United States: European Council Removes Obstacles To Enlargement: Accession Treaty To Be Signed In April 2003

Leaders of the European Union ("EU") have resolved the last outstanding obstacles to the largest expansion in the history of the Union. During a meeting of the European Council in Brussels on October 24-25, 2002, the Council agreed that the countries of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia will be able to assume the obligations of membership beginning in early 2004. The EU intends to conclude accession negotiations with these countries at the European Council meeting in Copenhagen on December 12-13, 2002, and has set the Athens Summit in April 2003 as the date on which the Accession Treaty will be signed.

Following signature of the Accession Treaty by the current EU Member States and the Candidate Member States, all EU Member States and the applicant countries will have to ratify the Treaty according to their respective constitutions (e.g. referendum, Parliamentary assent, etc.). Finally, the new Member States will enter into the European Union on "the date of accession". The Union has targeted the first half of 2004 for the accession in order to allow the new Member States to participate in the European Parliament elections in June of that year.

On balance, parties with trademark rights in Europe will benefit from the enlargement. All existing Community Trade Mark ("CTM") registrations and pending applications with a filing date prior to the extension will be extended automatically to the enlarged countries without any additional fees. In addition, all CTM applications with filing dates subsequent to the date of accession but which claim the priority of an application with a filing date prior to enlargement also will be automatically extended. Automatically extended CTMs will be enforceable in the new Member States from the date of accession. Owners of extended CTMs will be entitled to claim the seniority of an earlier identical registration in any of the new Member States that is owned by the same entity. This protects claims of seniority even if owners later abandon or fail to renew their national registrations.

The issue of use will depend on the existence of priority, or "earlier rights," in the new Member States. Earlier rights are defined as those rights either (1) with a filing or priority date in the new Member State that is prior to the date of enlargement, or (2) acquired according to their applicable rules prior to the date of enlargement. They may be in the form of national trademark registrations and applications, International Registrations under the Madrid Agreement and Protocol, and well-known marks. Earlier rights also may be unregistered marks and other similar rights, such as name and portrait rights, copyrights, and industrial designs. Earlier rights in a new Member State will confer the right to prohibit the use of the extended CTM in that State. Thus, owners of earlier rights may have an action for trademark infringement or passing off against a confusingly similar mark. The "junior" trademark owner will have a defense if the earlier rights are invalid or subject to attack, or if they were acquired in "bad faith" (i.e. made to obtain trademark registrations which are identical or confusingly similar to trademarks registered in other jurisdictions, with a view to preventing market access, claiming pecuniary compensation or taking profit from the reputation of another’s trademark).

Owners of earlier rights will not have a general right to oppose or cancel the automatically extended CTM. However, there will be a six-month opposition window to allow owners of earlier rights in accession countries to oppose applications for Community Trade Marks filed or claiming a priority date in the six months just prior to the accession date. As with infringement actions, this opposition right will not be available where the earlier right was acquired in bad faith in relation to the extended CTM application. The Office for Harmonization of the Internal Market ("OHIM") has indicated that, because the examination process usually takes in excess of six months, this provision will not cause extreme hardship to applicants.

If an existing CTM is descriptive, non-distinctive or generic in the official language of a new Member State, anyone in that Member State will be allowed to use the term covered by the CTM under a "fair use" exception. If an extended CTM is deceptive or is against public policy or morality in a new Member State, its use may be prohibited in that country.

Enlargement now appears to be likely in early 2004. Accordingly, prudent European Union trademark owners or those interested in expanding protection of important brands in Europe should take advantage of this time to prepare for the change. For example, owners should review their portfolios and searchtrademark rights in the candidate Member States for possible earlier rights. It also may be advisable to file national trademark applications for important marks in these countries prior to the six-month period before the likely accession date to avoid the opposition window. Such defensive filings may prevent pirates from obtaining earlier rights and avoid possible expensive opposition or infringement actions in the future. In addition, we recommend that owners review all intellectual property licenses that cover the existing CTM territory and the Candidate Member States to head off potential territorial conflicts and unintended expansion of licensed rights.