Wine and Sweet Words – Intellectual Property and Identifying Drinks

Case Brief of the 2016/2017 Oxford IP Moot

Jakob Rehder, Felix Tann, Katharina Watzke*

A. The facts

This year’s Oxford International Intellectual Property Moot problem dealt with two wineries in the fictional country of Erewhon: Whispering Gums Winery (“Whispering Gums”), the appellant, and Loddon River Vineyards (“Loddon River”), the respondent.

Whispering Gums produced a sparkling white wine marketed under the name “Wizard’s Wizz Erewine”. The term “Erewine” was widely used by wine producers in the country to refer to a double-fermented sparkling white wine made in Erewhon using locally grown grapes. Wizard’s Wizz Erewine was sold in recently invented and specially designed bottles with 1cm-wide internal dimples instead of a flat interior, enhancing the effervescence, flavour and aroma of the bottle’s contents by increasing the number of bubbles produced once a bottle had been opened.

Improving a drink’s flavour was not the only effect of the bottle: A study found that the blood-alcohol levels of persons drinking alcoholic beverages rose between 1.5 to three times faster when they consumed alcohol from the newly invented bottle as opposed to a regular one. Essentially, the bottle ensured that consumers became drunk faster, which raised public policy concerns. Young Erewhonian citizens used Wizard’s Wizz Erewine primarily to become intoxicated as quickly and cheaply as possible, which was assumed to have led to several hospital admissions and arrests.

Whispering Gums held a patent (“the 789 Patent”) in respect of this bottle design. Claim 1 of the 789 Patent read: “A glass bottle for enhancing the effervescence of sparkling wines, being a bottle [the claim goes on to describe the interior dimpling].” While the claim itself specifically referred to “sparkling wines”, the description of the invention referred to beverages containing carbon dioxide in general.

In November 2015, Loddon River launched an alcoholic apple cider and a fizzy non-alcoholic elderflower wine marketed as “Elderflower Erewine” in bottles physically identical to the those used by Whispering Gums for its Wizards Wizz Erewine.

At first instance, the High Court of Erewhon faced two complaints. First, Whispering Gums alleged that Loddon River’s selling apple cider and elderflower wine in a bottle identical to the one patented under the 789 Patent constituted patent infringement. Second, Whispering Gums contended that Loddon River’s use of the word “Erewine” to describe its non-alcoholic Elderflower wine constituted passing off in its extended form.

Madame Justice Davies found in favour of Loddon River. She reasoned that, although Loddon River’s bottles fell within the scope of Claim 1, the 789 Patent was invalid for being contrary to public policy or morality under section 10 III of the Patents Act 1980. Furthermore, she held that the word “Erewine” lacked goodwill or, if there was goodwill associated with it, the claimant was not a member of the class sharing the goodwill.

B. Overview

In the Oxford IP Moot the case is always decided by a fictional court (the “Erewhonian Supreme Court”) in an imaginary country (“Erewhon”) that has not previously dealt with the legal questions before it. Case law from any country is persuasive authority. The mooters therefore always have to argue as regards what reasoning the Erewhonian court should adopt, and why.

The case had five major issues. Two of them concerned patent law, and the other three pertained to extended passing off, an IP doctrine that derives from trademark law.

The first issue was how the Erewhonian Supreme Court should construct patent claims. The second was how the Court should apply sec. 10 III of the Erewhonian Patents Act, which precludes inventions contrary to morality or public policy from being patented. The third question was whether “Erewine” attracted goodwill and, if it did, whether Whispering Gums was a member of the class of Erewine producers that enjoyed that goodwill. The fourth issue was whether Loddon River’s sale of the Elderflower Erewine was a misrepresentation and, finally, whether that sale caused Whispering Gums to suffer damage.

C. Patent issues

I. Construction (general)

The first question was whether the sale of Loddon River’s Elderflower wine and cider in the 789 patented bottle fell under the scope of the patent claim. Loddon River would only have infringed the 789 patent if that was the case. Claim 1 of the 789 patent refers to “A glass bottle for enhancing the effervescence of sparkling wines, being a bottle…”. There are three possible ways to interpret this claim: literally, purposively or by way of a non-textual construction (the “doctrine of equivalence”).

