Microsoft power point comparative study of the main features of unfair competition and law of usa & uk [compatibility mode]
UNFAIR COMPETITION Sanjeev Kumar Chaswal LL.M. (IPR & ARB) M.S. Cyber Security & Cyber law
• A market economy allows and encourages competition between industrial and commercial organisations. As competitors are out to win, they may sometimes be tempted to use malicious means to gain an unfair advantage such as making a direct attack against a competitor or misleading the public to the detriment of a competitor.• Self-regulation, via associations of organisations, can play an important role by setting up a code of conduct or controlling practices, however, it often fails to be respected by participants or followed by judicial authorities.• In 1900, at the Brussels Diplomatic Conference for the Revision of the Paris Convention, Article 10 bis was added to the Convention to try and prevent unfair competition.
What is Unfair competition• As a general rule, any act or practice carried out in the course of industrial or commercial activities contrary to honest practices constitutes an act of unfair competition; the decisive criterion being “contrary to honest practices”. In Belgium and Luxembourg honest practices are sometimes referred to as “honest trade practices”, in Switzerland and Spain as “the principle of good faith” and in Italy as “professional correctness”.• It is not easy to find a clear-cut and worldwide definition of what constitutes an act contrary to honest practices. Standards of ‘honesty’ and ‘fairness’ may differ from country to country to reflect the economic, sociological and moral concepts of a given society
Behaviour classified as unfair competition• To prevent unfair practice certain actions are limited by law. Article 10 bis of the Paris Convention classifies unfair business practices into three broad categories:• Acts causing confusion.• Acts that are misleading.• Acts damaging goodwill or reputation.• t.
Acts causing confusion.• An act or practice, in the course of industrial or commercial activities, that causes, or is likely to cause, confusion with respect to another’s enterprise or its activities, in particular, the products or services offered by such an enterprise constitutes an act of unfair competition.• Even the likelihood of confusion having a detrimental effect comparable to actual confusion constitutes an act of unfair competition and this widely enlarges the scope of protection. For instance, a trademark, whether registered or not, or a product’s appearance may lead to confusion. Appearance of a product includes packaging, shape or other non-functional characteristic features of the products.
Acts that are misleading• A misleading act can create a false impression of a competitor’s product or services leading to the consumer, acting on false information, suffering financial damage.• Misleading acts can take the form of a statement giving incorrect indications or allegations about an enterprise or its products or services.• For example, misleading statements concerning the manufacturing process of a product may relate to a product’s safety and create a false impression.
Acts damaging goodwill or reputation• Reducing the distinctive character, appearance, value or the reputation attached to a product could damage another’s goodwill or reputation. For instance, any act that dilutes the effect of a trademark is considered unfair as it could destroy the originality and distinctive character of a trademark.• Other acts that could be classified as causing unfair competition include discrediting another’s enterprise or its activities, industrial or commercial espionage, and acting unfairly with respect to confidential information such as breach of contract or breach of confidence.
Protection against unfair competition• Protection against unfair competition is an ever-evolving notion that has to adapt to the evolution of trade, and the development of new principles and obligations for participants in the business market. Originally designed to protect the ‘honest businessman’, the scope of protection against unfair competition has now been enlarged to include protection of the customer. Nowadays laws against unfair competition aim to ensure fair competition in the interests of all concerned.• Under the Paris Convention, Member States are obliged to provide protection against unfair competition. This obligation is reinforced by Article 2 of the Trade-Related Trade- Aspects of Intellectual Property Rights (TRIPS) that obliges members of the WTO to comply with the Paris Convention. Convention.
What is Unfair Competition Law• Two potential meanings of the term „competition law“ competition law• Set of provisions ensuring that competition continues to exist in anti-trust law• Rules of fair practice in an existing market - unfair competition law. Both areas are generally distinct.• What is acts of competition:• The Acts done for the purpose of selling goods or providing services.• Unfair competition law addresses traders• In proceedings concerning unfair competition the defendant is generally a trader.• It may, however, protect consumers.• Some legal systems give locus-standi to consumer organisations in unfair competition proceedings.• Other legal systems distinguish between unfair competition law and consumer protection law.
