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Retail & Intellectual Property: What's on the horizon?

Posted on 23 August 2023

Effective protection, exploitation and enforcement of valuable intellectual property rights is a recurring focus for the retail sector.  With a number of technological developments forcing rapid change across the sector, the following IP-related issues are worth keeping an eye on for all types of retailer:

Generative AI

Whilst AI has long been in use across the industry, the explosion in the use of generative AI in recent months has led to intense exploration of its opportunities, from supply chain management through to its use in producing website copy and advertising campaigns.

Whilst generative AI has vast potential to streamline processes, and to produce within seconds seemingly creative content, implementing a generative AI tool in your retail business gives rise to a number of IP issues (alongside other issues relating to data protection, discrimination, accuracy etc).

The IP issues include the risk of IP infringements in relation to inputs used to train the AI tools themselves (and potentially in prompts), as well as in outputs produced using the tools. There are also important aspects to consider in terms of the extent to which IP may be available to protect works generated using an AI tool and, if so, who would own those rights.  We discuss the key issues relating to generative AI and IP in this article, and are also tracking developments in a range of cases that have been brought before the Courts, including in the UK and US.

At the policy/legislative level, the UKIPO has been tasked with producing a code of practice in relation to IP rights and generative AI, expected for Summer 2023. The EU meanwhile is considering how best to deal with generative AI in its forthcoming EU AI Act, where the European Parliament has proposed that there should be transparency in relation to the use of copyright-protected works in relation to such tools. It will be interesting to see how these proposals fare during the trilogue discussions that form part of the EU legislative process

More generally, our guide to Generative AI deals with the various issues that need to be considered for both developers and adopters of generative AI solutions. 

Proposals to reform design law protection

Following the UK's departure from the EU, the UK Government has taken the opportunity to review the UK designs system to ensure it is 'fit for the future' and adequately incentivises innovation. In early 2022, the UK Intellectual Property Office (UKIPO) published a Designs Framework Survey and Call for Views to seek feedback from stakeholders to inform consideration of whether any legislative change was needed.

We explained in this article (on the Survey) and in this article (on the Call for Views) that the UKIPO was seeking views across three broad areas: new opportunities, future technologies and the digital environment and better regulation. We summarised the responses received here. Developments slowed as a result of the UKIPO having to focus on an intensive review of retained EU IP laws (including case law) as part of the passage of the Retained EU Law (Revocation and Reform) Act 2022.

Similarly, the EU is considering a comprehensive reform of EU design law. A number of the proposals, like in the UK, aim to modernise and future proof against technological advances such as the metaverse. We summarise the proposals in our article here. We can expect an update on the proposed legislation in the latter part of 2023.

The different and overlapping ways in which designs can currently be protected in the UK and EU presents complexity and uncertainty, alongside the risks of gaps in protection. As the UK and EU both carry out reviews of their respective design frameworks, it will be interesting to see how the respective proposals develop and interplay with one another. For example, a key issue for those in the retail sector is unregistered protection, and the current need for simultaneous first disclosure of products in the UK and EU, to ensure there are no gaps in unregistered protection. Clarity on parity of unregistered protection in both the UK and EU no matter the location of first disclosure will be welcomed as part of any legislative reform.

In this regard, it is worth noting that any remaining 'continuing unregistered designs' will cease to exist in the UK on 31 December 2023. Existing Unregistered Community Designs (UCDs) that were in place as at the end of the Brexit period remained protected as 'continuing unregistered designs' in the UK for the remainder of their term of protection (up to three years) after the end of the transition period.

The reform exercises present a unique opportunity to identify improvements in both systems. Design-led businesses and those in the retail sector at large are encouraged to participate in stakeholder discussions and consultations where possible. Developments are expected in the coming months.

Looking beyond the UK and EU, the Diplomatic Conference on the Design Law Treaty (DLT) is scheduled to be held by WIPO in 2024. The DLT aims to harmonise and simplify the process of applying for registered design protection via international design registrations. This will be of benefit to those seeking to obtain design registration in multiple territories. 

Potential reforms re parallel imports?

Another important area in which reform may be expected in the UK is in relation to parallel trade and exhaustion of IP rights. One of the most challenging issues to resolve following the UK's departure from the EU has been the approach to take in relation to imports of parallel goods into the UK, and the extent to which IP rights holders and their authorised licensees can prevent such trade.  

Previously the UK was part of the EU's so-called 'fortress Europe' which prevented the importation of goods from outside the EEA into the EU (which at that time included the UK) without the rights holder's consent (i.e., there was no concept of international exhaustion).

When the UK left the EU, the UK Government decided unilaterally to continue to participate in the EEA regime, meaning goods put on the market in the EEA could continue to be imported into the UK without requiring the consent of the relevant IP owner (EEA exhaustion). However, as the UK is now no longer in the EEA, the same does not apply for goods put on the market in the UK and imported into the EEA – in those circumstances, the rights holder can rely on their IP rights to prevent the importation. This so-called 'UK+ regime' was initially intended as a temporary measure but remains in place today.

