Legal Analyses written by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.

Legal Analyses written by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.

2002 International Law Update, Volume 8, Number 1 (January)

FORUM NON CONVENIENS

In dispute between BCCI and Pakistani State Bank over $50 million loan, Second Circuit remands to district court for forum non conveniens analysis where Pakistan may be alternative forum and Pakistani banking laws changed while case was pending in Second Circuit

The following case involves the Bank of Credit and Commerce International Overseas Limited (hereinafter BCCI), one of a group of closely affiliated international banks known as the BCCI group. When the financial group collapsed in 1991, bank regulators seized the bank’s assets and imposed court supervision. In 1997, the bank’s court-appointed fiduciaries brought an action in the Supreme Court of New York against the State Bank of Pakistan (SBP), seeking repayment of a $50 million dollar loan made by BCCI to the SBP. The SBP first removed the case to federal district court, and then moved for dismissal under the forum non conveniens doctrine, arguing that Pakistan would be the more appropriate forum.

In opposition, BCCI argued that a nonwaivable 3-year statute of limitations would bar the action in Pakistan. Even if the case could somehow proceed, it could face a delay of up to 25 years, given the back-up in the Pakistani court system. The SBP, in turn, contended that the Pakistani Banking Companies Act of 1997 would revive the case, provide a legal claim, and permit expedited processing. Thus, the Pakistani courts could decide the case in seven to ten years. BCCI countered by arguing that the Banking Act would not revive the claim because the statute of limitations had already barred the claim at the time of the Act’s enactment and because BCCI would not qualify under the Act as a “banking company.”

The District Court granted the motion to dismiss on forum non conveniens grounds, subject to three conditions. First, SBP would have to agree in writing to waive any statute of limitations defense that might be available to it in the Pakistani Courts. Second, the Pakistani courts must not decline to hear the case on statute of limitation grounds. Finally, the SBP would have to consent in writing to allow BCCI to enforce any judgment received in a Pakistani Court in a country other than Pakistan. The SBP agreed to the first and third conditions.

BCCI, however, appealed. The U.S. Court of Appeals for the Second Circuit vacates and remands so that the district court can take into account certain subsequent changes in Pakistani law. The day before the appellate argument in this case, the SBP filed a letter stating that Pakistan had enacted a new banking statute that modified the Banking Act of 1997. According to the letter, the new statute would allow the Pakistani Banking Court (PBC) to entertain a case already barred by limitations if the plaintiff satisfies the PBC that it had sufficient cause for not filing the case within the statutory limitations period.

BCCI argued that the appellate court should send the case back to the district court so that it could assess the impact of the changes in Pakistani law on the forum non conveniens issue. BCCI noted in particular the following aspects that required analysis: (1) the effects of the change in the law’s provision relating to statutes of limitations; (2) the replacement of the terms “customers” and “finances” with “borrower” and “loan,” respectively (according to BCCI, the new law would not apply to BCCI, to SBP or to the transaction at issue); and (3) the replacement of the concept of “interest” with the concept of “cost of funds” to the financial institution (BCCI contended this change bars it from recovering any interest in connection with its claim). SBP argued to the contrary that the Court of Appeals should itself analyze the impact of the new Pakistani law.

The Court applies forum non conveniens analysis, beginning with the existence of an alternative forum. Such a forum is adequate if: “(1) the defendants are subject to service of process there; and (2) the forum permits ‘litigation of the subject matter of the dispute.’” [Slip op. 9] In this case, however, the district court relied heavily on the original banking act in concluding that it would apply to this matter and that the act would revive the action under the relevant statute of limitations. In the meantime, however, the law has changed and the district court’s finding of an adequate alternative forum does not rely on current law. Therefore, the Court remands to the district court to consider the implications of the new law for the forum non conveniens analysis.

Finally, the Court clarifies the type of ruling that a district court must make when faced with the question of the adequacy of an alternative foreign forum where there are unsettled issues of foreign law. According to the case law, a district court may dismiss on forum non conveniens grounds even though it cannot make a definitive finding as to the adequacy of the foreign forum “if the court can protect the non-moving party by making the dismissal conditional.”

“This case law does not, however, excuse the district court from engaging in a full analysis of those issues of foreign law or practice that are relevant to its decision, or from closely examining all submissions related to the adequacy of the foreign forum. [Cit.] If, in the end, the court asserts its ‘justifiable belief’ in the existence of an adequate alternative forum, it should cite to evidence in the record that supports that belief. In doing so, the district court should keep in mind that it remains the movant’s burden to demonstrate the existence of an adequate alternative forum.” [Slip op. 14]

Furthermore, the lower court should add a condition regarding the possible congestion in the foreign court. In this case, “[t]he district court seems to have, in part, assuaged its concerns on the subject of delay by assuming that the Banking Court will hear the case. [Cits.] State Bank supports this assumption. ... We do not believe, however, that the matter should be left uncertain. Accordingly, the district court, if it decides to dismiss, should condition dismissal on the Banking Court’s accepting jurisdiction over this case. In specifying this condition, we do not mean to impose any requirement on the Banking Court, a step that would be beyond our authority. We are simply requiring the district court to permit BCCI Overseas to restore this case to the district court’s docket in the event that the Banking Court determines that it lacks jurisdiction.” [Slip op. 12]

Citation: Bank of Credit and Commerce Int’l (Overseas) Ltd. v. State Bank of Pakistan, 273 F.3d 241 (2nd Cir. 2001).

