Reported by Professor Dr. Alexander von Mühlendahl, J.D., LL.M.
The Trade Marks Directive was adopted almost 25 years ago, the Community Trademark Regulation 20 years ago. The Community trademark, valid and enforceable throughout the European Union, has proven to be a true alternative to national trademark protection. Still, the total number of Community trademark applications, currently around 100.000 annually, is much lower than the sum of trademark applications filed in the Member States. For example, in France alone there were some 91,000 new national trademark applications in 2011, of which more than 95 % by nationals. Naturally, the creation of the Community trademark has had the effect that national applications filed by foreigners have dropped, which affects smaller EU Member States much more than large ones where trade marks applied for by local companies have traditionally been more numerous than those from abroad. Overall the principle of coexistence of national and Union-wide trademark rights, one of the fundamentals of European trademark law, has stood the test as a whole, and there is no reason to depart from this in the future.
Imbalances exist at the Office for Harmonization in the Internal Market (OHIM) in Alicante between revenues and expenditures – despite fees which are moderate or even low OHIM has accumulated surpluses and reserves in excess of EUR 600 million. The Member States agreed in 2007 with OHIM and the Commission to share in the revenues of OHIM, in the order of about 50 % of the renewal fees. The Council of Ministers also instructed the Commission to undertake an overall evaluation of the European trademark system and then bring forward legislative proposals which should also provide a legal basis for the “fee sharing”. The Commission awarded the contract for a study of the functioning of the system to the Munich-based Max Planck Institute for Intellectual Property and Competition Law. The results were presented in March 2011, “Study on the Functioning of the European Trademark System” (cf. BARDEHLE PAGENBERG IP REPORT 2011/II), and later supplemented by texts for the Regulation and the Directive, wich are accessible through the Institute’s website.
Commission proposals were announced initially for 2011, but repeatedly postponed. Now, however, we do have them, since March 27, 2013, after an earlier version of the proposal was “leaked” a few weeks previously: A proposal to amend the Trademark Regulation and a proposal for a recast of the Trade Marks Directive. In addition, the Commission proposes to amend the current fee schedule for the Office in Alicante.
The proposals for amending the Regulation amount, as regards substantive law and procedure, to a moderate revision of and addition to existing law. There are, however, marked changes in the organization of the hitherto largely autonomously administered OHIM. The proposal to recast the Directive contains an ambitious expansion of harmonization: Not only is the substantive law almost completely harmonized, with an elimination of most of the currently existing many options and the addition of elements previously not covered, such as trade marks as an object of property, but the proposal also covers procedures and would oblige the Member States to have largely comparable trademark procedures, while currently there are still major differences.
II. The European Trademark and the European Office – Name, Organization, Tasks
OHIM, in practice also known by its other abbreviations HABM, OAMI, OHMI and UAMI,is, in future, the “European Union Agency for Trade Marks and Designs”. The change from “Community” to “European” follows from the change of terminology in general from “European Community” to “European Union” in the European Union Treaties agreed in Lisbon. The change from “Office” to “Agency” is, it is claimed, follows from an agreement between Parliament, Council and Commission regarding the rules governing subordinated authorities (previously variously called “Office” or “Agency”). Perhaps the name “Office” could remain so then the agency might be named “European Trademark and Design Office”. Not only will the office give up its name, but the “Community trademark” is to mutate to “European trademark”, and throughout “Community” will be replaced by “Union”, such as in “Union law”, since the “Community has disappeared in favour of the “Union”.
Another important organizational change is that in the future the Commission will be competent for all implementing regulations, including the setting of the fees, by means of “delegated acts” as provided for in Article 290 of the Treaty on the Functioning of the European Union, without the participation of Member States as is currently still the case through the so-called regulatory committee. Among the consequences of this is, inter alia, that the Regulation now in many places states that the Executive Director shall issue more detailed provisions. Currently, this sub-delegation was included in the implementing regulation, whereas under the news rules such sub-delegation is apparently no longer possible.
The “Administrative Board”, the organ that exercises oversight of the Agency, will in future be called “Management Board”. The “President” will become the “Executive Director”. The Commission’s role is strengthened – it will have two voting members on the Board and Budget Committee, while currently the Commission is represented by one non-voting member, and the Commission will have the competence for making proposals for the appointment of the Executive Director and the Deputy Executive Directors, the President and Chairpersons of the Boards of Appeal. Whereas currently the Council of Ministers appoints these high officials, this will in future be the task of the Management Board.
The Budget Committee will continue to be responsible for adopting the budget and giving discharge to the Executive Director, and the budget will remain autonomous in the sense that it is adopted and executed without the participation of the EU budgetary authority (Council and Parliament). Should structural surpluses remain, the surplus would be transferred to the EU budget.
