Question Q218 National Group: The Philippines Title: Contributors: The requirement of genuine use of trademarks for maintaining protection Aleli Angela G. Quirino John Paul M. Gaba May A. Caniba-Llona Reporter within Working Committee: Aleli Angela G. Quirino Date: 25 April 2011 Questions I. Analysis of current law and case law The Groups are invited to answer the following questions under their national laws: 1. Is genuine use a requirement for maintaining protection? What is the purpose of requiring genuine use? Is it to keep the register uncluttered and to thereby allow for new proprietors to make use of a limited supply of possible marks? Is the purpose of requiring genuine use to protect consumers from confusion as to the source of origin of the goods or services? Or are there multiple purposes? Yes, the Philippine Intellectual Property Code (IP Code, for brevity), specifically Sections 124.2 and 145 thereof, requires the submission of a Declaration of Actual Use (DAU, for brevity) and evidence to that effect for maintaining protection over a mark. These requirements were imposed for the following purposes: a. To keep the Trademark Register uncluttered; and b. To limit the use of the marks to trademark owners who actually use the registered marks. 2. What constitutes genuine use of a trademark? Actual use of the mark in commerce constitutes genuine use. The Intellectual Property Office (IPO, for brevity) requires that the goods are placed on the market or 1
the services are made available in the Philippines [Subsection 4.4, IPO-Bureau of Trademarks Memorandum Circular No. 3, Series of 2009]. 3. Is use as a mark required for maintaining protection? Is use as a business name, use in advertising or use on the Internet sufficient? Is use of a mark in merchandising genuine use for the original products? (For instance, is use of the movie title Startrek, registered for clothing and used on the front of a T- Shirt, genuine use of the mark for clothing?) Yes, to maintain protection over a mark, use as a mark is required. Use of a mark as a business name, or use thereof in advertising and in the Internet, or any other proof of use is also allowed, provided that the goods or services are available in the Philippines. 4. What degree of use is required for maintaining protection? Our prevailing trademark laws and regulations do not specify the degree or extent of use of a mark. So long as the mark is actually used and that there is evidence to that effect, protection over the mark is maintained. Is token use sufficient? Is minimal use sufficient? There are no current cases expressly allowing or disallowing token use or minimal use of a mark. 5. Is use in the course of trade required? In general, use in the course of trade is required. Does use by non profit-organisations constitute genuine use? Does use in the form of test marketing or use in clinical trials constitute genuine use? Does use in form of free promotional goods which are given to purchasers of other goods of the trademark owner constitute genuine use? Yes, while IPO-BOT Memorandum Circular No. 03 provides that goods and services must be available in the market, there is no express provision regarding use by nonprofit organizations, use in the form of test marketing or use in clinical trials, or use in form of free promotional goods. With regard to use by non-profit organizations, although the goods or services are not sold in the normal channels of trade, such goods and services are made available to members, supporters, patrons or benefactors, and such use of the mark constitutes genuine use. With regard to use in the form of test marketing or use in clinical trials, or use in form of free promotional goods, these are assumed to be done in anticipation of, or prepratory to, the eventual availability of the goods or services in the normal channels of trade; hence, such use may constitute genuine use. Does internal use constitute genuine use? No. 2
6. What is the required geographic extent of use? Use within the Philippines is required. Is use only in one part (or a state in the case of confederation) of the country sufficient? Is use of the CTM in only one EU member state sufficient? Is use only in relation to goods to be exported sufficient? Not applicable. Is use in duty free zones considered to be genuine use? Yes. 7. Does genuine use have to take place in the exact form in which the mark is registered? Is use in a different form sufficient? What difference is considered permissible? What if (distinctive) elements are added or omitted? No. Use of a mark in a different form shall not diminish the protection granted over the mark, provided the distinctive feature or element is maintained [Section 152.2, IP Code; Rule 803, Rules and Regulations on Trademarks]. The addition or omission of an element is permissible. Is use of a mark in black and white instead of colour sufficient (in case of marks with a colour claim) and vice versa? In practice, when a mark is registered in black and white, use thereof in color is accepted by the IPO. However, when a mark is registered with a claim of color, use thereof in black and white is accepted as not sufficient. 8. Does the mark have to be used in respect all of the registered goods and services? No, use in one or more of the covered goods or services is allowed [Section 152.3, IP Code; Rule 804, Rules and Regulations on Trademarks]. What if mark is used in respect of ingredients and spare parts or after sales services and repairs, rather than registered goods and services? Such use will not constitute genuine use. What is the effect of use which is limited to a part of the registered goods or services? What is the effect of use limited to specific goods or services? Such use of the mark will constitute genuine use. 9. Evidence of use: How does one prove genuine use? As provided in IPO-Bureau of Trademarks (IPO-BOT, for brevity) Memorandum Circular No. 3, Series of 2009, acceptable evidence of use for both goods and services are: 3