II. Literal

Under a literal construction, claim 1 can be read in two different ways. The crucial question is how “for” should be interpreted. The first possible literal meaning would be “a glass bottle when used for enhancing the effervescence of sparkling wines”. The second way to read the claim could be “a glass

* The authors participated in the Oxford IP Moot Court Competition 2016/2017 as members of the team of Bucerius Law School. The team won the competition, in which about 60 law schools from all over the world take part every year.

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bottle suitable for enhancing the effervescence of sparkling wines”. The difference between the two interpretations is that under the first reading the patent claim would protect the 789 patented bottle only when it is filled with sparkling wine. The second reading would grant patent protection to the 789 bottle regardless of the purpose for which it was being used, as long as the bottle had the physical characteristics necessary to improve the effervescence of sparkling wines. Bastus Cortes v. Idea Italia supports the latter construction. In that case, the patent claim referred to “a protective case for enclosing a delicate object”. The court found that the stated use simply implied certain physical limitations without which the apparatus could not be used for that purpose.1

III. Purposive construction

Under a purposive construction, the standard is what a person in the practical field in which the invention is intended to be used would understand to fall within the protected scope. One issue the court had to determine was who that person of average skill and knowledge would be (for example, a beverage manufacturer or a producer of sparkling wine, or both). Another issue was to what extent the patent description could be used to interpret the patent claim. The patent description here referred to “beverages such as sparkling wine that contain carbon dioxide in order to make them effervescent upon opening and pouring”. The description might therefore suggest to the skilled reader that the invention was not intended to be claimed only when it was used for storing sparkling wines. However, Merck v Generics, Brugger and Ors. v. Medic-Aid Ltd. and Kirin-Amgen v. Hoechst Marion Roussel suggests that, while the description can be used to interpret the patent claim, it cannot be used to extend the patent claim, since the patent description and the patent claim have different functions.2 The patent description describes the invention, while the claim states the monopoly that is claimed.3 The inventor may claim less than he invented.4

IV. Non-textual construction (“doctrine of equivalence”)

Furthermore, courts in some countries employ a non-textual approach to patent claim construction, the so-called “doctrine of equivalence”. Under this doctrine, there can be patent infringement even if the infringing device does not literally or implicitly fall under the patent claim,5 provided that the infringing device is equivalent to the claimed invention. This will be the case where the subsequent device features a change that has no or little effect on how the prior invention works, but which makes the device fall outside the language of the patent claim.

The first issue was whether the Erewhonian Supreme Court should adopt such a non-textual approach to patent construction at all. Many countries, such as the UK, do not employ such an approach.6 Countries that do employ it, such as Germany and the US, do so quite differently.7 The court could and would only employ the doctrine if it found that there was no textual infringement. That would only be the case if the court interpreted the patent claim to mean “a glass bottle when used for enhancing the effervescence of sparkling wines”. If that was the meaning of the claim and the court adopted the doctrine in this case, then replacing the sparkling wine with Elderflower wine or cider would likely constitute an immaterial change, since changing the drink contained in the bottle would have no effect on how the invention worked. Consequently, there would be no infringement under the doctrine of equivalence.

V. Summary patent construction

The court would probably find that the patent claim should be read as meaning “a glass bottle that must be suitable for the stated use”. Consequently, the sale of the Elderflower wine and cider would constitute patent infringement under a literal construction. In terms of that interpretation, Loddon River did not change the invention at all by using the 789 patented bottle to hold beverages other than sparkling wine. Accordingly, there would be no need for to use the doctrine of equivalents.

D. Morality or public policy exclusion

Section 10 III of the Patent Act provides that “a patent shall not be granted for an invention the commercial exploitation of which would be contrary to public policy or morality”. There is no plain formula for public order or morality issues.8 Thus, there are different approaches to establish what constitutes a violation of public policy and morality.

