Select Committee on Trade and Industry Minutes of Evidence


Examination of witnesses (Questions 420 - 439)

TUESDAY 11 MAY 1999

MR R WESTON and MR A SERJEANT

Mr Hoyle

  420. May we move off your torture equipment? May we get back onto something else after that detailed explanation? The CIPA notes that the English courts have historically favoured international exhaustion of trademark rights. In your experience, what, if any, were the main problems associated with international exhaustion operating previously in the UK?
  (Mr Weston) Not significant. My predecessors made a statement there about the decisions. First we have to remember that these decisions are old law, they are 15 or 20 years old. The old system of English common law with licences was good but the world has moved on so far as definitions are concerned. The continental jurisdictions have favoured exhaustion of rights whereas in the common law jurisdictions we have had licensing. This just illustrates that this is the way the flexibility is having to occur throughout the IP area in the United Kingdom. We are willy-nilly going down the track of European harmonisation and European style of law. The old ideas are having to go.

  421. Did it work before or not?
  (Mr Weston) Yes. I have to go back. It is 20 years old and one of the problems before this committee when you talk about a global market is that there is also global intelligence. People are now far more aware via the media or via their own travel and investigations how market conditions can vary round the world. They have far more information. Twenty years ago the average purchaser in this country was ignorant as to what the market was elsewhere and therefore a lot of our clients were ignorant as to what the market was elsewhere. However, the world has moved on.

  422. How do you view the assertion that removing the right to resist parallel imports from outside the EEA would lead to a loss in sales within the EU?
  (Mr Weston) We cannot comment on that. Speaking personally, as opposed to a representative, I would say a loss of sales by whom? A market is being satisfied, but this is a personal view. As for my Institute's point of view, I have to come back to our fence-sitting position. Different people sell and there is a market to be satisfied by one route or another.
  (Mr Serjeant) It must lead to an international standardisation throughout. The luxury market is killed because people can import inferior quality or different quality goods and sell into it. Then I would say that the luxury market will not be supplied. It will simply be given the same product as other markets so there will be a lack of choice.

  423. Same quality goods. What about that? That is the reality of what happens. You are actually getting identical goods coming in. Not inferior, not low quality, exactly the same quality.
  (Mr Weston) As a practitioner in IP, my view is that to a certain extent the brand holders, the IP owners, can control the situation themselves by choice of the trademarks they wish to use. The example was given before by Miss Cratchley of Shield soap, different formulation, same trademark. As far as I understand it, again between the European market and the United States market, Nestle« have instant coffees which are the identical product but sold under different brands. When I was in the United States I went into the supermarket there to try to get my favourite Gold Blend and I could not find it. I found out it has a different name. That is fair enough and that is in fact a good use of branding to identify a particular market and, if you like, to control what happens to that brand on resale. My view is in these areas, and it is a view represented by the majority of my committee but not all, that you can, using existing IP rights, obtain protection for get-up, for new trademarks, for designs, if it is an invention for patenting. How you obtain and how you apply those rights, you can still control a market or even control a market if there are worldwide parallel imports.

  424. It is interesting because I do not think Shield soap is a high quality product as such. In fairness to it, that is something Unilever may have decided to do. Let us go back to a quality product, say Chanel going to South Africa. Surely you are not trying to tell me that it is a different perfume in South Africa and the UK?
  (Mr Serjeant) That is my understanding. I do not actually know the South African market. Yes; definitely.

  425. Let me just get this clear. I do not want to put words in your mouth. What you are saying to me is that Chanel designs Chanel No.5 with five different aromas which are sent round the world.
  (Mr Serjeant) That is my understanding. Certainly in the case of Cinzano the public taste in France was held by the manufacturers to be different from that in UK so the product was different. The question you asked me was when the products were identical.

  426. I believed that Chanel's perfume would be identical all round the world. No.5 is No.5. Cinzano is not something you dab behind your ear, it is something you actually drink and I would not have thought personally it was a luxury product. If you were saying it was a bottle of champagne by Moet, I would think it was the same Moet which goes round the world but I am not interested in Cinzano. What we are talking about is high quality goods at a very expensive rate which we pay more for in the UK than in other parts of the world. That is what we are talking about.
  (Mr Weston) I can answer that in two ways, being a professional fence- sitter. One is that you do not have to buy luxury goods. Luxury goods are an option in life. If they want to price these matters so you can go out and buy Tesco's own brand Chanel Light perfume instead of Chanel No.5 that is one argument. The other argument is that personally I do not like being ripped off.

Chairman

  427. That is the consensus on this side of the table.
  (Mr Weston) This is speaking personally and not speaking professionally.