a. Labels of the mark as actually used; b. Downloaded pages from the website of the applicant or registrant clearly showing that the goods are being sold or the services are being rendered in the Philippines; c. Photographs (including digital photographs printed on ordinary paper) of labels or goods bearing the marks as these are actually used; d. Photocopies of brochures or advertising materials evidencing use of the mark in the Philippines (subject to the submission of the original materials if required by the IPO-BOT); and e. Other similar evidence of use, provided the goods are placed on the market and the services are available in the Philippines. Is advertising material sufficient? Yes, as long as the goods or services are made available in the Philippines. Are sales figures sufficient? No. Is survey evidence required? No. Are the acceptable specimens for proving genuine use different for goods and services? No; acceptable evidence of use for both goods and services are the same. Who has burden of proof for genuine use? Generally, the trademark owner has the burden to prove that the mark is in genuine or actual use in the Philippines. 10. If the trademark owner has a proper reason for not having put his mark to genuine use, will he be excused? What constitutes a proper reason for nonuse? Yes, non-use of a mark may be excused if caused by circumstances arising independently of the will of the trademark owner, except lack of funds. These special circumstances must be stated in an affidavit and must show that they are clearly beyond the control of the registrant (e.g., prohibition of sale imposed by government regulation). Moreover, non-use of the mark within an uninterrupted period of three (3) years will make it susceptible to a cancellation action by thrid parties. If the non-use is excusable, is there a maximum time limit? If so, is the time limit dependent upon the nature of the excuse? Although no maximum time limit is required for non-use of mark to be excusable, registrant is required to indicate in the affidavit the length of time the mark has not 4
been used in commerce, the steps being taken to put the mark back in commerce, and the date when use in commerce may be expected to resume. 11. Within which period of time does use have to take place? In the Philippines, there are two (2) reglementary periods within which actual use must take place, namely: a. With regard to pending applications, use of a mark must take place within three (3) years from the filing date of the application, extendible for another six (6) months upon filing of request of extension of time to file a declaration to that effect. Actual use may take place within the six (6)-month extension period; and b. With regard to registered marks, use thereof must take place at any time within five (5) years from date of registration; and declaration to that effect must be filed within one (1) year from the 5th anniversary of registration. 12. Does use of the mark by licensee or distributor constitute genuine use for maintaining protection? Yes. If so, does the license have to be registered? No, the IP Code does not require the registration of a license agreement. However, the license agreement must contain the mandatory provisions and must not contain any of the prohibited provisions. Failure to do as such will render the unregistered license agreement unenforceable. Subsections 87.1 to 87.15 of the IP Code outline the provisions that are prohibited in a license agreement, namely: a. Imposing upon the licensee the obligation to acquire from a specific source capital goods, intermediate products, raw materials, and other technologies, or of permanently employing personnel indicated by the licensor; b. Reservation of the licensor s right to fix the sale/resale prices of the products manufactured; c. Provisions on restrictions regarding the volume and structure of production; d. Prohibiting the use of competitive technologies in a non-exclusive technology transfer arrangement; e. Establishing a full or partial purchase option in favor of the licensor; f. Imposing upon the licensee the obligation to transfer for free to the licensor the inventions or improvements that may be obtained through the use of the licensed technology; g. Requiring payment of royalties to patent owners for patents which are not used; 5
h. Prohibiting the licensee from exporting the licensed product to countries where exclusive licenses to manufacture and/or distribute the same are non-existent; i. Imposing restrictions on the use of technology supplied after the expiration of the agreement, except in cases of early termination of the agreement due to the fault of the licensee; j. Requiring payments for intellectual property rights after their expiration; k. Prohibiting the technology recipient from contesting the validity of any of the patents of the technology supplier; l. Restricting the conduct of research and development activities that can be undertaken by the licensee designed to absorb and adapt the transferred technology to local conditions, or restricting the initiation of research and development programs in connection with new products, processes, or equipment; m. Preventing the licensee from adapting the technology