What Kind of Use is This?
Few cases referred to the CJEU were accompanied by such vigorous and passionate political debates as ONEL/OMEL.
Stakeholders as well as the Commission were in an acute state of alarm after the Benelux IP Office (BOIP) decided that genuine use made in the Netherlands was not sufficient for the earlier CTM “ONEL” to be considered as a valid ground for opposition against the Benelux trademark application for “OMEL”. Now, more than six months after the CJEU has handed down its decision, commentators remain remarkably silent. Rather than indicating a common understanding that the answers given are satisfactory, this seems to signal the opposite: so much has been left open for anyone’s guessing that it’s impossible to say what the decision actually means.
CTM system is a huge success
The system of the Community Trade Mark (CTM) is enormously successful. The downside of this is that the constantly growing number of CTM registrations at least in principle creates a barring effect for new market entrants, not only on the Community level, but also in all 27 (since 1 July: 28) Member States.
The problems potentially arising therefrom are exacerbated by the fact that, according to critics, CTM registrations tend to be “oversized” in the sense that protection is claimed for more goods and services than what the applicant actually needs. Such strategic behaviour even seems to be encouraged by the procedural rules applied under the current CTM regime. Among others, this concerns the policy observed by OHIM that any commercial use of CTMs is considered as sufficient for maintaining the validity of the registration after expiry of the five-year grace period. As a back-up for that approach, reference is usually made to the Joint Statement issued by the European Commission and the Council in the context of enactment of the CTMR in December 1993, setting forth that
“[t]he Council and the Commission consider that use which is genuine within the meaning of Article 15 in one country constitutes genuine use in the Community” (Joint Statement of 20 December 1993; emphasis added).
While the statement formed a powerful selling argument for the CTM in its early stages, it is now argued by some that it no longer matches the reality of the European Union.
Use in one Member country not enough
The clash of opinions erupted when in June 2009, Hagelkruis Beheer BV filed an application for “OMEL” with the Benelux IP Office. Opposition was thereupon filed by Leno Merken BV, based on the earlier CTM “ONEL” for the same goods and services. It was uncontested that ONEL had been genuinely used in the Netherlands, but no use had been made of it beyond the Dutch borders. The BOIP took the opportunity to take a firm stand against a “too lax” interpretation of the genuine use requirement as set forth in the Joint Statement (paragraph 34).
The BOIP further argued that the Joint Statement is at odds with the second, third and sixth recitals in the preamble of the CTMR, which emphasize that the CTMR is not meant to replace the national systems which continue to be of importance for entrepreneurs whose activities and needs for protection do not pertain to the Community level.
Applause and support to the BOIP’s position were offered by the Hungarian Patent Office. In a somewhat differently structured case, it was likewise concluded that a CTM for which use had only be established in one country – in that case: the UK – did not satisfy the criteria of genuine use in the meaning of Art. 15 CTMR. Meanwhile, the BOIP decision was appealed and the questions concerning the correct interpretation of Art. 15 CTMR and the Joint Statement were sent to the CJEU.
The Hungarian and Benelux decisions met with a storm of indignation by stakeholder organisations. Alarm was also caused at OHIM as well as in the EU Commission. Following a question posed by interested members of the European Parliament, Commissioner Barnier appeared in session and conjured up the danger that any tightening of the requirements for genuine use might seriously compromise the capacity of SMEs to defend themselves against counterfeiting, arguing that only by obtaining and safely maintaining rights in a CTM would they be able to effectively prevent fake merchandise from entering the EU market.
The same question in the Trade Mark Study
The question reverberating in ONEL/OMEL also figured in the catalogue of issues that the Commission set out for examination in the Study on the Overall Functioning of the Trade Mark System in Europe.
The answer given in the Trade Mark Study points out that the Joint Statement of December 1993 can be read in different ways. On the one hand, it may be understood as meaning that any use satisfying the criteria of genuine use in the national context will be sufficient to maintain a CTM. On the other hand, and more correctly, it can be read as expressing the principle that political borderlines should not be relevant for assessing whether the use made of a CTM is genuine. In other words, genuine use of a CTM should not be excluded for the sole reason that the use did not extend beyond the boundaries of one single Member State.
In view of this, the outrage caused by the decisions seems to have been fairly exaggerated. But though the issue never really was such a matter of life and death as initially staged, the questions posed in the conflict remain crucial. Even submitting that there is broad agreement that a schematic, numeric approach (in the sense that use must be made in one, two, or more Member States) should not be applied, it is still unclear how substantial the use must be, and how it relates in that respect to use that suffices for maintaining a mark on the national level.
The CJEU gives no clear answers
Hopes that the CJEU would give clear and instructive answers to those questions were only fostered by true optimists, and any such expectations were disappointed by the decision rendered on 12 December 2012. However, the judgment at least contains some basic clues.
In regards of substance, however, the judgment is rather tight-lipped. Instead of positively defining the requisite threshold distinguishing genuine use of CTMs from that of national marks, the CJEU rather expands on what is irrelevant for the purpose. This concerns first and foremost the territorial aspects: considering that the CTMR seeks to establish a unitary right by providing conditions on the internal market which are similar to those obtaining in a national market, any significance attributed to national borderlines would frustrate the very purpose of the Regulation.
Furthermore, the CJEU rejects the arguments made by interested parties seeking to establish parallels with the notion of marks having a reputation in the Community, or drawing conclusions from the convergence mechanism established by Art. 112 (2) (a) CTMR. Finally, it is confirmed in line with previous case law that neither the Joint Statement of December 1993 nor the Opposition Guidelines issued by OHIM have any bearing on the interpretation of Community legislation.
