Spain: How Alicante’s New Court Can Help Owners of Community Trade Marks and Community Designs

When Alicante was chosen as the seat of the OHIM, it converted itself in an important place in the European IP system. Now, this leading role has been strengthened with the establishment in this city of the Spanish Community Trade Mark (CTM) and Design (CD) Courts. They are the only courts in Europe which may hear and decide on CTM and CD infringements where none of the parties is domiciled or has an establishment in the European Union. This may mean that the Alicante courts will hear a large number of CTM and CD disputes.

Article 91 of the CTM Regulation (CTMR) and Article 80 of the CD regulation (CDR) oblige EU member states to designate a limited number of first and second instance courts, to perform the functions assigned by the Regulations. Spain has finally complied with this obligation by means of Law 8/2003 that amended Law 6/1985 of the Judiciary. In accordance with the new provisions, the Alicante Courts are the only ones in Spain that can hear, in first and second instance, actions on infringement and validity of CTMs and CDs as enumerated in Articles 92 CTMR and 81 CDR.

In the system designed by the CTMR and CDR, in a dispute on the validity or infringement of a CTM or a CD, specific rules should be followed to determine whether a Member State Court has jurisdiction to hear the case.

In particular, according to Article 93 CTMR and 82 CDR, in the absence of an express or unwritten submission to a specific jurisdiction (Art. 93.4 CTMR and 82.4 CDR), the claims for infringement or validity of a Community trade mark or design can be brought in the courts of the Member State in which:

1. the defendant is domiciled or has an establishment (Art. 93.1 and 82.1)
2. the plaintiff is either domiciled or has an establishment (Art. 93.2 and 82.2).
3. the OHIM has its seat, that is to say, the courts in Alicante (Art. 93.3 and 82.3).

Alternatively, the claims and actions can also be brought in the forum delicti commisi, that is to say, before the courts of the Member State where the act of infringement of a Community trade mark or design has been committed. (Art. 93.5 and 82.5).

This constitutes the "permanent alternative competent forum", but it suffers an important limitation as to the extent of its jurisdiction. Contrary to CTM and CD courts whose jurisdiction is based on Art. 93 (1) to (4) CTMR or Art. 82 (1) to (4) CDR, it can only hear and decide cases regarding acts committed or threatened within the territory of the state in which that court is situated (see Art. 94 and 83, respectively).

The rules on jurisdiction in the Community Trademark and Design Regulations open the door to forum shopping in CTM and CD disputes. The courts of each Member States compete each other to attract CTM and CD litigation and parties will go to the courts of those Member States that guarantee the most satisfactory results for their interests.

It is therefore vital to evaluate the conditions and elements in order to choose the right place to sue.

In the system designed by the Regulations, the Alicante courts have an important competitive advantage. Actually, contrary to the rest of the courts of the Member States they can hear and decide cases in which none of the parties is domiciled nor has an establishment in the European Union, and the effects of their decision will regard the whole European Community. According to the last statistics published by the OHIM, 37% of all the registered CTMs and 20% of CDs are owned by non-EU proprietors. This consequently means that situations in which Arts. 93.3 CTMR and 82.3 CDR apply (the residual jurisdiction of the Alicante courts) could be very common in CTM and CD litigation.

In particular, non-EU litigants seeking pan-European relief will find that Alicante is the place to go.

Predictability of decisions of a court is one of the most important factors that litigants take into account when forum shopping. This mainly depends on the organisation of the judicial system and the specialization of the courts.

On one hand, it is important to note that the Spanish legislator opted for establishing a one-court system. This has a basic advantage in respect of a multiple-court system. First of all, because it avoids consulting the domestic rules for determining the competent forum in the territory of the Member State. Secondly, because one single court ensures a certain uniformity of the judgments.

On the other hand, it should be underlined that the CTM and CD Courts of Alicante belong to the newly established Commercial Courts, which have been created all over the Spanish territory to deal with commercial matters. All the judges appointed to these new Courts are specialised in company and commercial law, a field which includes IP. The judges appointed for the Alicante Courts are IP specialists, having passed a long and difficult selection process in which they had to demonstrate their knowledge and experience among hundreds of candidates. In addition, having to deal exclusively with Community and Design matters will naturally enhance this IP specialisation.

The result is a single national court competent in Community trade mark and design infringement actions whose members are specialised in IP matters: this should guarantee the uniformity and fairness of the judgements and, therefore, predictability of the decisions.

It should also be taken into account that the Alicante forum is situated in the same city as OHIM. Despite the work of the Court of First Instance and the European Court of Justice in interpreting the rules set out in the Regulations (especially the CTMR), there are still many issues that have not yet been dealt with on the judicial level. In this respect, the criteria followed by the OHIM while interpreting the Regulations would significantly contribute to the specialisation of the courts. The proximity of the institutions makes it conceivable that the OHIM practice will have a certain weight in the progressive specialisation of the Alicante courts.

