Denmark Danemark Dänemark. Report Q192. in the name of the Danish Group by Dorte WAHL and Martin Sick NIELSEN
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1 Denmark Danemark Dänemark Report Q192 in the name of the Danish Group by Dorte WAHL and Martin Sick NIELSEN Acquiescence (tolerance) to infringement of Intellectual Property Rights Questions 1) The Groups are invited to indicate if their system of national law provides rules conferring an effect of the tolerance shown by the holder of an intellectual property right with regard to a third party who infringes his/her right. Does this effect of tolerance apply to all intellectual property rights (patents, designs, trade marks and other distinctive signs) or only to some? Danish legislation does not contain any general provisions on the effect of tolerance expressed by the holder of an intellectual property right with regard to a third party who infringes his rights. However, in respect of trademark rights, the Trademarks Act confers an effect of tolerance expressed by the holder of a trademark with regard to a third party who infringes his trademark right. In respect of the other intellectual property rights neither the Patent Act, Utility Model Act (hereinafter together the Patent Act ), Design Act or Copyright Act includes provisions on the effect of tolerance. However, regarding the enforcement of patents, designs and copyrights the general legal principle of tolerance applies taking into consideration the nature of the intellectual property rights. According to the general legal principle of tolerance, tolerance may have the effect that a claim for damages is refused or at least reduced, it may influence the Court to allow the infringer a phase out period, but it will generally not have the effect that the infringement is allowed to continue. The Groups are also invited to provide the justifications put forward in their country for the introduction of this rule on the acquisition of rights as an effect of tolerance and to define its scope. Introducing such provisions in the Danish Trademarks Act was motivated by the fact that a) the holder of an earlier right should not be reluctant to enforce his rights but should act immediately when he becomes aware of an infringement and b) that the person who uses and establishes a trademark without being confronted with earlier rights may as time passes be lead to (rightfully) expect that his right to use the mark will not be contested. The balancing of such considerations led the Danish Courts to create a tolerance principle taking into account both objective and subjective circumstances, which was codified by the amendment of the Trademarks Act in 1959 and is still part of the Trademarks Act now as amended to comply with Directive 89/104/EEC. 1
2 The reason for only applying the more extensive tolerance rule to trademarks may be seen as a consequence of the nature of trademarks. Trademarks are contrary to other intellectual property rights such as patents, designs and copyrights unlimited in time, and the scope of protection as well as the value of trademarks is increased substantially by the continued use of the trademark. Based hereon there seems to be a greater need to allow the continued use of an infringing trademark as an effect of the tolerance by the holder of the infringed right, than to allow the continued used of other intellectual property rights. Finally, the last question is to identify if the rules relating to the acquisition of rights through the effect of tolerance should be the same for different kinds of intellectual property rights. As described above rules are different with respect to trademarks and other intellectual property rights respectively Do national laws make a distinction between intellectual property rights that have been registered and intellectual property rights which are simply conferred by use and not by registration? This question is only relevant regarding trademarks. According to the Trademarks Act trademark rights are obtained by registration or by use. Rights conferred according to the Trademark Act are generally the same irrespective of how the trademark rights are obtained. However, with respect to tolerance the Trademark Act introduces a distinction between registered trademarks and trademarks obtained by use. According to Section 8 of the Trademarks Act a later right in a registered trademark may co exist with an earlier right in a confusingly similar trademark, provided that the registration was applied for in good faith and that the proprietor of the earlier right has been aware of and tolerated the use in Denmark of the later right for a period of five successive years. Furthermore, according to section 9 of the act a later right in a trademark (not necessarily registered) may also co exist with an earlier right in a confusingly similar trademark if the holder of the earlier right has not, within a reasonable time, taken the necessary steps to prevent the use of the later mark. 2) The acquisition of rights by tolerance remains subject to conditions, in particular, in relation to the duration of this tolerance and the attitude expressed by the third party that is exploiting the prior intellectual property right without authorization. The Groups are thus invited to indicate the duration necessary for tolerance to confer a right to a third party and deprive the holder of that intellectual property right of the possibility of acting against this third party. In respect to trademarks, a later right in a registered trademark may co exist with an earlier right in a confusingly similar trademark provided the later right has been used in Denmark for a period of five successive years, see above. However, the holder of the earlier right always has an obligation to take the necessary steps to prevent the use of the later mark (whether registered or unregistered), within a reasonable time. Based on case law a reasonable time cannot be clearly defined, it may be shorter than 5 years but also much longer. What can be seen as reasonable time depends entirely on the circumstances of the matter. From the travaux préparatoires of the Trademarks Act it appears that the period of reasonable time may be prolonged if the holder of the later right has acted in bad faith, i.e. had knowledge of the earlier mark when he initiated use of his mark. 2
