Major Reforms to EU Trade Marks Law

On 8 June 2015, the European Council published the final 'compromise' texts on the reform package.

Background

In 2008, the European Commission began its evaluation of the functioning and interaction of the Community and national trade mark systems. Some 7 years later, in April 2015, the European Commission, the European Parliament and the European Council confirmed that they had reached political agreement on the most extensive changes to EU trade mark law since the 1989 Trade Marks Directive (2008/95/EC) and the 1994 Community Trade Mark Regulation (207/2009/EC).

On 8 June 2015, the European Council published the final 'compromise' texts on the reform package. The proposals recast the Trade Marks Directive to further align registration procedures in the EU and to make them more accessible and efficient for businesses in terms of lower costs, increased speed, more predictability and greater legal certainty. The Community Trade Mark Regulation will also be revised to provide further cooperation between OHIM and national offices. Importantly, there are also proposals to provide more effective trade mark protection against counterfeits. The extent of the changes is evident from the increase from 19 articles to 57 in the Trade Marks Directive.

Basic Definitions

One of the key changes is the amendments to the basic definitions: 

• All references to Community in the legislation have been changed to Union.
• The Office for Harmonisation in the Internal Market (OHIM) will become the European Union Intellectual Property Office (EUIPO).
• The Community Trade Mark (CTM) will become the European Union Trade Mark (EUTM).

The changes to trade marks directive

Filing

• Trade Marks: The definition of a trade mark has been expanded so marks don't need to be "capable of being represented graphically". What specifically constitutes a trade mark has also been expanded to include colours and sounds.
• Representation: There is no longer the need for the trade mark to be represented graphically, provided that it can be represented in a manner which enables the authorities and public to determine the clear and precise subject matter of the protection. The recitals indicate that the representation can be in any appropriate form using generally available technology.  This should make it easier to register non-traditional marks, such as hologram and motion marks in line with digital branding strategies.
• General Headings: Before the ruling in the IP Translator case, a class heading was interpreted as covering all possible goods and services in that class. Implementing the IP Translator decision, the new provisions will require trade mark owners to ensure sufficient clarity and precision in relation to the goods and services for which protection is sought. General indications in class headings may be used, provided they comply with the requisite standards of clarity and precision, and will include all goods/ services clearly covered by the literal meaning of the indication or term. The aim of this requirement is to guide applicants to give their trade mark applications more thought as to precisely what they should cover.  The new EUTMR deals with this differently – see below.  

Absolute grounds for refusal or invalidity

• Technical exclusion: Currently, signs can be refused registration if they consist exclusively of the shape of goods or a shape which is necessary to achieve a technical result or provide substantial value to the goods. Even if they are registered, they are prone to declarations of invalidity. This exception has now been extended to signs which consist exclusively of "another characteristic", which results from the nature of the goods themselves, is necessary to obtain a technical result or give substantial value. It isn't possible to overcome this objection with evidence of acquired distinctiveness. This new exception will need to be considered in relation to less traditional marks such as smells. 
• Geographical indications: There are new grounds for refusal where the sign conflicts with designations of origin, geographical indications, traditional terms for wine, traditional specialities guaranteed and plant varieties.
• Bad faith: This is now a mandatory ground for invalidity. In addition, Member States have a discretion to provide that such marks shall not be registered.
• Acquired distinctiveness: Marks which are non-distinctive, descriptive or generic shall not be refused if, before the application date, they have acquired a distinctive character. Similarly they won't be declared invalid if they have acquired distinctiveness before the date of application for invalidity. Member States also have a discretion regarding distinctiveness acquired after the application but before the registration date.