Rights owners usually seek quick proceedings as their willingness to defend their rights depends on the success of the product in the marketplace. In addition, long proceedings are always more expensive, and there is an inherent risk that the costs of enforcement could be higher than the benefits derived from a successful action.

In Spain, proceedings on CTM and CD disputes are governed by the Law of Civil Procedure 1/2000 (LEC), which changed the so-called ordinary trial configured by the old regulation and gave a leading role to the oral argument in detriment of the written formalisms in order to speed-up proceedings.

The great backlog at the courts all over Spain has impeded the development of the new, faster proceeding designed by the LEC. However, the newly-established CTM and CD court should be able to handle lawsuits swiftly and rapidly, especially because they will start with no backlog.

Business people are often not willing to accept the average length of proceedings: infringements of IP rights can have damaging effects on companies and need to be stopped as soon as possible. However, the demand for quick decisions must be balanced with the need for legal certainty and a fair hearing for the defence, and this is especially true where interim measures are concerned. In the system designed by the EC Regulations, there is another advantage for the Courts whose jurisdiction is based on paragraphs 1 to 4 of Art. 93 CTMR or 1 to 4 of Art. 82 CDR , namely that interim measures can be enforced in any of the Member States, whereas measures adopted by the forum delicti commissi can only be enforced in the territory of the State in which this court is located. Pan-European preliminary injunctions are therefore precluded to these courts and this makes the first category of courts more attractive to litigants.

The CTMR and CDR do not specify which procedures should be followed to adopt these measures. The rules governing the interim system are decided nationally, so the flexibility and speed with which the tribunals can grant provisional measures may vary from one state to another. Therefore it is important for litigants to consider whether a court has a system of preliminary measures that guarantees quick and effective protection.

On a general level, Spain still lacks speed and flexibility. The average time to obtain provisional measures in the Spanish legal system is about one month. The courts of Alicante are therefore competing with other more flexible and quicker systems, such as those of Germany, the United Kingdom and the Netherlands. In addition, it should be notes that there is a general reluctance of the Spanish judges to grant provisional measures in trademark and design disputes, especially when the title on which the petition is made is not yet registered. The excuse is that there is not yet evidence of the existence of the good-right (the fumus boni iuris), which is given when the plaintiff can provide the court with a certificate of registration.

In this respect, it should be noted that the CTMR allows the granting of interim measures on the basis of CTM applications. In the evaluation of the fumus boni iuris in order to grant a provisional measure on the basis of a mere CTM application, the knowledge of the OHIM proceedings is essential. For example, it could be considered that a CTM application which passed the three-month period after publication is a virtually registered trademark (since the absolute grounds check has already been performed). In this sense, the owner has already a strong right on it since there is no reason to think that the application will not accede to registration.

Litigants may go to courts in other member states if they seek a quick adoption of provisional measures. Nonetheless, the LEC offers the Spanish judges a number of mechanisms which could be taken into account by the new Alicante courts and which could ameliorate the position of the courts of Alicante vis-à-vis those in other countries.

The most effective mechanism to accelerate the grant of precautionary measures is contained in Art 733 (2) of the LEC: "If the applicant applies for it and proves that there are urgent reasons or, if the previous hearing can jeopardize the good purpose of the precautionary measures, the Court will be able to grant it without proceedings and through an edict, in a five-day term, reasoning separately on the requirements of this precautionary measure and the reasons leading to its granting without hearing the defendant." This provision allows CTM and CD owners to obtain a provisional measure in five days, putting the Spanish system on a level with the quickest other national systems.

Ex parte proceedings for provisional measures are also endorsed by the Community legislation (Art 9 (4) of Directive 2004/48). In this respect, the courts of Alicante must be flexible to apply Art 733 (2) of the LEC in CTM and CD disputes.

A final element litigants should take into account in forum shopping is the possibility to recognize and enforce the judgment in the country where the defendant has his assets. This problem particularly arises when the litigants have their assets in a non-EU country and especially concerns the Alicante courts when gaining jurisdiction on the basis of Art. 93.3. CTMR and 82.3 CDR (residual jurisdiction in litigation between non-EU parties).

If the decision is to be enforced only in the European Union, Regulation 44/2001 or the Brussels convention (for Denmark) apply and the enforcement is automatic. The same occurs in case the decision is to be enforced in countries that are party to the Lugano Convention, which includes all the EU States as well as the EFTA countries (Switzerland, Iceland, Norway).

When the decision is to be enforced in the country where the defendant has its assets and these are not in a EU or EFTA country, the recognition and enforcement of judgments are governed by bilateral conventions between the state where the judgment is adopted and the state where the assets are held or, in the absence of such conventions, by the rules of the third country where the enforcement is sought.

