European Union: EU Trademark Reform: What Brand Owners Need To Know

By now, many of us have heard about changes to the Community Trade Mark (CTM) system entering into force on March 23, 2016. The following is an overview of the key changes to expect, and actions that brand owners should take now to prepare for those changes.

Background

The CTM system has been in existence since 1996. It allows for brand owners to obtain registered protection for their trademarks in a single pan-European Union filing, rather than having to seek—and ultimately maintain—separate registrations in each of the twenty-eight EU member states. Concluding a process that began in 2008, the European Parliament has now formally approved the Directive and Regulation calling for significant changes to the CTM system, representing the first major reform affecting EU trademarks since the program began. The main goal of these changes is to modernize the EU trademark system itself, rather than to overhaul the underlying legal regime, although some substantive changes will feature in the new system.

Summary of Key Changes

  1. Nomenclature. The "Community Trade Mark" will be called the "European Union Trade Mark," and the "Office for Harmonization of the Internal Market" will be called the "European Union Intellectual Property Office."
  2. Fees. Currently, trademark applicants may obtain coverage for up to three classes for one official fee of €900. The new system, however, will require a separate fee for each additional class. For example, filing in one class will cost €850 in official fees; two classes will cost €900 in official fees; and three classes will cost €1050 in official fees, with an additional official fee of €150 for the fourth and each subsequent class. A similar incremental fee structure will apply to renewals. See "Timing of Next Steps" below for a further discussion of fees.
  3. Classification. Building on the 2012 IP Translator decision, the new system will require applicants to identify their desired goods and services with "sufficient clarity and precision," and the literal meaning of the good or service will apply. For example, while an applicant will still be allowed to designate the Class 18 heading of "Leather and imitations of leather, and goods made of these materials and not included in other classes; animal skins, hides; trunks and travelling bags; umbrellas and parasols; walking sticks; whips, harness and saddlery," the application will be deemed to cover exactly what the class heading says and nothing more. Brand owners in the fashion industry will note that "handbags" are not explicitly covered by the heading and therefore must be indicated specifically in order for such coverage to attach.

    The situation for CTM registrations covering class headings where the mark was applied for before June 22, 2012 (the date of the IP Translator decision) is more complicated, as explained below. See "Timing of Next Steps" below for a further discussion of classification.
  4. Absolute Grounds. Under the new system, marks that consist of "the shape or another characteristic" resulting from the nature of the relevant goods, or which is necessary to achieve a technical result, or which give substantial value to the goods, will not be registrable. This language extends the existing "shape-based" absolute refusal ground.
  5. Non-traditional Marks. Because the current requirement that a trademark be capable of graphical representation will no longer apply, non-traditional marks such as sound, smell, motion or hologram marks will be more easily registrable, provided their applicants can identify the marks "in a manner which enables the public, and the relevant authorities, to determine the clear and precise subject matter" of the desired protection. Certification marks will also be available in the EU for the first time.
  6. PDOs and PGIs. Once the new system goes into effect, oppositions can be based on Protected Designations of Origin and Protected Geographical Indications.
  7. Proof of Use. Currently, an opponent who owns a CTM registration which is more than five years old can be required by its adversary (the applicant) to submit proof that the registered mark was used during the five-year period ending on the publication date of the mark which is being opposed. Under the new system, this proof-of-use period will shift to five years ending on the filing date or priority date of the mark which is being opposed, whichever is earlier. This change only applies to oppositions filed on or after March 23, 2016.
  8. Acquired Distinctiveness. Currently, a trademark application which is refused due to non-distinctiveness will be allowed if the applicant can show that the mark acquired a distinctive character through use before the application filing date. The new system will extend this concept to invalidation actions, meaning that a mark will not be invalidated on non-distinctiveness grounds if the registrant can show that the mark has acquired a distinctive character through use prior to the filing date of the invalidation action.
  9. 9.Infringement. New categories of trademark infringement will include: (i) using a mark as a trade name or company name, meaning that the "own name" defense will no longer be available, except for natural persons; (ii) using a mark in comparative advertising in a way that runs afoul of the Misleading & Comparative Advertising Directive; and (iii) using a mark in preparatory acts, such as affixing the mark to packaging, labels, and tags.
  10. Goods in Transit. Currently, goods passing through the EU cannot be classified as "counterfeit" or seized unless the trademark owner can prove that the goods are intended for sale in the EU. The new system changes the focus of the rule by providing that the trademark owner cannot prevent the transit of goods through the EU if the trademark owner is not entitled to prohibit the sale of those goods in the final destination country.
  11. Harmonization. By 2023, revocation (non-use cancellation) and invalidity proceedings must be implemented by all EU Member States, whereas currently, some States require parties to lodge such proceedings before a court. Further harmonization of national laws will mandate provisions for joint suspension of oppositions, revocation (non-use cancellation) and invalidity proceedings; six-month renewal grace periods; and a more consistent definition of when the five-year non-use period starts to run.