Mr Berry

  428. This is not just about goods which we might describe as luxury or not, is it? It is about the fact that you have products, you have patents, you have trademarks and there is great confusion. The Colgate case has been referred to. Okay, we have the same trademark which covers totally different products. Colgate is not the same product everywhere. There is Colgate No.1 and Colgate No.2, Colgate No.3, but it is not the same product. Is there not an inherent problem there where you have one trademark for different products?
  (Mr Serjeant) Colgate is a house mark. As far as I know, it is used on countless different products.

  429. Yes, but is there not a problem when no information is provided to the consumer giving a clear indication that we are talking about different kinds of Colgate products? The manufacturer is keen presumably in providing a lower quality cheaper version in certain parts of the world to con the consumer into thinking they are buying the same product they would be buying if they went down the high street in Europe. Is this not basically a problem that attempts are being made by manufacturers to say that two goods are the same when in fact they are not?
  (Mr Serjeant) Manufacturers are not trying to say two are the same. They recognise there are differences in public tastes and so they knowingly sell a different quality in one country from another. As the public is different there is no deception.

  430. The market is different and they choose how to operate the market. Would life not be easier if there was a requirement that trademarks and products were more closely linked so that people knew exactly where there was a difference between products, that the trademarking regime assisted the consumer to distinguish between different products rather than to confuse.
  (Mr Weston) This is what happens a lot. With trademarks you have the house mark. Let us take Kodak for example, which is one of the best trademarks ever invented. Kodak as a company has a whole range of different products which they put out into the market. They have disposable cameras, they have digital cameras, they have imaging software and everything else. Everything quite rightly goes under the company's name, Kodak; that is the umbrella. Within that they have separate product names and brands and these are differentiated and under these they quite justifiably say okay, we will send a particular type of Snapper, disposable camera, for this market because this is what they want and there will be another camera with a Kodak name but another lower level product name, different product, which they can sell to a different market. This must be good business and entirely justifiable. The problem which comes is say you have a Snapper being sold in Africa and a flash de luxe being sold in Europe for example. They are both Kodak cameras. It is very difficult to consider things so that Kodak cannot prevent re-importation into the European Union of the Snapper one which is directed towards a particular market just because it has Kodak on it, even when that product is not sold anywhere in the European Union and under a different name. This is the structure you have in trademarks.

  431. Is a Japanese buying a Cinzano Bianco in Japan not entitled to assume it is the same as buying it in Italy?
  (Mr Serjeant) No, he knows nothing about the Italian market.

  432. How do you know?
  (Mr Serjeant) The average Japanese. It is a theoretical question.

  433. I see. So if the average Japanese does not know anything about the Italian market, we are being advised that a Japanese citizen in Japan is not entitled to assume that Cinzano Bianco bought there is the same as Cinzano Bianco bought in Italy.
  (Mr Serjeant) Correct.
  (Mr Weston) This applies to all sorts of things and Coca-Cola especially. The formulation of Coca-Cola varies, especially as to sweetness content, from country to country, because of their market research and the tastes they have evolved as to which particular form sells best. If you go along to Pret-a-Manger for example, you can buy cans of Coke there and they are French Coke and they taste different from English Coke because the formulation is slightly different. There is nothing wrong with that.

  434. When buying a Honda car in the UK we are not entitled to assume that it is the same as buying a Honda car in Japan.
  (Mr Weston) No, because in fact they are slightly different. I should love, being a Honda owner myself, to be able to buy Honda cars in the UK at the rates at which they sell in Japan and with all the goodies and gimmicks they put on in Japan because you are stalled in traffic jams for even longer than we are in this country.

  435. A similarly specified car.
  (Mr Weston) Yes. With all due respect, we are drifting away because the premise we are talking about here is whether it is the identical product we are dealing with. Even in the luxury range, assuming we are talking about Chanel No.5, there are plenty of other Chanel perfumes. It is a question of whether it is the identical Chanel No.5 you can re-import from South Africa. If they decide to sell Chanel No.15 in South Africa but only sell Chanel No.5 in the United Kingdom then it is a different ballgame and it is a justifiable use of IP to sell to different markets.

  Mr Berry: Remind me never to drink in Japan.