What is Unfair Competition Law• Areas of unfair competition law – Focus: consumer protection – Misleading advertising – Aggressive advertising = Undue influence on consumers – Cold calling, e-mail spamming, ect. (some jurisdictions only) – Focus: protection of trade values – Damaging goodwill – Exploiting goodwill – Interference with contractual relations – Misappropriation of trade secrets – Product imitation
The Unfair competition and IP legal framework• Unfair competition and intellectual property : – Theory: – Unfair competition law is a specific branch of tort law. It prohibits certain acts without granting rights. – Example: Art. 10bis of the Paris Convention aims at the prevention of prevent misleading advertising without protecting a competitor‘s or consumer‘s subjective right. – Practice: – Some areas of unfair competition law do protect rights. There is no clear dividing line between unfair competition and intellectual property law. – Examples: – protection of trade secrets, protection of goodwill against acts causing confusion• Open (and debated) question: Should unfair competition law be allowed to fill gaps in the intellectual property system.
The Unfair competition and IP legal framework Geographical indications • Trade secret protection IP UC • Unregistered TMs • Misappropriation of reputation • Product imitation
The international legal framework• Article 10bis Paris Convention: 10bis Convention:• (1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.• (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.• (3) The following in particular shall be prohibited:• 1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;• 2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;• 3. indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.
The international legal framework• Provisions on unfair competition in the TRIPS agreement?• No consensus on the question of a general tort of unfair competition.• (Art. 22) Protection of geographical indications.• (Art. 39) undisclosed information,• borderline areas between intellectual property and unfair competition
The international legal framework• Examples of unfair competition according to WIPO Model Provisions:• Causing confusion• Damaging another‘s goodwill or reputation• Misleading the public• Discrediting another‘s business• Disclosing or misappropriating trade secrets
The international legal framework• European Community law (overview) – No consensus on …what unfair competition means – level of regulation – Administrative v. private law model – Harmonised areas – Misleading and aggressive practices – Comparative advertising – TV advertising – E-mail spamming – Not yet harmonised – Protection of goodwill – Protection against imitation – Trade secrets – Interference with business / with contracts
U.K. Law• Some history on UK Law: Law:• 1888 - 90:• Mogul Steamship v. McGregor and related decisions – rejection of general tort of unfair competition.• Early 19th century: origins of passing off action• 1966: first Code of Advertising Practice• 1980: Erven Warnink v. Townend (Advocaat case)• 1981: Cadbury-Schweppes v. Pub Squash• 1988: Control of Misleading Advertisements Regulations• 2008: Consumer Protection from Unfair Trading Regulations / Business Protection from Misleading Marketing Regulations 2008
The Legislation• There is no statute in the UK relating to unfair competition as such. There is, however, protection for a trader whose competitor seeks to mislead customers as to whose goods the customer is buying. In the UK, this concept is called "passing off", and in the context of trade marks, the law and principles of Equity have evolved over time by (primarily) the High Court of England & Wales (although the Scottish and Northern Ireland Courts, follow to a large degree, the approach of the English Court. They are not, it should be noted, precisely the same, and do constitute a different jurisdiction). In essence, therefore, the law is "judge made" and hence why it is referred to as "the common law tort of passing off”.
U.K. Law• Three meanings attributed to the term „unfair competition“ (see Moorgate Tobacco v. Philip Morris)• synonym of passing off• generic term for all causes of action available against unlawful acts done by a competitor• general tort of misappropriation of trade values• Arguments advanced against the introduction of a general „tort of unfair competition“• Difficulties in forming clear line between fair and unfair• lack of legal certainty• judicial law-making• interference with freedom of trade
U.K. Law• Three layers of protection against (what a continental lawyer would call) unfair competition:• Tort law:• specific economic torts protect traders against some types of unfair behaviour of competitors.• Consumer protection:• criminal and administrative sanctions against misleading advertising• Self-regulation:• British Code of Advertising, Sales Promotion and Advertising Practice (and other codes of practice)
U.K. Law• The tort of passing off• protection of goodwill against misrepresentations misleading the public as to the origin or the quality of goods or services• „Misappropriation by misrepresentation“ – Elements Claimant – owner of goodwill – Misrepresentation – defendant misleads public as to trade origin or quality … – Thereby causing damage to claimant.
U.K. Law• Torts protecting competitors against acts of „unfair competition“.• passing off.• injurious falsehood: falsehood:• protection against malicious false statements about a competitor.• breach of confidence: (doctrinal basis disputed): protection of confidential information against disclosure by person who is under a duty of confidence.• Conspiracy.• Intimidation.• interference with contractual relations.
• Example discussed in this course: U.K.• • Other examples: Scotland, Ireland, to some extent US• • No general prohibition of unfair competition.• • Ideal: free competition.• Some areas of unfair competition law covered by specific torts• (examples: passing off, injurious falsehood, intimidation, interference with contractual relations).• Distinction between protection of competitors (tort law) and consumer protection (criminal and administrative law).• • Strong role of self-regulation.
