MARQUES comments on leaked European Trademark draft legislation and struggles with implementation of ‘IP Translator’

In February this year the European trademark community took note of a leaked version of the European Commissions’s draft trademark legislation in reaction to the widely discussed Study on the Overall Functioning of the European Trademark System presented by the Max Planck Institute for Intellectual Property in February 2011 (pdf, 4.5 MB).

The so called ‘leaked proposal’, which immediately received a considerable press coverage (see e.g. WTR or MIP), basically consists of two draft regulations and one draft directive:

• draft amended Council Regulation No 207/2009 on the CommuniyEuropean Trade Mark,
• draft amended Regulation (EC) No 2868/95 on the fees payable to the OHIM,
• proposal for a Directive to approximate the laws of the Member States relating to trademarks (Recast).

The leaked proposal is a pre-final text which gives extensive insight into the EU Commission’s plans to substantively refurbish the Community Trademark (CTM) system as we know it today.

The reasons why and by whom the legislative proposal was ‘leaked’ instead of being officially published on the EU servers lie in the dark, but it can be assumed that the political intentions outweigh the legal ones. As the drafts have been sent, inter alia, to the member organisations of the so called OAMI Users’ Group, a consortium of international NGO’s active in the IP sector and accredited to the OHIM, the leaker apparently intends to provoke a reaction of stakeholders, for instance to test the acceptance of the new legislation in a more conspirative way instead of risking open and public criticism. 

The MARQUES association considers itself as a defender of trademark owner’s and system user’s interests. Compared to other member organisations of the OAMI Users’ Group, MARQUES appears to be more interested in a public discussion as it now again involved the public in a discussion that many other stakeholders consider a topic for closed expert circles only. The extensive comments (pdf, also here) published yesterday (20 March 2013) also include a detailled summary of the substance of the draft legislation.

By this open approach MARQUES refuses to become a silent accomplice of the leaker and his political interests and, even more important, reminds lawmakers that openness and public consultation are vital to a democratic community and the acceptance of its laws.

Besides renaming CTM to ETM (European Trademark), the legislative proposal contains many larger and smaller changes on both the European and the national level. The gist of the new law is to streamline processes, increase efficiency and better synchronise the national systems with the European one (for details see below under sections 1 and 2 of the  MARQUES paper).

As many of those measures are more or less understandable and may well enhance the European trademark system in one way or another, the inclusion of the IP TRANSLATOR decision (CJEU C-370/10) on the specifications of goods and services into the draft legislation is controversial, especially with respect to the handling of already registered trademarks reciting one or more class headings, which the CJEU failed to comment on. In the past, MARQUES took a critical position towards OHIM’s interpretation of the decision as outlined in Communication 2/12 (see also here). 

The rulings of the IP TRANSLATOR decision are implemented in new Article 28 of the Regulation. Article 28(8)  provides that the owners of already registered trademarks reciting one or more class headings  

may declare that their intention on the date of filing had been to seek protection in respect of goods or services beyond those covered by the literal meaning of the heading of that class, provided that the goods or services so designated are included in the alphabetical list for that class of the edition of the Nice classification in force at the date of filing.

The declaration shall be filed at the Agency [i.e. OHIM] within [NOT YET DECIDED] months from the entry into force of this Regulation, [...].

European trade mark registrations for which no declaration is filed [...] shall be deemed to extend, as from the expiry of that period, only to goods or services covered by the literal meaning of the indications included in the heading of the levant class. 

As this results in the very uncommon and for the public undesirable situation that owners of such trademarks can broaden the scope of their trademark retroactively, MARQUES refers this issue to the courts:

The purpose of this provision is obviously to give those applicants who relied on OHIM’s Communication 4/03, an opportunity to “correct” their list of goods and services to what they had intended to protect when, at the time of filing, they recited a class heading instead of the individual goods and services of interest.

MARQUES has been a long-standing supporter of the ‘means-what-it-says’ approach, and while MARQUES appreciates the fact that the Commission is seeking to assist businesses that might have been misled by Communication 4/03, it is apparent that such an option would only add another layer of complication. The “corrected” registrations would have to be republished for opposition purposes, and in effect this would only increase the lack of clarity.

The majority of the registrations (those from June 2003 to June 2007) will already be vulnerable to non-use cancellation actions, and MARQUES questions how many applicants did in fact rely completely on the Communication 4/03. MARQUES would prefer to leave any interpretation of individual registrations made prior to the IP TRANSLATOR decision in the hands of the Courts. MARQUES suggests that Article 28(8) is deleted.

