The Enduring Pull of Territoriality in European Trade Mark Law

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1 The Enduring Pull of Territoriality in European Trade Mark Law Pharmaceutical Trade Marks Group 92nd Conference 14 March 2016, London Graeme B. Dinwoodie Professor of Intellectual Property and Information Technology Law, University of Oxford

2 Looking Back....

3 Looking Back.... April 1, 1996: OHIM opens for business

No 207/2009 on the Community trade mark and Commission Regulation (EC) No 2868/95

4 .... and Forward 23 March 2016: the EUTMR is effective Regulation (EU) 2015/2424 of The European Parliament and of The Council of 16 December 2015 amending Council Regulation (EC) No 207/2009 on the Community trade mark and Commission Regulation (EC) No 2868/95 implementing Council Regulation (EC) No 40/94 on the Community trade mark (OJ L 341/21, 24 December 2015)

5 The Trade Mark Package Trade Mark Directive, recital 2: pre-1988 national laws contained disparities which may have impeded the free movement of goods and freedom to provide services and may have distorted competition within the common market. It was therefore necessary to approximate the laws of the Member States in order to ensure the proper functioning of the internal market

6 Territoriality in EU Trade Mark Law Trade Mark Regulation (2009), recital 4: The barrier of territoriality of the rights conferred on proprietors of trade marks by the laws of the Member States cannot be removed by approximation of laws...

7 Territoriality in EU Trade Mark Law Trade Mark Regulation (2009), recital 4: The barrier of territoriality of the rights conferred on proprietors of trade marks by the laws of the Member States cannot be removed by approximation of laws. In order to open up unrestricted economic activity in the whole of the internal market for the benefit of undertakings, trade marks should be created which are governed by a uniform Community law directly applicable in all Member States.

8 Trade Mark Regulation Trade Mark Regulation (2009), recital 2: To promote development of economic activities and create conditions which are similar to those obtaining in a national market there is a need not only to remove barriers to free movement of goods and services but arrangements [must] be instituted [that] ensure that competition is not distorted [and] legal conditions must be created which enable undertakings to adapt their activities to the scale of the Community, whether in manufacturing and distributing goods or in providing services. For those purposes, trade marks enabling the products and services of undertakings to be distinguished by identical means throughout the entire Community, regardless of frontiers, should feature amongst the legal instruments which undertakings have at their disposal.

9 So... Unitary Rights Trade Mark Regulation, art. 1(2): A Community trade mark shall have a unitary character. It shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered or be the subject of a decision revoking the rights of the proprietor or declaring it invalid, nor shall its use be prohibited, save in respect of the whole Community. This principle shall apply unless otherwise provided in this Regulation.

10 A model for elsewhere? Eurasian Customs Union (Russia-Belarus- Kazakhstan) Trans-Tasman (Australia/New Zealand) African Unions (OAPI/ARIPO) ASEAN Framework Agreement on Intellectual Property Cooperation, Bangkok 15 December 1995, art. 1(5) Lusophone marks (Portugese speaking countries)

11 A Conventional Account 1. Trade mark law is territorial : Trade mark protection is, quintessentially, territorial. That is because a trade mark is a property right that protects a sign in a defined territory. Leno Merken B.V. Hagelkruis Beheer BV, C-149/11, [2013] ETMR 16, at AG1 (AG Sharpston)

12 A Conventional Account 2. This is anachronistic: the territoriality of trade mark law is (or should be) on the wane as markets globalise See, e.g., Marshall A. Leaffer, The New World of International Trademark Law, 2 MARQ. INTELL. PROP. L. REV. 1, 28 (1998) (arguing that the territorial model of trademark law... is an anachronism in the global market)

13 A Conventional Account 3. So, we should revise our territorial conceptions Trade Mark Regulation (2009), recital 4: The barrier of territoriality of the rights conferred on proprietors of trade marks by the laws of the Member States cannot be removed by approximation of laws...

14 A Revised Conception? Pago at AG29: an approach which focuses on Member State boundaries when seeking to establish the extent of a CTM s reputation is fundamentally misconceived. Rather, the starting point must be to consider the territory of the Community regardless of frontiers, as a single and indivisible whole. (Sharpston AG).

