Thursday, 21 April 2011

Clutter: Planck's New Constant

The Max Planck Institute’s Study on the Overall Functioning of the European Trade Mark System was published on 8 March. It has taken me a while to get to this – and I haven’t yet read all 278 pages – so these thoughts are liable to be added to, changed, or dropped. Watch this space!

It was commissioned (appropriately enough) by the European Commission, and it is one element of the Commission’s overall evaluation of what it insists on calling the European trade mark system. (See my separate posting on that.)

The purpose of the Commission’s evaluation of the trade mark system is to provide an assessment of how the system is working and to identify potential areas for improvement. It also considers the potential for enhanced co-operation between OHIM and the national offices, and evaluates the distribution of a proportion of the renewal fees paid for CTMs – a particularly touchy subject between national offices and the Community one. The Commission is free to choose not to follow recommendations in the Study, and some of them are certainly controversial: it will bring forward its ideas for legislative change in the autumn. The general tone of the Study, and its recommendations, would lead to greater cohesiveness between the Community and national trade mark systems – and several recommendations involve making optional provisions in the Directive mandatory (including the extended anti-dilution protection afforded to marks with a reputation).

The Study begins by canvassing the views of relevant stakeholders in the Community and national systems (I will call them collectively the systems, to save me becoming over-excited about the misuse of the word “European”). I’m glad they didn’t waste time with irrelevant stakeholders, though if they are stakeholders surely they are relevant by definition. The MPI organised two hearings with representatives of these stakeholders – but I have a feeling that when you examine the identities of the stakeholders you’ll find that they all have a vested interest in the continuation of the trade mark system pretty much as it is.

It also collected information from national trade mark offices, and the Benelux regional office (BOIP) which I hope will not feel offended if I don’t single it out for special mention every time I use the expression “national offices”. Finally, a representative survey among users of the CTM system was conducted by the Institut für Demoskopie Allensbach in February and march 2010.

The Study draws a number of conclusions from its survey of the field and makes many recommendations. A recurring theme throughout the study, and an expression for which I for one am indebted to the Institute, is “cluttering”. Such is the extent to which it is used that it should be regarded as a new Planck’s Constant.

The recommendations include:

Dividing up the spoils
Sharing out the half of OHIM’s renewal fees that had already been earmarked for the national offices, so all national offices get a minimum plus a top-up amount depending on the number of applications and international registrations dealt with by them. With a surplus of €400 million, this is a significant issue, especially as national offices might feel that this is money that has been taken from them by the parallel system in Alicante.
The requirement for graphical representation should be removed from the Directive and the Regulation. This will allow the development of new types of representation, while not detracting (although it’s not clear how you could do that without detracting) from the level of certainty for “non-traditional” marks prescribed by the Court of Justice (not, note, the European Court of Justice, though it it commonly so-called) in Case C-273/00, Sieckmann.

