Impact of counterfeiting in Spain's sporting goods sector third-highest in the EU

Spain ranks third among EU countries in which counterfeiting has the greatest impact on the sporting goods sector, at 15.7 % of sales, more than twice the EU average (6.5 % of sales), behind only Lithuania and Latvia. Nevertheless, in absolute terms the greatest impact is in France and Spain, these two countries accounting for one-third of lost sales due to counterfeiting in the EU, amounting to a total of 492 million euros.

These are the main conclusions with regard to Spain in the recent report entitled "The Economic Cost of IPR Infringement on Sports Goods", issued jointly by the OHIM's European Observatory on Infringements of Intellectual Property Rights and the European Patent Office. According to the report, total consumption of sporting goods in the EU in 2012 was estimated at 7,500 million euros, with 4,271 companies manufacturing products of this kind, employing 43,000 workers in the EU.

In addition to the direct repercussions of counterfeiting in the form of lost sales by lawful companies in the sporting goods sector, other economic sectors are also indirectly affected, suffering losses of 361 million euros. Government revenues are also impacted, with lost taxes (VAT, income taxes, corporate taxes, and social security contributions) estimated at 150 million euros. The direct and indirect impact of counterfeiting in this sector on the EU economy is estimated at around 850 million euros and 5,800 lost jobs.

The report takes into account only manufacturing of sporting goods and equipment as such (e.g., golf clubs, tennis rackets and balls, skis, etc.), excluding sports apparel and footwear, so the economic costs associated with the counterfeiting of sporting goods are in fact higher than those estimated by the report.

Author: Juan José Caselles

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Product shape and acquired distinctiveness: possible registration of the KIT KAT trademark

On 16 September 2015, the Court of Justice of the European Union (CJEU) delivered its long-awaited judgment (case C-215/14) on the referral for a preliminary ruling made by the High Court of Justice of England & Wales concerning whether it was possible to register the shape of Kit Kat chocolate wafers as a trademark: 

Nestlé had filed an application for registration of the mark with the UK Trademark Office.  However, the Office accepted an opposition lodged by Cadbury and refused the application on the grounds that it had not been sufficiently demonstrated that the mark had acquired distinctive character.  It considered that the shape that had been applied for had three features, as follows:  

• The basic rectangular slab shape; 
• The presence, position and depth of the grooves running along the length of the bar; and
• The number of grooves which, together with the width of the bar, determine the number of ‘fingers’.

According to the UK Office, the first of those features was a shape that derived from the very nature of the goods claimed (with the exception of cakes and pastries), and the other two were necessary to obtain a technical result.

That decision was appealed to the High Court of Justice, which found that there was not enough case-law from the Court of Justice in respect of the issues that had been raised, and therefore made a referral for a preliminary ruling.  In its judgment, the CJEU changes the order of the three questions that had been referred to it, and first of all examines the question concerning the possibility of cumulatively applying the bar to registration of signs consisting of the shape of goods where that shape is imposed by the nature of the product and where it is necessary to obtain a technical result.  The reasoning behind this change of order is that a sign to which that ground for refusal applies can never acquire distinctive character through use. 

In that regard, the CJEU reiterates the legal doctrine established in the recent Hauck judgment, C 205/13, EU:C:2014:2233 (Tripp-Trapp chair), in the sense that the three particular grounds for refusing to register product shapes operate independently of one another. Therefore, in the Court’s view it is irrelevant whether a certain shape could be denied registration on the basis of a number of grounds, and it will suffice for just one of those grounds to be fully applicable to the shape in question in order for registration to be denied.

As the Advocate General had explained in points 65 and 66 of his Opinion of 11 June 2015, what the CJEU had precluded in the Hauck judgment was the possibility of applying the three different grounds for refusal in combination, but not the possibility of applying them cumulatively, provided that at least one of those grounds fully affects the sign in question.

A new Patent Act … In two years' time? (I)

Publication this summer of the new Patent Act, Act no. 24/2015 (in Spanish) of 24 July 2015, in the Official State Gazette (BOE) has resulted in the appearance of a flurry of urgent commentary and reviews in a wide range of different media outlets. This reaction comes as a bit of a surprise: while all law reform is newsworthy, what we have in this case is an Act that will not come into force until … 1 April 2017!!

This unusually protracted vacatio legis (22 months) highlights the far-reaching scope of the revision while at the same time likewise attesting to prudence on the part of lawmakers.

Not only will industry need some time to adapt, because certain changes (e.g., the change-over to a single system for grant involving the preliminary examination of all patent applications) will require major adjustments to current thinking and practice, but implementing the changes will require the Administration to undertake its own re-organization, with no room for improvisation.

For once the government is to be commended for not rushing headlong to put a law on the statute books when enforcement will hinge on a particularly arduous process of setting up the requisite implementing regulations. The painful examples of other, premature reform attempts (copyright, for instance?) are still with us.