UNFAIR COMPETITION LAWS IN US• In 2008, the total cost of tort liability in the United States was more than $255 billion, which is equivalent to an $838 yearly tort tax on every American or $3,340 for a family of four. Another study puts the cost at $9,827 for a family of four if all the indirect costs are included.• Since 1990, commercial torts against business have increased more than personal torts against individuals, and Small Business bears a disproportionate amount of liability costs. It is the small business — perhaps a family-run business or a tech startup or a local business employing a handful of people — that bears the biggest burden.• A single tort suit can cripple a small business, especially a self-insured business. It is no wonder that more than three- quarters of small business owners say they are concerned about the threat of unfair lawsuits
• Increasingly, the plaintiffs in tort suits against small business are other businesses (often, big businesses) making tort claims to recover economic, business damages. These business-versus-business tort claims are often called economic or business torts and are increasingly based on state law, not federal law.• Typically, these business lawsuits are intentional torts because the defendant intentionally caused some harm to the plaintiff. These cases do not necessarily involve injury directly committed against a person or property, but rather involve losses related to intangible business assets, including economic interests, business relationships, and assets of good will and business reputation. Business torts include an ever lengthening list of civil wrongs, such as:
• Civil Conspiracy-Copyright infringement.• Fraud and fraud in the inducement-Injurious falsehood• Interference with contract- Interference with prospective economic advantage• Misappropriation of trade secrets-Negligence and negligent misrepresentation• Product disparagement- Slander and slander of title• Trade libel or disparagement- Trademark infringement• Trade name infringement-Unfair competition and trade practices
Federal Unfair Competition Law Under LANHAM Act.• The trademark infringement and trademark dilution, which are two areas of the law falling within the broader scope of unfair competition law.• The false designations of origin and false descriptions as covered by Section 43(a) of the Lanham Act.• While the Lanham Act, in general, focuses primarily on obtaining, maintaining, and enforcing trademark and service mark rights, Section 43(a) has frequently been referred to as a federal unfair competition provision.• The section 43(a) available to challenge certain unfair competition practices under this portion of the Lanham Act
• Section 43(a), in part, states• "Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which:• (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or• (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities or geographic origin of his or her or another persons goods, services or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."
Examples under Lanham Act• Paragraph A, the conduct must be likely to cause confusion or mistake or deceive regarding affiliation with another person or origin, sponsorship, or approval of the goods, services, or commercial activities by another person. For example, conduct must give the impression that there was such an affiliation or that the origin, sponsorship, or approval emanated from another person when, in fact, it did not.• Paragraph B focuses specifically on commercial advertising or promotion and has two prohibitions. The nature, characteristics, qualities, or geographic origin of goods, services, or commercial activities cannot be misrepresented. Such misrepresentations also cannot be made with respect to anothers goods, services, or commercial activities
• A further area of protection under Section 43(a) involves the trade dress of a product. For example, the unique shape of the Coca-Cola bottle is readily recognizable by a high percentage of people as identifying the Coca-Cola product. The trade dress, in order to be protectable under Section 43(a), must either be inherently distinctive or have acquired secondary meaning through usage.• It is not necessary to have a trademark registration in order to enforce rights under Section 43(a). One must, however, have "standing to sue" in order to seek relief under the law. Among the factors considered in evaluating this issue are the nature of the conduct alleged to be in violation of Section 43(a), the manner in which the person seeking relief has been or is likely to be damaged by such conduct, and whether the damage is of the type sought to be protected by the act
OTHER UNFAIR COMPETITION LAWS IN US AN OVERVIEW• Business Torts - Commercial Disparagement• Since 1990, commercial torts against business have increased more than personal torts against individuals, and small business bears a disproportionate amount of• liability costs. It is the small business — perhaps a family-run business, a tech startup, or a local business employing a handful of people — that bears the biggest• burden.
Federal Trade Commission Act - Unfair or Deceptive Acts or Practices• The Federal Trade Commission ("FTC ") is an independent agency established by Congress in 1914 to enforce the Federal Trade Commission Act ("FTC Act").• (1)Section 5 of the FTC Act prohibits "unfair methods of competition," and was amended in 1938 also to prohibit "unfair or deceptive acts or practices.“• (2) TheCommission enforces a variety of other antitrust and consumer protection laws as well.
