European Commission publishes proposals for reform of trade mark law

Practical Law UK Legal Update 9-525-4775 (Approx. 8 pages)

European Commission publishes proposals for reform of trade mark law

by PLC IPIT & Communications

Background

Trade mark registration has been harmonised in EU member states for more than 20 years, with national and Community trade mark (CTM) rights co-existing for over 15 years. In 2008, the European Commission indicated that it believed it was time for an evaluation of the overall functioning of the Community and national trade mark systems (see Legal update, European Commission publishes Communication on industrial property rights strategy). Consequently, it commissioned a study by the Max Planck Institute, which proposed a number of draft amendments to the Trade Marks Directive (2008/95/EC) and the CTM Regulation (207/2009/EC) (see Legal update, Max Planck Institute proposes draft amendments to EU trade mark legislation).

Facts

The European Commission has now published provisional draft revisions to the Directive and the Regulation, as well as proposals for changes to fee levels under the Trade Mark Fees Regulation. The Commission identifies the primary objectives of these proposals as:

Streamlining and harmonising registration procedures within the Office for Harmonisation in the Internal Market (OHIM) and national registries.
Improving the legislation by amending outdated provisions, removing ambiguities, clarifying trade mark rights in terms of their scope and limitations, and incorporating European case law.
Improving provision for combating counterfeit goods that are in transit through the EU.
Facilitating co-operation between national registries and OHIM.

The recast of the Directive and revision of the Regulation will be made under the co-decision procedure, which requires the approval of the European Parliament and the Council of the European Union. The Commission says that it hopes to adopt the proposals by spring 2014, and that member states will then have two years to transpose the new rules of the Directive into national law.

The proposed revision of the Trade Mark Fees Regulation will be adopted by the Commission as an implementing act, and will only require prior endorsement by the competent committee of fee experts from EU member states. The Commission states that the first meeting of that committee will take place before the summer, with the aim of adopting the amended Fees Regulation before the end of 2013.

The Commission has published a marked-up version of the Directive and a written explanation (without a mark-up) of its proposed amendments to the Regulation, together with explanatory notes for both sets of changes.

The proposed measures are summarised below. References to Article numbers are to those of the current Regulation or Directive, except where we indicate that we are referring to the proposed version of an Article.

Proposed changes to Directive and Regulation to clarify or remedy effects of case law

Some of the Commission's proposals, designed to make changes and clarifications in the light of ECJ case law, would apply to both the Directive and the Regulation. In the respective explanatory notes, these are included under the heading "Modernising and improving existing provisions" (for the Directive) and "Increasing legal certainty" (for the Regulation). The proposed changes would:

Delete from the definition of "Trade Mark" the words "capable of being represented graphically", to reflect the fact that marks can be represented in other ways, such as by sound files.
Add additional wording to clarify that in infringement cases involving identical marks and goods/services, and similar marks and goods/services, there is no infringement unless the defendant's use affects, or is liable to affect, the function of the trade mark to guarantee to consumers the origin of the goods or services. The Commission notes that there has been some legal uncertainty as to whether acts which impair other functions of a mark should be classed as infringements, and refers by way of example to the Opinion of the Advocate General in the Interflora reference (Case C-323/09; see Legal update, AG's opinion in Interflora v Marks & Spencer advertising keywords reference), in which he noted that the mark in issue performed the functions of an internet search term and of a keyword to trigger advertising. It confirms that it is only the origin function that matters.
Confirm that infringement claims are without prejudice to earlier rights.
Confirm that the use of a sign as a trade or company name, or as part of such a name, is potentially infringing use.
Harmonise the law on infringement of marks with a reputation (whose implementation in relation to national marks is currently at the discretion of national legislatures) and confirm that (in accordance with case law) this type of infringement can occur regardless of whether the goods or services of the infringer are identical, similar or dissimilar to those for which the mark is registered. For more information, see Practice note, Trade marks: Infringement and offences: Infringement of mark that has a reputation.
Clarify that a trade mark owner can prevent the use of his mark in comparative advertising if such advertising fails to meet the criteria set out in Article 4 of the Comparative Advertising Directive (2006/114/EC). For more information about this directive, see Practice note, Comparative advertising.
Confirm that infringement can occur by the importation of goods into the EU even if the purchaser is a consumer, as long as the consignor itself is acting in a commercial capacity. The Commission adds that it is particularly concerned to discourage the ordering and sale of counterfeit goods via the internet.
Narrow the concept of exhaustion of rights by entitling trade mark owners to prevent the importation of counterfeit goods (that is, goods bearing a sign identical with the trade mark) into the customs territory of the EU, even if they are not being released for free circulation there. This is intended to change the current legal position, confirmed by case law, which permits the importation of such goods under suspensive customs procedures as long as they are not marketed or offered to consumers in the country of importation (Koninklijke Philips Electronics NV v Lucheng Meijing Industrial Company Ltd and others, Nokia Corporation v Her Majesty's Commissioners of Revenue and Customs, Joined cases C-446/09 and 495/09; see Legal update, ECJ gives guidance on obtaining detention and destruction of infringing goods held under suspensive customs procedures).
Prohibit the distribution and sale of labels, packaging and similar items that may subsequently be combined with illicit products.
Clarify that provisions allowing third parties to use their own name or address without risk of infringement apply only to personal names and addresses (and not, for example, corporate ones).
Extend the scope of provisions permitting the use of indications concerning kind, quality, quantity and so on of goods or services, so that they apply to any sign or indication that is non-distinctive.
Add provisions to explain that the concept of "honest practices" excludes any practice which gives the impression that there is a commercial connection between the third party and the proprietor of the trade mark, or which takes unfair advantage of or is detrimental to, the distinctive character or the repute of the trade mark without due cause. These are given as two examples of non-honest practices, rather than as an exhaustive list.