Chairman

  436. Not again. The Committee had a very hard working and abstemious trip to Japan some years ago, I hasten to add. You spoke about Europe a while ago and you spoke about the difficulties of getting an agreement between what were in effect two different legal systems, two different ways of working. Are there other problems involved in getting this kind of very close international harmony? What about questions of translation, the speed of translation, which seem to bedevil a lot of the activities certainly of this place where we get European instructions taking a very long time to arrive because of the problems of translation and questions of law. Surely the interpretation of the law affects the translation thereof.
  (Mr Weston) At the moment on the assessment of jurisdictions it is not a problem because there are established translations involved. If you are dealing with European patents, the current law is that there must be an approved translation of that patent into the national country before it is enforced. There are three languages prevalent on European patents: French, German and English. These are the languages of prosecution and to go into the establishment of the national patent which comes from the European patent you have to translate into the local language. If a patent is being prosecuted in German through the European Patent Office, before it can be enforced in the United Kingdom a sworn translation must be filed so the information is available in front of the public as to what the right is. The same happens with the Community trademark, except it is even worse because currently there are five official languages of prosecution but 11 languages to be filed in and eventually to be translated into. Publication from them can be yea thick and I am certain colleagues from ITMA can speak to this at least as well as I can or longer. That is not the problem of establishing the right or establishing the law because that is laid down. We have problems now and if we go to something like a court of first instance there will be problems of simultaneous translation, problems of language of the proceedings and language of the people being represented there.
  (Mr Serjeant) It is the whole question of approach. In the EpiLady case Mr Weston mentioned a moment again, the tradition in Germany is to interpret the claim in a completely different way from this country.

Mr Laxton

  437. May I ask you a question with regard to look-alikes? Can you explain how any additional brand protection against look-alikes would disadvantage or could disadvantage those wishing to search the register on trademarks? Could you explain that a little?
  (Mr Weston) We have two methods of protecting get-up in the United Kingdom at the moment. The first of all is a registered trademark. A registered trademark could be anything from the particular name, shape, smell, everything like that. Because it is a registered right it is searchable. You look at it and ask whether anybody is using it. If a client comes to me and says he has a new product coming onto the market, trademark, shape or anything else, I can go ahead and search to find out whether there is already an established registered right to that product. We also have common law passing off, which is an unregistered right. It is a right which is there and as such it is very difficult to search to find out whether there is an unregistered right for a particular shape of a bottle or anything else. There are some industries where they have by agreement lists or indices of trademarks. I have clients in the carpet field and there is a British index of quality marks which is the listing but that is not comprehensive. Unregistered rights are very difficult to search. Even here on other parallel rights we have registered designs and unregistered design rights; registered design because there are statutory rights. You can search to find out whether there is a right there. With unregistered design rights nobody knows whether it is out there or not and clients have to rely on their knowledge of the particular industry to find out whether in fact there is a right over which they could trip or not.
  (Mr Serjeant) In addition to that if I do a search and find that a particular bottle shape is registered, so I say a competitor has this right, according to the various proposals put forward someone would have to make a judgement as to whether what the client intended to do was sufficiently similar and other subjective matters, that he intended to take unfair advantage and that kind of thing which sitting in our offices is pretty difficult.
  (Mr Weston) No, I disagree with my colleague there. It is no more than we do for patent infringement anyway. You have to make an assessment of the right and the penumbra or the extent to which that right extends. It is easier for patents because patents have a thing called a claim at the end which is a word description of where the invention lies, but against which—we talked about this EpiLady case—is how different countries can interpret that same EpiLady claim in different ways. When it comes to trademarks or appearance and get-up it becomes more objective. If they are identical there is no problem. If it is a "Chinese copy", when you trade in the areas of how close can you go, can you be a fair follower as to a theme or a trend or have you gone a step over the line to become an infringement, on designs this is very difficult. The classic argument on registered designs is that you take the design which is registered, you take the alleged infringement, you take the nearest bit of early design you know of and you have to say which one is closer. Here is the registered design. If you think that the nearest bit of prior art is closer than the alleged infringement then the extent of protection from the design means there is no infringement. It is an elastic protection system because there is no specification.

Mr Butterfill

  438. May I take you up on this, flowing back to what we were talking about before? You said you can register a bottle shape. Presumably the thinking behind registering a bottle shape is that somebody buying that shape of bottle will expect the contents to be what that bottle shape implies.
  (Mr Weston) Yes.

  439. Presumably wherever they go if they buy the genuine article they can expect, if they buy that bottle shape, to find the same contents. But you have just said that the contents may vary from place to place and from market to market. Is there any real justification for allowing companies to register a bottle shape when the public really has no idea of what the contents may be from one place to another?
  (Mr Weston) The answer to that is yes, because it depends on what the market is. At the moment effectively we have national markets. We are expanding and evolving into a pan-European market. In consumer items, especially looking at foodstuffs for example, there is no uniformity of taste. I have already given an example of Coca-Cola changing its formulation. I know Nestle« change the formulation of their instant coffees depending on the market. In southern Europe their Blend 37 would have a higher chicory content than in northern Europe. At the moment, because they are essentially just satisfying a national market and they will have a national formulation, the customer in that market is being protected by what a trademark is for because they can say if they buy Nestle« Blend 37 they know they get a particular taste. If you are a visitor to that market, you detect a difference.


 
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