HAGUE CONVENTION (EVIDENCE)

English Court of Appeal rejects request of New York state court under Hague Evidence Convention to assist it in obtaining discovery of testimony and unparticularized documents from third-party witnesses and banks in U.K.

The sister companies of Genira Trade & Finance Inc and Binzer Enterprises Corporation (Genira and Binzer) (plaintiffs) brought an action in the Supreme Court of the state of New York against Refco Capital Markets Limited and Refco Group Limited (Refco or defendant). For eighteen months they had an account with Refco, during which time plaintiffs engaged in high risk “Brady Bonds” and other transactions with Refco. Mr. Ramlal Melwani (RM) had not only introduced plaintiffs to Credit Suisse (First Boston) Ltd. (CSFB) and Standard Bank (London) Ltd.(SBL) (collectively, the Banks) but also to Refco. Plaintiffs alleged that RM had told them that CSFB and later Refco would pay him a small fraction of the spread between the bid and asked price for each transaction according to industry custom and practice.

When Refco began to demand high margins, however, plaintiffs refused to pay and Refco shut down their accounts. In plaintiff’s original breach of contract action against Refco in the New York courts, a deposition of RM, a non-party, turned up evidence that Refco had certain commission or profit-sharing deals with RM and with entities controlled by RM’s family members (the Melwani Entities). Plaintiffs then abandoned their contract claims and sought leave to plead claims of fraudulent dealings.

Their amended pleadings claimed that the sharing arrangements between Refco and the Melwani Entities were improper. Thus, the payments made to the Melwani Entities were inducements or kickbacks to make it profitable for Melwani Entities to bring customers to Refco and to trade through Refco. With Refco’s agreement, and to further boost the amounts that he and his accomplices would receive as revenue sharing, RM allegedly raised the sums plaintiffs paid in buying Brady Bonds and “When Issued Rights” and cut back the amounts plaintiffs received in selling those securities.

Refco opposed the amendments. It argued that they would require more discovery from RM and from the Banks to bring out that the fee arrangements between the Banks and the Melwani Entities were about the same as those between Refco and the Entities and accorded with normal trading standards. This further discovery would have to seek production of additional relevant documents from third‑parties that would show the fees claimed and/or earned by Melwani, Investment Services, and/or Dimensions (two Melwani Entities) through entities other than Refco Capital.

The New York court granted plaintiffs leave to amend, subject to payment of the further costs of defendant’s discovery. In June 2000, Refco asked that court to issue Letters of Request addressed to the Senior Master of the Supreme Court of Judicature (Queens Bench Division) under the Convention on the Taking of Evidence abroad in Civil or Commercial Matters, 23 U.S.T. 2555, T.I.A.S. 7444 (The Hague, 1970).

In substance, the letters asked the Master to order the depositions of RM and his father (HM) and depositions of bank officials about the contents of relevant records from the Banks. The Senior Master ordered the production of the documents as against the Melwanis, Investment Services (a Melwani company) and the Banks.

In May 2001, the Banks moved to have the order set aside. The major grounds were (1) that the request was for discovery and not solely for evidence at trial; (2) that the documents were not separately described as particular documents; (3) that the lower court should not have been satisfied that the witnesses could give relevant evidence admissible in New York; and (4) that the list of topics was open‑ended. By consent, the Senior Master transferred the matter to a High Court Judge. In July 2001, the Judge turned down the requests for evidence as too general and as not authorized by the Evidence Act of 1975.

Refco obtained review in the Court of Appeal (Civil Division) but that Court refuses the appeal. The Court preliminarily laments the failure of American lawyers to research the limits on English domestic discovery. “Once again time and money is being spent in the English courts over Letters Rogatory requesting the English court to order the production of documents and oral deposition[s] from third parties to litigation in the United States of America. That time and money would be unnecessary, if those seeking the request from the United States Court appreciated the differences between the attitude of the United States Courts to the making of discovery orders against non‑parties, and the attitude of the English court to the making of such orders.”

“The United Kingdom, when becoming parties to the Hague convention concluded in 1970, registered a reservation pursuant to Article 23 which became enshrined in the Evidence (Proceedings in Other Jurisdictions) Act 1975 making it clear that discovery against non‑parties was something the English court would not provide because it simply was not part of its procedure. It is only that Act which gives the English Court the jurisdiction to make orders to assist foreign courts. A number of authorities of the House of Lords since the coming into force of that Act have emphasised the position. But still much time is taken up in our courts trying to give effect to Letters of Request, problems in relation to which could have been avoided if proper steps had been taken to bring to the attention of the foreign court the constraints under which the English court operates.” [para. 1]

It is fundamental, the Court declares, that the English courts should make every effort allowed by English law to assist American courts in obtaining evidence located in the United Kingdom. In some instances, this may sometimes involve a judicial modification of the request. “The court, so far as documents are concerned, can by application of the blue pencil identify particular documents, and so far as oral testimony is concerned make it subject to terms that for example the examination of witnesses shall be for the purpose only of eliciting and recording testimony appropriate to be given at trial and that no question may be asked of the witness that in the opinion of the examiner is not a question of the nature that could properly be asked by counsel examining a witness‑in‑chief at a trial before the High Court of England and Wales.” [para. 30]

A major difficulty here is the lack of particularity in the identification of documents sought as required by the Evidence Act. In the Court’s view, this is not even a compendious description of actual documents as approved in prior cases. “For that to be so, ... the various categories would have to describe documents that existed rather than conjectural documents. It seems to us plain that they do not. For example, in relation to the first category, [seeking s]pecific agreements between the Banks and a variety of different entities or persons relating to payment of fees or commission requested from the Banks and the Melwanis alike, is a request to search for documents and disclose; it is not an identification of particular documents which are known to exist and which should be produced. To put it another way, it is not a request for the agreements, it is a request for any or all. The same point can be made in relation to the other three categories.” [para. 35]