 Relative grounds for refusal/invalidity

• Reputation marks: It is now mandatory for Member States to refuse registration or declare marks invalid if an earlier mark has a reputation and the use of the later marks would take advantage of or be detrimental to the distinctive character of the earlier mark. For example it is not possible to do this currently in Cyprus or Lithuania. 
• Article 6septies (Paris Convention) refusal: This is now mandatory where the trade mark is applied for by an agent or representative without authorisation.  
• Geographical indications: Marks shall be refused or could be declared invalid where there is a designation of origin or geographical indication that predates the application and confers the right to prohibit the use of a subsequent trade mark.
• Seniority: Where seniority has been claimed on the basis of a mark that has been surrendered or allowed to lapse, the validity of that mark may still be challenged if the mark could have been declared invalid or revoked at the time the mark was removed from the register.
• Limit on invalidity: It isn't possible to invalidate a registration on the basis of an earlier right if the earlier right couldn't have been used to prevent registration because, at the filing date, the earlier mark had not yet acquired distinctiveness or reputation or become sufficiently distinctive to support a finding of confusion.

Infringement

• Use as a trading or company name: This is now a specific infringement. 
• Use in comparative advertising: It is clarified that trade mark owners may prevent use of their trade mark by competitors if it breaches the EU Comparative Advertising Directive (2006/114/EC). This is to ensure consistency because the relationship between the two directives has led to uncertainty.
• Counterfeit goods in transit: These will now infringe a trade mark. This reverses the controversial decision in Philips and Nokia (C-446/09 and C-495/09) that had ruled that goods could only infringe in the EU if they were released into free circulation in the EU, were intended for the EU market or were the subject of a commercial act directed to EU consumers. Now, trade mark owners will be able to prevent the bringing into the EU of goods bearing a mark that "cannot be distinguished in its essential aspects from that trade mark" using any customs procedure (including transit, internal processing, temporary storage or free trade), unless the importer can prove that the trade mark owner would not be able to prevent the sale of the goods in the country of destination. See our previous post on this aspect of the Directive, which is aimed at strengthening brand owners' fight against counterfeiting.
• Personal Goods: There had been proposals to ensure that there would be infringement if consumers imported counterfeit goods and the consignor acted in a commercial capacity. This was aimed at discouraging the online purchase and importation of counterfeits but has been removed from the final draft.
• Preparatory Acts/ Packaging: It will be an infringement to affix trade marks to packaging, labels, security or authenticity features and to sell, stock or import such packaging, labels, tags, security tags. Again, this is stated to help trade mark owners fight counterfeiting more effectively.
• Use in reference works: Trade mark owners are able to request that the publishers of dictionaries or other reference works indicate that the reproduction of a mark is a registered trade mark. The aim of this is to guard against genericism.
• Licensees: Licensees' rights are harmonised so that they will be able to sue for infringement only with the consent of the trade mark owner. Exclusive licensees will also be able to act if the owner fails to do so. 
• Origin function: The recitals expressly state that the origin function of a trade mark is absolute in cases of double identity and where there is similarity between the mark and the sign and the goods or services. This is in recognition of the legal uncertainty that has been caused by the introduction of additional trade mark functions, in particular with the relationship between double identity cases and the extended protection afforded to trade marks having a reputation. However, there is no mention of this in the enacting terms of the Trade Marks Directive and the EUTM Regulation is silent on the topic.

Limitations/Defences

• Prior Rights: The rights conferred by a trade mark are expressly stated to be without prejudice to the rights of proprietors acquired before the filing date or priority date of the registered trade mark. The current forms of the Trade Marks Directive and CTM Regulation do not make this clear.
• Own name defence: This is available for natural persons if the use is honest. The CJEU in Celine v Celine (C-17/06) has previously determined that use of a company name also relates to the goods or services offered by the company so it is appropriate to treat trade name use of a protected trade mark as an infringing act, if the requirements of use for goods or services are met.  This means, therefore, that the own name defence will not be available for companies in the future as it was recently for Asos.
• Referring to the proprietor's goods or services: Third parties are able to use trade marks to honestly identify the proprietor's goods or services e.g. in relation to the resale of genuine goods, to indicate accessories, spare parts or alternative products or for parody. It is also possible to use indications which are not distinctive. The recitals indicate that these provisions are aimed at allowing general fair and honest use of marks and to respect fundamental rights, in particular the freedom of expression.
• Non-use: It is not possible to use a trade mark to prevent the use of a sign if that trade mark is liable to be revoked for non-use (see below) at the time the infringement action is brought. If the defendant requests, the proprietor of the mark needs to provide proof of use or proper reasons for non-use.
• Later registered marks: It is not possible to prevent the use of later marks where it isn't possible to invalidate the later mark because: (i) at the relevant time there was no acquired distinctiveness or reputation or insufficient distinctiveness for confusion; (ii) there is acquiescence; or (iii) there is no proof of use. Similarly, the proprietor of the later mark can't attack the earlier mark.

