Changes to the European Trademark system

Classification reform – Article 28 (8)

As we mentioned in our blog on 18 January 2016, a new regulation on the European Trademark (EUTMR) will enter into force on 23 March 2016. One of the changes concerns the scope of protection of a trademark registered in the European Union (“EU Trademarks”).

The new regulation reflects the changes in practice that followed the ruling of the EU Court in Case C-307/10 “IP Translator”. Thus, EUTM registrations with goods and services specification consisting of class headings will no longer be considered protecting the trademark for all goods and services that belonged to the alphabetical list of the relevant classes. Instead, the scope of protection will be restricted to cover the literal meaning of the goods and services in the relevant class headings (“What you see is what you get”). For instance, the heading of class 25 comprises “clothing, footwear, headgear” and protects inter alia “football shoes” but not “studs for football boots”.

According to the new regulation, the owners of EU Trademark registrations which were applied before 22 June 2012 and cove­ring a class heading will have the possibility to amend the specification of the goods and services to also include goods/services that belonged to the alphabetical list of the relevant class, at the time of the filing of the application. For this purpose, a declaration must be filed with the trademark registry between 23 March 2016 and 24 September 2016. Each term of goods and services indicated in the declaration must be clear and precise in order to be accepted.

If an EU Trademark registration covers the class heading and no declaration is submitted to the registry within the six month period, the registration will simply cover what can be naturally understood by each term of the class heading.

We strongly recommend the owners of trademark registrations to go through their portfolio of EU Trademark registrations filed before 22 June 2012, to ensure that they cover goods/services they actually need protection for.  We would be happy to assist with a strategy for amending and obtaining the best protection.

Please do not hesitate to contact Awapatent for more details or with any questions.

OEM activities in China do not amount to trademark infringement

The PRC Supreme People’s Court has decided that OEM activities in China do not amount to trademark infringement (however, this does not seem to be the final word on the issue)

A foreign brand owner has registered its mark in a foreign country, but not in China. Another unrelated entity has registered the same or similar mark in China. Would a Chinese manufacturer be liable for trademark infringement in China if it manufactures in China solely for export purpose products bearing the foreign registered mark upon the authorization of the foreign brand owner?

Although in recent years, there have been more and more cases where the courts ruled that in the above original equipment manufacturer (OEM) scenario the Chinese manufacturer is not liable for trademark infringement, the position has not been clear. The law does not offer a definite answer and different courts have decided the issue differently. The Supreme People’s Court (SPC) had never ruled on this issue. In November 2015 its judgment in the “PRETUL” case was made. The judgment was long awaited as it was expected to offer some guidance on the issue.

TRUPER SA is a Mexican company and it has registered the marks “PRETUL” or “PRETUL & oval device” in Classes 6 and 8 etc. in different countries including Mexico. In China, an individual registered the mark “PRETUL & oval device” in Class 6 in 2003 and assigned this registered mark to Focker Security Products International Limited (Focker) in 2010.

TRUPER SA entrusted Zhejiang Pujiang Yahuan Locks Co, Ltd (Yahuan) to supply and produce goods bearing the marks “PRETUAL” and “PRETUL & oval device” and the goods were only for export to Mexico. Focker sued Yahuan for trademark infringement.

Both the Ningbo Intermediate People’s Court at the first instance and the Zhejiang Higher People’s Court at the second instance ruled against Yahuan. Both courts ruled that Yahuan’s use of the marks was trademark use and the marks and the goods are similar to those of Focker’s registered mark in China.

Yahuan requested the SPC to retry the case. The SPC overturned the previous judgments and found that there was no trademark infringement. The SPC considered that trademark use as referred to in the Trademark Law means use of the trademark for identifying the trade origin. The SPC ruled that the products were only for export to Mexico and were not sold in China and therefore the signs used on the products would not cause confusion in China and would not perform the identifying function within China. The affixation of the signs on the products cannot be regarded as trademark use. The SPC stated that if a trademark does not perform the identifying function and its use is not trademark use, it would not be meaningful to determine if the marks and goods involved are identical/similar.