“But if no order for the production of documents can be made at this stage, then the primary basis on which Refco desired and persuaded the New York court to have Bank witnesses provide a deposition, i.e., to be examined about the documents, has disappeared. This was in reality a typical United States style discovery deposition which was being requested and that is an exercise which the English Statute simply does not allow.” [para. 37]

Finally, it would not be feasible to treat the requests as for perpetuation of admissible evidence for a foreign trial rather than as discovery. Thus, there are strong doubts as to the admissibility of any evidence about what RM charged the Banks or the Melwani Entities. Whether or not the third parties charged fees higher or lower than, or similar to, those Plaintiffs complain of does not go very far toward determining whether they were reasonable or customary charges or whether there was fraud. For this, defendant would seemingly need the testimony of an expert in the area of English banking or investments.

“We do not think it should be the function of this court to redraft Letters of Request where there are serious doubts about the admissibility of the evidence. That is particularly so where it does not appear that the New York court has considered precisely what evidence is being sought for the trial, or its likely weight if it were obtained. Accordingly this is a case where it seems to us clear that the order so far as the Banks were concerned was rightly set aside by the judge. This is a case where if further Letters of Request are to be made they should only be made after further consideration by the New York court.” [paras. 44-45]

Citation: In the Matter of the Evidence (Proceedings in Other Jurisdictions) Act 1975 ... and in The Matter of a Civil Matter Now Proceeding Before the Supreme Court of the State of New York, County of New York Entitled: Genira Trade & Finance Inc. v. Refco Capital Markets Ltd., 2001 WL 1347093 (CA), [2001] E.W.C.A. Civ. 1733 [Eng. Ct. App. (Civ. Div.) November 21, 2001].

INTERNET

In “cybersquatting” case involving internet domain names, First Circuit holds that U.S.’s Anticybersquatting Consumer Protection Act grants federal courts jurisdiction to override findings of World Intellectual Property Organization (WIPO) dispute resolution policy

This case raises an important issue of first impression, namely, whether a domain name registrant who lost in a World Intellectual Property Organization (WIPO) proceeding pursuant to its Uniform Domain Name Dispute Resolution Policy (UDRP) may challenge this result in federal court. Under 15 U.S.C. Section 1114(2)(D)(v) of the U. S.’s Anticybersquatting Consumer Protection Act (ACPA), it is provided in part that “A domain name registrant ... may ... file a civil action to establish that the registration or use of the domain name by such registrant is not unlawful ...”. Obtaining a judicial declaration that plaintiff did not violate the ACPA and getting an injunction forcing a transfer of the disputed domain name back to him, would seemingly overturn the result of the earlier WIPO proceeding.

[Editorial Note: “Cybersquatting” or “cyberpiracy” or “domain name hijacking” denotes a practice whereby someone buys a particular domain name with the intention of selling it to the trademark holder for profit.]

In August of 1998, one Jay Sallen registered a primary Internet domain name with Network Solutions, Inc. (“NSI”) under the name “corinthians.com.” In addition to being having a New Testament context, “Corinthiao” happens to be the name of a popular and successful soccer franchise in Brazil. One year later, Sallen contacted agents of Corinthians Licenciamentos LTDA (“CL”) of Brazil, the exclusive licensee of Corinthians’ intellectual property. According to Sallen, a number of Brazilians had gotten in touch with him more than once about buying corinthians.com. He had decided, however, that it would be in CL’s best interest to own the domain name. CL responded with a “cease and desist” letter. At some point, Sallen posted biblical material on the corinthians.com website. CL alleges that Sallen had posted this material after he had gotten the “cease and desist” letter. On the other hand, Sallen claims that he had posted this material before any dispute arose over the domain name.

By default, Sallen’s registration agreement is subject to the UDRP. Moreover, the UDRP only applies to allegations advanced by a third-party trademark holder that the registrant of the domain name in question has engaged in “cybersquatting” activity. To decide this controversy, the registrant and the third party submit to an administrative dispute resolution service provider which the Internet Corporation for Assigned Names and Numbers (“ICANN”) has authorized to decide such matters. In order to prevail, the complainant has to establish three elements: (1) that the registrant’s domain name is “identical or confusingly similar to a trademark or service mark in which the complainant has rights;” (2) that the registrant lacks any rights or legitimate interests in the trademarked name; and (3) that the registrant has registered and used the domain name in bad faith.

On May 18, 2000, CL filed a complaint with the WIPO, alleging the above three elements. The WIPO concluded (1) that “Corinthians” and “Corinthiao” are phonetically nearly identical, (2) that Sallen did not use or prepare to use the domain name in connection with a genuine and authentic offering of goods or services before he received the “cease and desist” letter, and (3) that Sallen was not “making a legitimate noncommercial or fair use of the domain name without intent for commercial gain or to misleadingly divert customers.” Finally, the panel declared that Sallen had bought the domain name in bad faith. It thus ordered the transfer of the ownership of corinthians.com to CL.

Sallen next filed a complaint in federal court, seeking a judicial declaration that his registration and use of corinthians.com was not impermissible under the ACPA. Sallen further tried to show that he was entitled to retain ownership of the disputed domain name. CL moved to dismiss Sallen’s claim, arguing that the district court lacked subject matter jurisdiction because Sallen requested a declaration of his rights under the ACPA despite the absence of CL’s intent to sue. The district court agreed that, without the threat of suit, there was no “case or controversy,” and thus no federal jurisdiction. Sallen appealed.