Revocation 

• Generic, misleading or non-use: Marks can be liable for revocation if they have become generic or misleading or if they haven't been used for a continuous period of 5 years.

• Non Genuine Use: Use includes "use in a form differing in elements which do not alter the distinctive character of the mark in the form in which it is registered and "affixing the mark to goods or packaging solely for export purposes". The requirement for genuine use within 5 years starts at the end of the opposition period or, where an opposition has been lodged, from the date when a decision terminating the opposition proceedings became final or the opposition was withdrawn.

Miscellaneous

• Use as property: Trade marks may be transferred separately from any undertaking, although the transfer of the whole of an undertaking shall include the transfer of the trade mark. Trade marks may also be given as security.
• Certification and collective marks: There are provisions for the protection of collective, guarantee and collective marks and details about the use of such marks and grounds for their revocation and validity.

Procedure

• Harmonisation: Unlike its predecessor, the Trade Marks Directive harmonises some aspects of the application procedure across national registries, including filing dates, standards for classification of goods/ services and the development of common search tools.
• Third party observations: Member States have a discretion to allow third parties observations to be filed prior to registration explaining why a mark should not be registered.
• Oppositions and revocation/ invalidity procedures. It will be mandatory for Member States to ensure that third parties can oppose trade mark applications and seek revocation or declarations of invalidity in administrative proceedings at national trade mark offices, as opposed to having to go to Court, which is a long and cumbersome and expensive process. However, Member States will have 7 years to implement the invalidity/ revocation procedure. Non-use will be a defence in such proceedings.

THE KEY CHANGES TO THE COMMUNITY TRADE MARK REGULATION

Many of the substantive changes mirror the changes in the Trade Marks Directive but there are some differences specific to the EUTM Regulation.

Name changes

 As referenced above: 

• A Community Trade Mark will be re-named a European Union Trade Mark (EUTM)
• The Office for Harmonisation in the Internal Market (OHIM) will be re-named the European Union Intellectual Property Office (EUIPO) and will be the only place where you can file a EUTM. This reflects the fact that over 96% of applications are now directly filed through OHIM's e-filing system.
• References to Community will be changed to Union

Classification

The EUTM Regulation mirrors the Trade Mark Directive in stating that general indications included in the Nice class headings may be used, provided that they comply with the requisite standards of clarity and precision. In addition, owners of CTMs filed before 22 June 2012 can declare that the Nice headings set out in their specification were intended to cover all goods/ services in that class and not just those covered by the literal meaning. This declaration has to be made within 6 months of the entry into force of the EUTM Regulation and needs to indicate in a clear and precise manner the goods and services other than those clearly covered by the literal meaning. Those EUTMs for which no declaration is filed within that period shall be deemed to extend only to those goods or services clearly covered by the literal meaning of the indications.

Protection is provided to existing trade mark owners who might be prejudiced by the expansion of trade mark rights resulting from such declarations. Where the register is amended, the EUTM cannot be used to prevent third parties from continuing to use a trade mark where that use commenced before the register was amended and the use did not infringe on the literal meaning of the goods and services at that time. In addition, any amendment to the classification does not give the owner the right to oppose or apply for invalidity of a later trade mark where that later mark was in use or an application for registration had been made before the amendment and the use would not have infringed on the literal meaning of the goods and services on the register at the time.