MARQUES’ comments on the major proposals regarding CTMs/OHIM and national trademark law are as follows

1. Major Proposals – CTMs and OHIM

The Commission notes that it is not proposing a new trademark system, “just well-targeted modernisation of existing provisions”. It has set out the following aims in relation to CTMs: 

• Streamlining application and registration procedures for CTMs; 
• Increasing legal certainty by clarifying provisions and removing ambiguities; 
• Establishing an “appropriate framework for cooperation” between OHIM and national offices for promoting convergence; and
• Aligning the framework to Article 290 of the Treaty on the Functioning of the EU and adapting terminology to the Lisbon Treaty. 

Perhaps most readily noticeable is the proposal to change the designation Community trademark (CTM) to European trademark (ETM), and to change the name of OHIM to the European Union Trademarks and Designs Agency (EUTDA?). The President of OHIM will become the Executive  Director of the Agency. This is the result of a review of all EU agencies aimed at harmonising agency structures.

Some major changes to CTM filing practice are proposed:

• The ability to file CTMs at national offices (and the Benelux Office of Intellectual Property) will be abolished;
• CTM fees will become due immediately on filing, not a month later, to prevent the filing of  “test applications”; and
• The current optional search of some national registries will be abolished. MARQUES welcomes the abolishment of national searches. 

In terms of legal certainty:

• The requirement for “graphic representability” of a mark is to be abolished, allowing for the registration of sound and smell marks. “Colours as such” and “sounds” will be specifically included in the definition of trademark; 
• Following the Philips/Nokia decision on suspensive customs procedures, the burden of proof will be reversed so that the importer must prove that the counterfeit goods are destined for a territory outside the EU; 
• A prohibition is to be introduced on the production and distribution of labels and packaging which may subsequently be combined with illicit products;
• Amendments are made to incorporate the IP TRANSLATOR decision on specifications of goods and services; and
• Certification marks are to be introduced. 

Proposals are also made to promote cooperation between OHIM and national trademark offices (and BOIP). OHIM and national offices will be obliged to cooperate with one another. A compulsory cooperation framework will provide for mandatory access to tools to assist in technical capacity building at national offices. This is all to be financed from the OHIM budget. On fees, the fee structure is amended to include only one class of goods/services on application and renewal. Users will not be penalised – a three class application will not cost more than currently. Further fee incentives are provided for using OHIM’s common converged classification database.

2. Major Proposals – National Law

The proposed recast Directive is to be considered together with the draft Regulation impacting on CTM practice and procedure. The recast Directive notes some specific objectives:

• Modernising and improving the existing TM Directive by amending outdated provisions, increasing legal certainty and clarifying trademark rights in terms of their scope and limitations;
• Achieving greater harmonisation of national laws and procedures, aiming to make them more consistent with the CTM system by adding further substantive rules and introducing principal procedural rules; and 
• Facilitating cooperation between national offices and OHIM. 

Interestingly, the Commission considered full scale harmonisation, with a single trademark rulebook to replace member states’ national trademark law in their entirety. This was rejected, in favour of partial expansion of harmonisation.

In addition to the substantive laws proposed for the CTM system, the major changes proposed for
national law include:

• Compulsory protection for geographic indications and traditional terms; 
• New mandatory protection for marks with reputation (presently optional); 
• A new body of rules dealing with trademarks as objects of property; 
• Specific provisions relating to collective marks, to complement the changes to the CTM system; 
• Abolition of relative grounds examination in the 12 member states which maintain it; 
• Filing fees will only include one class and additional class fees will be introduced; 
• Administrative opposition and cancellation procedures before the national office (rather than having to go to court); and 
• The ability for an applicant for national rights to request proof of use of any prior trademark relied on, where it has been registered in excess of five years. 

As a general statement, national trademark law and practice will be brought much closer to the law as it relates to CTM and OHIM practice.

Several member states will have little to do to implement the recast Directive – others will need to make significant changes to their local law and practice. MARQUES strongly supports the harmonisation of national practices and procedures, and particularly the significant cost savings to be obtained with administrative opposition and cancellation procedures. MARQUES also specifically supports the abolishment of relative grounds examination. 

