Important decisions strengthen protection of GIs

Two important decisions on geographical indications (GIs) have recently been issued, further strengthening the protection of GIs in Italy. However, these decisions also highlight the importance of having the right defence strategy, since the respective outcomes largely depended on the claims presented by the parties.

In Decision No 2828 (February 12 2015), the Supreme Court of Cassation considered the alleged infringement of the GI 'Felino', which refers to a particular kind of salami manufactured in the Parma region. It is now a protected GI (since 2013), but was not yet protected at the EU level when the case was brought. The Supreme Court denied the sought-for protection, based on the decision rendered by the Court of Justice of the European Union in Case C-35/13 (May 8 2014), whereby Regulation 2081/92 on the protection of GIs and designations of origin for agricultural products and foodstuffs:

“does not afford protection to a geographical designation which has not obtained a Community registration, but that geographical designation may be protected, should the case arise, under national legislation concerning geographical designations relating to products for which there is no specific link between their characteristics and their geographical origin.”

The Supreme Court held that the fact that the GI 'Felino' was used for products coming from a different region was misleading and amounted to unfair competition under Italian law, irrespective of whether there was any link between the origin and the quality of said products.

However, the court dismissed the claimants’ action, because “generally speaking, this kind of unfair competition act could have been invoked by the claimants, but had not actually been invoked, as seen in the claims stated in their writ of summons”.

In contrast, the Court of Milan (IP Specialised Division), in a decision rendered on June 9 2015, upheld all the claims filed by the Consortium Emmentaler Switzerland (whose GI is not protected at EU level) against certain companies which manufactured in Switzerland, and marketed in Italy as 'Emmentaler', cheese which was not produced according with the Swiss rules of production for this kind of cheese. The court decided that the defendants’ conduct amounted to infringement of the consortium’s indications of origin (ie, Emmentaler, Emmental and Emmental/Emmentaler Svizzero) and of its registered and unregistered trademarks (including collective unregistered trademarks, which is a first in Italy), as well as unfair competition.

In a previous decision dated March 17 2012, the Court of Milan had already decided that the denomination 'Emmentaler' should be protected in Italy even though it was not registered at the EU level, on the basis of the 1951 Stresa Convention, which concerns denominations for cheeses. The court held that the convention was valid and still binding on Italy in its relationships with Switzerland, which is not an EU member state.

The new decision also upheld the claimant’s argument that the Stresa Convention provides protection for the indications 'Emmentaler' and 'Emmental' as such, declaring that cheese manufactured outside Switzerland which has specific qualities must indicate its place of origin, and that 'Emmentaler' and 'Emmental' still refer only to the famous cheese produced in Switzerland according to Swiss rules. This represents a milestone in the field of GIs in Italy.

As a result, the court issued an injunction to stop the infringing activities (ie, importing, trading and advertising products bearing infringing signs such as 'Emmentaler', 'Emmental', 'Emmental/Emmentaler Svizzero' and/or 'lo Svizzero', or, in any case, indications and signs which are misleading with regard to the origin and qualities of the products) and to prevent the defendants from repeating those activities in the future. The court also ordered the definitive withdrawal of the products from the market and their destruction, or their assignment to the claimant’s ownership. The order of the court was further strengthened by the issuance of a penalty for any further violation (€100 each) and for each day during which the court order was not complied with.

A further important point concerned the award of damages as a consequence of the unlawful acts committed by the defendants. The court not only granted the amount determined by the court-appointed expert accountant as lost profits (equivalent to the contribution which would have been paid to the consortium for a corresponding quantity of the original product), but also ordered the defendants to compensate the consortium for the damage to its reputation in the same amount as the lost profits. The total amount of damages was therefore approximatively €1.8 million.

The court also ordered the publication of the judgment, at the defendants’ cost, in leading Italian newspaper Corriere della Sera.

These decisions confirm and strengthen the positive momentum of Italian case law concerning the protection of GIs, beyond the EU rules. Although the legislation in this field was initially developed in a fragmentary manner – often through special laws relating to specific situations (eg, 'Prosciutto di Parma', now a protected designation of origin, was recognised as a designation of origin as a result of Law No 506 of July 4 1970, later replaced by Law No 26 of February 13 1990), it has progressively acquired consistency and homogeneity.