In 2021, the UKIPO consulted on a future exhaustion framework in the UK seeking views from stakeholders on four options (see our overview of the consultation):

  • Maintain the UK+ regime – i.e., maintain unilateral participation in the EEA exhaustion regime
  • National exhaustion regime
  • International exhaustion regime
  • Mixed regime, comprising differing approaches for certain sectors, products and/or IP rights

Of the respondents to the consultation who expressed a preference, the majority favoured the current UK+ regime. However, many did so on the basis that the Government's consultation indicated that a national exhaustion regime (which would require rights holder consent to import goods from anywhere outside the UK, including the EEA) would not apply owing to its alleged incompatibility with the Northern Ireland Protocol. 

As we explained in our article here, the UK Government confirmed in January 2022 that it would not make any changes at that time, due to a lack of evidence. However, since that date, there have been press reports that the Government is revisiting the issue (see for example this article in The Financial Times) and so we have to expect that further developments on this very important and complex topic will resume in due course. Any change to the exhaustion of rights framework for the UK has the potential to affect many business sectors and consumers, including retail. As with the design reforms rights holders are encouraged to participate in further consultations, given previous concerns about gaps in the evidential base.

EU Digital Services Act

The EU Digital Services Act (DSA) has introduced a package of measures relating to online intermediaries, including improved mechanisms for the removal of illegal content. It will be fully in effect from February 2024, but provisions relating to certain designated 'Very Large Online Platforms' (VLOPs) and 'Very Large Search Engines' (VLOSEs) took effect on 25 August 2023. Included in the list of VLOPs are Amazon Store, Alibaba AliExpress, Google Shopping, and Zalando, as well as platforms such as Instagram, TikTok, Twitter, YouTube.  However, Amazon and Zalando are both challenging their designation as a VLOP.   

Whilst of course the DSA will not apply in the UK, UK-based providers may be in its scope, and also UK-based retailers may wish to take advantage of its provisions if faced with an issue with infringing content or products online in the EU. The DSA updates and incorporates aspects of the EU E-Commerce Directive. It provides updated tools in relation to notice and action mechanisms, redress mechanisms, trusted flagger status for rights holders, repeat infringer policies, and 'know your business customer' requirements.  We discuss the highlights of the DSA for IP enforcement in this article.

Address for service in relation to UKTM and Design registrations 

As part of the UK's withdrawal from the EU, the UK and EU agreed that, at the end of the Brexit transition period, existing registered EU trade marks and designs would be preserved in the UK in the form of what were called 'comparable UK rights'. For a period of three years, it was also agreed that it was not necessary to have a UK 'address for service' listed at the UKIPO for such comparable UK rights. This meant that existing EEA representatives could continue as the listed address for service. 

This period comes to an end at the end of 2023 and so, from 1 January 2024, it will be necessary to have a UK address for service when new contentious proceedings are brought involving these comparable UK trade marks or re-registered designs.

When contentious proceedings are brought involving such rights, the UKIPO will seek to obtain a UK address for service before serving any formal documents but, given the risk of proceedings succeeding by default, it is advisable to put in place a UK address for service for such rights now, i.e., before any proceedings are commenced.  We discuss the issues in more detail in this article. Please get in touch if you would like to discuss this further.

Forthcoming Case Law

A number of important IP cases are worth tracking in the coming months as they will impact on the retail sector, including the following:

  • Various Supreme Court decisions/hearings including Sky v SkyKick, as well as Lifestyle Equities v Ahmed (concerning directors' liability for IP infringements), and Lifestyle Equities v Amazon (looking at Amazon's liability for trade mark infringements on its platform).
  • Various Court of Appeal decisions/hearings including Lidl v Tesco (Tesco has sought permission to appeal the finding that its Clubcard logo infringed Lidl's trade mark and copyright), Swatch v Samsung (where Samsung has appealed the finding of infringement in relation to the availability of infringing watch faces on its app store) and Noco v Shenzhen Carku Technology (where Noco was found liable for making unjustified threats of patent infringement proceedings by submitting a complaint to Amazon, which led to Amazon de-listing certain Carku products).
  • The decision of the Intellectual Property Enterprise Court in Waterrower v Liking which will consider the extent to which copyright protection is available for functional designs under UK law post-Brexit, in this case an iconic award-winning design of a water rowing machine.  The case was heard in July 2023.
  • Various cases relating to lookalike products such as AU Vodka v NE10 Vodka (concerning the design of Vodka bottles) and Thatchers Cider v Aldi.
  • The EU General Court will hear argument in an important trade mark case for retailers concerning Iceland Foods' EUTM registrations for its ICELAND work mark and logo.


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