One way is to apply a narrow standard, which is only met where an invention is universally regarded as outrageous (the abhorrence standard). This is the case where granting a patent would seem unconscionable since it would be in such stark contrast to society’s values.9 Similarly, the European Patent Office has established that patenting is forbidden only when products can be used in an exclusively immoral way.10 This test takes into account that patent law is generally not a regime of public policy or morality, which suggests that courts should be slow in deciding that a patent should be interpreted as being contrary to public policy or immoral. The patent system is primarily concerned with technical considerations. Patent Offices are hardly competent or qualified to be routinely involved in ethical questions.11 This approach is also supported

1 Bastus Cortes v. Idea Italia, T 1389/10, p. 6.

2 Merck & Co. Inc v. Generics UK Ltd. [2004] R.P.C. 31, p. 622 pg. 38; Brugger and Ors. V. Medic-Aid Ltd. [1996] R.P.C. 635, 641 ff.; Kirin-Amgen v. Hoechst Marion Roussel [2004] UKHL 46.

3 Kirin-Amgen v. Hoechst Marion Roussel [2004] UKHL 46, p. 634.

4 Merck v. Generics [2004] R.P.C. 31, p. 622.

5 Graver Tank & MFG. Co. v. Linde Air Products Co. 339 U.S. 605, 606 (1950).

6 See Catnic Components Ltd. v. Hill & Smith Ltd. (1982) R.P.C. 183; Kirin-Amgen, Inc. v Hoechst Marion Roussel Ltd. [2004] UKHL 46, p. 6 ff.

7 BGH GRUR 2002, 515 – Schneidmesser; Graver Tank 339 U.S. 605, 606.

8 Accordingly, the World Intellectual Property Organization (WIPO) states, “What constitutes a contravention against public order and morality depends on the time and the place. In certain cases, the question of public order and morality will be answered differently even by individuals in the same country.” See WIPO, Standing Committee on the Law of Patents (2009) SCP/13/3.

9 EPOR 16 (Opposition Division).

10 Ibid.

11 OJ EPO 388 (Opposition Division), again stating that the EPO is not the right institution to decide on fundamental ethical questions.

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by the fact the Section 10 III of the Patent Act was originally a TRIPS provision. The TRIPS agreement seeks to establish similar standards in all signatory states, including Erewhon. Article 27 No. 2 provides for an optional ordre public or morality exception. Those states are not required to introduce immorality exception provisions and, indeed, many states have not done so. A wide interpretation would frustrate the agreement’s purpose of having similar patent-law standards in all signatory countries.

Alternatively, a utilitarian balancing test can be applied (balancing exercise). This test involves a careful weighing of the respective benefits and risks at stake.12 In Harvard/OncoMouse, the board employed this utilitarian balancing test.13 This test relates to the primary aim of patent law, which is to promote the progress of science and the useful arts.14

A third method was established in Plant Genetic Systems/Glutamine synthetase inhibitors.15The court employed on a three-element test. According to this test, the exploitation of a patent is contrary to public policy and morality, if, firstly, public policy and morality concerns are severe; secondly, the patent can be exclusively used in an immoral way or is directed at misuse; and, thirdly, the respective risks outweigh the potential benefits of the patent.

Morality exclusion clauses are typically relevant in biotechnology cases. For instance, patents pertaining to methods involving the destruction of human embryos have been regarded as abhorrent and non-patentable.16 This year’s mooting case, however, concerned a standard glass bottle. Hence, Whispering Gums questioned the applicability of section 10 III of the Patent Act to this case. By referring to the standard established by the European Patent Office, it was argued that drinking alcoholic beverages cannot be regarded as exclusively immoral.

Relying on the balancing exercise, Loddon River emphasised that the 789 Patent was intended and promoted to be used in an abusive and irresponsible way. In terms of the three-element test established in Plant Genetic Systems/Glutamine synthetase inhibitors, the patent was, therefore, directed at misuse. Moreover, it was argued that the potential risks to public health and safety arising from overconsumption of alcohol (for example, in traffic) would outweigh the minor benefits (primarily enhanced flavour and aroma) of the patented bottle.

However, contending that the patented bottle is contrary to public policy or morality must in the end be considered far-fetched and unjustifiable, taking into account that there is no concrete case law regarding common items like glass bottles.

E. Trademark issues

Finally, the case encompassed an aspect of trademark law – namely, whether the term “Erewine” had acquired a distinct meaning and reputation in Erewhon, and was therefore to be considered capable of being passed off in the extended sense. A second, related issue was whether the sale of non-alcoholic “Elderflower Erewine” diminished the acquired reputation and distinctiveness of “Erewine” or, alternatively, whether it was different from “Erewine”, and therefore did not misrepresent the potential class of “Erewine”.