The delay, amply justified as it is for the broad sweep of administrative adjustments needed by the Patent Office, is more vexing when it comes to other areas. As it evolved, the new Patent Act came to contain more and more changes bearing on legal proceedings and procedure. In the end, unexpectedly, the Act ushers in a whole aggiornamento addressing patent litigation proceedings (with collateral effects extending to other types of industrial property), so it will be bound to resonate. It is indeed unfortunate that we will be kept on tenterhooks for so long awaiting the tantalizing prospects for legal proceedings that the Act holds out to us.

ELZABURU will be reviewing and assessing the new Act in a series of posts that will be appearing on our blog in the coming weeks for our clients, colleagues, and friends. Until then, we can look forward with expectation to this new Act, that will be so long in coming, like a long-awaited dish of a favourite food.

Blog entries dealing with the new Patent Act:

I. A new Patent Act … In two years' time? (Antonio Castán)

II. 180º turn in Spain's system of granting patents  (Francisco J. Sáez)

III. The importance of professional advice (Francisco J. Sáez)

IV. Lawsuits under the new Patent Act (Antonio Castán)
V. Utility models under the new Patent Act (Pedro Saturio)

Author: Antonio Castán

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Good news for owners of reputed trademarks

TRADEMARKS HAVING A REPUTATION IN CERTAIN EU COUNTRIES MAY ALSO BE ENFORCED IN COUNTRIES WHERE THEY DO NOT HAVE A REPUTATION

In its judgment of 3 September 2015 in the matter of Iron & Smith kft/Unilever (Case C-125/14), the Court of Justice of the European Union ruled on an interesting question referred by a Hungarian court concerning the territorial effect of the reputation of a Community trademark under Article 4.3 of Directive 2008/95 (refusal of a trademark application conflicting with an earlier Community trademark having a reputation but covering different goods). At issue was whether the reputation of a Community trademark in certain EU countries could also be relied on and have legal effect in other EU countries in which the mark was not reputed.

Happy-go-lucky European citizens will lose no sleep over the question raised by the Hungarian court, but to IP practitioners the issue is intriguing, since it is directly related to those two pillars of the EU trademark system, namely, the unitary character of the Community trademark and the co-existence of that system with the various national systems.

These two principles are firmly enshrined in the Community Trade Mark Regulation and underpin the EU's trademark system, but day-to-day practice can give rise to interesting, hard-to-assess issues like the one raised by the Hungarian court in its referral, since grand principles and doctrines tend not to be so clear-cut and helpful when it comes down to dealing with individual cases in the context of local market realities.

The unitary character of the Community trademark means that it shall have equal effect throughout the European Union, as expressly laid down in Article 1 of the Community Trade Mark Regulation. The wording "equal effect" should mean not only that a registration as such is formally in force in the 28 Member States of the European Union but also that the rights conferred on its owner, jus prohibendi chief among them, are equally effective throughout the European Union.

In the case at hand, the Court of Justice was asked to rule on whether the prohibitive rights of action emanating from the reputation enjoyed by a Community trademark reputed in certain countries could also be wielded in other EU countries in which the mark did not have a reputation. In the case before the Hungarian court that referred the question for a ruling, an earlier Community trademark opposing a later trademark application had a reputation in the United Kingdom and Italy but not in Hungary, where the new application had been filed. As the Hungarian court adroitly noted, the question displayed certain similarities with the controversy surrounding the issue of Community trademark use and the territorial scope of use that was to be deemed sufficient, a question on which the CJEU had already ruled, chiefly in the Leno Case (C-149/11). The Court has held that a trademark's reputation needs to be assessed on its own terms, not necessarily the same ones used to assess use.

The Court's judgment is tightly argued and clearer than usual. So, setting aside its customary vagueness, the Court has ruled straightforwardly that:

1. If the reputation of an earlier Community mark is established in a substantial part of the European Union, which may in some circumstances coincide with the territory of a single Member State, the said earlier Community trademark is to be held to have a reputation in the European Union as a whole.
2. The principles concerning genuine use of Community trademarks laid down by the case law are not necessarily relevant for the purpose of establishing the existence of a reputation.
3. A Community trademark having a reputation may benefit from the extended protection specified for reputed marks in the Directive, even in a Member State in which it does not enjoy a reputation, where it is shown that a commercially significant part of the public is familiar with the mark and makes a connection between it and a later national mark and there is either actual and present injury to the Community trademark or there is a serious risk that such injury enjoy may occur in the future.

A Community trademark having a reputation can thus enjoy the extended protection conferred on reputed trademarks even in those countries in which it is not considered reputed, provided that certain conditions relating to actual and present injury are fulfilled, as the case law has in fact already been requiring even in those territories in which the reputation of an earlier mark is beyond question, as, for instance, in the judgments in the General Motors (C-375/97) and Royal Shakespeare (T-60/10) Cases.

Author: José Ignacio San Martín

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An end to unrestricted banking secrecy when investigating online sales of counterfeit goods

In its judgment of 16 July 2015 (Case C-580/13) the Court of Justice of the European Union (CJEU) placed limits on national laws protecting banking secrecy. In response to a request from Germany's Bundesgerichtshof (Federal Court of Justice) for a preliminary ruling on whether Germany's national banking secrecy law contravened Directive 2004/48/EC on the enforcement of intellectual property rights, the CJEU held that the Directive precluded a national provision which allows, in an unlimited and unconditional manner, a banking institution to invoke banking secrecy in order to refuse to provide the judicial authorities with information concerning the name and address of an account holder in the framework of proceedings dealing with the infringement of an intellectual property right.