The U.S. Court of Appeals for the First Circuit reverses. The Court finds that there clearly is federal jurisdiction over these claims. CL argued that, although Sallen had notified CL of his claims, “Corinthians” is registered only with the Brazilian Institute of Industrial Property, and not as a trademark with the U.S. Patent and Trademark Office (PTO). Since CL is not a “mark holder”, Sallen subsequently failed to satisfy his obligation under 1114(2)(D)(v) to notify the “mark holder.” The Court rejects CL’s argument. CL appears to have engaged in the very practice of “reverse domain name hijacking” that subsection (D)(iv) seeks to discourage. The purpose of subsection (D)(iv) is to ensure that trademark holders do not abuse anti-cybersquatting provisions to take domain names from non-infringing, rightful registrants.

In the ACPA, Congress has in fact provided a cause of action to override UDRP decisions. Under Section 1114(2)(D)(v), registrants such as Sallen have an affirmative cause of action to recover domain names lost in UDRP proceedings. The statute clearly states that a registrant whose domain name has been “suspended, disabled, or transferred” may bring an action for a declaration that the registrant is not in violation of the Act, and for an injunction returning the domain name. Therefore, the Court reverses and remands the case for a determination according to ACPA.

Citation: Sallen v. Corinthians Licenciamentos Ltda., 273 F.3d 14 (1st Cir. 2001).

POLITICAL QUESTION

Federal Circuit finds that Korean citizens lack standing to enforce U.S. agreement with Korea to compensate Korean veterans of Vietnam conflict and that case involves “political question”

In 1966, through a letter from the then-Ambassador to Korea, Winthrop B. Brown, to the Korean Minister of Foreign Affairs, the U.S. allegedly agreed to provide military and economic assistance to Korea, as well as compensation for death and disability for Korean casualties suffered in Vietnam. Pursuant to this commitment transmitted through Ambassador Brown, the U.S. allegedly paid death and disability payments to the Republic of Korea, through the Minister of National Defense, of $10.5 million. Two individuals, Kang Joo Kwan, as representative of Korean veterans of the Vietnam conflict, and Se Jeik Park, for 270 members of the Korean National Assembly, claim moneys due under that commitment. Their claims are seemingly based on Agent Orange exposure and late-developing illnesses.

The district court dismissed the Republic of Korea as a party, and found that the plaintiffs lacked standing to enforce the Brown commitment, and that their claims involve non-justiciable political questions. The plaintiffs appealed. The U.S. Court of Appeals for the Federal Circuit finds that Kwan and Park lack standing to enforce a government-to-government obligation, and that their claims encompass non-justiciable political questions.

First, the Court explains that “[w]hen the foundation document is an agreement between governments, non-governmental entities can not ordinarily challenge either their interpretation or their implementation, in the absence of express authorization for such private action. ... ‘A treaty is primarily a compact between independent nations. It depends for the enforcement of its provisions on the interest and the honor of the governments which are parties to it. If these fail, its infraction becomes the subject of international negotiations and reclamations, so far as the injured party chooses to seek redress, which may in the end be enforced by actual war. It is obvious that with all this the judicial courts have nothing to do and give no redress.’” [Slip op. 5] Since the Brown Commitment was informal and not legislatively implemented, it cannot be judicially enforced.

In particular, the appellants argued that prior cases have determined that treaties can provide a right of action. The Court, however, points out that the cases referred to by the appellants did not involve the enforcement of a political promise. Instead, they dealt with a court’s jurisdiction over a foreign defendant in extradition proceedings, or the application of property and inheritance treaties.

Finally, appellants suggest that the Brown Commitment be read as a contract with the Korean plaintiffs as third party beneficiaries. The Court explains that “¼the appellants cite no authority, and we know of none, whereby an individual has been found entitled to judicial enforcement of a government-to-government agreement on the legal theory that they are third party beneficiaries of the agreement. The district court ruled that ‘the commitment by Ambassador Brown was made on behalf of the United States to the government of the Republic of Korea and not to the individuals¼.” [Slip op. 8-9].

The payment made to the Korean Ministry further shows that the Brown Commitment was intended to be a government-to-government agreement. Thus, the matter does not implicate fundamental liberty interests and personal rights.

Finally, the Court reviews the appellants’ standing. The determination of standing depends on whether Korea formally protested a violation of the individuals’ rights under the Brown Commitment. The Court notes that the appellants presented a letter from Korea to the U.S. State Department that raised the issue of additional compensation for Agent Orange injuries. The district court, however, did not consider this letter an “official protest.”

Compliance with the Brown Commitment is therefore a matter of foreign policy and foreign relations, and not a matter for the courts to decide.

Citation: Kwan v. U.S., 272 F.3d 1360 (Fed. Cir. 2001).

WORLD TRADE ORGANIZATION

WTO Appellate Body partially reverses earlier WTO Panel decision in dispute over trademarks of confiscated Cuban businesses

The Appellate Body of the World Trade Organization (WTO) has reversed the earlier Panel decision in the U.S.-EC trademark dispute involving the ownership of the trademark “Havana Club” for rum. A Cuban family originally owned the “Havana Club” mark but they abandoned it in 1973. A company acquired it in 1976 and sold it to Pernod-Ricard, which is engaged in a joint venture with a Cuban company to market “Havana Club” rum.