All of these issues arise under the action for extended passing off, which is derived from the classic trademark action for passing off. The main goal of passing off is to protect traders in the market from fraudulent behaviour by competitors who market their products by referring to the good name or signs of another trader, and thereby profit from an already clearly established position in the market.

I. Goodwill

The first requirement for extended passing off is that there is a class of goods with distinctive qualities that has acquired goodwill in the market.17 According to the case of Erven Warnink BV v J Townend & Sons, there has to be a distinct set of qualities to establish goodwill in a class of goods.18 “Erewine” denotes a type of wine that has certain distinct qualities owing to a particular method of production (double fermentation). It is produced in a restricted geographical area (Erewhon), made from a limited range of ingredients (only locally grown white-wine grapes), and has a confined scope of execution19 (resulting in 5-14% alcohol content). However, there is no evidence of anything special about the product, other than the fact that it is manufactured in a certain country (Erewhon). At first glance, this would suggest that “Erewine” might not have acquired goodwill in the market and the action for extended passing off is not available.

Nevertheless, if one considers the roots of the action for extended passing off, and in particular the fact that it stems from “classic” passing off, one needs to consider the case of IRC v Muller & Co.’s Margarine.20 Handing down judgment in the matter, Lord Macnaghten held that the first requirement for establishing goodwill lies in identifying a class of goods that has the attractive force that brings in custom.21 This idea is the cornerstone for proving goodwill, and refers to the original conception of passing off: protection of what distinguishes an established business in the market from a newcomer. On top of that idea, Lord Diplock and Lord Fraser of Tullybelton crafted a broader and less restricted version

12 EPOR 525 (Exam).

13 EPOR 525 (Exam).

14 Article 1 Section 8 Clause 8 of the Constition of the United States of America.

15 24 IIC 618 (Opposition Division).

16 [16] European Patent Office T 0522/04.

17 Among many, Erven Warnink BV v J Townend & Sons [1980] AC 731, 739; J Bollinger v Costa Brava Wine Co. Ltd. [1960] Ch. 262, 280; Chocosuisse Union des Fabricants de Chocolat v Cadbury Ltd [1999] RPC 826 (CA), 831; FAGE UK Limited, FAGE Dairy Industry SA v Chobani UK Limited, Chobani Inc [2014] EWCA Civ 5, [2014] FSR 29, 49-53.

18 Erven Warnink BV v J Townend & Sons [1980] AC 731, 739.

19 A “confined scope of execution” is characterized by a limited range of potentially viable outcomes, e.g. in the case of champagne: 12 % of alcohol. Anything that is not within a scope of 11 % to 13 % needs to be considered out of the “confined scope of execution” and therefore cannot be considered champagne.

20 Commissioners of Inland Revenue v Muller & Co.’s Margarine Ltd [1901] AC 217.

21 Commissioners of Inland Revenue v Muller & Co.’s Margarine Ltd [1901] AC 217, 222.

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of passing off in Warnink v Townend – also known as the “Advocaat case”, in which a British producer of egg liquer was found to be passing off, by associating his drink with the more famous Dutch egg liquer that was made with brandy instead of Cyprus wine and produced in Holland instead of England.22 Even though “Erewine” might not have attained the cachet of the luxurious products referred to in the other leading cases in the history of extended passing off (for example, champagne or swiss chocolate),23 “Erewine” is distinguishable in the market and, going back to the roots of passing off, has acquired the power to pull in customers.

Therefore, by employing the underlying theme and original intention of extended passing off, “Erewine” has to be considered as a class that has acquired goodwill in the market.

II. Misrepresentation

The second requirement, misrepresentation, “lies in marketing the goods in a way which will lead a significant section of the public to think that those goods have some attribute or attributes which they do not truly possess”.24 According to this formulation, one needs to define the goods. “Erewine” unites four distinct qualities. First, it is produced in a restricted geographical area – namely, Erewhon. Second, it is made from a limited range of ingredients – only locally grown white-wine grapes. Third, it has a confined scope of execution (5-14 percent of alcohol), and, finally, has a particular method of execution – namely, the process of double fermentation. Apart from not containing alcohol, non-alcoholic “Elderflower Erewine” possesses all the relevant attributes claimed to be possessed by “Erewine”. Moreover, the producer of non-alcoholic “Erewine” included the words “non-alcoholic” on the label, supposedly to avoid confusion in the mind of the potential customer.