The paper goes on discussing the following issues:

3. Detailed Proposals – OHIM 

• Renaming 
• Delegation of powers
• Graphical Representation 
• Geographical Indications 
• Foreign descriptive terms
• Bad faith
• Marks with reputation
• Rights conferred by a European trademark
• Trade Names
• Comparative advertising
• Private importation
• Customs procedure 
• Preparatory actions – labels
• Honest use of trademarks
• Intervening rights 
• Use of a different sign still genuine use
• Recordal of CTM transfers 
• Filing CTM applications at national offices
• Fee required for filing date 
• Designation and classification of goods and services
• Priority
• Seniority
• Disclaimers of non-distinctive material
• Searches
• Publication
• Observations
• Oppositions 
• Date of proof of use in oppositions 
• Registration
• Surrender when invalidity application already filed
• Acquiescence
• Application for revocation or invalidity
• Proof of use in invalidity and revocation proceedings
• Appeals
• Revision in inter partes cases 
• Appeals to the General Court 
• Collective marks
• Certification marks
• Examination of facts by OHIM in invalidity proceedings
• Notification by electronic means
• Noting of loss of rights
• Correction of errors
• Continuation of proceedings
• Costs enforcement 
• Register
• Earlier right of the defendant in infringement proceedings
• Informing OHIM of challenges to the validity of a CTM
• Acts of the President
• Cooperation to promote convergence
• Fees 
• International Registrations 
• Review

4. Detailed Proposals – Fees

5. Detailed Proposals – National law

• Provisions consistent with changes to the CTM Regulation 
• Extension of territories where absolute grounds apply
• Acquired distinctive character
• New relative grounds
• Seniority
• Proof of earlier rights in invalidity actions
• Acquiescence
• Exclusive rights
• Dictionaries
• Representatives and agents
• Genuine use
• Trademarks as objects of property
• Guarantee, certification and collective marks
• Harmonisation of application procedures 
• Abolition of relative grounds examination
• Observations
• Division of applications and registrations 
• Fees
• Administrative oppositions 
• Proof of use in opposition and invalidity proceedings
• Revocation and invalidity
• Renewal
• Co-operation

Under its final section, the MARQUES paper refers to issues raised by the Max Planck Study or other user groups that have not been adopted into the legislative proposal:

• MARQUES regrets pre-registration opposition proceedings have not been made mandatory in all member states;
• Nothing has been done to mandate consistency of decision making at OHIM. MARQUES would have preferred to see amendments to the Regulation to require OHIM to follow its own decisions, in the same way that precedent works before the Court of Justice; 
• The proposals do not deal with an issue of OHIM consistency for which MARQUES has long requested. Where a “batch” of trademarks is filed, they tend to be passed to different examiners, leading to different, and often inconsistent examination reports, particularly in relation to specifications. The same difficulty applies to multiple oppositions against the same CTM application. Greater consistency does not require primary legislation. MARQUES therefore hopes that greater consistency can be achieved either by administrative changes at OHIM, or, failing that, delegated rule making by the Commission; 
• The proposals do not deal with exhaustion of trademark rights, and particularly offer no further harmonisation of national law with respect to the burden of proof, especially if the trademark owner is operating a selective distribution system; 
• MARQUES would also like to see greater harmonisation of the remedies available for trademark infringement. It is well known that some national courts will issue ex parte injunctions in trademark cases for little more than the asking, whilst the courts in other member states have significant requirements to protect third parties. Damages assessments also vary greatly. Whilst the Enforcement Directive has gone some way to effect harmonisation, it is insufficient, particularly in relation to preliminary measures. The differences in enforcement practices lead to significant forum shopping (for a multi-jurisdictional dispute) or greatly differing levels of enforcement of national rights (very few trademark cases in some countries, many cases in others); 
• No harmonisation has been proposed to procedures for when a CTM is converted to national applications. Whilst the draft Regulation continues to provide for conversion, national practices, once they receive a request to process a CTM converted to their national mark, are widely inconsistent. Greater harmonisation is required; 
• The Study had also looked at the issue of conversion of a CTM opposed on the basis of another CTM, but where the conflict only arose in some member states (ie, there was only likelihood of confusion for consumers in Bulgaria): see also ARMAFOAM/NOMAFOAM, Case C-514/06 P. No proposals have been put forward in this regard; 
• MARQUES submitted that a specialised chamber of the General Court to deal with intellectual property matters would be appropriate. This suggestion has not been taken up in the proposed legislative changes;
• There was a suggestion in the Study that a re-filed application that appears to seek to avoid the non-use provisions is a priori filed in bad faith. This is the law in some member states. This suggestion has not been picked up in either the draft Regulation or the recast Directive; 
• Whilst third party liability for infringing goods was discussed during the consultations, and MARQUES advocated third party liability at least for counterfeit goods, these proposals have not been taken up;
• Proposals to allow “fair use” of trademarks and use of trademarks in parodies have not been taken up – MARQUES supports the absence of any proposals in this regard; and
• At paragraph 201 of the Study, suggestions were made for rules requiring parties submitting evidence to specify those parts they rely on. This would prevent the blunderbuss of chaff that many parties file as evidence, wasting costs for the other party and for OHIM, forced to sift through it. These proposals have not been adopted at this stage, and MARQUES hopes that they will find a place in the delegated rule making that is anticipated. Compiled by the MARQUES Study Task Force.