to local conditions; n. Exempting the licensor from liability for non-fulfillment of his responsibilities under the agreement and/or liability arising from third-party suits relating to the use of the licensed product or technology; and o. Other clauses with equivalent effects. Meanwhile, Subsections 88.1 to 88.4 of the IP Code mandates that the following provisions be included in a licensr agreement: a. Philippine laws shall govern the interpretation of the agreement; b. In case of litigation, venue shall be the proper court of the place where the licensee has its principal office; c. Continued access to improvements in techniques and processes related to the technology shall be made available during the duration of the agreement; d. In case the agreement provides for arbitration, the venue of arbitration shall be the Philippines or any neutral country, and any of the following rules/procedures shall apply: (i) Arbitration Law of the Philippines; (ii) Arbitration Rules of the United Nations Commission on International Trade Law; or (iii) Rules of Conciliation and Arbitration of the International Chamber of Commerce; and e. Philippine taxes on all payments relating to the agreement shall be borne by the licensor. If so, are there any requirements to be met by the trademark holder (the licensor) to maintain the trademark (e.g. quality controls, inspections or retaining a contractual right to control or inspect)? See reply above with regard to mandatory and prohibited provisions. In addition, license contracts should provide for effective control by the licensor of the quality of goods or services of the licensee. Otherwise, or if such quality control is not effectively carried out, the license contract shall not be valid. 6
13. What are the consequences if a mark has not been put to genuine use? The following are the possible consequences should a trademark owner fail to use the mark within the prescribed periods: a. The trademark application shall be refused registration by the IPO; b. The trademark registration shall be deemed automatically cancelled by the IPO; or c. The trademark registration shall be susceptible to a cancellation action by interested third parties. Who may apply for a cancellation and in what circumstances? Any person who believes that he is or will be damaged by the registration of a mark may file a cancellation on the ground that the registered owner of the mark failed to use the mark within the Philippines without legitimate reason, or failed to cause it to be used in the country by virtue of a license during an uninterrupted period of three (3) years or longer. Is a defendant in opposition proceedings entitled to challenge the opponent and demand proof of genuine use of the earlier mark? If so, under what circumstances? A defendant in an opposition case may challenge the opposer and demand proof of actual use of the mark if the ground for opposing defendant s trademark application is that the opposer is the true owner of the mark based on the alleged prior and continuous use of the same mark. The Philippines adopts the first-to-file rule; hence, prior use is generally not a requisite for an application for registration of a mark. However, in the recent Supreme Court cases of E.Y. Industrial Sales, Inc. v. Shen Dar Electricity and Machinery Co., Ltd. [G.R. No. 184850, 20 October 2010], the Court upheld the ruling in Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc. [G.R. No. 159938, 31 March 2006] and ruled that ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a mark without registration, and registration of the mark without actual use thereof, the former prevails over the latter. 14. Assuming a trade mark owner has not made genuine use of his mark within the prescribed period, can he cure this vulnerable position by starting to use in a genuine way after this period and will he then be safe against requests for cancellation or revocation? No; unjustified non-use of a mark within the prescribed period is incurable. Is it allowed to re-register a trade mark that has not been genuinely used in the prescribed period of time? Yes. 7
II. Proposals for adoption of uniform rules The Groups are invited to put forward proposals for adoption of uniform rules as concerns the requirement of genuine use for maintaining protection. More specifically, the Groups are invited to answer the following questions: 15. What should the purpose of the uniform rules be? Should the rules address either or both purposes of protecting the consumers from confusion and of keeping the register uncluttered for new/potential trademark registrants? The purposes of the proposed uniform rules should address both purposes of protecting the consumers from confusion and of keeping the register uncluttered for new/potential trademark registrants. 16. Should there in your opinion be a threshold to the genuine use, such as a de minimis rule for a trade mark? If so, what would be suitable threshold? Should the rule be construed differently for large co-operations than for small businesses? There should be no threshold to the genuine use of mark in order to maintain protection. It is difficult to establish a uniform baseline standard across jurisdictions with respect to extent or scope of use of a mark to entitle it to continued protection in a particular jurisdiction. Also, it is difficult to standardize degree of use of mark. As long as the mark is actually used in commerce, whether the same be minimal or extensive, and products or services on the which the mark is being used is made available to local consumers through standard and acceptable trade channels, the mark should be entitled to continued protection. 