Settlement in eagerly awaited design rights case

Out-Law News | 11 Mar 2020 | 1:25 pm | 3 min. read

An out-of-court settlement has deprived fashion designers of an eagerly anticipated ruling which could have clarified whether first showcasing designs in locations outside of the EU would undermine claims for unregistered Community design right protection, an intellectual property law expert has said.

Florian Traub of Pinsent Masons, the law firm behind Out-Law, was commenting after Beverley Hills Teddy Bear Company (BHTB) and PMS International Group reached a settlement in a case that had been listed for a preliminary ruling by the Court of Justice of the EU (CJEU). The companies had been in dispute over the validity of unregistered Community design rights claimed by BHTB for some animal-like toys. The case was being watched closely by a range of other businesses and practitioners concerned with the application of design rights, Traub said

The CJEU confirmed last month that the case was to be removed from the register of the court after the Intellectual Property Enterprise Court (IPEC) in London, part of the High Court, sent the CJEU a letter which withdrew its request for a preliminary ruling.

The IPEC had referred questions of EU law to the CJEU seeking answers which would help it determine the outcome of the underlying dispute between the two companies. The dispute centred on whether US-incorporated BHTB could claim that the design of its toys were novel for the purposes of claiming unregistered Community design rights since it had disclosed the designs at a trade fair in Hong Kong months before it first exhibited them in the EU.

The IPEC asked the CJEU for its help in interpreting whether EU design law requires disclosure to the public to first take place within the geographical confines of the EU for unregistered Community design rights to apply.

However, the High Court has now told Out-Law that the reasons it withdrew its request for a preliminary ruling from the CJEU was because BHTB and PMS International had agreed to settle their underlying dispute out of court.

Paul Beverley, managing director of PMS International, a wholesaler, importer and distributor based in the UK, told Out-Law that the decision to settle the case was a commercial one agreed mutually by both parties after the costs involved in pursuing the matter before the courts became disproportionate to the value of their dispute.

Out-Law asked BHTB for a statement but did not receive a response.

Traub said: "It is somewhat disappointing that the CJEU will not get an opportunity to provide clarity on the very relevant question whether it is necessary for unregistered Community design rights (UCD) protection to come into being that the event of disclosure must take place within the geographical confines of the EU. The question is far from just academic – it has significant effects on design strategy, particularly in the fashion industry. It is hoped that another national court will refer the question to the CJEU in the near future."   

"The High Court judge, in his reference to the CJEU, expressed his view that disclosure must indeed take place within the EU in order for the design to obtain protection under the UCD regime. Although certainly not binding, it would suggest that the English courts would side with the German courts which decided just that. In light of Brexit this means that UK designers would gain a supplementary unregistered design in the UK, which mirrors the UCD after the implementation period, but would no longer benefit from UCD protection if they launched their new design in the UK. Vice versa, designers may benefit from EU-wide UCD protection when launching a design in the EU, but would not be able to rely on a supplementary unregistered design in the UK in these circumstances," he said.

EU law provides designers with scope to register the designs they create so that they can exercise a monopoly over how they are used. Designs must meet strict criteria to benefit from Community registered design right status, but designers that achieve that standard can obtain up to 25 years worth of rights, renewed at five year junctures.

Not all designs have to be registered to benefit from protection against copycats, however. A UCD is infringed by any unauthorised act which uses the design or a design which does not produce on the informed user a different overall impression. It must be shown that the protected design was copied.

Unregistered design rights can also apply solely within the UK. Beyond the issue of scope, the UK unregistered design right differs slightly from the unregistered Community design rights that apply in the EU. In essence, UK design rights protect original, non-commonplace designs of the shape or configuration of products. Community design rights protect the appearance of the whole or part of a product resulting from the lines, contours, colours, shape, texture and/or materials of the product and/or its ornamentation. A UK unregistered design right arises on the creation of the work.