The European Union (EU) brought its complaint in July 1999, claiming that U.S. law denied court access to trademark owners seeking to assert their intellectual property rights. The dispute focused on Section 211 of the U.S. Omnibus Appropriations Act [Pub.L. 105-277, Section 101(b), 112 Stat. 268]. It concerns trademarks and other commercial designations that are the same as, or substantially similar to, those related to businesses or assets confiscated by the Cuban Government on or after January 1, 1959. Section 211(a)(2) provides that “[n]o U.S. court shall recognize, enforce or otherwise validate any assertion of rights by a designated national based on common rights or registration obtained ... of such a confiscated mark, trade name, or commercial name.” Congress reportedly put this section in the Act at the request of Bacardi, Ltd., a Bermuda company, that wished to bar Havana Club Holdings (HCH) from enforcing the “Havana Club” trademark in the U.S.

The original Panel agreed with the EU that Section 211 violated the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and that Section 211 should not apply where the trade mark owner has abandoned the mark. Based on the Panel report, Pernod-Ricard could enforce the trademark in U.S. courts, and challenge Bermuda-based Bacardi over use of the Havana Club brand name.

Both the EU and the U.S. appealed. The Appellate Body essentially upholds the 1998 U.S. law which bars American courts from enforcing Cuban brand names for products of companies that were seized by the Cuban government after Fidel Castro took power.

In particular, the Appellate Body: (1) upholds the Panel’s findings that Sections 211(a)(1), 211(a)(2), and 211(b) are not inconsistent with TRIPS; (2) finds that Section 211(b) is not inconsistent with Article 42 of TRIPS; (3) rules that Section 211(b) is inconsistent with Article 2.1 of TRIPS in conjunction with Article 2(1) of the 1967 Paris Convention and Article 3.1 of TRIPS (4) reverses the Panel’s findings regarding original owners and concludes that, in relation to trademarks, Sections 211(a)(2) and (b) are inconsistent with Article 4 of TRIPS; (5) reverses the Panel’s finding in paragraph 8.41 that TRIPS does not apply to trade names and holds that WTO Members do have an obligation under TRIPS to provide protection to trade names.

Thus, the U.S. must still make changes to bring its law into conformity with the TRIPS Agreement. The interpretation of the Appellate Body decision is difficult because it does not state how the U.S. would have to change the law to make it compliant. The U.S. Trade Representative issued a press release, declaring that “... [T]he ruling does not call into question the distinction that the U.S. law in question ... draws between original trademark owners and companies that acquire a trademark as part of a government confiscation. In another key finding ... the Appellate Body ... also overturned an earlier WTO panel report finding that section 211 denied parties fair and equitable judicial procedures to enforce trademark rights. It found, however, that the law’s treatment of U.S. and Cuban companies is contrary to the national treatment and most-favored-nation obligations under WTO rules. Today’s report suggests that in the absence of discrimination a law along the lines of section 211 would be consistent with WTO rules, and therefore those trademark owners who currently enjoy protection under section 211 could continue to enjoy that protection.”

Citation: United States - Section 211 Omnibus Appropriations Act of 1998 (WT/DS176/AB/R) (2 January 2002); U.S. Trade Representative press release 02-01 (January 2, 2002); The Washington Post, page E2 (January 3, 2002). Appellate Body report is available on WTO website “www.wto.org.”

TRADEMARKS

European Court of Justice rules that Procter & Gamble’s diaper product, BABY-DRY, qualifies for registration as Community trademark because, even to English speakers, it consists of distinctive combination of otherwise ordinary descriptive terms

In April 1996, Procter & Gamble (P&G), a corporation with its headquarters in Cincinnati, Ohio, applied to the Office for Harmonisation in the Internal Market (OHIM) to register “BABY-DRY” as a European Community trademark. It would cover disposable diapers made of paper or cellulose as well as diapers made out of textile. The OHIM’s examiner rejected the application in January 1998.

The First Board of Appeal next dismissed P&G’s appeal. It ruled that BABY-DRY merely designated the intended purpose of the goods and lacked distinctive character, thus making it ineligible for registration under Article 7(1)(b) and (c) of Regulation No. 40/94 (the Regulation). The Board, however, declined to consider P & G’s contention that, under Article 7(3) of the Regulation, the trade mark had acquired distinctiveness following its use because P&G had not raised this point before the examiner.

P&G then took the matter to the Court of First Instance (CFI). That Court held that a mark using words referring to the intended purpose of the goods is “intrinsically incapable of distinguishing the goods of one undertaking from those of another, even if the ground for refusal obtains only in part of the Community.” That is, that the term BABY-DRY merely informs the consumer that its function is to keep babies dry but without a distinguishing term.

On the other hand, the Court concluded that the Board had erred by failing to consider applicant’s offer to show that BABY-DRY had acquired a distinctive character through use under Article 7(3) of the Regulation merely because applicant had not made this point to the examiner. The CFI therefore annulled the contested decision.