Apart from that, the CJEU makes reference to previous case law, emphasizing that the use must be assessed as to whether it is such as to serve the essential origin function, thereby taking account of all relevant circumstances, including the geographical scope of the use made.
The non-use of a CTM effects competition
For all its brevity – and admittedly going beyond a strictly literal exegesis of the black-letter text – the Court’s reasoning appears to lean slightly more in the direction of the Benelux and Hungarian approach than lending support to the position taken by the Commission. Some indication of this can be found in the CJEU’s explicit confirmation of the reference made by the Advocate General to the impediments for competition resulting from non-use of a CTM, which may, after all, result in restricting the free movement of goods and services.
Furthermore, regarding the argument based on Art. 112 (2) (a) CTMR that in order for the provision to make sense, genuine use of a CTM must necessarily be more substantial than use which is sufficient for maintaining a national mark, the CJEU concedes that “[t]here is admittedly some justification for thinking that a Community trade mark should – because it enjoys more extensive territorial protection than a national trade mark – be used in a larger area than the territory of a single Member State in order for the use to be regarded as ‘genuine use’”.
Likewise, when dealing with the argument that genuine use of CTMs must be measured according to the same standards that apply to assessing of reputation, meaning the use must be made in a substantial part of the Community, the CJEU sets out by declaring that “it is reasonable to expect that a Community trade mark should be used in a larger area than a national mark”.
Geographic or political borders?
Of course, the lines quoted here are substantially qualified by the Court’s unequivocal confirmation of the principle that territorial borders of the Member States must be disregarded in the assessment of genuine use in the Community. However, instead of adopting the Commission’s position that all discussions concerning the (geographic) extent of CTM use are contrary to EU law and should therefore be banned as irrelevant, the CJEU only states that “it cannot be ruled out that, in certain circumstances, the market for the goods or services for which a Community trade mark has been registered is in fact restricted to the territory of a single Member State” and that “it is not necessary that the mark should be used in an extensive geographic area for the use to be deemed genuine”.
Understood in this way, the decision should arguably have repercussions on the practice of OHIM as well as of other offices, which until now were quite ready to accept that use of a CTM satisfies the legal requirements if any commercial use was made of it which goes beyond mere token use.
Saying this also means that offices and proprietors will probably not be over-eager to oblige: as a general tendency such additional requirements would result in prolonged opposition and cancellation proceedings, and would thus add to the overall costs incurred on all sides. On the other hand, this might clear the way for more trade mark registrations, at least in those Member States where no use has been made. Based on the assumption that the balance between national marks and CTMs has been distorted by giving too much weight to the latter, such effects may, after all, turn out to be beneficial for the system in its entirety.
Is the practice going to change?
It is still unclear whether and to what extent the CJEU judgment will have sizeable effects in practice. Any prognosis for the future is encumbered by at least two factors. First, it is unclear how serious the CJEU is about considering the geographic extent of the use made. At least nominally, geographic scope already now forms part of the factors considered by OHIM for the assessment of genuine use, however, without much weight being given to the aspect. After all, the Court maintains as a governing principle that the mark must be used in accordance with its essential origin function, and that criterion is so broad and vague that it can arguably be satisfied by any non-token use, even if it occurs on a rather minimalist level.
Second, it is impossible to make any clear assessment of the practical dimensions the issue might possibly have. How many CTMs are there in the OHIM registry that would, under a strict interpretation of ONEL/OMEL, have to be revoked for non-use? If a large proportion of registered CTMs are only used on a minimal level, this might indicate a certain malfunctioning of the system, that was after all explicitly designed for undertakings to adapt their activities to the scale of the Community.
If, on the other hand, most entrepreneurs only apply for registration of CTMs when they are seriously considering commercial activities transgressing the domestic sphere, no significant changes would result from including the geographic extent of use into the legal assessment.
Whatever the immediate or long-term results may be, one point is clear: the CJEU decision has not improved the level of practical harmonization. On the contrary, considering the vagueness of the wording as well as the fact that the matter was nearly entirely sent back to the various competent courts and authorities, it is a safe bet that the issue will remain contentious and fraught with uncertainty, and that we will see more litigation of the kind before the matter is eventually settled.
Prof. Dr. jur.
Max-Planck-Institute for Intellectual Property and Competition Law, Munich
CJEU case C-149/11 – Leno Merken/Hagelkruis Beheer (ONEL/OMEL), decision of 19 Dec. 2012 (not yet reported in ECR):
BOIP 15 January 2010, No. 2004448, Leno Merken/Hagelkruis. Hungarian Patent Office, 11 February 2011Case No. M0900377 “C City Hotel”.
Study on the Overall Functioning of the European Trade Mark System (Trade Mark Study), presented by the Max-Planck-Institute for Intellectual Property and Competition Law, February 2011, at http://www.ip.mpg.de/files/pdf2/mpi_final_report_with_synopsis.pdf.
OHIM’s Contribution to the Study on the Overall Functioning of the Trade Mark System in Europe: http://oami.europa.eu/ows/rw/resource/documents/OHIM/OHIMPublications/ohim_contribution.pdf
A. Kur: Unitary rights in fragmented markets? Some thoughts on the CTM system and its interaction with national law. In M.-Ch. Janssens & G. van Overwalle, Harmonization of European Intellectual Property Law, contributions in honour of Frank Gotzen, 119-136, 2012.