How design rights can add value to a business

This article is based on UK law. It was last updated in May 2007.

Design rights are often overlooked by businesses seeking to protect their intellectual investment in new products or new technologies. But changes in the law, new European Community design rights, and recent high profile court cases suggest that the time is right for companies to reconsider their view of design rights. This article looks at how design rights can add effective and affordable protection and value to a business.

Introduction

Design rights have existed in the UK for more than 50 years. For most of that time, however, they have been the 'Cinderella' intellectual property right, overlooked in favour of their more famous siblings.

A large part of the problem has been a widespread perception that they are only of interest to certain narrow industry sectors. Indeed, it is not uncommon to hear them referred to as the 'spare parts right' – relating to their use in the automotive and manufacturing industries.

These misconceptions have not been helped by a general lack of understanding of when and how design rights should be applied – even amongst some intellectual property lawyers. The introduction over recent years of additional design rights at the national and European level has only served to muddy the waters.

The purpose of this article, therefore, is to clear up some of the misunderstandings. It will:

• give a brief summary of the existing design rights, the protection which they offer, and how they differ from each other;
• show how design rights can provide valuable protection in many business sectors, and how they are already being adopted by many industries to deal with particular challenges; and
• summarise and discuss recent and potential new developments of the legislators and the courts, which are helping to make the law easier to understand.

Design rights: a summary

There are four main design rights which businesses can seek to rely on to protect their interests in the UK:

• the UK registered design right;
• the UK unregistered design right;
• the Community registered design right; and
• the Community unregistered design right.

The table below provides details about what can be protected by each of these different rights, and explains the levels of protection afforded by each. It is worth noting, however, that registered and unregistered designs (particularly the UK rights) do not necessarily protect the same products in the same way. Similarly, the UK designs do not necessarily protect products in the same way as the corresponding Community designs.

As the name suggests, all design rights are intended to protect features of the design of an object. In the case of registered designs they have traditionally protected 'aesthetic' qualities of the object, where these are new and show individual character. This includes the appearance of the whole or part of the object, taking into account features like the lines, contours, colours, shape, texture and materials of the object, or its ornamentation. Examples include decorative patterns, graphic symbols, the shape of products and their packaging. Unregistered designs, on the other hand, have traditionally protected the 'functional' qualities of the object, where these are original (or in other words not 'commonplace'). This describes those aspects of the object which have no aesthetic element, but rather relate to the way in which the object operates. Examples include component parts of a mechanical device.

The hidden value of design rights

Design rights often seem to get overlooked when businesses come to protecting their product portfolio. While the number of trade mark applications received by the UK Intellectual Property Office each year is reaching 40,000, the number of registered designs struggles to reach one-tenth of that.

Yet registering a design is a relatively pain-free process. Applications are not subjected to the same level of scrutiny as trade marks and patents. And filing fees for registered designs are a bargain compared with other forms of registered intellectual property rights. The obvious question, therefore, is why have design rights been left out in the cold?

The answer is perhaps two-fold. First, design rights suffer (perhaps more than any other intellectual property right) from a general level of misunderstanding, both about what they can be used to protect and which industries can benefit from this protection. Second, the law and registration practice connected with design rights is unnecessarily complex and unclear. The final section of this article will discuss what steps legislators and courts are taking to solve this second issue. This section, therefore, will help to clear up some of the misconceptions about where design rights apply, and explain exactly how useful they can be when used properly.

It is not by chance that unregistered designs are often referred to as the 'spare parts right' – a stereotype derived from widespread exploitation of the right by the automotive industry during the 70s and 80s to protect component parts of their products.

Registered designs, similarly, have struggled to shake off their roots as a means for fabric manufacturers to protect patterns on their products. UK Intellectual Property Office statistics show that of the 32 Locarno classes for registered designs, just two – furnishing and household goods – account for almost 20% of applications.