One issue which the SPC did not deal with is the allegation that the Chinese registration by the individual was made in bad faith because that individual was a shareholder and officer of a supplier of TRUPER SA.

There is no case law (stare decisis) in China, so the courts are not bound to follow the SPC’s judgment, although it is expected that the courts would tend to follow the SPC judgment. This judgment may therefore help foreign brand owners who do not manage to register their marks in China, but want to have their products manufactured in China.

Further, how the courts decide on the issue would depend on the facts of the case and the courts may depart from the judgment of the SPC, if distinguishing facts are found. The Jiangsu High People’s Court, for example, has recently decided differently from the SPC. In that case, the Jiangsu High People’s Court, though recognizing that the activity involved is OEM manufacturing, ruled that there is infringement because the OEM manufacturer should know that the Chinese registered trademark is a well-known mark and the foreign brand owner may have hijacked the Chinese trademark and registered the same in the relevant foreign country (though the relevant authority in the foreign country has decided that the registration is valid). Based on this judgment, the OEM manufacturer has the burden to ensure that the company entrusting it with the manufacturing has the rights to do so.

Commentators have taken the view that the “PRETUL” case still needs to be explored regarding the legal questions surrounding OEM activities and the “PRETUL” case does not represent the final complete opinion of the SPC on OEM. It would be interesting to see how the jurisprudence evolves with further OEM decisions from the courts. It would also be interesting to see whether and how administrative trademark enforcement authorities such as AIC and Customs would be affected by the SPC judgment.  A simplistic pro-OEM approach can be a double-edge sword as this may not be favourable to foreign brand owners who have trademark registrations in China, but would like to stop the manufacture in China of counterfeits by foreign counterfeiters who have registered the marks in the exported countries.

Unitary SPCs in Europe after all?

As readers of this blog know, we at Awapatent are actively following the exciting developments in the creation of a unitary patent system in Europe. It will be possible to obtain European patents with unitary effect in 25 countries, and we’ll have a new Unified Patent Court (UPC) for centralized patent disputes. We look forward to the start of the new system, and will be prepared to act from day one. Right now, those of us with a focus on the biotech and pharma industries are looking closely at how the new system applies to the possibility to prolong protection beyond the normal life span of a patent, through Supplementary Protection Certificates (SPCs). SPCs are available in the EU for medicinal and plant protection products.

SPCs for pharmaceuticals are arguably the most valuable intellectual assets, at least in terms of the value per individual registered right. In the EU, SPCs are national, and must be applied for in each country separately. Against this background, one would have expected the new unitary patent legislation to take account also of SPCs, and to create a unitary SPC title. Unfortunately, even though there are provisions in the court agreement that bring national SPCs under the new jurisdiction, no unitary SPC is created. As a result, there will be a gap in the European law of SPCs, and substantial uncertainties regarding the interplay between unitary patents and national SPC rights.

Quite naturally, this situation is a concern to those industries that rely on SPCs to recoup their investments into new products. In a joint position paper from July 2015, the European industry organizations for human and veterinary medicine and crop protection called upon the EU Commission to urgently begin work on creating a unitary SPC. They also gave suggestions concerning what body would be responsible for granting such SPCs and how they may be litigated in the UPC. In a pleasing turn of events, it now seems like this call is going to be answered. In a strategy document from October 2015, the EU Commission stated that “the Commission will consider […] a recalibration of the patent and SPC regulatory framework in the EU, including […] a unitary SPC, which would enhance the value, transparency and legal certainty of the protection of medicines and plant protection products”. Recently, we received another sign that this process is underway, when the EU Commission put out a tender for a study of the current SPC system. The aim of this study is for example stated to be the creation of a starting point “for a future proposal by the Commission to create a European SPC title”.

The current SPC regime, while well-known to us, is full of inconsistencies, and is also applied differently in different countries. Just like the industry organizations in their position paper, we and our clients would very much welcome a unitary SPC and its likely positive effects on harmonization and predictability.