ECJ ends controversy on interim rules on copyright protection for designs

European Union
 The Court of Justice of the European Union (ECJ) has issued its decision in Flos SpA v Semeraro Casa e Famiglia SpA (Case C-168/09, January 27 2011), a reference for a preliminary ruling by the Tribunale di Milano (Italy) concerning the interpretation of the Community Design Directive (98/71). The reference sought to clarify the transitional regime of copyright protection for industrial designs in Italy, which has changed four times since 2001, when copyright protection for industrial designs was introduced (for further details please see "Design law discrepancy prompts questions to ECJ"). 
In August 2010, following the opinion delivered on June 24 2010 by Advocate General Bot (for further details please see “Interim rules on copyright protection for industrial designs contradict EU law”), Legislative Decree 131/2010 - which amended the Italian Code of Industrial Property - reworded Article 239 of the code to bring it into line with the directive. The law now recognises that industrial designs created before 2001 benefit from full copyright protection (for further details please see “Interim rules on copyright protection for designs now in line with EU law”).
The new Article 239 was warmly welcomed by the design and industry associations. However, there were protests from companies which had profited from the previous regime by manufacturing or importing from the Far East vast quantities of fake products at low prices. These companies claimed that they had a “right” to continue their activities and criticised both the legislature and IP rights owners. The decision of the ECJ was thus eagerly awaited in Italy.
In its decision, the ECJ fully upheld the conclusions of Advocate General Bot, finding that Article 17 of the directive must be interpreted as precluding a national legislation which excludes from copyright protection designs which entered the public domain before the date of entry into force of that legislation. Moreover, the ECJ stated that the 10-year moratorium in respect of copyright protection (which was introduced in Italy in 2001) appeared to go beyond what was necessary. Further, the ECJ found that the 2007 law which had abolished the moratorium, thereby rendering copyright protection unenforceable for an indefinite period in the case of products manufactured on the basis of designs which were in the public domain before April 19 2001, was contrary to Article 17 of the directive.

In particular, with regard to the transitional period, the ECJ held that:

As regards, in the first place, 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 Directive 98/71 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)”.

More specifically, according to the ECJ:

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”.
Therefore, the ECJ held that the activity of said third parties should have been permitted only for a period shorter than 10 years (ie, before March 2011, the expiry date of the transitional period being deemed excessive). The ECJ also indicated the criteria that the national legislature should follow in order to establish a transitional regime consistent 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 right 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 Directive 98/71 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 is in line with these criteria, since it provides as follows:
Third parties that manufactured or marketed, in the 12 months prior to April 19 2001, products based on industrial designs entered in the public domain, are not liable for copyright infringement for activities carried out after that date, limited to products manufactured or purchased before April 19 2001 and those manufactured in the following five years, provided that such an activity has remained within the limits of prior use.”
Even though the new Article 239 has not yet been applied by the Italian courts, it clearly means that all products based on industrial designsmanufactured in Italy after April 19 2006 (as well as those imported after April 19 2001) may be deemed to be counterfeit. This complies with the directive and is consistent with the criteria laid down by the ECJ.
The judgment of the ECJ thus put an end to the debate and gives Italian designs the protection that they deserve.
Cesare Galli, IP Law Galli, Milan

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