The Regulation will now list in much detail the tasks of the Agency. Among the explicitly listed mandates is the cooperation with the authorities of the Member States, which in substance is the obligation to “harmonize” practices in the field of trade marks and design. Thus, what is currently already carried out in the Cooperation Fund and the so-called “convergence” programs will now have a statutory basis. The relevant provision reads as follows:
Cooperation to promote convergence of practices and tools
1. The Agency and the industrial property offices of the Member States and the Benelux Office for Intellectual Property shall cooperate with each other to promote convergence of practices and tools in the field of trade marks and designs. This cooperation shall cover the following areas of activity:
(a) the development of common examination standards;
(b) the creation of common or connected databases and portals for Union-wide consultation, search and classification purposes;
(c) the continuous provision and exchange of data and information, including the feeding of the databases and portals referred to in point (b);
(d) the establishment of common standards and practices, with a view to ensuring interoperability between procedures and systems throughout the Union and enhancing their consistency, efficiency and effectiveness;
(e) the sharing of information on industrial property rights and procedures, including mutual support to helpdesks and information centres;
(f) the exchange of technical expertise and assistance in relation to the areas laid down in points (a) to (e).
2. The Agency shall define, elaborate and coordinate common projects of Union interest with regard to the areas referred to in paragraph 1. The project definition shall contain the specific obligations and responsibilities of each participating industrial property office of the Member States and the Benelux Office for Intellectual Property.
3. The industrial property offices of the Member States and the Benelux Office for Intellectual Property shall participate effectively in the common projects referred to in paragraph 2 with a view to ensuring their development, functioning, interoperability, and keeping up to date.
4. The Agency shall provide financial support to the common projects of Union interest referred to in paragraph 2 to the extent this is necessary to ensure the effective participation of the industrial property offices of the Member States and the Benelux Office for Intellectual Property in the projects within the meaning of paragraph 3. That financial support may take the form of grants. The total amount of funding shall not exceed 10% of the yearly income of the Agency. The beneficiaries of grants shall be the industrial property offices of the Member States and the Benelux Office for Intellectual Property. Grants may be awarded without calls for proposals in accordance with the financial rules applicable to the Agency and with the principles of grant procedures contained in the Financial Regulation (EU) No 966/2012 of the European Parliament and of the Council and in the Commission delegated Regulation (EU) No 1268/2012.
As is clear from paragraph 4, projects in the field of cooperation would be co-financed by the Agency, with an upper limit of 10 % of annual revenues. In 2011 total revenue was about EUR 180 million, so that – if it were to remain at that level – approximately EUR 18 million per year would be available to support cooperation between the offices. This funding model has taken the place of the allocation of 50 % of the renewal fees. The total is about the same: 2011 revenue from renewal fees amounted to approximately EUR 33 million (without Madrid marks).
III. Substantive Law: European and National Trademark Law
The Commission’s proposals include some additions to the absolute and relative grounds of refusal, the scope of protection and the limits to the exclusive rights, the changes being evolutionary. Regulation and Directive will have the same content as regards substantive trademark law, with few exceptions. The Directive will have a fewer options and will have complete set of rules on trade marks as property, and thus deal with transfers, rights in rem, licenses, and insolvency.
1. Categories of Marks, Eligibility and Absolute Grounds
The Commission proposes that European trademark law should allow registration not only, as now, of collective marks, but also of certification or guarantee marks. These are marks which certify certain qualities or characteristics of the goods or services, with the certifying body or authority being the proprietor, but not itself making or selling these goods or services. The Directive would harmonize the rules on collective marks and leave it to the Member States whether or not to provide for certification or guarantee marks as well. This seems consistent with regard to collective marks but half-hearted as regards certification and guarantee marks: It would clearly be preferable if national law would also include this category of marks (and not only to allow a possible conversion).
The definition of signs being registrable as marks would no longer require “graphic representation”. Rather, the proposed criterion is whether the sign is capable of being “(…) represented in a manner which enables the competent authorities and the public to determine the precise subject of the protection afforded to its proprietor.” This will make it somewhat easier to obtain registration of new types of marks but is unlikely to allow the registration of smell marks or haptic marks.
The exclusion from registration of marks which conflict with EU-protected geographical indications or designations of origin is generalized. The prohibition would now also include traditional terms for wines and the names of traditional food specialties. Furthermore, earlier plant variety designation also must be taken into account.