15 A Sharpstonian View of Europe

16 Leno Merken B.V. Hagelkruis Beheer BV, C-149/11 (CJEU) [T]he territorial borders of the Member States should be disregarded in the assessment of genuine use in the Community... ( 44)

17 The Enduring Pull of territoriality in European trade mark law (Understandable) push back against top-down unitary nature of CTMs (applying CJEU decisions in DHL, Leno and Storck/OPTIONS) Enterprise Sofaworks Ukulele Orchestra Iron & Smith (Surprising) resistance to ground-up common law evolution (in UK law) Starbucks

19 Or Perhaps a More Complex Map?

20 A Conventional Account: A Friendly Critique 1. Trade mark law is territorial It is a bit more complex than that... Different kinds of territoriality at play in trade mark debates: intrinsic versus political territoriality 2. Territoriality is anachronistic (given recent social changes) 3. So, we should revise our territorial conceptions

21 Trade mark law is territorial Trade mark protection is, quintessentially, territorial. That is because a trade mark is a property right that protects a sign in a defined territory. Leno Merken B.V. Hagelkruis Beheer BV, C-149/11, [2013] ETMR 16, at AG1 (AG Sharpston)

22 Complexity I: Different Dimensions to Territoriality Territorial Laws (Norms) Territorial Rights (Acquisition) Territorial Actions (Enforcement)

23 Complexity I: Different Dimensions to Territoriality Territorial Laws (Norms) Harmonisation of Laws: Trade Mark Directive/TRIPS Territorial Rights (Acquisition) Amelioration: Madrid Protocol Abolition or Reconfiguration: CTM Territorial Actions (Enforcement) Brussels I Regulation (Recast) But GAT v. LuK (cf. Solvay v. Honeywell) CTM: DHL (general rule) De facto adaptation: in-transit seizures/intermediary liability/article 11 IPRED orders (Cartier)

24 Complexity II: Conceptions of Territoriality in Trade Mark Law

25 Consider a U.S. Example

26 United Drug v. Rectanus 1877: Regis (predecessor of United Drug) uses REX on medicinal products in Massachusetts 1883: Rectanus (and later his company) uses REX on medicinal products in Louisville 1912: lawsuit between them: United Drug wants to use, and wants Rectanus enjoined from use, in Louisville

27 United Drug Co. v. Rectanus [T]he adoption of a trade-mark does not, at least in the absence of some valid legislation enacted for the purpose, project the right of protection in advance of the extension of the trade, or operate as a claim of territorial rights over areas into which it thereafter may be deemed desirable to extend the trade United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918)

28 United Drug Co. v. Rectanus [T]he adoption of a trade-mark does not, at least in the absence of some valid legislation enacted for the purpose, project the right of protection in advance of the extension of the trade, or operate as a claim of territorial rights over areas into which it thereafter may be deemed desirable to extend the trade United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918)

29 Federal Registration in U.S. Law S. REP. NO , at 4 (1946) ( Trade is no longer local, but is national... It would seem as if national legislation along national lines securing to the owners of trade-marks in interstate commerce definite rights should be enacted. ).

30 Complexity II: Conceptions of Territoriality in Trade Mark Law registration systems derive their territorial character from political institutions with territorially defined sovereignty (one) intrinsic purpose of trade mark law suggests defining rights by reference to the geographic reach of goodwill, because sufficient to protect the source-identification function of the mark

31 Why does it matter? registration (and enforcement) systems derive their territorial character from political institutions with territorially defined sovereignty economic policy; administrative grant; judicial enforcement (perhaps) more resistant to change than social or commercial behavior intrinsic purpose of trademark law: defining rights to the geographic reach of goodwill social and commercial practices dictate the reach of the property less commensurate with (or tied to the institutions of) the nation-state increasingly fluid (perhaps)

32 A Conventional Account: Summary 1. Trade mark law is territorial 2. Territoriality is (and should be) on the wane 3. So, we should revise our territorial conceptions

33 The CTM Response... Unitary Rights Trade Mark Regulation, art. 1(2): A Community trade mark shall have a unitary character. It shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered or be the subject of a decision revoking the rights of the proprietor or declaring it invalid, nor shall its use be prohibited, save in respect of the whole Community. This principle shall apply unless otherwise provided in this Regulation.

34 DHL Express France v. Chronopost (CJEU 2011) In order to ensure... uniform protection, a prohibition against further infringement or threatened infringement issued by a [CTM] court [with international jurisdiction] must..., as a rule, extend to the entire area of the European Union. (para 44).