More generally speaking, the protection of designations of origin not limited to cases of public deception was governed, first of all, by rules in matters of unfair competition. Articles 29 and 30 of the Code of Industrial Property (which, in their original wording, were essentially the same as Article 31 of Legislative Decree No 198/96 implementing the TRIPs Agreement) already protected designations of origin by safeguarding such designations in cases of public deception, since the use of false designations of origin is considered as free-riding (see, eg, Court of Naples, July 8 1996, in Il dir ind, 1996, 1016 ff; Court of Appeal of Bologna, June 24 1996, in Giur ann dir ind, 1997, No 3598; Court of Modena, August 17 1993, ibid, 1993, No 2990; Court of Modena, April 30 1991, ibid, 1991, No 2662; Court of Appeal of Genova, July 4 1990, ibid, 1990, No 2631). Further, Article 30 of the Code of Industrial Property accorded protection to all names which met the requirements of Article 29, regardless of whether they had obtained protection through ad hoc legislation. These requirements are more limited than those provided by the Lisbon Agreement ('milieu géographique' is understood as a link between the objective characteristics of the product and the geographical area - this difference is all the more relevant as, when applying the agreement, the Italian courts have always checked on a case-by-case basis whether this 'milieu' exists; see, in particular, Supreme Court, November 28 1996, No 10857, in Giur ann dir ind, 1996, No 3565, and Supreme Court, September 10 2002, No 13168, ibid, 2002, No 4337), it being sufficient, just as with the Community GI, that only the reputation of the product be linked to the area, as provided by the TRIPs Agreement.

However, with the reform of the Code of Industrial Property by Legislative Decree No 131/2010, Article 30 was rewritten in such a way that it is virtually identical to Article 13(1)(a) of Regulation 1151/2012. Now, all designations of origin in every field (and not only those for agricultural products registered at the Community level) are protected in Italy against any unauthorised use which “unduly exploits the reputation of the protected name” (ie, against parasitical exploitation) and against deceptive uses. It should also be noted that the amendment of Article 11 of the code now allows the use in trade of geographical names, even if they are registered as collective trademarks, provided that said use complies with fair practices.

In all cases, parasitism marks the extent and the limit of protection. This demonstrates the progressive coming together of the rules on designations of origin and those on trademarks, which has occurred in relation not only to protection but also to the primary importance attributed to the fact that the sign must not mislead (this has always been fundamental for designations of origin, and has now also become the keystone of trademark law), with a sort of common law for commercial signs thus being created. Naturally, this does not mean that there is a uniformity of rules for signs of different types, but most certainly a common denominator between them (see Galli, Codice della proprietà industriale: la riforma 2010 (Milan, 2010, p 19 ff)).

This coming together also indicates a possible path towards the harmonisation of the rules at the international level, creating the conditions for overcoming the current divergence between the position of EU member states and that of non-EU member states, especially the United States and Asian countries. The World Congress of the International Association for the Protection of Intellectual Property, held in Gőteborg in October 2006, passed a resolution which proposed a ban on public deception and undue exploitation of commercial reputation as a guideline for resolving, at the international level, frequent conflicts between trademarks and designations of origin. It is extremely significant that this proposal was also approved by the North American delegates, thus indicating a possible path towards harmonisation and a workable strategy for settling such conflicts on the basis of current rules.

The amendments to the Code of Industrial Property introduced by the 2010 reform may also permit the legitimate exploitation of values inherent in 'significant' geographical names, in particular by means of licences (from this perspective, the new wording of Article 19 on the trademarks of public territorial bodies is important; the article states that "the exploitation of a trademark for commercial purposes may be exercised directly by the municipality through merchandising activities, with the relative proceeds going to the financing of institutional activities or to covering past deficits of that body"). The new provisions allow consortiums protecting designations of origin and public territorial bodies to use geographical names and other symbols connected to the territory as instruments to valorise the positive externalities linked to the renown of that territory. Not only would all forms of free-riding and parasitical exploitation of this reputation be forbidden, but such reputation would also be positively monetised, in particular by allowing these signs to be used by undertakings operating in the territory, with precise limits being imposed on them in order to prevent the signs from becoming a source of deception. This would act as a driving force for the development of local initiatives in that area.

Naturally, the consolidated rights of third parties are excepted, even with regard to the non-distinctive use of these signs, although it cannot be ruled out that changing public perceptions may lead to such rights lapsing or allow various ways of exploiting signs with a distinctive function. The key element, once again, will be the public perception - the decisive element both for establishing whether a sign is protectable and for defining its scope of protection. This is fully in line with the indications of Community law.

This represents a new balance between exclusive rights, competition and contracts in which protection is given only to what really requires protection, in the knowledge that rules are intended to regulate real situations and that their justification is strictly connected to the human perception of such situations.

Cesare Galli, IP Law Galli, Milan