The prohibition of registration will extend to those marks which are not in a script of one of the Union languages or otherwise in a foreign language, but which, if transcribed or translated, acquire a meaning which would result in the refusal of protection. There is no justification given for this far-reaching proposal – for which there is no basis in the preliminary work –, and it is of questionable legitimacy unless the language concerned is already known to the relevant circles of the public in the European Union.
For the Directive a provision is proposed which mirrors Article 7 (2) of the Regulation – marks must be refused if they are descriptive or non-distinctive in any of the EU languages. Here again, there is no true justification given for this proposal. It seems doubtful whether such far-reaching exclusions, entirely appropriate for the current Community (and future European) trademark, actually are needed or appropriate for the national trademark systems.
2. Relative Grounds for Refusal
The right to oppose on the basis of unregistered rights is proposed to include explicitly Union-wide protected geographical indications, which corresponds to existing law.
Furthermore, the Commission proposes that in addition to the conventional cases of unfaithful agents a further opposition ground should be the existence and continued validity of a mark abroad and the filing of that mark in Europe in bad faith. Here again there is no real reason given for that proposal, and it seems doubtful that it adds anything of merit to the existing “bad faith” ground of invalidity. Apart from that, no proposals are made for permitting the raising of absolute grounds (or of “bad faith”) in opposition proceedings.
3. Scope of Protection and Infringing Acts
Another “gap” in the current legislation will be closed with the proposal that the exclusive rights of the trademark proprietor do not extend to proprietors of earlier rights, in accordance with Article 16 of the TRIPS Agreement. Until now, Community trademark law contained a hidden provision in Article 99 of the Regulation which required however that the allegedly infringed Community trademark could be declared invalid on the basis of an earlier right.
The three infringement situations – double identity, likelihood of confusion, detriment to a mark with reputation – are maintained, with a drafting addition to the reputation marks in order to include identical or similar goods or services. The Commission somewhat surprisingly proposes to add for the double-identity cases that the use complained of must be liable to affect adversely the origin function of the mark. This would reverse the case law of the ECJ which has recognized as meriting protection also the advertising, communication, and investment function of marks. The underlying problem was analysed in detail in the Max Planck Study. The Study proposed to clarify in the Preamble that the injury occasioned when the mark is used not for the goods or services of the infringer, but for those of the proprietor – in cases of comparative advertising, for example, or in exhaustion cases – is different from the damage in the classical case where the infringer uses the mark for his own goods or services. In order to balance the interests of those making referential use of the proprietor’s mark, additions to Article 12 of the Regulation (fair use) were suggested. The Commission proposal still includes comparative advertising not meeting the requirements of the law as an act of infringement, as well as the expansion of referential use in Article 12 of the Regulation. Thus, the new limitation in double identity cases actually disturbs the balance sought with the other proposals.
Among the infringing acts is now also the use of a company or trade name – subject to the inherent limitation that the infringing use must be in relation to goods or services and not for other purposes. For this latter situation the Directive will continue to allow Member States to provide for protection as well (currently Article 5  of the Directive), but the Commission has not taken up the suggestion in the Max-Planck Study to add a similar provision in the Regulation.
Until recently much debated was whether the Commission would make an ambitious, or dilatory, or no proposal for transit. The Max Planck study had proposed that an infringement would exist if goods in transit would infringe in the transit country and in the country of destination, and if the goods are “counterfeit goods” within the TRIPS definition of such goods. The Commission now proposes that counterfeit goods are infringing even if in transit, regardless of the situation in the country of origin or in the country of destination. It seems that “legitimate” transit, where the infringement would be limited to the transit country, has been neglected too much. It remains to be seen whether Parliament and Council of Ministers will agree with this ambitious proposal.
Another addition to the infringing acts is the sending of goods from abroad to Europe where only the sender is acting in the course of trade. This is intended to solve the “small packages problem”, which arises when counterfeit goods are directly addressed to private purchasers in Europe who as purchasers are not acting in a commercial capacity.
Finally, the Commission proposes to include the use of registered trade marks for labels and other means of marking goods or packaging which may be prohibited if their use, on or for the finished goods, would amount to an infringement. Thus, the separate shipment of goods and their labels or packaging (e.g., empty bottles), later to be combined to infringing goods, may be prohibited.
The traditional fair use limitation is expanded and made more explicit. The right to use one’s name is to be limited to “personal names”, thus reversing the result of the ECJ judgment in the Anheuser-Busch case. The fair use exception currently limited to descriptive indications will in future also apply to non-distinctive signs or indications.
For the requirement of use, the Commission proposes to codify the result in the recent Rintisch (PROTI) judgment of the ECJ (cf. BARDEHLE PAGENBERG IP REPORT 2012/V) – an acceptable variation must be taken into account even if itself registered. As regards conflicts between marks, the five-year grace period is to be calculated not from the date of publication of the application, but from the filing or priority date of the later mark.