Therefore, the issue of misrepresentation boils down to the following question: “Can one trader be allowed to market his non-alcoholic grape juice using the name of an alcoholic fermented drink?” According to leading cases like Singer Manufacturing,25 labelling a product with, for example, even a rival’s name can be lawful. Accordingly, as long as the trader obviates any reasonable possibility of misunderstanding or deception, it would be perfectly reasonable to allow Loddon River to use the descriptor “non-alcoholic Erewine”, as it describes the properties of the product (a drink from Erewhon) with adequate precision. However, in J Bollinger v Costa Brava Wine Co. Ltd.26 , describing non-French “champagne” on the bottle’s label as “Spanish”, was considered to be confusing. Accordingly, it could be argued that providing the contradictory word ‘non-alcoholic’ next to the term ‘Erewine’ is not enough to avoid confusion.

Keeping in mind the similarity between the cases of J Bollinger v Costa Brava Wine Co. Ltd and the moot-problem, it is submitted that the respondent’s sale of non-alcoholic “Elderflower Erewine” as “Erewine” is indeed a misrepresentation.

III. Damage

Finally, damage is an essential prerequisite for an action action for extended passing off. While individual damage need not be proved, the standard of proof only refers to the likelihood of damage to the class of producers.27 In the given scenario, both the appellant and the respondent operate in the same field of business – namely, alcoholic and non-alcoholic beverages from locally grown grapes. However, it is questionable whether a significant section of the relevant public would be confused by what is on offer, owing to the specific labelling of the drink as “non-alcoholic”. These words clearly indicate a difference that is easily intelligible to every consumer. “Only a moron in a hurry”28 would confuse the respondent’s beverage with an alcoholic ‘Erewine’. Those easily misled customers are, under normal circumstances, to be considered irrelevant.29 Keeping this in mind, the court is likely to deny damage in this particular instance.

F. Conclusion

In light of the preceding arguments the case tends to favour, in terms of pure legal reasoning, the following positions:

a) The sale of the Elderflower wine and cider would constitute patent infringement under a literal construction;

b) contending that the patented bottle is contrary to public policy or morality must in the end be considered far-fetched and unjustifiable;

c) ‘Erewine’ is indeed a class that contains goodwill and has been misrepresented by the respondent’s sale non-alcoholic “Elderflower Erewine”.

Nonetheless, the Oxford IP Moot Court provides enough freedom for every participating team to express their very own solution to each and every problem. No solution can be considered false as long as the reasoning underpinning it is based on precedent and fact. Participants of the Oxford IP Moot Court are expected to find innovative solutions in IP law, a legal field which in itself is constantly catching up to the latest trends and quirks of technology and the media. Therefore, the competition enables interested students to reflect deeply on the topic of IP and challenges them to question the status quo in a stimulating environment of equally invested peers. Whichever team turns out to be the reigning champion in each given year will have proven itself to be flexible, spontaneous and innovative in its advocacy, but also to have possessed that extra bit of luck necessary to proceed through each and every round.

22 Erven Warnink BV v J Townend & Sons [1980] AC 731, 791, 803.

23 J Bollinger v Costa Brava Wine Co. Ltd. [1960] Ch. 262 (champagne); Chocosuisse Union des Fabricants de Chocolat v Cadbury Ltd [1999] RPC 826 (swiss chocolate).

24 Chocosuisse Union des Fabricants de Chocolat v Cadbury Ltd [1999] RPC 826, 837.

25 Singer Manufacturing Co. v. Loog (1882) 8 App.Cas. 15, H.L.(E.).

26 J Bollinger v Costa Brava Wine Co. Ltd. [1960] Ch. 262, 280.

27 cf. Erven Warnink BV v J Townend & Sons [1980] AC 731, 756.

28 Morning Star Co-operative Society Ltd v Express Newspapers Ltd [1979] FSR 113, 117.

29 Morning Star Co-operative Society Ltd v Express Newspapers Ltd [1979] FSR 113, 117.