35 A Sharpstonian View of Europe

36 DHL Express France v. Chronopost (CJEU 2011) However, the territorial scope of the prohibition may, in certain circumstances, be restricted. (Para 46) The exclusive right is conferred to ensure that the trade mark is able to fulfil its functions. So, the territorial scope of that right, may not extend beyond what that right allows its proprietor to do in order to protect his trade mark, that is, to prohibit only uses which are liable to affect the functions of the trade mark. The acts or future acts of a defendant... which do not affect the functions of the Community trade mark, cannot therefore be prohibited.

37 DHL Express France v. Chronopost SA (CJEU) Scope of Injunction under Article 102(1)? determined both by territorial jurisdiction of the CTM court issuing that prohibition, and territorial extent to which the function of the CTM was adversely affected by the infringement or threatened infringement (Para 33) * Blend of political and intrinsic territoriality, achieved by functional analysis.

39 DHL Express France v. Chronopost SA So when is the general rule of EU-wide relief limited? (para 48) When a court finds that the acts of infringement [of a CTM] are limited to a single Member State or to part of the territory of the European Union If claimant has restricted the territorial scope of its action, or The defendant proves that the use of the sign at issue is not liable to affect the functions of the trade mark for example, on linguistic grounds

40 DHL Express France v. Chronopost SA (CJEU) Applied by the (UK) CTM courts routinely to grant EU wide relief. See, e.g., Interflora Inc. v. Marks & Spencer Plc [2013] EWHC 1484 (Ch) (since vacated) At trial, court had assessed Interflora s claim by reference to reasonably wellinformed and reasonably observant internet users in UK and had made no finding with regard to internet users in other Member States ( 34) But defendant had adduced no evidence to show that internet users in other Member States had different characteristics to, or interpreted M & S s advertisements in a different manner than, UK users ( 35) Cf. Home Depot v. Bauhaus, [2005] E.T.M.R. 100 (Hanseatic Higher Regional Court) (affirming automatic grant of EU-wide injunction, though noting that this might not be so clear if there is no risk of confusion.. in another country ), aff d, [2009] ETMR 63 (German Supreme Court),

41 Enterprise v. Europcar [2015] EWHC 300 (Ch)

42 Enterprise v. Europcar Both exceptions to DHL triggered Failure to show secondary meaning in France or plead infringing acts in France, or introduce evidence of confusion in France meant claimant had restricted the scope of the action despite claiming pan-eu relief in particulars of claim (para 26) Defendant s use of the logo not liable to affect the functions of the mark other than in the United Kingdom (para 27) No res judicata affect of judgment vis-a-vis claims of infringement in other member states

43 Unanswered second question in Pago.. Recall Holding: CTM must be known by a significant part of the public concerned... in a substantial part of the territory of the European Community and territory of single state may be considered to constitute a substantial part of the territory of the Community Unanswered Second Question: AG Paras 53-57: It is seldom if ever appropriate for a court to make an order in wider terms than are necessary. Where the infringement of the trade mark is confined to a single Member State (here, Austria), it will normally be sufficient for the order prohibiting such an infringement likewise to be confined to that single Member State. I see nothing in the Regulation that would preclude competent court from making an order limited in that way

44 So, are all claims (including dilution) also subject to Intrinsic Territoriality of Reputation? Sharpston AG in Pago Reading in Max Planck study (para 3.90) Volkswagen v. Volks.Inspektion, Case I ZR 214/11 (German Federal Supreme Court) Hormel Foods Corp v. Dukka (District Court, the Hague 9 October 2013) Case C-125/14, Iron and Smith v. Unilever (CJEU 2015)

45 Iron and Smith v. Unilever (CJEU 2015) Iron & Smith sought Hungarian registration for colour figurative sign Be Impulsive Unilever opposed based upon earlier CTM for word IMPULSE for body spray, arguing that the Iron & Smith mark would dilute its word mark IMPULSE had no reputation in Hungary, but based upon sales in the United Kingdom and Italy, it had reputation in substantial part of the EU (satisfying Pago) Court of Justice: even if the earlier Community trade mark is not known to a significant part of the relevant public in the Member State in which registration of the later national mark has been applied for, it is conceivable that a commercially significant part of the latter may be familiar with it and make a connection between that mark and the later national mark (para 30) A link is not sufficient to make out a dilution claim: must also have blurring, tarnishment or unfair advantage Some national courts had taken stronger line; how likely is blurring etc? See e.g., Hormel Foods Corp v. Dukka (District Court, Hague 9 October 2013) Decision addresses same dynamic as Arnold J. in Enterprise v. Europcar

