The EU trademark reform package - (too) bold a step ahead or back to status quo?

• Author: Kur, Annette

BACKGROUND I. OVERVIEW: STRUCTURE AND CONTENT OF EU TRADEMARK LAW II. SELECTED ISSUES FROM THE TRADEMARK REFORM PACKAGE A. Changes concerning procedural law B. Substantive Law 1. Protection requirements a. Graphical Representation b. Absolute Grounds for Refusal-Scope of Examination c. Bad Faith as a Relative Ground for Refusal--Discrimination of Trademark Proprietors in Other Member States? 2. Scope of Protection a. "Double Identity" b. Limitations and exceptions c. Goods in Transit CONCLUDING REMARKS BACKGROUND

The European trademark system consists of two components: the Trademark Directive (TMD) (1) and the Community Trademark Regulation (CTMR). (2) The CTMR has established a unitary right extending throughout the Eu, based on registration filed at a central office, the office for Harmonization in the Internal Market (OHIM). The TMD has compelled Member States to harmonize the core rules on substantive requirements and scope of protection in the national systems. The national trademark systems and the Community system are meant to co-exist, without a hierarchical structure giving precedence to one or the other.

Having been in existence for about twenty years, (3) the European trademark system is currently due for its first major overhaul. The exercise is triggered not least by the unpredicted success of the CTM: the revenues from registration and renewal fees were much higher than what had been anticipated. As the OHIM is supposed to be self-supporting (4)--without any gains having been envisaged--it became necessary to change the system in order to deal with the surplus. An agreement was therefore reached by the governing bodies of OHIM (5) and was confirmed by the European Council (6) in 2010 (7): that some portion of the annual income should in future be redistributed to the Member States. (8) As the implementation of that scheme requires an amendment of the CTMR, it was further decided that an overall evaluation of the functioning of the European trademark system should be carried out, so as to identify potential problems and lacunae which could be tackled in the same legislative context.

As an element in that evaluation, the Max Planck Institute for Intellectual Property and Competition Law in Munich (9) was commissioned to investigate the need for reform. The Study was delivered and published in early 2011 (MPI Study). (10) This was followed by a prolonged phase of internal deliberation by the Commission, which resulted in the March 2013 publication of Commission proposals for amendment of the CTMR (CP-CTMR) (11) and a recast of the TMD (CP-TMD). (12) Although the proposals are of an evolutionary rather than a revolutionary character, the sum of the proposed changes adds up to a major legislative reform. This concerns not least the TMD where the proposals--if adopted--would significantly enhance the current level of harmonization, thereby tightening the accord between the national regimes and the Community system.

Both proposals are currently under review by the European Parliament and the Council. In February 2014, the Parliament, in its first reading, (13) suggested several amendments. (14) Similar points were also raised in a compromise text submitted by the Council in May (15) and in a Common Council Position adopted by the Committee of Permanent Representatives (COREPER) on July 23, 2014. (16) Unsurprisingly, the Commission proposals were most vividly criticized where Member States' freedom to organize the national systems according to their own needs and prerogatives is felt to be in jeopardy.

As a background to this presentation of the European trademark reform package and the reactions it has evoked so far, Part II briefly presents the structure and main features of European trademark law. Part III reports on selected issues, in particular those that have proved to be controversial. Part IV contains some conclusions as well as suggestions for further changes that, until now, do not form part of the current reform agenda.

1. OVERVIEW: STRUCTURE AND CONTENT OF EU TRADEMARK LAW

   Although the CTMR and the national trademark systems are independent of each other, together they form the common body of European union (Eu) trademark law. The provisions on the requirements and scope of protection in the TMD are substantially the same as in the CTMR, thereby obligating Member States to align their national laws with those same rules. Also, the systems are interdependent in the sense that prior rights existing under each system must be given mutual recognition. (i.e. all prior national marks (and other signs used in the course of trade) form obstacles for protection of subsequent CTMs, and all prior CTMs form obstacles to subsequent national marks.)