Federal Trade Commission - Bureau of Competition• The Federal Trade Commissions Bureau of Competition champions the rights of American consumers by promoting and protecting free and vigorous competition. The• Bureau: reviews mergers and acquisitions, and challenges those that would likely lead to higher prices, fewer choices, or less innovation; seeks out and challenges anticompetitive conduct in the marketplace, including monopolization and agreements between competitors; promotes competition in industries where consumer impact is high, such as health care, real estate, oil & gas, technology, and consumer goods; * provides information, and holds conferences and workshops, for consumers, businesses, and policy makers on competition issues and market analysis
Federal Trade C ommissions Investigative and Law Enforcement Authority• The Commissions specific investigative powers are defined in Sections 6, 9, and 20 of the FTC Act, 15 U.S.C . Sec’s. 46, 49, and 57b-1, which authorize investigations and various forms of compulsory process. In addition,• the premerger notification provisions in Section 7A of the Clayton Act, 15 U.S.C . Sec. 18a, prohibit consummation of covered acquisitions until the requested information is provided, thus effectively enabling the Commission to obtain information regarding such acquisitions.
Unfair Competition - FTC Act - Sherman Act - Clayton Act• Federal antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade, such as price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.•
Federal Trade Commission ("FTC“)• The Federal Trade Commission ("FTC") is an independent agency established by Congress in 1914 to enforce the Federal Trade Commission Act ("FTC Act").• The Section 5 of the FTC Act prohibits "unfair methods of competition," and was amended in 1938 also to prohibit "unfair or deceptive acts or practices.”• The Commission enforces a variety of other antitrust and consumer protection laws as well. The FTC Act provides a comprehensive framework for carrying out the Commissions law enforcement initiatives.• Under Section 5, the Commission has determined that a representation, omission, or practice is deceptive if:• (1) it is likely to mislead consumers acting reasonably under the circumstances; and• (2) it is material, that is, likely to affect consumers conduct or decisions with respect to the product at issue.
• In executing its antitrust law enforcement responsibilities, the Commission relies upon both Section 5 of the FTC Act -- which prohibits unfair methods of competition -- and a number of other antitrust statutes• As a general proposition, practices that constitute unfair methods of competition include at least practices that violate the Sherman Act and the Clayton Act.• Thus, for example, although the Commission cannot directly enforce the Sherman Act, it can prohibit -- as unfair methods of competition -- practices that (1) violate Section 1 of the Sherman Act because they constitute a "contract, combination .• . . , or conspiracy, in restraint of trade or commerce;" or (2) violate Section 2 of the Sherman Act because they constitute monopolization of, an attempt to monopolize, or a conspiracy to monopolize a particular market.
Sherman Act• 15 U.S.C. § 1. Trusts, etc., in restraint of trade illegal; etc. illegal; penalty. penalty.• Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.• Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.
15 U.S.C. § 2. Monopolization; penalty• Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000.• if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.
Clayton Act• 15 U.S.C. § 18. Acquisition by one corporation of stock of another• No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce,• where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. •
NEW UNFAIR COMPETITION LAWS IN US• The States of Washington & Louisiana already have full‐fledged Unfair Competition Laws and on 4th November 2011, 36 States & 3 U.S. Territories came together to write a strong memorandum to the Federal Trade Commission (FTC) and Bureau of Competition, seeking a federal law on federal Unfair Competition law.• Further, 24th January 2012, U.S. President, Mr. Barack Obama, in his State of the Union Address, announced the creation of the Trade Enforcement unit which would investigate cases of unfair competition in manufacturing by way of IP infringement
• One of the first states to introduce such specific legislation was the state of Louisiana in 2010. 0ther states have followed closely behind and introduced their own measures that take aim at IT and fair competition.• That Washington is one of the more trade-dependent states in the United States and its volume of manufactured imports in 2011 was more than 30% higher than that of other states• The State of Washington’s Unfair Competition Act, a similar piece of legislation that took effect in July 2011.• The laws’ requirements are very clear and simple. They obligate and mandate the manufacturers, who export to U.S., to show by way of poof of licenses or necessary certifications provided by the software publishers or industry, that they are only using genuine and licensed software for their entire business operations.
• The laws also provide for injunction against sales, seizure of products and monetary damages, if a manufacturer does not follow the law and remains non‐compliant.• The exporter doing exports its products to U.S., directly or indirectly, then it must ensure that their usages of IT (software products) in their business operations are genuine, legal and licensed. They should preferably get a compliance certificate from the software publishers by undertaking a Software Asset Management (SAM) Review led by a third party consultant or obtain an Industry level ISO aligned SAM certification such as provided by BSA | The Software Alliance (BSA)