In the view of the ECJ, the Regulation does require a distinctive character under Article 7 but does not give the trade mark owner a monopoly over the honest use of the component terms as Article 12 points out. “It is clear from those two provisions taken together that the purpose of the prohibition of registration of purely descriptive signs or indications as trade marks is, as both Procter & Gamble and the OHIM acknowledge, to prevent registration as trade marks of signs or indications which, because they are no different from the usual way of designating the relevant goods or services or their characteristics, could not fulfil the function of identifying the undertaking that markets them and are thus devoid of the distinctive character needed for that function.” [para. 37]

Moreover, a tribunal must determine descriptiveness based on the mark as a whole. “As regards trade marks composed of words, such as the mark at issue here, descriptiveness must be determined not only in relation to each word taken separately but also in relation to the whole which they form. Any perceptible difference between the combination of words submitted for registration and the terms used in the common parlance of the relevant class of consumers to designate the goods or services or their essential characteristics is apt to confer distinctive character on the word combination enabling it to be registered as a trade mark.” [para. 40]

Finally, Article 7(1) of the Regulation on purely descriptive language applies even if it is nondistinctive in one part of the EC. “In order to assess whether a word combination such as ‘BABY‑DRY’ is capable of distinctiveness, it is therefore necessary to put oneself in the shoes of an English‑speaking consumer. From that point of view, and given that the goods concerned in this case are babies' nappies, the determination to be made depends on whether the word combination in question may be viewed as a normal way of referring to the goods or of representing their essential characteristics in common parlance.”

“As it is, that word combination, whilst it does unquestionably allude to the function which the goods are supposed to fulfill, still does not satisfy the disqualifying criteria set forth in paragraphs 39 to 42 of this judgment. Whilst each of the two words in the combination may form part of expressions used in everyday speech to designate the function of babies' nappies, their syntactically unusual juxtaposition is not a familiar expression in the English language, either for designating babies’ nappies or for describing their essential characteristics.”

“Word combinations like ‘BABY‑DRY’ cannot therefore be regarded as exhibiting, as a whole, descriptive character; they are lexical inventions bestowing distinctive power on the mark so formed and may not be refused registration under Article 7(1)(c) of Regulation No 40/94.” [paras. 42-44]

The ECJ therefore annuls the judgment of the CFI and orders the OHIM to pay costs.

Citation: Procter & Gamble Company v. Office for Harmonisation in the Internal Market, Case C-383/99 P, 2001 Eur. Ct. Rpts. 0000 (Eur. Ct. Just. 20 September 2001).

TRADEMARKS

European Union issues comprehensive Regulation on trademarks that provides for simplified procedures and for uniform trademark protection throughout EU

With Council Regulation No 6/2002, the European Union (EU) has issued comprehensive rules for “Community Designs,” providing for simplified and uniform protection throughout the EU. [Editors’ Note: In the EU legal system, a “regulation” is directly applicable within the Member States and does not need further implementation in each Member State. By contrast, a “directive” would need transposition into each Member State’s national law to be effective.] This Regulation will enter into force on the 60th day of its publication, that is, on March 5, 2002.

The introduction to the Regulation notes that only the Benelux countries have a uniform design protection law. In all other Member States, design protection depends on national law. Thus, identical designs receive different protection in different Member States, which leads to trade disputes. Thus, the EU desired to create a Community design which is effective in each Member State through a single application made to the Office for Harmonisation in the Internal Market (Trade Marks and Design) (OHIM), or to the competent national authority.

The Regulation provides for both “short-term” and “long-term” protection, depending on the registrant’s business needs. For example, many designs have a short market life because they are part of a series of successive designs. Others may need long-term protection because they are durable and may remain unchanged for many years. If a design is registered according to this Regulation, it would be a “registered Community design.”

The Regulation defines “design” as “the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colors, shape, texture and/or materials of the product itself and/or its ornamentation”. (See Article 3). A design can only gain protection if it is “new” and has “individual character.” (See Articles 4-6).

The Regulation protects such a design for an initial period of five years, and allows for successive extensions up to 25 years. (See Articles 1 and 12). The owner can obtain some protection even without registration if it distributes the design to the public (“unregistered Community design”). The Regulation protects such a design for a period of three years from the date on which the design first went before the EU public. (See Articles 1 and 11).

Owners may apply for the protection of a Community design either at the OHIM or at the central industrial property office of a Member State. In the Benelux countries, the Benelux Design Office may process such applications. (See Article 35). The Annex to the Agreement establishing an International Classification for Industrial Designs, signed at Locarno on October 8, 1968, spells out the various types of design classifications. (See Article 40). The “Community Designs Bulletin” publishes all registered designs. (See Articles 49 and 73).

The Regulation grants special consideration to designs applied for under international agreements. For instance, designs for which applications have been filed under the Paris Convention for the Protection of Industrial Property, or the Agreement establishing the World Trade Organization (WTO), receive a right of priority of six months from the date of filing the first application. (See Article 41).

The Regulation also outlines procedures for resolving disputes including questions about whether a design is registrable. (See Titles V, VI, VII, VIII, IX). For example, the Member States are to create “Community design courts” that will handle disputes as to EU designs. (See Article 80). It provides for international jurisdiction over such disputes in the courts of the Member State(s) where the defendant is domiciled or has an establishment.

If the defendant has no such presence in the EU, jurisdiction lies with the courts of the Member State(s) where the plaintiff is domiciled or has an establishment. If neither the defendant nor the plaintiff has such a presence in the EU, plaintiffs are to file proceedings in the courts of the Member State where the OHIM has its seat. (See Article 82). In the course of a legal proceeding before a Member State design court, the court is to apply this Regulation. On all matters not covered by this Regulation, such as procedures, the Community design court may apply its national law, including its private international law. (See Article 88).

Citation: Council Regulation No 6/2002, 2002 O.J. of European Communities (L 3) 1, January 5, 2002.