   The most conspicuous difference between United States (US) and EU trademark law lies in the fact that Eu trademarks are acquired by registration only (17) (with deference to national systems which may, as an additional option, provide for use-based protection). Signs eligible for trademark protection (18) are registered and, thus, acquire protection if they are neither devoid of distinctive character nor descriptive, deceptive, contrary to morality, or--regarding shapes--functional, in the sense that they result from the very nature of the goods, are necessary to achieve a technical result, or confer substantial value to the goods. (19) In addition to clearing those "absolute" grounds for refusal, trademark registrations also fail or are subject to cancellation if they conflict with prior rights of third parties ("relative" grounds for refusal/cancellation). (20) Once protection is acquired, the mark is protected against any subsequent registration or use of signs by which a likelihood of confusion is created, conflicts with the "double identity" rule (below), or which takes unfair advantage of, or is detrimental to, the distinctive character or reputation of the mark, provided that such reputation exists in the territory where such extended protection is sought. (21)

   Of primary importance for the understanding and interpretation of EU trademark law are the decisions of the EU Court of Justice (CJEU). (22) The CJEU's function in the system is two-fold. For one, the Court decides as the last instance (and only regarding appeals on points of law) on appeals against decisions taken by OHIM in registration or cancellation procedures. (23) In addition, if in infringement proceedings or other litigation before national courts (24) doubts arise about the correct interpretation of provisions in the TMD or the CTMR, the national courts can (or must) refer those questions to the CJEU. (25) In that case, the CJEU is confined to answering the questions posed to it, while the competence to decide the case as such remains within the national court hierarchy.

   Due to its unique position, decisions of the CJEU are of seminal importance not only for the CTMR, but also for the national trade mark systems, to the extent that the substantive provisions of both systems coincide. Both OHIM and the national courts must comply with what the CJEU decides; national practices and legal traditions must yield to its authority.

2. SELECTED ISSUES FROM THE TRADEMARK REFORM PACKAGE

   1. Changes concerning procedural law

      As a matter of principle, harmonisation measures in the EU must be confined to what is necessary to improve the establishment and functioning of the Internal Market. (26) When the TMD was enacted in its original form in 1989, its scope was strictly confined to that goal, meaning inter alia that only substantive law was harmonised, while the existing disparities of procedural law were not straightened out. (27) Trademark procedures in the Member States have therefore retained a considerable degree of diversity. Specifically, in twelve (28) of the twenty-eight EU Member States, prior rights of third parties--the "relative grounds for refusal"--are examined ex officio in the registration process; in most other Member States and at the OHIM, ex officio examination only covers the absolute grounds for refusal (lack of distinctive character, descriptiveness, etc.) In case of a conflict with prior rights, it is for the proprietors of those rights to file an opposition or, after registration, a request for cancellation. Differences also prevail with regard to the exact grounds on which an opposition may be filed, the type of procedures to be brought in case of a conflict with a prior right, and other details of the registration and/or cancellation processes.

      Considering that the economic relationship between the Member States is now more close-knit than in 1989, the Commission found that time is ripe to promote legal harmonisation with regard to procedural issues. The Commission proposals therefore suggest a nearly complete alignment of national procedures with those at the OHIM concerning: the registration process (articles 38-44 CP-TMD (29)), procedures for opposition, revocation and invalidity (articles 45-49 CP-TMD), and the duration and renewal of registrations (articles 50, 51 CP-TMD).

      Inter alia, the Commission proposals oblige Member States to provide for efficient administrative procedures for opposition as well as for cancellation requests that are based on the invalidity of the mark (30) or its liability to revocation, in particular due to lack of genuine use. (31) The apparent reason is that court proceedings are usually too slow and costly to provide efficient relief; furthermore, trademark proprietors as well as their counterparts should be able to rely on the same procedural framework throughout the EU. (32)

      Although the proposals will force a number of Member States to change their laws, the proposals appear largely un-contentious. However, the Commission proposals have raised strong concerns where they attempt to abolish ex officio examination of relative grounds for refusal as well as searches for informational purposes (article 41 CP-TMD). (33) In the...