3 In respect to other intellectual property rights the required duration of the tolerance depends entirely on the circumstances of the matter, and may be shorter than the 5 years applied for registered trademarks but also much longer. However, it is held that in respect to other intellectual property rights tolerance can never notwithstanding the duration deprive the holder of his right to obtain injunctive relief. The question raised also involves discerning what the starting point of this duration is and the act that the holder of the right must carry out in order to interrupt this period. Is positive action by the owner of the prior right necessary in order to start calculating the tolerance period, or can this date also be assumed? Thus, the Groups are invited to answer the question of what the requirements are in order for tolerance to be considered to have been interrupted: is it necessary to initiate legal proceedings or is it sufficient to protest against the alleged infringement, for example, by means of a letter? The starting point of the duration is in principle the time when the holder of the earlier right becomes aware, or ought to have become aware of the infringing use in Denmark. However, in practice it will never be possible to fix the exact starting point. A cease and desist letter from the holder to the infringer is considered to be sufficient to interrupt the effect of tolerance provided such letter is duly followed up e.g. by pursuing settlement negotiations or by initiating legal procedures if no settlement is reached. 3) The tolerance supposes that the holder of the prior right is aware of the existence of the infringement to his right and accepts it in an intentional way. The question arises then of recognizing the degree of knowledge of the acts of infringement the holder of the former right must show in order for him to be considered to have accepted the conflictive exploitation. Can this knowledge be supposed or must it be proven in a positive way? We understand this question to be a question of whether the holder of an earlier right must have positive knowledge of an infringement in order to accept (tolerate) it or if it is sufficient that he has a supposed knowledge. The knowledge of the infringement may be positive or supposed. However, in the event of very long lasting tolerance Danish case law has accepted that neither knowledge nor supposed knowledge is required. Supposed knowledge depends entirely on the circumstances of the matter including in particular the duration and the extent of the infringement and nothing general can be said about the degree of knowledge required. It should be mentioned that based on the wording of Section 8 (implementing Article 9 of Directive 89/104/EEC) and Section 9 (national Danish law codifying the general legal principle of tolerance with respect to trademarks) of the Trademark Act there seem to be a slight difference between the degree of knowledge required in the situation covered by the respective provisions, see question 1 above. 4) In the same way, the Groups are invited to indicate the requirements which the third party exploiting the prior intellectual property right without the authorization of its holder must meet. Does this exploitation have to be carried out in good faith? And according to what criteria do the jurisprudence and the national law define this good faith? 3
4 The Groups are also invited to indicate if the third party that exploits a prior intellectual property right without authorization must be unaware of the existence of this right in order to be considered to have acted in good faith or if knowledge of the prior right does not exclude good faith? The third party exploiting prior intellectual property rights without authorization is generally not required to meet any requirements including to be in good faith of the existence of the earlier right and/or of the infringement. However, it should be noted that being able to claim tolerance normally implies good faith in relation to the existence of the older right. With respect to a later infringing registered trademark (Section 8 Trademarks Act) it is a specific requirement that the application for such registration is filed in good faith of earlier rights. Whether a third party is in good or bad faith is determined taking into consideration all the circumstances of the matter. Knowledge of the earlier right does not necessarily establish bad faith. 5) The Groups should also indicate if their legal system provides other conditions (such as for example, the value or the geographical extent of the infringing activity) which the exploitation of the second right by the third party must meet in order to be able to call upon the benefit of the tolerance of this right by the holder of the prior right. Another question relates to the conditions that have to be fulfilled by the use of intellectual property rights which are subject to tolerance. Do national laws impose conditions on this use relating to its importance, duration or continuous nature? It is generally required that the third party, who is benefiting from the effect of tolerance, has made a continuous real commercial use of the intellectual property right. The extent (whether in terms of geographical scope or volume) and the value (whether absolutely or for the third party) of the use may be taken into consideration when considering the circumstances of the matter, but neither a certain extent nor a certain value is a condition to benefit from the effect of tolerance. In respect of later registered trademarks it follows directly from Section 8 of the Trademarks Act that the use of the later right has to be continuous for at least five years. No other conditions for the use have been provided except that the use has to be of a nature that enables the holder of the earlier right to gain knowledge of the infringing trademark. In Section 9 of the Trademarks Act it is repeated that the use of the later mark (whether registered or unregistered) has to be continuous and of a certain, however, unspecified duration. 