European Commission Proposes for Reform of European Trade Mark System
The European Commission has proposed a number of initiatives aimed at improving trade mark registration systems all over the European Union to make them cheaper, quicker, more reliable and more predictable. For example, as well as harmonising the rules and criteria for the classification of goods and services and introducing new fee structures for national registries and OHIM, the Commission proposes a new definition of a trade mark and a number of significant procedural changes aimed at reducing cost and delay.
The Commission mainly based its evaluation of the European trade marks system on a study by the Max Planck Institute for Intellectual Property and Competition Law undertaken between November 2009 and February 2011. See OTS: European Commission Publishes Max Planck Institute Study on European Trade Mark System. The final report by the Max Planck Institute concluded that the basics of the European trade mark system are solid and generally meet business needs and expectations.
The co-existence of national trade mark protection in individual European Union countries alongside Community trade mark (CTM) protection constitutes a corner stone of the European Union’s approach to intellectual property law, and allows businesses a choice of protecting their marks at national or EU level. The perceived need for modernisation and improvements arises largely due to the fact that national trade mark registration in EU countries was harmonised 20 years ago and the CTM was created over 15 years ago, and there has been no major modification to the regime since then despite the fact that the business environment has changed significantly during this time. There are also inconsistencies between the two major legislative instruments governing the European Trade Mark System, the 1994 CTM Regulation (now codified as Regulation 2007/2009/EC) (CTMR) and the 1989 Trade Mark Directive (now codified as Directive 2008/95/EC) (TMD).
Harmonisation efforts to date have been concentrated on a restrictive number of substantive rules, with formal requirements and procedures in individual EU countries remaining mostly non-harmonised. The divergences are significant and are perceived as endangering the intended complementary relationship between the CTM and national trade mark systems.
The reforms proposed by the Commission are not intended to create a new system, but to modernise existing provisions by streamlining and harmonising registration procedures across EU countries. The reforms are intended to modernise existing provisions and increase legal certainty by:
Amending outdated provisions
Removing ambiguities and clarifying trade mark rights in terms of their scope and limitations (partially by incorporating Court of Justice of the European Union case law)
Facilitating cooperation between national registries and the Office of Harmonization for the Internal Market (OHIM) by developing common tools and putting in place a legal basis for such cooperation
Improving the means of fighting against counterfeit goods
Introducing more flexibility to the fee structures of OHIM and national registries to better meet the needs of businesses.
The reforms are aimed ultimately at recasting the TMD and revising the CTMR and the 1995 Commission Regulation (2869/95) concerning fees payable to OHIM (Fees Regulation).
Key Areas of The Proposed Reforms
Change of Terminology
As a consequence of the entry into force of the Lisbon Treaty, the Commission notes that the terminology of the CTMR should be updated. Accordingly, the term “Community trade mark” should be changed to “European trade mark”. It is also proposed to rename OHIM as the “European Trade Marks and Designs Agency”.
Definition of a Trade Mark
At present, in order for a sign to be protectable as a trade mark, it must be capable of “graphic representation”. This requirement is outdated and creates legal uncertainty with respect to the protection of non-traditional marks. For example, in the case of sound marks, representation by other means, such as by a sound file, would enhance legal certainty as to what is being protected. The proposed new definition of a trade mark, which provides that a sign must be 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 it proprietor”, does not restrict the permissible means of representation to graphic or visual representation, but is instead broad enough to allow representation by appropriate means, such as technological means, to identify the subject of protection.
Protection of Geographical Indications and Traditional Terms
Unlike the CTMR, the grounds for refusal in the TMD do not address conflicts with protected geographical indications, traditional terms for wines and traditional specialities guaranteed. There is consequently no guarantee that the level of protection afforded to these rights is being applied in a uniform and exhaustive manner in trade mark examination throughout the European Union. The TMD is to be revised to include provisions relating to geographical indications, traditional terms for wines and traditional specialities guaranteed as absolute grounds for refusal.
Bad faith is an absolute ground for refusal, which already exists before OHIM. It has been implemented in some EU countries, such as the United Kingdom, but to date has been voluntary. The proposed amendments to the TMD make “bad faith” a mandatory absolute ground for refusal. This is prima facie a significant extension of grounds of objection for trade mark owners. It remains to be seen, however, how these grounds would be applied in practice in the individual EU countries. By way of example, in the United Kingdom, the allegation of bad faith is considered to be a serious one and conduct that is, in essence, tantamount to fraud. As Advocate General Sharpston said in Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH, Case C-529/07, 12 March 2009, “bad faith cannot be defined at all in the sense of determining its precise limits”.