But the figures don't reveal the whole truth. By their nature there are some classes of product which will always attract a low number of registered design applications. But over recent years we have undoubtedly seen increasing use of designs rights outside the 'traditional' industries. And with intelligent application, design rights can offer particularly attractive benefits over other forms of intellectual property right.

The low costs of design registration, matched by the speed of a registration process unencumbered by lengthy review, means that design rights are perfect for manufacturers seeking to protect wide and ever-changing product ranges. The toy industry has been quick to spot these qualities. During the height of the craze for 'beanie babies', their maker Ty Inc helped protect its monopoly position by registering hundreds of its products for design protection. At roughly the same time Mattel, the maker of Barbie dolls and accessories, used its Community unregistered design rights to convince the English Court of Appeal to grant a Europe-wide injunction against a competitor selling infringing products.

Design rights also present a unique way for companies to protect new media and digital products. While copyright will protect the underlying code of a software application, arguments that it should also protect the 'look and feel' of the results displayed on the screen are considerably harder to construct. However, the nature of design rights – and in particular the Community design rights – means that they are ideally suited to protecting digital images. This means protection of, amongst other things, video game characters – like Lara Croft, the buxom star of the Tomb Raider games. This has helped the game's developers to control and license the use of Lara Croft's image in other media. The right has also been widely used to protect graphic icons that appear in computer applications and on mobile phones.

Registered design rights also offer the ability to achieve speedy remedies – important for fast moving industries. The fashion industry has a notoriously short time for stock turnover, with fashions changing by the season, if not more frequently. The potential risks of damage mean that infringement action has to be quick and easy, injunctions have to come almost before goods reach the shop floor. The current phenomenon of no-frills fashion – clothing chains that specialise in providing the look of designer fashion at bargain basement prices – often strays into the realm of direct copying. The Community design rights (particularly the registered design) have given fashion designers a quick and easy means of protecting their designs, allowing them to strike before the worst of the damage is done.

These examples show some ways in which design rights have been adopted to meet the needs of particular industries, but they are by no means exhaustive. Clever application of design rights means that their value can be stretched a lot further.

Many businesses are also recognising the benefit of incorporating design right protection into their broader portfolio of intellectual property rights. Design rights can sit alongside trade marks, providing a different level of protection, and crucially, a different means of enforcement. Arsenal Football Club is a good example of one such business.

In 2002 Arsenal Football Club was locked in the middle of a three year trade mark and passing off battle against a seller of unauthorised replica scarves. Arsenal was seeking to stop the sale of replica goods which made unauthorised use of the club logo – a heraldic crest with a picture of a cannon. The case was eventually decided by the Court of Appeal in Arsenal's favour, but a number of earlier judgments had gone the other way.

As a result of the difficulties it was facing in enforcing its rights, Arsenal took the decision to re-brand, abandoning the logo used by the club for 53 years. The new logo is still made up of a shield containing the image of a cannon, but it differs in almost every single regard from the old logo. The heraldic shield has been replaced by a stylised 'shield image'. The breach-loading cannon, circa 1750, was replaced by a muzzle-loading cannon from the 15th century. The cannon even points in a different direction.

Cynics saw it as a way of Arsenal forcing fans to replace branded merchandise, but if anything this was only a side effect. Arguably the real motivation behind the re-brand was to create a logo with sufficient novelty to be able to benefit from design registration as well as trade mark protection. The fact that unlicensed use of a registered design is in itself sufficient to prove infringement means that Arsenal now has a very direct means of stopping unauthorised replica sales.

Changes in the law

One of the main historical factors preventing the uptake of design rights was a lack of clarity in the law. Fortunately both legislators and the courts have sought to address this problem in recent years. The introduction of the Community design rights in 2003 and the amendments brought into UK law by the EU harmonisation directive of 1998 have both played their part. However, the advances to date have only taken us so far, and there is still work to be done.

