Oakley Inc v Animal Ltd & Ors

Section 2(2) of the European Communities Act 1972 permits subordinate legislation to implement Community obligations and to select appropriate forms and methods. It does not confer a free-standing power to amend primary legislation merely because the subject matter is connected with a Community obligation. Powers enabling the Executive to amend Acts of Parliament require a narrow and purposive construction.

A permissive derogation in a directive involves a significant policy choice. Unless Parliament has delegated that choice clearly, it must be made by primary legislation. Where regulations implementing a directive are partly ultra vires, the court may sever or revise them if the valid remainder is substantially unchanged in purpose, operation and effect.

Oakley sued Animal and related defendants for infringement of a registered design. The parties agreed that Oakley had sold sunglasses embodying the design in the United Kingdom on 10 May 1996 and applied for design protection on 10 June 1996.

Animal argued that the registration was invalid for prior publication under the Registered Designs Act 1949. Oakley relied on the 12-month grace period introduced to implement Directive 98/71/EC. The registration pre-dated the Registered Designs Regulations 2001, which preserved the old validity law for certain existing registrations through regulation 12.

The central questions were whether regulation 12 was authorised by section 2(2) of the 1972 Act and whether the United Kingdom could exercise the directive’s derogation after the transposition deadline.

1. Section 2(2). Section 2(2), read with section 2(4), is a King Henry VIII power and must be construed narrowly. It authorises regulations needed to implement a Community obligation, or to select appropriate methods for achieving a result required by Community law. It does not authorise the Executive to achieve a substantive result which neither Community law nor Parliament requires merely because the result is related to a Community obligation. The wider reasoning in R v Secretary of State for Trade and Industry, ex parte Unison was not followed.
2. Regulation 12. Article 11.8 of Directive 98/71/EC permitted, but did not require, the United Kingdom to retain its former validity rules for existing registrations. Choosing whether to exercise that derogation was a significant policy decision. The Secretary of State therefore lacked power under section 2(2) to make regulation 12(2) and (3). It was ultra vires as originally framed.
3. Severability. Applying DPP v Hutchinson, the court could notionally revise regulation 12 so that the relevant date was 28 October 2001, the directive’s transposition deadline. The revision preserved the substantial purpose, operation and effect of the 2001 Regulations and was therefore permissible under the doctrine of substantial severability.
4. Late transposition. Following Case C-255/01 Markopoulos, a Member State could not use a transitional derogation after the ultimate date fixed by the directive so as to postpone harmonisation. Regulation 12, as worded, caught registrations made between 28 October and 9 December 2001 and was consequently contrary to Community law. The court considered that defect curable by revision, subject to any unresolved question of European law.
5. Result. The revised regulation left the old law governing the validity of Oakley’s existing registration. The preliminary point was therefore decided in favour of Animal, unless Oakley pursued a reference to the European Court of Justice on whether the derogation had wholly expired after the deadline.