This is a hot potato currently before the Court in Case C-307/10, IP TRANSLATOR. The main problem in this area is that OHIM will insist on treating an application for everything in a class heading as covering everything in the class, even though there will be stuff in the class that isn’t mentioned in the class heading. Practices in national offices vary (and one of the Study’s most useful contributions is to tell us what each national office is doing). Overwide specifications, whether using class headings or otherwise, lead to cluttering of the register and firmer action than recommended by the Study should be taken. The Study offers a classic SOTBO: OHIM and national offices should agree a common approach. It suggests (more helpfully) that applicants should be required specifically to claim goods or services which might not be understood to fall under a class heading – giving the example of “software” in class 9.
How many classes?
This sort of cluttering could also be reduced if the Community system were not so generous as to allow applications in three classes for the basic fee. The Study suggests that separate fees – application and renewal fees – should be payable for each class.
Acquired distinctiveness
This should be assessed not on a state-by-state basis, as the General Court requires at present, but across the EU. The result will be to allow more marginal trade marks onto the register, which is hardly a step forward and will lead to cluttering. This appears to apply only to non-traditional marks. Why not all? The study also recommends "in accordance with the spirit underlying Article 6quinquies(C) of the Paris Convention, the length of time of an unchallenged and substantial use of a sign should be taken into account for the establishment of acquired distinctiveness”.
Relative grounds
There should be no change from the way OHIM deals with relative grounds – conflicts between registered trade marks and new applications – because it doesn’t have the resources to carry out a proper examination (as opposed to just a search) and work out whether to refuse applications. How can this be squared with the €400 million surplus? This despite 48 per cent of proprietors favouring the change – not an absolute majority, but more than were of the opposite view.
Prior unregistered rights
Relative grounds based on unregistered rights should be limited to nationwide rather than purely local rights.
The mandatory search of the OHIM register for prior registrations should be retained. The Study reports that many stakeholders like it. However, OHIM should be free to offer pre-filing search services in co-operation with national offices – on payment, naturally, of a fee.
Bad faith
OHIM should not start examining bad faith ex officio as a ground for refusal, but it should be a mandatory ground for refusal or cancellation in national offices – which cannot possibly promote consistency.
Even fewer proprietors wanted to change the opposition period from three to two months (as the UK has already done), and the Study thought this was not enough to warrant a change.
Should the period of non-use after which a registration is vulnerable to challenge be reduced from five years to three? A trade mark which clutters up the register depletes the stock of available trade marks and may even foreclose the market to new entrants. Although there is an almost infinite variety of trade marks available to be used, the CTM system is already up to number 9 million and something (not all granted trade marks, certainly, but it’s still a very large number which tends towards infinity) and in any case an entrant to the market from outside the EU with an established brand is hugely vulnerable to foreclosure.
The Study also rejects the introduction of declarations of use, despite the fact that they would have massive decluttering power.
Promotional activities outside he core area of a trade mark’s registration should be regarded as a form of genuine use.
Clutter is also the product of the extension of what amounts to infringement, but far from reversing this trend the Study suggests rewriting the Regulation and the Directive to accommodate the Court’s lawmaking in cases like Case C-292/00 Davidoff v Gofkid.

Genuine useGenuine use requirements are the second big area of controversy (along with classification issues – probably the bigger of the two) and also before the Court in ONEL/OMEL . The Study recommends that there should be no requirement that a CTM be used in more than one Member State: but by what logic can it be called a Community trade mark if it is in fact nothing of the sort? The Study recognises that there will be difficulty in enforcing a CTM against a later national trade mark in a distant part of the internal market from where the CTM is in use – a co-existence rule to deal (under carefully defined conditions) with conflicts between CTMs and later national trade marks is suggested.
Priority claims
The present system of "confining the examination [of priority claims] to requiring the necessary documentation for inclusion in the files and the congruence between what is documented and what is claimed" is not up for change, because it keeps costs down.
Extended protection
Trade marks that meet the criteria for extended protection, against dilution, based on their reputation – which are now coming to be referred to as “reputation trade marks” - should be regarded as well-known trade marks and accorded the protection of Article 6bis of the Paris Convention. That might be helpful, because no-one has ever had the faintest idea what constituted a well-known mark before. If you are lucky to have a well-known mark, it will enjoy protection against likelihood of confusion as well as against unfair use of, and detriment inflicted on, their reputation or distinctive character, irrespective of whether they are registered or not in the territory where protection is sought.
The meaning of “unfair advantage” is also something that could usefully be clarified, leading to more certainty about the extended protection for reputation marks.
For the purposes of infringement, use of a trade mark should include use anywhere in the territory of a Member State or (for a CTM) the EU – including custom-free zones, which means a change from the current position. If goods are counterfeit within the meaning of the TRIPS agreement and would be infringing in the country of transit (or the EU) it should be possible to take action against them. This is another controversial matter currently before the Court in Cases C-446 and C-495, Nokia and Philips.

The Regulation might benefit from saying something about sanctions for infringement, but perhaps (the Study concludes) that’s a matter for the Enforcement Directive (2004/48) which is currently under review. However, it does say that it thinks that Community Trade mark Courts should be able to grant Community-wide injunctions in all cases where they are requested – on which, see the DHL case.

The report also recommends that a role for OHIM in the counterfeiting field be considered. This seems to be part of an inexorable and undesirable process by which intellectual property offices arrogate to themselves roles well outside their natural jobs of maintaining registers of who owns what (and, perhaps, making sure that no-one claims what someone else owns, or has rights over something that they shouldn’t have).

Consistent decision-making
The study found substantial room for improvement in consistency of decision-making between OHIM and the national level, evidenced by the proportion of users who expressed dissatisfaction.

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