30 September 2016

BREXIT and EU Trade Marks: What’s the worst that can happen?

Often, when I am asked what I consider the impact of Brexit would be on EU trade marks, the Dr Pepper’s “what’s the worst that can happen?” slogan springs to mind.

The adverts associated with it frequently show some calamitous event which occurs to the drinker, which often made me wonder why that was such a positive thing and why anybody would want to drink it!  However, the cynical lawyer in me considers that the worst that can happen (from the view of a lawyer) is that we no longer have to pay attention to the Court of Justice of the European Union’s decision on trade marks, which tend to make clients’ lives complicated by the legal uncertainty they often throw up and so keep me in a job.

In all seriousness though, most trade mark practitioners would point to the harmonising effect that CJEU’s decisions have had on trade mark law about Europe, and the potential loss of that would not be beneficial for proprietors and consumers alike.  An example of this that is often trotted out is the fact that owning a EU trade mark (“EUTM”) means that a proprietor can obtain a pan-European injunction against an infringer, without the need to bring infringement proceedings in each separate Member State.  This does, of course, assume that the defendant is sued in his or her home jurisdiction, and the court is willing to grant that pan-European injunction based on the evidence put forward. That ability may well be lost if the UK does not negotiate a deal whereby the unitary nature of the EUTM is preserved (which will probably mean the CJEU will remain the Supreme Court in relation to trade mark matters).

However, after the recent Combit/Commit decision, even that may be an advantage, which does not actually exist, even though everyone believed it did.

For the sake of one letter

The two protagonists (a German company and an Israeli company) marketed their respective software under the respective marks “COMBIT” and “COMMIT”.  The latter was available to German individuals, via a section on its website and could be ordered for delivery to Germany.  The German company brought proceedings in Düsseldorf for trade mark infringement on the basis of its EUTM for the mark “COMBIT” and sought an injunction restraining the Israeli company from using the mark anywhere in the European Union.  They also had an identical German mark, which was used as an alternative ground for infringement.

In the first instance court, the German company lost, but on appeal it was held that the German-speaking part of the EU would be confused, but that the English-speaking part would not be confused. This is because the appeal court considered that the average English-speaking consumer would understand “COMBIT” to be a combination of “COM” meaning “computer” and “BIT” meaning “bit” or “binary digit” (which “bit” is the shortened version of).  Therefore, any phonetic similarity there may be would be completely cancelled out by the conceptual differences, which would be apparent to the average English-speaking consumer.  The question that was therefore referred to the CJEU was, in effect, given the unitary character that a EUTM possesses, how should Article 102, Regulation 207/2009/EC, which enables sanctions to be applied across the entirety of the EU for infringement of a EUTM, be applied?

Confused? You will be now!

As Intellectual Property lawyers, we have been drilled into considering the EU as a whole, which must not be partitioned. Any attempts to do so, for example, by using different trade marks in different jurisdictions, were stamped all over and the legion of parallel import cases shows just how paramount this is, even though there is a “get-out” provision that enables a trade mark proprietor to prevent parallel imports, but only if it is appropriate and necessary.  It is, however, very rarely the case.

In reading the COMBIT/COMMIT decision, one would be forgiven for skipping to the end of the judgment to find out the answer, in the belief that it would be a foregone conclusion and that the unitary nature would be paramount.  If German speakers are confused, then it is just bad luck on those that are not and the Israeli company should be prevented from selling its goods anywhere in the EU.  However, flipping to the end would provide a big shock, since the CJEU did not decide the case in that way.  Instead, it said that the national EU trade mark court can prohibit any further use where there is infringement through confusion, but not in those Member States where there is no such confusion.

The Court did not need to go any further, and indeed, did not do so.  Instead, it pointed out that the national court that was granting the sanction must be clear as to what it finds as “English-speaking” countries and so the territorial scope of the relief it is granting.  As the CJEU only gives guidance on how the law should be interpreted, rather than telling a national court “this is how it is”, it was inevitable that the onus would be put on the national court to establish precisely which “English-speaking” countries they understand to be included in the scope of any sanction.

The CJEU has looked at the situation of English word marks, and where basic English might be understood, in the context of English word marks acquiring distinctiveness.  There is, however, a difference between “English-speaking” and those understanding English (which, of course, would also include Germans, particularly in business).  Previous case law has considered that English is spoken in the United Kingdom, Ireland as well as Cyprus and Malta.  Those at least would appear to be automatically excluded from the scope of any protection.  However, the courts have also gone further and included the Scandinavian countries, the Netherlands and Finland (although I thought Finland was part of Scandinavia, but not according to a CJEU decision).

Je ne parle pas anglais!

The COMBIT/COMMIT decision has clearly opened up a gulf between those parts of the EU (currently) that are English-speaking and those that are not, when it comes to the issue of use of an ordinary English language word and how it would be understood.  The significance is all too obvious when taken in the context of pan-European sanctions being available to a trade mark proprietor.

However, the case has thrown a spotlight upon the ability of a EU Member State’s national court to grant pan-European-wide injunctive relief.  The German Court of Appeal in Düsseldorf considered that German-speakers would be confused but English-speakers would not be.  That begs the question: what about the rest?  In considering the scope of the territorial relief to be granted, will the national court be obliged to call for evidence as to how native speakers in those other countries would consider the marks and whether there will also be confusion there?  If that were the case, then it would completely drive a coach and horses through the unitary character of a EUTM.

However, the answer to this question may well hold the key to any Brexit negotiations in relation to trade marks.  If the current regime becomes, in effect, territorial, and the unitary character of the EUTM regime is not as it was believed to be, and so lost, then the system will become regarded as an additional bureaucratic layer that offers little more than is available under existing national legislation in terms of infringement.  Worse, it means the trade mark proprietor could lose the underlying trade mark right by reason of a “central attack” on the validity of the mark at the EU IPO.  Accordingly, the system would have all the problems associated with the Madrid Protocol, which is why the UK and many others chose to join the Madrid Agreement, to avoid the “central attack” issue.

All I can say is, as the (alleged) ancient Chinese curse states: “May your lawyer live in interesting times!”.