The UK IPO has been consulting on possible changes to UK design law. One of those changes concerned the introduction of criminal sanctions for the infringement of UK unregistered design rights (UDR). The IP Federation strongly opposes such an introduction. The following article focuses on how the fast moving consumer goods (FMCG) industry would be impacted and why it is opposed thereto.
The FMCG industry faces a confluence of challenges when bringing its products to market. A non-exhaustive list of those challenges includes: rapid product innovation cycles; managing the relationship with retailers (including battle for shelf-space / avoiding supply disruption); supply chain complexity; rising raw material costs; relationship with end consumers; brand equity preservation and growth; targeting of high profile brands for vexatious litigation; management bandwidth; etc.
The challenges mentioned above are not exclusive to FMCG; they will be felt across various industry sectors. However, their impact within FMCG has promoted a necessity for early and accurate assessment of freedom to operate (FTO) risks for all new product launches.
When conducting design FTO searching for a new product design, account must be taken of both registered designs and unregistered designs. There are numerous database searching tools that can facilitate the searching of registered designs. The register entry for each design can be inspected to understand its validity and scope to arrive at a FTO risk assessment for the new product.
However, it is more challenging to conduct FTO of unregistered design rights (UDR) due to how those rights come into existence. UDR are rights that come into existence automatically and for free if the qualification requirements are met and, importantly, with no obligation to register or publish their existence. As a consequence, their existence, scope and validity are untested and opaque.
Since it is not possible to determine whether a potentially conflicting UDR exists, its validity, what it protects, or for how long, guardrails are put in place to avoid infringing UDR. One commonly used guardrail is contractual. FMCG companies often use external design agencies for their product design endeavours, and it is possible to contractually require that those design agencies warrant that they will not copy an existing design and indemnify the FMCG company in cases where there is an allegation of copying an existing design that is protected by UDR. Those contractual guardrails work well when civil remedies are the sole recourse for dealing with infringement, but they are unlikely to work should criminal prosecutions be available.
Compounding the difficulties associated with criminalisation of UDR infringement is that the UK criminal courts and criminal enforcement mechanisms are wholly unsuited to deal with matters of UDR infringement, as the legal certainty of the allegedly infringed UDR is almost always going to be in question insofar as its validity and scope are concerned. Criminal courts have no experience in dealing with a determination of whether a UDR exists, the extent to which it is valid and whether the alleged infringement actually infringes, which results in significant uncertainty for both the court and potential defendants.
FMCG product design is typically iterative rather than truly innovative. If criminal sanctions were to be extended to UDR, it would necessarily increase the FTO risk profile for products bearing new designs, particularly iterative designs, as the existing safeguards for avoiding UDR infringement would no longer be sufficient when the impacts of getting it wrong could result in criminal prosecution.
In a post-criminalisation of UDR environment, FMCG companies would increasingly pursue the low-risk approach of reusing old product designs that have a track record of being free from UDR infringement risks. The fear of criminal sanctions, no matter how remote, would result in the stifling of the design industry within the FMCG industry, as companies would elect to dramatically reduce efforts to innovate in product design; the unknown and unquantifiable risk would not be worth the reward.
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