6) If the system of national law provides for the acquisitive effect of tolerance, the question arises of identifying the consequences from the point of view of the rights of the third party who is benefiting from this tolerance. First of all, the question arises of discerning whether this third party may only continue the same exploitation as that which benefited from the tolerance of the holder of the prior right or if, on the contrary, he may modify the nature as well as the extent of the exploitation which he has undertaken. The Groups are thus invited to indicate if the jurisprudence and the legal provisions in their country limit the exploitation of the prior right by the third party to the possibility of continuing that exploitation under precisely the same conditions as the exploitation that benefits from tolerance (both from the point of view of the form, the sign, the model or the product that is the subject matter of a patent and from the territorial and economic extent of this exploitation). 4
5 Based on jurisprudence the third party who benefits from the effect of tolerance may continue the use exactly as it has been tolerated by the holder of the earlier intellectual property rights without prejudice to the volume of the business of the third party. In respect of trademarks this means that the third party may continue using the infringing trademark in the same form, and for the same goods and services as tolerated by the holder of the earlier trademark right. If the third party changes the form of the trademark or extends the use to other goods or services, the holder of the earlier trademark will be entitled to invoke his rights in respect of this changed/extended use of the later trademark. This is assumed to be the case both in respect of tolerance covered by Sections 8 and 9 of the Trademarks Act. In addition, the question arises of identifying if the intellectual property right benefiting from tolerance (trade mark or another distinctive sign, design or invention) can be transferred to another third party and if this other third party may also profit from the tolerance from which its predecessor took advantage. Thus, the question is to recognize if tolerance has an effect that is limited to the person who has benefited from it through the holder of the prior right or if the tolerance is attached to the sign, design or invention which has been used, independently of the person who has carried out this exploitation. The Groups should explain the solutions adopted on this subject by their national laws. If a continued use has been allowed or even an independent intellectual property right has been established due to the effect of tolerance, this activity and/or right may be transferred to another third party and this transferee will enjoy exactly the same right towards the holder of the earlier intellectual property right as the transferor. 7) In the same context, the question of the exhaustion of the right also intervenes. Indeed, if the products or the signs benefiting from the tolerance are put on the market, the question of the freedom of circulation of these goods arises, since they can hardly be regarded a priori as commercialised with the authorization of the holder of the prior right. It should thus be discerned if the tolerance is limited to the acts of the exploitation carried out by the person who benefits from it initially or if the tolerance also extends its effects to the third parties that bought products, in particular, for their export abroad. If a third party is allowed to continue to use an intellectual property right due to the effect of tolerance, the holder of the prior intellectual property cannot enforce his intellectual property right against the users or purchases of e.g. the goods manufacturer using the intellectual property right, see also question 8 above. However, if such goods are legally manufactured due to the effect of tolerance in a third country and imported into Denmark, the intellectual property right will not be exhausted and it will be an issue under Danish law whether the holder of the prior intellectual property right may enforce such right against the importation. Only if the holder has tolerated also the importation of the goods into Denmark, the third party may be allowed to continue importation due to the effect of tolerance. Thus, irrespective that the third party is allowed to continue to use the intellectual property right in a third country, the third party will not be allowed to import such products into Denmark without the consent of the holder of the intellectual property right. 8) The acquisition of rights through the effect of tolerance also raises the question of the definitive and irrevocable character of the acquired right. 5
6 One can indeed ask the question of whether it is not possible to call into question the effects of tolerance, for example, by means of a regulation that organizes the coexistence of the two rights. The Groups are thus invited to indicate if such a regulation is possible in their national systems and how it might be organized. Specific conditions pertaining to co existence has been regulated in Section 10(2) of the Trademarks Act. However, this provision only applies to cases where the holder of the earlier right has not, within a reasonable time, taken the necessary steps to prevent the use of the later mark. In such cases the Courts may decide that one or both of the trademarks shall be used in a particular way e.g. in a certain version or with a certain geographical indication. This power is vested solely in the Courts. Without specific legal basis such as in Section 10(2) of the Trademarks Act, it is not possible for the trademark holder to claim a specific organization of the coexistence between the other intellectual property rights. 