Intellectual Property Specialization Course Protection from Unfair Competition 17 November 2011 Luca Ghedina

Free Competition  The basic tenets of free competition:  Is beneficial  Is highly efficient  Stimulates innovation  Lower prices for consumers  Free copying: the rule – exclusive rights: the exception

Unfair vs. Free Unfair  Unfair as the limit of free competition  Article 10 bis of Paris Convention signatories agree to assure “protection from unfair competition”  Definition: “any act of competition contrary to honest practices in industrial or commercial matters”

Unfair Competition - Definition  Impossible to define: no limit to human inventiveness!  Attempted definitions:  Contraire à la morale des affaires  Contrario alla correttezza professionale  Gegen die guten Sitten (no longer!)  Contrary to good conscience

Unfair Competition - Definition  Definitions are always too vague  No inflexible rule can or should be laid down  Traditionally, unfair competition is the result of court decisions also in civil law countries  The best definition is a list of concrete cases

Unfair Competition - Cases  Article 10 bis Paris Convention:  Acts that create confusion with the company, goods or activities of a competitor;  False allegations that discredit a competitor  Indications liable to mislead the public;  List not exhaustive

Unfair Competition - Cases  Below cost selling – predatory pricing  Boycotting – turning key employees away  Sending cease and desist letters accusing of infringement with no valid IP rights  Theft of trade secrets – know how misappropriation  Use of confusingly similar containers, product configurations, packaging  Advertising

Need for Protection  Free competition does not mean one can compete “too hard”  Grey area between free copying / competition and exclusive rights  Unfair competition has a residual character: it is actionable where no IP rights are available

The Legal Basis for Protection  No exhaustive definition – referral to vague principles subject to change  No exhaustive list  The law of unfair competition is dynamic  Lack of specific statute or precedent need not be a bar to a claim of unfair competition

The Legal Basis for Protection  International convention  National statutes  Court precedents

The Paris Convention of 1883  Article 10 bis and ter (amendments of 1925, 1934 and 1958)  Directly actionable (10 bis)  Binding for the Member States (10 ter), not directly actionable

National Statutes  Some countries do not have specific provisions (i.e. France)  Some countries have a specific unfair competition act (i.e. Germany: Gesetz gegen den unlauteren Wettbewerb - UWG)  Others have provisions contained in other broader statutes (i.e. Italy: Articles 2598 – 2601 Civil Code)

National Statutes  The common features of most statutes are (only):  Broad, vague definitions of unfair competition  Non exhaustive list of concrete cases  Protection of competitors only or also of the public

National Statutes - The Italian example: art. 2598, Civil code - “Without prejudice to the provisions on distinctive signs and patent rights, acts of unfair competition are performed by whoever: 1)Uses names or distinctive signs which are likely to create confusion with the names or distinctive signs legitimately used by others, or slavishly imitates the products of a competitor, or performs by any other means acts which are likely to create confusion with the products and activities of a competitor; …..

National Statutes - The Italian example: art. 2598, Civil code - … 2)spreads news and comments on the products and activities of a competitor, which are likely to discredit them, or treats as his own the good qualities of the products or of the enterprise of a competitor; 3)avails himself, directly or indirectly, of any other means which do not conform with the principles of correct behaviour in the trade and are likely to injure another’s business.”

Court precedents  Court precedents are the backbone of the law of unfair competition, however  “There is no part of the law which is more plastic than unfair competition, and what was not recognized as an actionable wrong 25 years ago may well have become one today” (Ely-Norris Safe Co. v. Mosler Safe Co.)  …but no unbridled discretion either!

Court precedents - Trends  Impose an higher legal standard of fair competition  Consequence of judicial activism  The law reflects the mores and conventions of the society  From the protection of the competitor to that of the public

Concrete Case  Trade dress / Product shape  Must be distinctive, i.e. capable of identifying source of origin  Not merely functional  Not merely decorative or aesthetic

Trade Dress - Product Shape  A trade dress/product configuration is protected against copying if it is distinctive AND  If the outcome of the imitation is a likelihood of confusion on the part of the public  In order to assess likelihood of confusion the trademark may also be taken into consideration

Unfair Competition vs. IP Rights  Traditional principle: avoid overlapping of protection  A decorative feature must be protected by way of design  A technical feature by way of a patent  A creative feature by way of copyright  A two-dimensional distinctive feature – ideally – by way of TM

Unfair Competition vs. IP Rights  Trend:  Gradual disappearance of any significant difference between the law of trademark and the law of “trade dress” (unfair competition)  Reduced relevance of unfair competition in traditional areas  Expansion of unfair competition to new form of acts contrary to commercial morality