46 Enduring Pull even on validity?

47 The Sofa Workshop v. Sofaworks [2015] EWHC 1773 (IPEC) Claimant owns CTM registrations for SOFA WORKSHOP Mark used extensively in the United Kingdom (and online), but not elsewhere in the EU (except for one sale and advertising in EU-wide magazines that the court found largely aimed at UK consumers) Court applies CJEU judgment in Leno Merken B.V. Hagelkruis Beheer BV (CJEU 2013) [T]he territorial borders of the Member States should be disregarded in the assessment of genuine use in the Community... [A CTM] is put to genuine use... when it is used in accordance with its essential function and for the purpose of maintaining or creating market share within the European Community for the goods or services covered by it [in which assessment, the territorial extent and the scale of the use is relevant]. Use in one member state may be sufficient to constitute genuine use

48 The Sofa Workshop v. Sofaworks For national marks the geographical extent of use is a factor to be taken into account, but it is apparently of no great weight.. In respect of Community marks the geographical extent of use is, in the general run, crucial: it must extend at least beyond the boundaries of one Member State. By way of a non-exhaustive exception to the general rule, this does not apply where the market for the goods or services is confined to one Member State. (Para 26) Based on assumption that trader making small use in one town may wish to expand across the entire country, but that such a trader is less likely to wish to expand across the EU Looked at another way, an applicant for a Community mark must be taken to intend to use it outside one Member State and has five years in which to justify his presumed intention. Otherwise he risks having to make do with a national mark by conversion and leaving the sign in question free for use elsewhere in the Community. (para 28)

49 The Sofa Workshop v. Sofaworks Thus registration revoked for non-use (para 40) and also found lacking acquired distinctiveness in other English-speaking member states; para 72 Claimant prevailed under passing off under English law Approach of Hacon J largely endorsed (with slightly different framing) by Arnold J in London Taxi Corp. v. Frazer-Nash Research [2016] EWHC 52 (Ch) at [230].

50 The Ukulele Orchestra of Great Britain v. Clausen [2015] EWHC 1772 (IPEC) Mark lacking acquired distinctiveness in Englishspeaking member states other than UK: invalidated At [40] ( A more relaxed policy would lead to the paradox that an application for a national trade mark could be refused registration because the sign in question is descriptive in that Member State, whereas an application for a CTM in respect of exactly the same sign could be granted because it has acquired distinctiveness somewhere else in the Community. ) Claimant prevailed under passing off under English law

51 Lessons? Effectuating unitary rights requires careful attention to political and enforcement institutions Use of CTM courts? cf unitary patent» Case C-75/15, Viiniverla (CJEU Jan 26, 2016) May be hard to resist intrinsic territoriality of marks: an enduring pull Different than other IP rights would DHL be followed in unitary community design case?

52 Lessons? Is the enduring pull of intrinsic territoriality a good thing? Costs of broad geographic rights moving ahead of social or commercial reality? Can trade mark law do what the CTMR claims for it? Do trade mark rights construct markets? Might depend upon normative vision of trade mark law (cf Maier v. Asos.com) or of Europe (see Brexit and ever closer union in Lisbon Treaty preamble) Approach might depend upon back up of national trade mark law (see Art 112; seniority; Benelux abolition) or ancillary regimes such as passing off or unfair competition Ground-up alternatives? Evolving notions of protectable goodwill to augment national rights rather than shrinking unitary rights? Starbucks (UKSC)/well-known marks (Paris 6bis)

53 Lessons for EU and elsewhere Costs of rigid adherence to expanding political territoriality: Excess of overlapping rights Requiring restraint: multiple non-exclusive rights In substantive trade mark Clutter: reform proposals in MPI Study; EUTMR reforms Co-existence rules in enlarged unions» Difference between 6 states and 28 states» Max Planck proposal» Hardly radical: Anheuser-Busch (ECJ) Not so easy to find use? In enforcement» Better awareness in online cases? Compare ebay v. L Oreal; Leno Merken B.V. Hagelkruis Beheer BV; Ansul BV v Ajax (C- 40/01); Laboratoires Goemar SA v. La Mer Technology Inc., Geographically-sensitive remedies» Compare WIPO JR on Use on the Internet;» DHL/Enterprise

54 Thank you Comments

Fordham IP Conference 4-5 April 2013 Remedies session Laëtitia Bénard Cross-border injunctions for registered IP rights in Europe

Fordham IP Conference 4-5 April 2013 Remedies session Laëtitia Bénard Cross-border injunctions for registered IP rights in Europe 1 I. General rule for all IP rights: Brussels Regulation No 44/2001 A right