In addition, a previously existing gap is closed: Currently, the continued validity of trademark rights obtained during a time when a potentially conflicting earlier mark could not be enforced (because of lack of use or because of not yet having obtained reputation or enhanced distinctiveness) was in doubt, except as regards acquiescence. Even for the “use” issue, the Regulation protected the registration when the mark could not have been opposed, but the right to use was not explicitly recognized. The Commission now proposes that these “intervening rights” should continue to be valid and that their use cannot be prohibited.
For the Regulation, a number of procedural changes are proposed primarily with the aim of simplifying and accelerating proceedings.
Applications should be submitted in the future only at the Agency, not with national authorities. If a foreign priority is claimed, the declaration of priority must now be made “with the application”. Article 4 D (1) of the Paris Convention leaves it to the laws of the Contracting Parties to determine the deadline for the declaration. Still, an obligation to do so even with the application appears excessive.
For obtaining a filing date the payment of the fee “with the application” will be required. Currently, the applicant has one month to pay the fee, and can still maintain the filing date.
For future applications, as well as for renewals, a separate class fee for all classes (except the first) will be required. This is not found in the proposal to amend the Trademark Regulation, which leaves the fees to delegated acts, but in a proposal to amend the Regulation on Fees, which – so the proposal – will be amended according to the current method (Commission with regulatory committee). An increase in fees is not provided – rather, an application for one or two classes will be less expensive than today. The Commission also proposes a discount to those limiting the goods or services to items in the database made available by OHIM.
A detailed rule governs the classification of goods and services in accordance with the June 19, 2012 IP TRANSLATOR decision of the ECJ (cf. BARDEHLE PAGENBERG IP-REPORT 2012/III). For applications filed prior to June 22, 2012, a transition period is proposed during which the specifications may be amended to the situation created with the IP TRANSLATOR decision.
The Commission proposes to abolish “disclaimers”. Most will welcome the disappearance of this rarely used instrument.
Stakeholders will also be pleased to know that both mandatory searches for earlier Community trade marks as well as the optional national searches are to be abolished.
A surrender of a registered trademark would not take effect while cancellation proceedings are pending. Nothing similar exists in opposition proceedings, where an application may be withdrawn at any time, and the merits of the proposed rule are questionable.
Interlocutory revision in inter partes cases – in practice never utilized – would also be abolished.
A major change concerns the role of the Agency in cancellation proceedings. While so far the truly adversary nature was limited to relative grounds, this would apply in the future to all cases of invalidation and revocation.
The cancellation of incorrect entries or revocation of decisions will in future be available for one year and not, as currently, for six months.
Continuation (also called “further processing”) will be more broadly available and include also opposition proceedings.
In Title X, dealing (primarily) with infringement litigation, there are only “cosmetic” changes – the Commission currently apparently has no interest to consider the introduction of uniform sanctions for trademark infringement, one of the major lacunae in the Regulation.
As already mentioned, the Commission proposes that the Directive provides for a complete “set” of procedures that are largely in line with the provisions applicable to Community (European) trade marks:
• Minimum requirements for obtaining a filing date; Member States may include payment of the fee as a filing date requirement;
• Additional fees for each class at application and renewal;
• Classification rules the same as for European trade marks;
• No ex officio examination on prior rights;
• Division of applications and registrations;
• Duration and renewal of registration.
Member States are required to have an opposition procedure before the trademark office, at least for the assertion of prior rights, and the objection of lack of use shall be permitted. Member States also need to have or introduce an administrative cancellation procedure, in which at least absence of genuine use, lack of registrability (absolute grounds) and prior trademark rights can be asserted. Parallel invalidity proceedings before the ordinary courts are not excluded.
The alignment of national procedures with those in the Alicante Agency appears indeed required, although some may question the internal market relevance of these procedures. Notably the absence of an administrative cancellation action in cases of absence of genuine use has proven to be an obstacle to removing potentially or actually conflicting earlier marks from national registers.
V. Overall assessment
The long wait for the reform “package” is over. The Commission proposals (or at least most of them) are appropriate – they reflect the interests of the “users” but at least in part also of the Member States and the Agency in Alicante. Now it remains to be seen how quickly Parliament and Council of Ministers will proceed with the legislative package – in 2014 parliamentary elections are held. Member States with currently more limited procedures may be reluctant to adopt the far-reaching proposals on oppositions and cancellations but should also be interested in an early adoption, also in view in the cooperation perspectives and the financing available through such activities. Users are likely to press for an early adoption of the package which, it seems, overall benefits users, both at the Union level and at the national level.