The Feasibility of Community Plan Registration in the light of the IQOS Litigation

Legal Insight

April 2019

George Psarakis LL.M. (mult.), PgCert

Summary: This note presents PMI's dispute with Shunbao in relation to the design of the well-known IQOS smoke heater. On the occasion of this interesting case, some basic knowledge regarding the Community design and the feasibility of its registration by Greek companies is summarized.

The UK Supreme Court earlier this year made an interim order with pan-European effect prohibiting the importation into the European Union of a tobacco heating device similar to Philip Morris International's IQOS system ("PMI"), on the grounds of the latter's protection as a Community design. The order was issued against the Chinese company Shenzhen Shunbao Technology Co. Ltd ('Shunbao'), which reportedly intended to exhibit a device similar to the IQOS at a tobacco heating system exhibition in England.

The 'IQOS' system is PMI's flagship product line of reduced-risk products (Reduced-Risk Products). It is a smoke heating device consisting of a charger and a base (holder) for the smoke rods. PMI had already registered the design as a Community design at the EU Intellectual Property Office on 16/1/2015 (design number RCD 001428379-0001). This protection is valid for 5 years from registration, and may be renewed by the right holder for 5 years at a time, with a maximum period of protection of 25 years. 

PMI was already aware that Shunbao was marketing in Asia a smoke heating system called "AMO", but where the rod base was almost the same visually as its IQOS system. When it was therefore informed, through the 'ALIBABA' website, that Shunbao intended to exhibit the 'AMO' at VAPER UK, a high-traffic trade fair in England, PMI sought, and ultimately obtained, an injunction from the United Kingdom High Court prohibiting the marketing of the product in question within the European Union.

The application was filed by PMI without notice and without requesting Shunbao's appearance before the English judge, due to the urgency of the situation and in view of the forthcoming 'VAPER' exhibition. PMI has applied to the UK Court of Justice for such an order on the basis of the possibility provided by the Community Regulation (6/2002), as Shunbao is not established in the European Union. 

A key factor in favour of the final issuance of the interim injunction was apparently the similarity in appearance of the two draft products. However, the criterion for issuing the order was also the consideration of the English judge that 'AMO' was presented as a potentially inferior product without the same advantages of reduced health risk to users. A less than good user experience of the 'AMO' device would probably have a negative impact on the sales of all tobacco heating products, and therefore also of the 'IQOS' device. That risk could not be averted, according to the English judge, except by an immediate ban on the sale of Shunbao's product.

As a result of the injunction, the organisers of the VAPER EXPO ultimately did not allow Shunbao to exhibit its product and the "AMO" base was excluded from European markets, at least for the time being. It is worth pointing out that the "AMO" device had not copied any PMI mark, in other words, a completely different indication, namely the title "AMO", was displayed on the device. 

Taking the above case as an example, the following can be mentioned in relation to the Community scheme:

1.The most important assets of modern enterprises are often intellectual property objects, i.e. intangible rights. The Community design is such a right, but it is not as well known as other rights (patents, trademarks, etc.). However, we note that in the above case it was the decisive right which ultimately protected PMI's product throughout Europe. This is because there was neither an infringement of its trade mark nor, as far as we know, of its patent, i.e. the method of operation of the heating system. The rival device bore a different marking on its body ('AMO') and incorporated a different operating mechanism; only the design of the product was similar.

2. Under the Community legislation in force, the proprietor of a Community design may prohibit the marketing of any product infringing his right throughout Europe without the need to bring legal proceedings in every Member State of the EU. It is sufficient for the court in which the infringer is domiciled or, if the infringer is domiciled outside the EU, the court in which the proprietor of the Community design is domiciled, to issue the relevant judgment. This was the case in the present case: because the undertaking infringing the PMI right was established outside the EU, the competent courts to issue the 'pan-European order' were those of the seat of the beneficiary undertaking, and therefore of the United Kingdom. 

3. The rightholder has the possibility of protection not only when his right is infringed but also when such an infringement is imminent. This was the case in the above case: the presentation of the Shunbao device was to take place at an exhibition in England, but the exhibition had not yet taken place. This imminent presentation was prohibited and thus the PMI right was proactively protected. 

4. In view of the urgency of these injunctions (injunctions), they can be ordered, at an initial stage, without hearing the other party, i.e. the company allegedly infringing the registered Community design. That is what happened in the case at issue: the above-mentioned court order was issued without SHUNBAU being heard.

5. A prerequisite for a company to obtain protection of its designs as registered is that it must first have registered them as national or, preferably, as Community designs by filing an application with the Intellectual Property Office in Alicante, Spain. The application is submitted electronically and the fees for each design are just EUR 350.

6. Protection in the Greek territory is granted only by the special courts of Athens and Thessaloniki. There are judges there who are specialised in Community Design and EU Trademarks, in order to provide the best possible protection with a harmonised application of the law within the EU as far as possible.

7. If an infringement of the right to the design occurs, the request for injunctive relief may consist of the immediate withdrawal of the products infringing the registered design and a prohibition on their sale, without of course excluding a claim for damages, as well as criminal sanctions against the infringer under the legislation on protection against unfair competition.

8. Approximately 2 000 Community design registrations have so far been made by undertakings established in Greece. From product packaging (bottles, etc.) and clothing and transport items (dresses, bags, etc.) to furniture, toys, watches and jewellery. We can therefore see that Greek businesses, more and more every year, are recognising the value of Community design registration, adding the weapons of Community law to their quiver of means of protecting their intangible assets. 

9. Three Community design cases have recently been brought before the Greek courts, two of them concerning handbags and the third concerning clothing. In all three cases the Greek courts upheld the rights of the proprietors and prohibited the marketing of the products infringing the designs.

10. As a final consideration, it should be said that it has been proven over the last decades that the design of a product and its appearance are decisive factors in its commercial success. In the age of the proliferation of consumer goods, differentiation through aesthetic approach and appearance provides the firm with the competitive advantage needed to excel. Design registration is a sound tactic for maintaining and protecting this competitive advantage.