U.S. publishes interim guidance on how financial institutions should comply with USA PATRIOT Act. The U.S. Department of the Treasury, Departmental Offices (DEPO), has published an interim guidance on how to comply with the anti-money laundering provisions of Sections 313 and 319(b) of the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism” (USA PATRIOT) Act of 2001 (Pub. L. 107-56) [see 31 U.S.C. 5318(j) & (k)]. Section 313(a) prohibits financial institutions from providing correspondent accounts for foreign “shell banks.” Section 319(b) requires financial institutions for foreign bank correspondent accounts to maintain records of the foreign bank’s owners and agents in the U.S. Citation: 66 Federal Register 59342 (November 27, 2001).

U.N. and Sierra Leone agree to set up war crimes tribunal. On January 16, 2002, the government of Sierra Leone and the United Nations entered into an agreement to create a special court to try persons accused of committing war crimes, crimes against humanity and other major breaches of international law during the government’s ten-year war with the Revolutionary United Front (RUF). The court will be set up in Freetown, the capital city, and is expected to try about twenty persons from RUF, such as Foday Sankoh, the leader of the rebel group accused of killing or hacking off the limbs of thousands of civilians. The United States has contributed $5 million to finance the court’s establishment and first year of operation. The day after the signing, government officials and RUF leaders had formally declared an end to the civil war and had witnessed the burning of weapons on a ceremonial bonfire. Since May 2001, more than 45,000 former members of the RUF, pro-government militias and other fighting groups had turned in these weapons to the U.N. Citation: The New York Times, Jan. 17, 2002, Late Ed. - Final, Section A, Page 8, Column 4, Foreign Desk; January 19, 2002, Late Ed. - Final, Id. (Byline: Reuters); U. S. Dept. of State, Office of Spokesman, January 18, 2002, Statement by Lynn L. Cassel, Acting Spokeswoman, dospress@lists.state.gov.

U.S. Department of State publishes list of reciprocating countries for family support obligations. The U.S. Department of State, Office of the Legal Advisor, has published the list of countries that have been declared reciprocating for the enforcement of family support (maintenance) obligations for U.S. residents. The countries are: Australia, the Canadian Provinces [of British Columbia, Manitoba, and Nova Scotia], the Czech Republic, Ireland, Poland, Portugal, and the Slovak Republic. These countries have established procedures through which U.S. residents can enforce support obligations. U.S. agencies participating in the program of Title IV-D of the Social Security Act must provide enforcement to those jurisdictions as if the request came from a U.S. state. The law also allows individual U.S. states to establish or continue reciprocating family or child support arrangements with foreign countries where there has not been any federal declaration. For more information, get in touch with the Office of the U.S. Central Authority for International Child Support Enforcement (OCSE), 370 L’Enfant Promenade SW, 4 Aerospace Building, Washington, D.C. 20447, Phone: (202) 260-5953, or the individual state IV-D Agencies. Citation: 66 Federal Register 58544 (November 21, 2001).

U.S. citizens win judgment against Iraq for Gulf War detentions. On December 6, 2001, the U. S. District Court for the District of Columbia handed down a $309 million judgment against the state of Iraq on behalf of twelve American nationals. Nine million dollars constitute compensatory damages and the rest are punitives. This is one phase of a case involving 172 U. S. citizens who were detained in Iraq or Kuwait at the outset of the Persian Gulf War. The largest of the twelve judicial awards, $1.75 million, went to a 53-year-old Montana native who had been a field superintendent at an Iraqi oil refinery. Iraqi forces held him for nearly two months, denying him insulin for his diabetes. He is now permanently disabled. The collection of these awards will be a difficult matter, since the U.S. government has apparently not made assets seized from state sponsors of terrorism available to pay off judgments such as this one. A few former hostages or victims of terrorism have obtained compensation through special acts of Congress. Citation: The Washington Post, Saturday, December 8, 2001, page A05 (by Neely Tucker, staff writer).

Capacity of EU to combat terrorism is strengthened. First, on December 4, 2001, the Council of Ministers and the European Parliament approved Directive 2001/97/EC to improve the money laundering Directive 91/308/EEC. The new Directive expands the existing Directive to include all proceeds from serious crimes. It imposes record-keeping requirements on additional persons such as external accountants and auditors, real estate agents, notaries, dealers in high-value goods, and casinos. Secondly, the EU has proposed a Council Framework Decision on combating terrorism (COM (2001) 521 final). It would require Member States to criminalize all acts of terrorism including the promotion of terrorist groups and interference with information systems. Third, the EU Council has issued a Common Position 2001/931/CFSP on the application of specific measures to fight all forms of terrorism. It targets specific terrorist entities, such as the Palestinian Islamic Jihad, the “Real IRA,” and the Revolutionary Nuclei. Fourth, the EU has proposed a Council Framework Decision on a European arrest warrant. (COM (2001) 522 final). Fifth, the EU Council issued a Common Position on combating terrorism on December 27, 2001 (2001/930/CFSP). It summarizes the EU’s position that all financial and other support for terrorist activities must be interrupted, and that the EU Member States must cooperate in this area. It urges the EU Member States to accede to existing terrorism-related international conventions. Finally, on December 27, 2001, the Council issued Regulation No. 2580/2001 that freezes the assets of listed persons, groups and entities with terrorist links. Cf. Council Decision 2001/927/EC. Citation: European Union in US news release No. 88/01 (November 20, 2001) [money laundering directive]; 2001 O.J. of European Communities (C 332E), 300, 305 (27 November 2001) [proposed framework on combating terrorism & extradition procedures]; 2002 O.J. of European Communities (L 344) 70, 83, 90, December 28, 2001 [Regulation 2580/2001, Decision 2001/927/EC, Common Position 2001/930/CFSP].