While the implementation of the Community design rights has created unity across borders, it does not always sit easily with remaining national design rights. The number of Community registered design applications have grown from some 10,000 in 2003 (the first year of registration) to over 41,000 in 2005. This growth has been at the expense of the UK registered design right, whose application numbers are dwindling as a natural result. The two rights are now sufficiently similar that most applicants are prepared to pay the slightly higher filing fees of the Community registered design in return for a greatly expanded area of coverage. In effect the Community right is killing UK registered designs – leading to questions about whether there is a continued need for both.

By contrast the Community unregistered design is sufficiently different from the UK unregistered design that it has had little impact on UK unregistered design law. This difference, however, means that the UK unregistered design has been the subject of much discussion within both the European Commission and the UK Intellectual Property Office. The Commission is concerned with the way in which UK unregistered design laws have moved in recent years, and in particular with the extent to which the 'must-fit' and 'must-match' exclusions have limited the right.

The concept of the 'must-fit' and 'must-match' were introduced by the House of Lords to counter what was considered to be an abuse by major car manufacturers of their dominant position in the spare parts industry during the 70's and 80's. The exclusions essentially provide that design rights cannot be claimed where the design of an article is pre-determined by its need to fit with another article so that both can work together (must-fit), or where the design of the article is dependant on the appearance of another article of which it is an integral part (must-match).

The exclusions found their way onto the statute books, and were incorporated in the Copyright, Designs and Patents Act 1988. However, the way in which they were incorporated, and applied, has lead to suggestions over the years that original equipment manufacturers were no longer able to assert unregistered design rights in component parts of mechanical products. The European Commission saw this trend as a significant limitation on unregistered designs, and in particular as having gone too far in limiting the ability of the manufacturing industry to protect their revenue streams. They have mooted the possibility of further reform of design rights, and the UK Intellectual Property Office issued a consultation.

However, any future action by the European Commission may have been forestalled by the Court of Appeal's ruling in the case brought by Dyson Limited against Qualtex (UK) Limited.

In this case Dyson sought to rely on unregistered design rights in component parts of its vacuum cleaners in an infringement action against Qualtex, a supplier of vacuum cleaner spare parts. Qualtex argued that the must-fit and must-match exclusions applied, meaning that Dyson could not benefit from unregistered designs.

The judgment of both the High Court and the Court of Appeal, however, supported a very tight interpretation of the must-fit and must-match exclusions. The courts were of the opinion that to be able to take any comfort from the must-fit exclusion a spare part manufacturer must show a very limited tolerance in creating a design capable of achieving the necessary functional fit. In order to take comfort from the must-match exclusion they must show that they had no freedom in designing the part in any other way.

In effect, the courts decided that the balance between the rights of the original manufacturer and the spare parts suppliers had tipped too far in the interests of the copiers. In the words of Justice Jacobs, who delivered the Court of Appeal's judgment, the exclusions to the unregistered design right do not give spare part manufactures 'carte blanche' for creating identical copies of spare parts, and "to be on the safe side they will have to make them different as far as is possible".

Conclusion

After 50 years of relative obscurity, the last five years have marked a significant turnaround in the fortunes of design rights.

The Community design rights have breathed new life into the area, and a number of industries have been quick to adopt the new rights to meet their particular needs.

The rapid uptake of Community design right registrations suggests that, as a form of registered intellectual property, there is much to look forward to. The dwindling number of UK registrations will doubtless lead to further questions as to whether there is a need to maintain separate systems which are so similar in nature.

At the same time the courts have begun dusting down the UK unregistered design, causing many to reconsider some traditional misconceptions about what it covers. The judgment in the Dyson case came at the same time as the European Commission and the UK Intellectual Property Office were considering the need to make further changes to the law on unregistered design rights. Although the Court of Appeal's judgment in Dyson is hardly a clear set of guidelines, it does go some way to address the issues under review by the Commission, so further regulation at this stage may not be premature.

The result is that our Cinderella right is starting to step out of the shadows, receiving long-overdue recognition for the value it can bring to all industries – not just textile designers and car manufacturers.

The original version of this article appeared in the April 2006 issue of BNA International's Patents Copyrights & Trademarks journal. It has since been updated.

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