Recast of Trade Marks Directive

As well as the proposed changes listed above, the Commission recommends two further categories of amendment to the Directive:

Amendments to bring the law applicable to national trade marks into line with that applicable to CTMs.
Amendments to align the rules of procedure for registration of national marks and CTMs.

These are summarised below.

Measures to make national marks subject to the same rules as CTMs

The Commission proposes to:

Expand the relative grounds for refusal to take into account earlier protected geographical indications (PGIs) and traditional terms.
Make the enhanced level of protection for marks that enjoy a reputation mandatory rather than (as at present) discretionary for member states.
Make national marks subject to the same rules as CTMs as regards their nature as objects of property, including matters such as transfers and rights in rem.
Add new provisions to provide for the registration and protection of collective marks.

Measures to align procedural rules for national marks and CTMs

The Commission proposes adding new provisions to the Directive to:

Reflect ECJ case law on the use, in trade mark specifications of goods and services, of the general indications of the class headings of the Nice Classification (CIPA v Registrar of Trade Marks, Case C-307/10; see Legal update, ECJ rules on use of Nice Classification class headings in trade mark applications). It proposes to make the same change to the CTM Regulation (see below).
Abolish ex officio objections to national trade mark applications on relative grounds (Article 41, draft Directive). (This was abolished in 2007 for UK applications; see Legal update, Goodbye to relative grounds examination.)
Impose the same fee structure for registrations and renewals on all national registries so as to require an initial payment for an application or renewal covering a single class of goods and services, and an additional payment per extra class. (This is already the practice for UK applications, but OHIM and some EU member states cover more than one class for the initial application fee). The Commission hopes that this change will make access to the trade mark system cheaper for small and medium-sized enterprises, who will often only require single-class registrations.
Require all member states to provide for an efficient and expeditious opposition procedure (Article 45, draft Directive), which must allow trade mark applicants to raise a defence of non-use of any mark that the opponent seeks to rely on which has been registered for five years or longer.
Require all member states to provide a procedure for having a trade mark declared invalid or revoked. The Commission notes that at present in some member states, this can only be done through the courts.

Revision of the CTM Regulation

The European Commission has published a set of proposed amendments to the CTM Regulation, although these are expressed in the form of a separate text rather than as a mark-up.

The Commission proposes to:

Change the name of the Community trade mark to "European trade mark", and the name of the Office for Harmonisation in the Internal Market to "European Union Trade Marks and Designs Agency".
Change the fee structure for CTM applications so that the application fee will cover a single class of goods or services, rather than three as is currently the case. The proposed application fee is EUR 750, lower than the current fee of EUR 900. The overall cost of applying for three classes will, however, remain at EUR 900.
Abolish systems for filing CTM applications with national trade mark registries. (The Commission notes that fewer than 4% of CTM applications in 2012 were submitted via national offices.)
Make CTM applicants pay up-front for filing applications. At the moment, they can file first and pay later (within one month) but, since examination reports are now often provided within that initial month, OHIM has found that this has led to many speculative applications which are abandoned and never paid for.
Abolish searches of the national registers as part of application procedures and, consequently, abolish the one-month period which must currently elapse between notification of search reports and publication of the application (proposed Articles 38 and 155, CTM Regulation). The Commission considers that the weaknesses of national and EU searches have become more acute over time, and that advances in technology have given users better, faster and cheaper search alternatives, so that national searches in those countries which conduct them have very little remaining value for applicants.
Allow third parties to submit observations at any time up to the end of the opposition period or (if the application is opposed) the conclusion of opposition proceedings (rather than, as under the present system, their having to wait until the official publication date before they can do so).
Delete Article 62 of the Regulation, which provides that when an appeal is made in inter partes proceedings and the department whose decision is contested considers the appeal to be well-founded and admissible, it shall rectify its decision. The Commission says that not a single decision has been rectified under this provision, for the obvious reason that the department whose decision is contested has no interest in changing it.
Provide for what should happen when a substantive decision in proceedings is made after the unobserved expiry of a time limit, but before the party who failed to take the relevant action in time has successfully applied for the continuation of the proceedings. The new provisions require the department competent to decide on the omitted act to review the decision and, where completion of the omitted act itself is sufficient, to make a different decision.
Shorten the opposition period for international registrations from six months to one month.
Extend the scope of relative grounds for refusal to include traditional terms.
Reflect ECJ case law on the use, in trade mark specifications of goods and services, of the general indications of the class headings of the Nice Classification (see above) and allow owners of CTMs filed before OHIM changed its classification practice in June 2012 to adapt their specifications of goods and services to ensure that they meet the necessary standard of clarity and precision.
Make provision for the registration of European certification marks. (These do not currently exist.)
Add a new Article 123c to the Regulation which sets out the tasks of the renamed EU Trade Marks and Designs Agency and describes how it must interact and co-operate with national trade mark offices, and they with it.

Revision of Trade Mark Fees Regulation

This Regulation provides for the fees payable to OHIM in relation to CTM applications and proceedings. No detail is given of any proposed amendments to the text of this Regulation, but the Commission sets out in its FAQs on the modernisation package a comparison table showing proposed fees alongside current ones.

Comment

The Council of Ministers first proposed a study on the functioning of the CTM and national trade mark systems in 2007, and the Max Planck report eventually emerged in March 2011. These proposals have now appeared after some delay (they were originally intended to be produced in 2011; see Legal update, European Commission publishes 2011 work programme). Perhaps unsurprisingly, given the comprehensive scope of the Max Planck study, the Commission has not included all the measures that it suggested. For example, the study identified as a problem the fact that a CTM remains unused in particular EU member states, but can be maintained in all member states because of its unitary nature. The Institute therefore suggested allowing third parties to register later conflicting national marks in the countries where no use had been made of the earlier CTM, provided they were geographically remote from the countries of use. In the light of the extensive case law that would no doubt be required in order to establish what is meant by "remote", the Commission seems to have decided not to pursue this idea.

The removal of the graphical representation requirement would be likely to cause a wave of applications aimed at pushing the boundaries of what can be registered. It seems clear that sound marks will be easy to represent (and the new European trade mark office will presumably make sound files available on its public database) but it is not clear, for example, how a smell could be represented with enough precision to make it clear what is covered. (For a discussion of this problem, see Eden SARL v OHIM, Case T-305/04, reported in Legal update, CFI rejects CTM application for strawberry smell).

The restriction of infringement to effects on the essential origin function as opposed to the communication, investment and advertising functions is a welcome simplification of the rules that were in danger of becoming over-complicated by ECJ jurisprudence.

The measures aimed at stemming the flow of counterfeit goods will be particularly welcomed by trade mark owners. In its last Annual Report, the Commission released statistics indicating an increase between 2010 and 2011 of almost 15% in counterfeit goods entering the EU. A quarter of these were medicines, and a further 21% were packaging materials (hence the introduction of measures for the seizure of labels and packaging that may subsequently be combined with counterfeit products). For information about the legal and practical steps for rights-holders to consider when implementing an effective anti-counterfeiting strategy in the UK, see Practice note, Working with UK Customs and Checklist, UK anti-counterfeiting strategy. Alongside the proposed reforms to trade mark law, the Commission is evaluating the effectiveness of the IP Enforcement Directive (2004/48/EC) (see Legal update, European Commission launches survey on intellectual property enforcement in member states)

The automatic inclusion of three classes of goods or services within a CTM application (and within national applications in some countries) encourages CTM applicants to include classes (often in their entirety) beyond those which are actually of commercial interest to them, and for which the mark will never be used. This obtains a wider scope of protection for the mark, at no extra cost, but is to the disadvantage of other potential applicants for rights that conflict with such registrations, as they must wait until five years have elapsed from registration before they can challenge them on the ground of non-use. The requirement to include only a single class is therefore a change that is likely to improve the functioning of the trade mark system as well as increasing its accessibility.

Source

Europa press release, FAQs and Trade marks webpage, 27 March 2013.

European Commission publishes proposals for reform of trade mark law | Practical Law