9) Lastly, the Groups are invited to give their appreciation on the operation of the mechanism of the acquisition of rights by means of the effect of tolerance in their country. And the Groups are also invited to indicate if the rules in their country, as they exist, could be used as a basis for possible international harmonization. As the question of tolerance is decided taken into consideration all the circumstances in each matter, the decisions of the Danish Courts are generally balanced and reasonable, although individual and difficult to predict. It is our opinion that the system operates well but cannot be used as a basis for a possible international harmonization with the exception of the rules with regards to trademarks, which already partly are the result of an international harmonization by way of Directive 89/104/EEC. II) Proposals for harmonization The Groups are invited to formulate suggestions on the possible international harmonization of laws of intellectual property in the field of the effect of the tolerance of acts of infringement. These suggestions should be founded on the evaluation that the Groups make of the legal system of their country, so as to base future harmonization on the legal solutions which appear to be the most effective and easiest to implement. 10) First of all, the Groups should formulate an opinion as to the intellectual property rights which could be damaged by the effect of tolerance of an infringement. Does this tolerance have to take effect with regard to all intellectual property rights or only for some (for example, for distinctive signs)? We understand the question as, whether tolerance shall apply to all intellectual property rights including with the same legal effect with respect to all intellectual property rights. It is our opinion that tolerance shall apply to all intellectual property rights, however, that a distinction should be made between trademarks and other intellectual property rights. In respect to trademarks tolerance and the effect of tolerance shall comprise co existence as well as the right to claim damages and compensation whereas in respect to other intellectual property rights the effect of tolerance shall be limited to the right to claim damages and compensation. We add that in this connection we have neither considered nor addressed, which effect tolerance shall have on the right to claim damages and compensation, including from which point in time. 6
7 Further, it is our opinion that Article 9 of Directive 89/104/EEC as implemented by Section 8 of the Trademarks Act implies too strict requirements for obtaining the effect of tolerance, and that a harmonized law should introduce tolerance on the basis of a global appreciation of all the circumstances in each matter. 11) The Groups are also invited to give their opinion as to the nature of the tolerance, if it were to be the subject of international harmonization: is it to be limited to being a means of defence in the event of infringement proceedings or should it confer a right pertaining to the second user by date? It is our opinion that it should be possible to invoke tolerance exclusively as a defence whereas the question of whether the third party establish an intellectual property right should be determined by the applicable law. 12) The Groups are also invited to formulate suggestions as to the conditions (such as: duration, extent and value of the second exploitation by date, the knowledge of the infringement by the holder of the prior right etc.) which the tolerance should fulfil in order to produce legal effects in the event of possible international harmonization of intellectual property rights. It is our opinion that the effect of tolerance should be produced taking into consideration all the circumstances in each matter, including the extent and duration of the use and whether the third party is in good faith of the existence of the earlier intellectual property right and/or the infringement. It should always be a condition that use by the third party is a continuous real commercial use and that the holder of the earlier right has known or ought to have known of the use by the third party. 13) Finally the Groups can formulate any additional opinions as to the possible international harmonization of the rules of intellectual property rights on the conditions and effects of the acquisition of rights by means of the effect of tolerance. We support a harmonization a long the lines of our replies to question above. The group finds it important to harmonize both the conditions and the effects of tolerance. The legal instruments by which such harmonization may take place requires further consideration. Summary Danish law confer an effect on the tolerance expressed by the holder of an intellectual property right with regard to a third party who infringes the right in accordance with the general legal principle of tolerance. With respect to trademarks the effect of tolerance is further expressly governed in the Trademark Act in accordance with Article 9 of the Trademark Directive (89/104/EEC). The required duration of the tolerance varies substantially depending on the circumstances of the matter. Résumé Le cas échéant, le droit danois exerce des effets sur la tolérance exprimée par le titulaire d un droit de propriété intellectuelle envers un tiers qui transgresse ce droit aux termes du principe juridique général de tolérance. Pour ce qui concerne les marques, les effets de la tolérance sont en outre expressément régis par la législation danoise sur les marques, conformément à l article 9 de la directive sur les marques (89/104/CEE). La durée requise de la tolérance varie largement selon les circonstances. 7
8 Zusammenfassung Dänisches Recht hat eine Wirkung auf die Duldung, die von einem Eigentümer geistigen Eigentums gegenüber einem Dritten ausgedrückt wird, der dieses Recht in Übereinstimmung mit dem allgemeinen Rechtsprinzip der Duldung beeinträchtigt. In Bezug auf Marken werden die Wirkungen der Duldung weiterhin ausdrücklich im dänischen Warenzeichengesetz in Übereinstimmung mit Artikel 9 der Richtlinie zur Angleichung der Rechtsvorschriften der Mitgliedstaaten über die Marken (89/104/EWG) geregelt. Der in Verbindung mit der Duldung erforderliche Zeitraum variiert wesentlich, je nach Sachlage. 8
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