EU Decision authorizes Member States to renew provisions contained in FTN treaties with third countries that comport with EU law and policy. The EU Council has issued a Decision authorizing the automatic renewal of treaty obligations contained in Friendship, Trade and Navigation (FTN) treaties with third countries, including the U.S. The EU Member States had requested this Decision to avoid having their contractual and commercial relations with third countries interrupted. The Council is only authorizing renewals as to those matters that existing EU agreements do not cover. EU agreements under the Common Commercial Policy (see Article 133 of EU Treaty) now govern many of the issues dealt with in these FTN treaties. The Member States remain under a continuing duty to eliminate any incompatibility between such treaties and EU law. They may renew or keep in force the compatible aspects of those treaties listed in the Decision’s Annex until April 30, 2005. The listed treaties include American FTN treaties with Austria, Belgium, Germany, Ireland, Italy, and the Netherlands, as well as U.S.-U.K. trade agreements dating from the years 1815, 1818 and 1827. Citation: Council Decision 2001/855/EC, 2001 O.J. of European Communities (L 320) 13, December 5, 2001.

Canadian protection of personal data found compliant with exacting EU standards. In Decision 2002/2/EC, the European Commission finds that Canadian law provides enough protection of personal data to conform to the strict European data protection Directive 95/46/EC. Under this Directive, EU Member States must make sure that personal data gets transferred to third countries with an adequate level of data safeguards. The Decision notes that the Canadian Personal Information Protection and Electronic Documents Act of 13 April 2000 regulates the personal data use of private sector organizations. In the Commission’s opinion, the Act contains all the basic principles for adequate protection of such data. Thus, EU Member States may allow the transfer of personal data to Canada unless there are indications that some one there may misuse it. Citation: 2002 O.J. of European Communities (L 2) 13, 4 January 2002.

Improved Cambodian working conditions lead U.S. and Cambodia to extend textile trade agreement. With a new Memorandum of Understanding (MOU), the U.S. and Cambodia have agreed to extend their Bilateral Textile Agreement for an additional three years, until December 31, 2004. In recognition of Cambodia’s progress in improving labor conditions, the quota for most of Cambodia’s textile exports to the U.S. will be nine percent more than the scheduled six percent increase. The MOU includes additional incentives for Cambodia to further improve working conditions, with the goal of having it in “substantial compliance” with international labor standards. Citation: U.S. Trade Representative press release 02-03 (January 7, 2002).

German High Court bars Benetton’s “H.I.V. POSITIVE” magazine advertisement. The German High Court (Bundesgerichtshof, BGH) has upheld the prohibition of fashion manufacturer Benetton’s “H.I.V. POSITIVE” advertising campaign as anti-competitive. Appearing in the magazine “Stern,” the ad featured a photograph of a large human rear end with a blue stamp “H.I.V. POSITIVE.” A non-profit organization challenged that ad as anti-competitive and immoral. The Court agrees that the ad contravenes moral standards (sittenwidrig) within the meaning of Section 1 of the Unfair Competition Law (Gesetz gegen den unlauteren Wettbewerb, UWG). It also forfeits free speech protections (see Article 5 of the Basic Law (Grundgesetz, GG)) because it violates the dignity of people infected with AIDS (see Article 1 para. 1 GG). In the Court’s view, Benetton’s ad had no particular message and no specific intent, having been designed simply to attract attention and stir up emotions. To promote its clothing sales, it exploits the suffering of AIDS-infected people. Moreover, “Stern” breached its duty to review the ad beforehand for potential anti-competitiveness. Finally, the Court opines that allowing such ads may foster future ads that exploit the alleged disabilities or weaknesses of social, ethnic, religious or political groups. Citation: German High Court (Bundesgerichtshof), Urteil vom 6. Dezember 2001 - I ZR 284/00.

U.S. updates its U.S. World Heritage Program regulations. In 1973, the U.S. ratified the Convention concerning the Protection of the World Cultural and Natural Heritage, 27 U.S.T. 37, T.I.A.S. 8226. It set up an international listing program for important natural areas and cultural sites in countries around the world. The U.S. Department of the Interior, National Park Service, has issued an interim rule to correct Sections 7 and 9 of the U.S. World Heritage Program regulations [36 C.F.R. Part 73]. The changes eliminate the obsolete calendar for the preparation and submission of U.S. nominations to the World Heritage List, and replace outdated criteria for the nomination of sites. Citation: 66 Federal Register 57878 (November 19, 2001).

U.S. FDA tightens regulations for foreign drug companies. The U.S. Food and Drug Administration (FDA) has issued a final rule, effective February 11, 2002, requiring the registration of foreign drug establishments, along with corresponding changes for the listing of human drugs, animal drugs, biological products, and devices. The rule requires foreign establishments that import or distribute their products in the U.S. to register with the FDA and to designate a U.S. agent, pursuant to Section 417 of the Food and Drug Administration Modernization Act of 1997 (FDAMA). Citation: 66 Federal Register 59138 (November 27, 2001).

EU again modifies Afghanistan sanctions. The EU has again modified its sanctions on Afghanistan and freeze of Taliban resources. The most recent changes add the “Export Promotion Bank of Afghanistan” to the list of organizations whose funds are frozen, as well as several more individuals. Citation: 2001 O.J. of European Communities (L 320) 11, 5 December 2001 & (L 345) 54, 29 December 2001; 2002 O.J. of the European Communities (L 17) 52, 19 January 2002 & (L 20) 1, 23 January 2002.