Timing of Next Steps

Most of the changes outlined above will take effect on March 23, 2016, while others, such as Item 6 above, will not be implemented until September 2017. Below are two actions that brand owners should be taking now, concerning Items 2 and 3 above.

First, given that the EU system will change from a "three classes for the price of one" model to a "one class per fee" model, brand owners who are considering filing new multi-class CTMs (soon-to-be EU TMs) in the near future may wish to file before March 23, 2016, in order to avoid the increase in official fees. On the other hand, a single-class application will actually be €50 less costly if filed after March 23, 2016.

As for renewals, official fees will decrease after March 23, 2016. Unfortunately, current OHIM guidelines indicate that even if a registrant takes advantage of the six-month renewal grace period, thus bumping the final renewal deadline past March 23, 2016, the current (more costly) fee structure will apply, including the 25% surcharge for grace-period renewals. In other words, the applicable fee structure for renewals will depend on the initial renewal period, not the grace period. Note too that under the new system, renewal payment must be made by the expiration date, not by the end of the month in which the expiration date falls (as under the current system).

Second, as mentioned above, new classification rules will go into effect on March 23, 2016. New EU TMs must specifically identify the desired goods and services, rather than assuming that the class heading will provide the broadest available protection. That is, while applicants may indeed still use the class headings, the same should not be used if protection for specific items not already mentioned in the class headings is also desired. Instead, as a general guideline, applicants should file for the class headings plus the specific goods and services of interest. Indeed, this was the general advice often followed after the IP Translator decision was issued in 2012.

The above pertains to future applications. We turn now to registrations granted from applications filed on or before June 22, 2012 (the date of the IP Translator decision) that include one or more entire class heading(s). The owners of these registrations will have until September 23, 2016 to file a declaration stating that their intention upon filing was to seek protection for goods and services beyond those covered by the literal meaning of the class heading. Failure to do so will result in coverage only for the goods and services encompassed by the literal meaning of the class heading(s).

The goods and services named in the declaration must have been included in the alphabetical list for the class(es) at issue according to the Nice Classification in force at the time of filing. Fortunately for brand owners who need to review their CTM portfolios, only five editions of the Nice Classification have been in effect since the CTM system began: the sixth in 1992, the seventh in 1997, the eighth in 2002, the ninth in 2007, and the tenth (the current edition) in 2012.

Based on current OHIM (soon-to-be EUIPO) communications, a few important points may be observed:

  1. The new rules, and thus the declaration requirement, apply to International Registrations designating the EU. However, national filings in Member States are not affected.
  2. In order for the declaration requirement to apply, the registration must cover at least one entire class heading. Additional goods and services may also be present, provided that the language does not limit or in any way disclaim the general scope of the heading.
  3. The EUIPO will object to declarations seeking protection for unclear, imprecise, or unspecific items; claims for the entire alphabetical list; goods and services that are covered by the literal meaning of the class heading; and goods and services not contained in the applicable alphabetical list.
  4. If the EUIPO objects to a declaration, the registrant will be given a further two months to remedy the deficiencies. If the deficiencies are left unaddressed, there is no adverse consequence, except that the registration will be deemed to only cover what is literally conveyed by the wording of the class heading.
  5. One declaration is required per mark. A specific recordal application form will be available.
  6. There will be no official fee for filing the declaration.

If a declaration is filed to claim additional goods and/or services, those additional items cannot be opposed or cancelled by third parties. However, the registrant cannot prevent third-party use of any of the additional goods/services, if the use began before the registration was amended and if the use would not have infringed the registrant's rights based on the literal meaning of the goods/services covered by the registration when the use occurred.

To avoid the above-described limitation on taking action against third-party uses, CTM registrants may instead file a "partial surrender" (i.e., an amendment) as a means to restrict their registrations to precise terms, thus bringing their registrations into conformity with the new system. It is advisable to do this prior to March 23, 2016, to avoid any of the above-described third-party defenses.

It is noted that declarations may not be submitted to clarify the scope of pending CTM applications filed before the issuance of the IP Translator decision. Rather, the literature refers only to "registrations." Thus, applicants wishing to clarify the scope of their pending CTM applications may wish to file amendments before March 23, 2016, because based on information currently available, waiting until the new law goes into effect on March 23, 2016 could reduce or perhaps even eliminate an applicant's ability to clarify the scope of a pending application. Applicants should, however, consider whether any amendments could affect any pending proceedings involving the applications, such as oppositions.

Future issues of this Newsletter will focus on the additional changes outlined above as they come into effect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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