unchanged. In practice, more incisive investigative instruments can be used only where criminal organizations are running a counterfeiting business and can be charged under Article 416 of the Criminal Code. In any case, a rights holder whose rights have been infringed can cooperate with the public prosecutor during investigations, and the best results in the fight against piracy and counterfeiting are still obtained by using a combination of civil measures (especially discovery and seizure) and criminal procedures that strike at the involvement of organized criminal infringers.
New minimum and maximum administrative fines
At administrative level, a welcome amendment to Article 1(7) of Legislative Decree 35/2005(5) implements a recommendation from the original anti-infringement package, imposing a minimum penalty of €100 for a purchaser who buys goods that he or she knows to be counterfeit. The maximum penalty has been reduced from €10,000 to €7,000. This range of fines is more realistic and easier for local police to enforce. The proviso "unless the circumstance constitutes a crime" has been deleted to make clear that the administrative penalty applies in place of a criminal penalty; this should also make the penalty easier for the administrative authorities to apply.
The revisions to the IP regime also included a particularly damaging change to the much-amended Article 4(49) of Law 350/2003. It prohibited the affixing of trademarks of Italian firms to goods produced abroad unless the true provenance was indicated "in clear print [or] another indication sufficient to avoid any mistake as to their real foreign origin". Although the provision was rewritten almost immediately, the improvement was relatively minor.
The provision unjustifiably hindered decentralization and production integration at international level - practices which clearly promote competition, reduce costs and ultimately benefit consumers. It also introduced an absurd disparity in treatment between goods produced abroad by Italian firms and those produced by foreign firms (including firms from another EU state). Quite apart from its probable incompatibility with EU law, this provision was arguably unconstitutional in Italian law. Furthermore, there was a risk that in order to avoid the rule, large corporate rights holders would transfer leading Italian trademarks to foreign companies within their group. Smaller firms would generally be unable to follow suit and would be at a disadvantage with regard to both foreign companies and Italian companies belonging to multinational groups. The new director general of UIBM tried to mitigate the effects of this provision by sending a interpretative circular to Customs, which correctly excluded application in all cases in which the affixing of trademarks occurred before the provision came into force.
The outrage expressed by various trade associations and a number of negative comments from experts led to a hurried U-turn. The provision was partly abrogated by Article 16 of Legislative Decree 135/2009, which introduced a new rule that is due to enter into force on November 9 2010. Although the new rule eliminated the criminal penalty, it replaced it with an extremely high administrative fine (between €10,000 and €250,000), and goods are still confiscated. Moreover, a marked disparity in treatment remains. The new article no longer uses the term 'Italian trademarks', but it prohibits "the use of a trademark by the holder or licensee in such a way as to lead the consumer to believe that the product or good is of Italian origin", unless the real origin is indicated. Penalties apply not when there is a difference between apparent and real geographical provenance, but only when goods are misleadingly presented as Italian. For example, a trademark that is used in a way that leads the consumer to believe that goods originate from France when they are actually produced elsewhere is not considered unlawful, even though this situation is directly comparable to that prohibited by the law.
It could reasonably be argued that this disparity in treatment violates (i) the principle of equality in Article 3 of the Constitution, whereby the law cannot apply different measures in the regulation of identical cases, and (ii) Article 28(30) of the EC Treaty, which prohibits quantitative restrictions and all measures with equivalent effect.
It is not even clear what the law aims to prevent. Does it seek to prohibit the mere affixing of a trademark that sounds Italian or which is well known to be Italian? Is the law broken only when the trademark owner or licensee takes further action to make the consumer believe not only that the trademark is Italian, but that the goods bearing the mark come from Italy? The latter interpretation seems logical if the new provision is interpreted in line with trends in Italian criminal case law, according to which a trademark does not in itself inform the public as to geographical origin. Likewise, the term 'use of the trademark by the holder or licensee' needs clarification. If the provision is interpreted as prohibiting the mere putting on the Italian market of products that do not comply with the rule, even if such products are intended for other markets where the rule does not apply, this will encourage Italian companies to relocate their logistics operations outside Italy - a further blow to Italian commerce. The fact that enforcement of the provision is entrusted to the administrative authorities, which are unlikely to have adequate training, is a further cause for concern.
Legislative Decree 135/2009 introduced criminal penalties (as laid down by Article 517 of the Criminal Code, but incongruously increased by one-third) for the wrongful use of:
"a sales indication which presents the product as having been entirely produced in Italy - such as '100% made in Italy', '100% Italia', 'tutto italiano', in whichever language it may be expressed - or anything else which may engender in the consumer a belief that the product was completely produced in Italy, or signs or figures which induce the same misapprehension."
Such sales indications may not be used in relation to goods that were not "completely produced in Italy", a phrase that includes products whose "design, planning, production and packaging were exclusively carried out in Italy". Once again, a key provision seems unclear, difficult to apply and potentially incompatible with EU law. Given that expressions such as 'made in Italy' may be used for goods that have only "undergone a final, substantial working", as laid down by the Community Customs Code, it seems logical that the concept of 'signs or figures' that communicate the concept of 100% Italian origin will not be taken to include the use of the Italian tricolour or an image of Italy unless such images are accompanied by a verbal expression such as '100%' or 'all'. However, the provision is open to interpretation. In addition, the provision fails to clarify how it is ascertained that a product's design and planning took place in Italy, especially when these activities involve foreign designers.
Thus, there is a risk that the provision will generate misconceptions and give rise to disputes. The intended outcome could be achieved much more easily by recourse to collective trademarks, which have the support of both Italian and EU law.
(3) Article 245(2) of the code. Paragraph 3 of the article sets out an analogous rule for proceedings which follow on from interim measures and which were commenced before the institution of the specialist divisions.
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