17. To what extent should it be possible to use a mark that differs from the representation in the register and maintain protection? Should it even be possible to add or omit elements of a registered figurative mark and maintain the trademark? Use of a mark in a form different from the registered one should be allowed provided the distinctive feature or element is maintained. Addition or omission of an element should be permissible. How should the system ensure that registers are reliable for third parties and yet provide some flexibility for the trademark holder when using the mark in commercial activities? This can be addressed by requiring trademark owners to submit actual proof of use of the mark, which submission third parties can rely on. 18. Should the requirement of genuine use deemed to be met if the use is limited to one product or service out of several registered? Is it in your opinion reasonable that a trademark holder can block an entire product category by using the mark for only one type of product within the category? If not, what kind of standard should be adopted? Use of a mark in one product or service should benefit the other products or services belonging to the same class. This is justified since the other products or services belonging to the same class are considered part of the trademark owner s zone of 8
business expansion. To provide a contrary rule would be counterproductive to trade and product development. 19. What would be a suitable grace period for genuine use? Three (3) years would be a reasonable grace period for genuine use. 20. What circumstances should justify non-use? Should different criteria apply for different industry sectors (e.g. pharmaceuticals and other industries where authorities typically require particular market approvals which could delay the use of a trademark)? Should the criteria be more stringent the longer the period of non-use is? Reasons that are clearly beyond the control of the trademark owner (such as, but not limited to, government prohibition or restrictions) and legitimate business or commercial concerns should justify non-use of a mark. It is advisable that circumstances to justify non-use of a mark should be industry-specific, as different industries pose different difficulties or obstacles to putting use of the mark in commerce. The criteria in determining whether the reason for non-use of a mark is justified should not be dependent on the length of period of non-use. 21. Should any use of a trademark by entitled third parties be attributed to the proprietor? Any use of a mark by authorized third parties should be attributed to, and inure to the benefit of, the trademark owner. Should there be a difference between licensees and independent distributors? There should not be any difference between licensees and independent distributors. With respect to use by licensees, registration of the trademark license agreement should not be a requirement in order that use thereof inures to the benefit of the trademark owner. Will registration of a license be necessary? No, considering that in certain jurisdictions, stringent provisions for registration may serve as an obstacle to the development of trade and commerce. For instance, in the Philippines, the IP Code requires the absence of prohibitive clauses and the presence of mandatory provisions; otherwise, the license agreement is unenforceable. 22. Should there be an exception from the genuine use requirement in some cases? There should not be an exception from the genuine use requirement, except for circumstances that are justified. 9
23. Should there be uniform rules addressing the issue whether the cancelled trademark should be eligible for re-registration immediately upon the cancellation decision? Should other parties interests than those of the new registrant be taken into account, e.g. consumers interests in avoiding confusion as to the nature and quality of goods and services that might be expected under a particular mark? Generally, there is no need for a uniform rule that would address this particular issue. If the reason for the cancellation of the trademark registration is due to the registrant s failure to file formal documents within the required filing period, such failure should not prevent the same proprietor to re-file a trademark application. Meanwhile, if the reason for cancellation is failure to genuinely use the mark within an uninterrupted period of three (3) years, such failure should prevent the re-filing of a trademark application. However, if the reason for the cancellation of the trademark registration is on the basis of a final and unappealable decision issued by a competent authority pursuant to a cancellation case and the decision has a finding that the registrant/defendant is not the true and legitimate owner of the mark, said proprietor should not be allowed to re-file an application for the registration of an identical or substantially similar mark. Summary Genuine use of a trademark should be made a requirement in order to maintain protection. The criteria in determining whether use of a mark is sufficient for the purpose of maintaining protection must be flexible and take into account the developments in global trade and changes in consumer preferences. Although establishing a uniform rule on what constitutes genuine use of a mark that would apply across jurisdictions is desirable, care should be taken in providing National Trademark Registers/Examiners sufficient discretion in determining, on a case-to-case basis, whether use of a mark is acceptable. 10