Abolition of Relative Grounds Examination
Currently, a number of national registries raise prior third party rights as a bar to registration. However, OHIM and other national registries, such as the United Kingdom, only cite prior third party rights to applicants for informational purposes. National registries are still permitted to provide searches for earlier rights on a purely informative basis. The Commission proposes, however, to abolish examinations on relative grounds because they often constitute an unnecessary barrier to registration as many cited earlier rights are no longer in use. Further, the examination on relative grounds leads to legal uncertainty, as objections are raised only on the basis of earlier registered rights filed for identical or similar goods and services. There are, therefore, no guarantees to applicants that a mark that successfully passes the relative grounds examination will not subsequently be opposed by a mark that has acquired a reputation in the marketplace or a well-known mark that has not been registered. This leads to duplication of procedures, significant delays in the prosecution of applications and additional unnecessary expenses for applicants, e.g., when trying to obtain letters of consent from owners of those prior marks that have been cited as a result of the examination process.
Designation of Goods and Services and Class Headings
OHIM and national registries follow different rules and criteria for the classification of goods and services. In order to ensure legal certainty with respect to the scope of trade mark rights and to facilitate access to trade mark protection, the Commission proposes that the designation of goods and services covered by a trade mark application should follow the same rules in all EU countries and should be aligned with those applicable to CTMs. The designation of goods and services should be sufficiently clear and precise; any use of general terms should be interpreted as including only goods and services covered clearly by the literal meaning of the term. The use of such terms or indications cannot be interpreted as comprising a claim to goods or services that cannot be understood to fall within the heading.
Notably, there is a proposed provision that proprietors of CTMs applied for prior to 22 June 2012 that are registered solely in respect of the entire heading of a Nice class, may declare their intention on the date of filing to seek protection in respect of goods or services beyond those covered by the literal meaning of the heading of that class, provided that these goods or services are included in the alphabetical list for that class of the edition of the Nice classification in force at the date of filing. It is proposed that any such declaration must be filed within four months of the date of the entry into force of the new CTMR, otherwise protection will only extend to the literal meaning of the indications included in the heading of the relevant class.
OHIM and some national registries currently offer protection in up to three classes of goods and services for the same initial application fee, whereas other national registries offer protection in only one class. Under the new proposals, all registries in the European Union would have a fee structure whereby the initial application fee covers only one class, with a separate fee payable for each additional class applied for. In the case of OHIM, the proposal is to reduce the initial application and renewal fees for applications in one or two classes. The precise fee levels are yet to be determined.
The intention of these reforms is to de-clutter trade mark registers by diminishing broad claims for goods and services that are not required by the applicant. It is also hoped that the reforms will benefit small and medium sized enterprises that will no longer be obliged to pay for classes of goods and services they do not require.
Opposition and Cancellation Proceedings
Pursuant to the national laws of some EU countries, it is not possible for trade mark owners to challenge the validity or opposability of earlier rights relied upon by other parties in the same proceedings as the action against their trade marks. Accordingly, it is often necessary to lodge separate actions to challenge validity or opposability, often in a different forum. Further, in a number of EU countries it is only possible to contest the validity of a prior trade mark in court proceedings. These procedural issues entail delay and expense.
The proposals state that there should be a mandatory administration opposition procedure and a mandatory administrative cancellation procedure that allows opponents to bring such actions before national registries. There are also proposed provisions to make it possible to raise the defence of absence of genuine use during the course of both opposition and cancellation procedures, rather than having to commence a separate action to determine the matter. These reforms are likely to lead to significant changes in procedure in some EU countries, but are unlikely to have a huge impact on the procedural rules of either the UK Trade Marks Registry or the English courts.
The new legislative proposals will be transmitted to the European Parliament and the Council for adoption under the co-decision procedure. It is predicted that the proposals will be adopted by Spring 2014, following which EU countries will have two years to transpose the new rules into national law. The majority of amendments to the Regulation will take effect once it enters into force, with some provisions becoming applicable only when the necessary delegated acts have been implemented.
The Revision of the Fees Regulation will follow a different procedure. It will be adopted by the Commission as an implementing act and will require prior endorsement by the Committee on OHIM fees. The intention is to adopt the amended Fees Regulation before the end of 2013.
The quest for modernisation and harmonisation of procedural matters is generally to be welcomed. There have been concerns that some national registries may be displaced by OHIM, in particular those registries that take several years to confer trade mark protection and are consequently unable to keep up with developments elsewhere in the European Union. These national registries currently distort the level playing field for companies and have a direct impact on the competiveness of EU companies and the European Union as a whole. However, the proposed reforms with respect to harmonisation are likely to have a real, positive impact on businesses within the European Union, providing them with the opportunity to make decisions based on business needs, rather than in response to procedural hurdles.