Spain: Will Holders of Trademarks Having a Reputation in Spain no Longer Fear? An Overview of the Main Changes Inserted by the New Law on Trademarks

1. The new law and the reasons for change

The recently enacted Law 17/2001 of December 7 on Trademarks ("Ley de Marcas") replaces the old law 32/1988 on Trademarks. For the most part, the new law will not come into force until July 31^st, 2002. The main purposes of this new legislation are the adaptation of Spanish trademark legislation to international and European Union treaties and regulations, and the adaptation to the needs of the so-called Information Society.

The new law inserts material changes with regard to crucial aspects such as the application process for the registration of a trademark, to the concept and protection of well-known trademarks and trademarks having a reputation, and to the conflicts between domain names, corporate names and trademarks. Besides, the new law explicitly provides for the exhaustion of the rights conferred by a trademark at the EU level, establishes a minimum indemnification for infringement and sets forth several legal presumptions aimed at completing trademark license agreements.

The registration process has been simplified by releasing the Spanish Authorities from its former obligation to verify ex officium that an application for a trademark did not violate the rights of former trademark holders. Law 17/2001 leaves this in the hands of the potentially affected parties, which may claim that an application violates their rights under a prior registration (for example, when a third party intends to obtain a trademark which is too similar to a registered trademark in order to identify similar or identical products).

In brief, the new law provides for the obligation of the Spanish authorities to verify and monitor that the application for a trademark does not breach what it calls "absolute prohibitions", which are grounds for the rejection of an application based on public interests. Therefore, "relative prohibitions", i.e. those mainly dealing with third parties’ interests, are no longer controlled ex officium by the Spanish authorities.

This speeds up, simplifies and makes more efficient the registration process, allocating the costs of the defence of third party interests’ to the relevant third parties. Besides, this change is made in accordance with the regulations on the obtaining of a European Trademark that may be used in Spain, putting an end to the discrimination suffered by applicants before Spanish authorities, who were subject to more strict monitoring.

A new cause of nullity of a trademark has been inserted: the registration of a trademark in bad faith. This new cause of nullity is a remedy that may be helpful in the framework of the aforementioned easier process for obtaining a registration of a trademark.

Besides, the registration system now permits to apply for a trademark at the same time embracing several categories of products or services, whilst pursuant to the former law a trademark could only be obtained for a certain category of products or services (and then eventually be extended to other products or services).

Should a conflict with the registration of a trademark arise, the parties may now submit it to arbitration as long as it has not been decided by the administrative authorities.

Prior to the new law, there were 3 different categories of industrial property rights subject to registration in Spain: trademarks ("marcas"), tradenames ("nombres comerciales") and street signs ("rótulos de establecimiento"). The new law has eliminated the concept of street sign as such, which from now on may be protected by registering either a trade name or a trademark with the same configuration.

On the other hand, the new law expressly provides for the register of acoustic trademarks, thus breaking with the traditional visual-only concept of trademark. The new law, includes acoustic trademarks in the exemplifying list of items subject to registration as such, but not smell, tact or taste trademarks, although their registration is not completely discarded either. In fact, the criteria for registration as trademarks in the new law is the possibility to be graphically depicted, thus so long as the interpreters of the law consider that those kinds of trademarks may be graphically depicted, smell, tact or taste trademarks might be granted registration in Spain. The new law grants an extraordinary degree of protection to holders of registered well-known trademarks and trademarks having a reputation. Well-known trademarks or trade names are defined as those trademarks or trade names which, because of its penetration in the market, volume of sales, geographical extent of its use or any other cause, are generally known by the public targeted with the products, services or activities designated by such trademark or trade name.

Trade names or trademarks having a reputation are defined as those trademarks or trade names which are known by the public in general.

Registrations of trademarks which are similar or identical to a registered well-known trademark or trade name may be contested by the holders of such registered rights even if the products or services to be designated by the trademark under registration are not similar or identical to those designated by the registered one, if there is a risk of association between both intellectual property rights or, even if there is no such risk of association, there is a risk of dilution of the registered right, unfair appropriation of its reputation or, in general, when the registration is intended without having fair grounds. The more well-known trade names or trademarks are among the targeted market of the products or services designated by them, the wider will be the range of protection (covering products that are not as similar to the ones designated by the well-known trademark or trade name).