Spain has ratified 13 bilateral agreements (including China but not the USA) on recognition and enforcement of decisions. These ones establish quasi-automatic recognition and enforcement of the judgements coming from the contracting party and ensure, in principle, a quick satisfaction for the rightholder. Nevertheless, according to these agreements, to recognize the judgment, the court of origin must have gained jurisdiction in accordance with one of the heads of competence listed in the bilateral agreement. The jurisdiction of the Alicante courts gained on the basis that neither party has its domicile or establishment in the Community (Art 93(3) CMTR or Art 82 (3) CDR) is not listed among these "acceptable heads of competence". It is therefore likely that, upon opposition of the defendant, the third country where the judgment is to be enforced will reject the recognition, claiming that the jurisdiction of the courts of Alicante is exorbitant. It would be even more difficult in this case to obtain the execution in a third country where bilateral agreements do not exist. The absence of bilateral agreements makes it necessary to be informed of the conditions set out in the relevant national rule for the enforcement of foreign decisions, in particular the foreseeability of the execuatur and the time needed for the execution of the judgement.

Nevertheless, this is a problem that, on a general level (i.e. not limited to CTM and CD litigation), concerns the majority of the European countries. Since there does not exist an international obligation of limiting "exorbitant heads of competence", the majority of the European States established residual heads of competence that allow the jurisdiction of their courts even when these ones have few links with the subject of the case. For example, French courts can gain jurisdiction as long as the plaintiff has French nationality; the UK courts are competent in international situations when the claim has been serviced in the United Kingdom’s territory; Swiss courts gain jurisdiction if the defendant has any type of assets in Switzerland. In the absence of bilateral agreements establishing that such heads of competence are fair enough to allow the third State’s court to execute their decision, it will be very difficult to obtain the recognition and enforcement of decisions.

In order to overcome these problems, efforts have been made in the framework of The Hague Conference of Private International Law to adopt a Convention on jurisdiction and foreign judgments in civil and commercial matters which would eventually establish a worldwide unified system of recognition and enforcement of judgements in IP cases. Nevertheless, for the time being, these efforts have not yet produced a final compulsory document.

The applicable law to the dispute in CTM and CD litigation is another element to be considered in forum shopping. The assumption that the existence of common rules for CTMs and CDs is all there is to this matter is totally wrong. Actually, the regulations do not cover the non-contractual aspects of CTM and CD rights, including the remedies and sanctions necessary to protect the recognized rights and to stop the consequences of infringement. This means that, for example, parties could be tempted to bring proceedings in a court of a Member State whose conflict-of-law rules ensure an easier proof of infringement or higher compensation for the infringing acts.

In almost all the Member States’ legal systems, it is generally agreed that the applicable law to the obligations deriving from the infringement of IP rights is the law of the country in which protection is sought or the law of the country where the infringement occurred. This gives legal certainty to litigants as to the law that the court will apply in those questions which are not covered by the CTMR and CDR.

In the Spanish legal system, conflict-of-law rule in IP matters is dealt with in Article 10.4 of the Civil Code (CC) that states "intellectual property rights shall be protected in the Spanish territory according to the Spanish law". This is considered an incomplete conflict-of-law rule since it only establishes that Spanish Law is applicable if the act of infringement occurred in Spain, but it cannot be used to determine which is the applicable law when infringements occurred in another Member State.

Since there is no case-law applicable to this matter, litigants may face the unexpected risk that the courts will apply a different law because, presently, Art. 10.4 of Spanish Civil Code leaves several interpretations open. This could lead litigants to bring proceedings in another court whose conflict-of-law rules are clear and lead to unequivocal solution.

The solution to this matter has been given by the Spanish academics. In their opinion, Art. 10.4 CC should be "bilateralized" in the sense that if it establishes that Spanish Law is applicable when the infringement acts is committed in the Spanish territory, Spanish courts should apply the law of the Member State in which the acts of infringements occurred. This does obviously not solve the case in which acts of infringements have been committed in more than one Member State.

Maybe, this issue will lose all its importance in the near future. The Community institutions are working on a proposal for a regulation on the law applicable to extra-contractual obligations (Rome II Regulation) which will imply the inapplicability of Art. 10.4 CC and any other national conflict-of-law rule among the EU Member States in CTM and CD litigation. Art 8.2 of the proposal states that "In the case of a non-contractual obligation arising from an infringement of a unitary Community industrial property right, the relevant Community instrument shall apply. For any question that is not governed by that instrument, the applicable law shall be the law of the member state in which the act of infringement is committed".

The final adoption of Rome II will eliminate the legal uncertainty that CTM or CD litigants may have to face when bringing proceedings before the courts of Alicante and any other CTM and CD court all over Europe.

The system designed by the CTM and CD regulations gives the Alicante Courts a central role in the framework of Community IP litigation. The residual jurisdiction to hear cases where non-EU parties are involved gives these courts more jurisdiction than any other CTM and CD court in Europe. In particular, when non-EU litigants seek Pan-European injunctions, they will find that Alicante is the place to go to. In addition, the specialization of the courts and the closeness to the OHIM will likely make the Alicante courts a reference for the rest of the CTM and CD courts in Europe. Nevertheless, as explained, there are various issues that should be taken into account by litigants when choosing Alicante, but it is likely that it’s court will become the leader among all the CTM courts in Europe.

This article was first published with Managing Intellectual Property, London, February 2005.

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.