Third Parties

• Opposition period: The opposition period for international registrations will remain at 3 months but this will start one month after the date of publication (as opposed to 6 months).
• Searches: Applicants may request that: (i) EUIPO draw up a EU search report, citing earlier conflicting EUTMs; and (ii) the Member State offices who have informed the EUIPO that they will search its own register, communicate a report citing earlier conflicting national trade marks and applications. The EUIPO shall inform proprietors of earlier EUTMs of the trade mark application, upon publication regardless of whether the applicant has decided whether to receive the search report. The recitals note that, to complement these optional searches, the public should have free access to all-encompassing, fast and powerful search engines within the context of cooperation between the EUIPO and member states.   
• Third party observations: Any third party may submit written observations as soon as they become aware of the application and the deadline for filing observations will be at the end of the opposition period or once opposition proceedings have concluded.

Miscellaneous

• Renewal: The EUIPO will inform the owner at least 6 months before expiry of the mark.
• Mediation: The EUIPO may establish a mediation centre whose services can be used on a voluntary basis with the aim of arriving at a friendly settlement of disputes.  
• Certification marks: A set of specific provisions has been added for the purpose of providing protection to EU certification marks eg Woolmark, Stilton.

Revised fee structure

In the Annex to the EUTM Regulation, there is a proposed amended fee structure for EUTM applications and a reduction in renewal fees as follows:

Application fees for an EUTM filed electronically 

Class(es)	Current fee (EUR)	New fee (EUR)
One	900	850
Two	900	900
Three	900	1050
Four	1050	1200
4th and subsequent class)	150	150

• Currently, the basic fee for a CTM covers up to three classes of goods and services. However, the new fee structure moves away from this and instead introduces a new "one-class-per-fee" structure.
• While the fees have increased for applications in some respects (e.g. to file in three classes will cost EUR 1050 versus the old EUR 900), it is hoped that the new fee structure will discourage applicants automatically filing every EUTM in three classes which the current fee structure incentivises, as you effectively get three classes for the price of one.
• The aim of the revised fee structure is to make it cheaper for businesses wishing to make single-class applications and to help reduce the potential of congestion of the EUTM register by reducing broad claims for goods and services not really required by the trade mark owner. This should ensure a more balanced trade mark system.
• The application fee will be payable on application as opposed to the previous one month grace period offered.

Class(es)	Current fee (EUR)	New fee (EUR)
One	1350	850
Two	1350	900
Three	1350	1050
Four	1750	1200
(4th and subsequent class)	400	150

• Renewal fees will be significantly lower and the European Commission has predicted a 37% saving for those renewing EUTM beyond the initial 10 year period.  
• There will also be reduced fees for opposing EUTM applications, seeking cancellations and for filing appeals.

Next steps

The European Council will now formally adopt the texts and the European Parliament will need to put it to the vote. However, as all 3 EU institutions were involved in the discussions on the current texts, it is expected that they will be introduced without major change. Member States will have 3 years to implement the rules incorporated in the new Trade Marks Directive into national law whereas most of the changes to the EUTMR will take direct effect after 90 days after its publication in the Official Journal (expected in the second quarter of 2016). As mentioned above, Member States will have 7 years to implement the invalidity/ revocation procedure at their trade mark offices.

Conclusion

Overall, the new legislation includes some important changes that will modernise trade mark law. Countries like the UK will need to implement less change than other countries as UK existing laws are more in line with the proposed revisions than other member states.

The changes to the EUTM Regulation will come into force quickly.  Brand owners with CTMs filed before June 2012 should therefore be considering whether to declare that any Nice class headings were intended to cover all goods and services in that class. If a declaration is not made within 6 months of the EUTM Regulation coming into force, the specification will be deemed to only cover those goods are services covered by its clear meaning.

Brand owners considering multi-class (3 ore 4 classes) filings might also consider taking advantage of the cheaper official fees now, before the changes come into law. Additionally, the reduction in renewal fees will mean that brand owners might consider reducing their budgets to account for the significant renewal fee reduction.

Whilst the changes set out in the Trade Marks Directive will take longer to be implemented into national laws, brand owners should be starting to consider and prepare for them now e.g. considering whether any non-traditional marks might now be registered under the new modernised representation requirement. Brand owners with counterfeit issues should also be considering how they can help Customs authorities to seize counterfeits that are using trade routes involving a transit in the EU territory.