In the case of registered trade names or trademarks having a reputation, the protection embraces any products or services, even though they are not at all similar to the ones designated by the registered trade name or trademark having a reputation.

Spain’s infringement of industrial property rights by obtaining identical or similar domain names makes it a jurisdiction with one of the highest rates of infringement world-wide. So far, it has proved difficult for the trademark holders to fight this violation, and the only way to do it was using Unfair Competition legislation. In several cases, trademark holders have been forced to pay huge amounts of money to the domain name holders in order to be transferred the relevant domain names, thus avoiding long and complex Court or arbitration proceedings.

Pursuant to the new Law, registered trademark holders and holders of non-registered well-known trademarks may, in certain circumstances, oppose the use of their trademarks as domain names. In case of non-registered well-known trademarks, its holder may only oppose to their use as a domain name if the intended use is related to identical or similar products or services.

It is no longer possible to register, as a trade name or as a trademark, a third party corporate name when the identity or similarity between the trademark/tradename and the corporate name, and the fact that their field of use is identical or similar, may lead to a risk of confusion in the public.

Although the exhaustion of a trademark at EU level, i.e. the fact that the trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the EU under that trademark by the proprietor or with his consent, had already been recognized by EU regulations and case law, the new law has explicitly provided for it. It might be useful to give an overview of the path followed by the Spanish regulations and Courts with regard to exhaustion of the rights conferred by a trademark, since the alternatives chosen by a jurisdiction in this area may have a material impact on its international trade.

It is worth noting that the European Court of Justice has in several cases upheld the principle of exhaustion at EU level. However, it has also stated that exhaustion at an international level does not exist in the EU legislation, nor can it be recognized by the laws of the Member States.

However, in a quite surprising decision (affaire Bacardi, Spanish Supreme Court decision of November 28, 2001), the Spanish Supreme Court ruled that Bacardi, as holder of a trademark having authorized the distribution of its products labelled with it in Mexico (a non-EU Member State) but not in any country within the European Union, could not oppose the import and distribution of such products by a third party in the Spanish market. Thus, it tacitly recognizes the exhaustion of rights conferred by a trademark at an international level. In our view, this decision contradicts the aforementioned principles so, hopefully, the Spanish Supreme Court will redirect its decisions in order for them to be in line with the explicit rejection of exhaustion at an international level made by the EU Court.

Aside from other remedies available to a registered trademark holder upon infringement of its rights by a third party, it must be noted that the new law establishes a very relevant indemnification provision pursuant to which the holder of a registered trademark that has been violated by a third party, such violation having been judicially declared, is entitled to claim from such third party a statutory indemnification of 1% of the revenue obtained by the third party with the products or services illegally labelled.

This 1% may be claimed without having to prove any actual damage and does not hinder the possibility of claiming a higher amount if the holder of the trademark proves that the damage caused by the infringement has been higher.

The content and the extent of a license of a trademark may be freely agreed by the parties in the trademark license agreement (as long as they respect the minimum imperative legal provisions). However, the new law has introduced several presumptions that will govern a trademark license agreement by default, i.e. with respect to the issues that the parties have not agreed to a specific regulation.

These presumptions, in brief, are the following:

• Unless otherwise agreed by the parties, the license is not exclusive, so the holder of the trademark may grant licenses on the same trademark to other parties, and use the trademark themselves.
• Unless otherwise agreed by the parties, should a license be agreed as exclusive, the holder may not itself use the licensed trademark.
• Unless otherwise agreed by the parties, the licensee of a trademark may not transfer its license or grant sublicenses to third parties.
• Unless otherwise agreed by the parties, the licensee may use the trademark and any renewals made during the term of the license agreement, the licensee may use the trademark throughout the Spanish territory and with regard to all and any products or services covered by such trademark.