In 2011 Coty Germany, exclusive licensees to the Community trademark for Davidoff Hot Water, purchased a bottle of perfume bearing that mark from an Internet auction platform and paid the purchase price into the seller's bank account with Stadtsparkasse Magdeburg. On observing that the perfume was counterfeit, Coty Germany asked the auction platform for the real name of the holder of the account from which the perfume had been sold under an assumed name. The party in question admitted to being the account holder but denied having sold the perfume and refused to furnish any additional information, relying on her right not to give evidence.

Coty Germany then asked the bank, Stadtsparkasse Magdeburg, to furnish the name and address of the holder of the bank account in which it had deposited the purchase price for the counterfeit perfume, but the bank refused to do so, invoking banking secrecy.

Coty Germany therefore instituted civil proceedings with the Landgericht Magdeburg (Regional Court, Magdeburg), which ordered the Stadtsparkasse to supply the information requested. This order was overturned by the Oberlandesgericht Naumburg (Higher Regional Court, Naumburg), ruling that under German civil law the bank was entitled to refuse to give evidence in civil proceedings. Coty Germany appealed this decision to the Bundesgerichtshof (Federal Court of Justice), which stayed the proceedings and referred a question to the CJEU for a preliminary ruling.

The question highlights the need to reconcile the right to an effective remedy and the right to intellectual property, on the one hand, and the right to protection of personal data, on the other.

Essentially the CJEU has held that, taken in isolation, the provision of national law that allows unlimited refusal by a banking institution to furnish information concerning the name and address of an account holder who engages in activities infringing an intellectual property right, inasmuch as the wording of the provision contains no condition or qualification, is liable to frustrate the fundamental right to an effective remedy and the fundamental right to intellectual property by preventing the competent national authorities from ordering the release of personal data pursuant to Article 8.1 of the above-mentioned Directive.

This ruling furnishes explicit support for national laws ensuring a fair balance between the different fundamental rights in question and clearly places limits on banking secrecy in investigations of cases of infringement of intellectual property rights. Given the invisibility available to sellers of counterfeit goods on the Internet, identifying the holder of the bank account into which payments are made can be critically important – in many cases the only way to uncover an infringer. The CJEU's ruling can be expected to have greater impact on civil matters in Spain, since it limits the banking secrecy that can be invoked in civil proceedings, and less on criminal matters, in which examining judges already enjoy broad powers to investigate crimes and set aside fundamental rights. In any case, the ruling is a big step forward in being able to combat the runaway scourge of sales of counterfeit branded goods on the Internet.

Author: Juan José Caselles

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Algeria joins the Madrid Protocol

Algeria deposited its instrument of accession to the Madrid Protocol on 31 July 2015, and the Protocol is to enter into force for Algeria on 31 October 2015.

Algeria was the only one of the 95 current member States of the Madrid System that was a party to the Madrid Agreement alone.

The Madrid Agreement is much less streamlined and up to date than the Protocol. For instance, international filings have to be based on a granted trademark registration, and certain procedures can only be carried out through the home Office. Not only do these sticking points give rise to delays and complications, but the Agreement does not allow the designation of States that are parties only to the Protocol, which include such major jurisdictions as the OHIM, JPO, and USPTO. This has no doubt been a stumbling block for Algerian trademark owners, who up to now have not been able to use the Madrid System to extend their rights to members that are parties to the Protocol alone.

Although the Madrid System comprises the Agreement, the Protocol and the Common Regulations, since the amendment of article 9 sexies of the Protocol (the safeguard clause) it is the Protocol alone which applies between States bound by both the Agreement and the Protocol. The accession of Algeria therefore represents a milestone for the Madrid System, given that from 31 October 2015 all international registrations of marks will be governed exclusively by the Protocol and the system as a whole will, as a result, be greatly simplified.

Author: Cristina Arroyo

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Recent entry into force of the new Rules of Procedure of the EU General Court

Back in March the European Union's General Court (GC) agreed to reform its Rules of Procedure. The revised legal text introduces some important new rules in the section relating to industrial and intellectual property cases (court proceedings relating to Community trademarks and Community designs). Some of the most significant new rules adopted are as follows:

• In direct appeals the language of the proceedings shall be that chosen by the plaintiff among the official EU languages. In the event of an objection to the language of the appeal by a party to the proceedings, the language of the decision of the Board of Appeal of the OHIM that is contested before the GC shall become the language of the proceeding.
• The possibility of supplementing the initial briefs of the parties via briefs of reply or rejoinders has been removed. 

• A cross-claim by a party to the proceedings must be submitted in a document separate from the brief of response to the appeal. 

• A cross-claim shall be deemed to be devoid of purpose when the applicant in the main appeal discontinues the main action and when the main action is declared manifestly inadmissible. 

• In terms of costs, under the new rules the General Court may order the OHIM to bear only its own costs where an appeal is successful (with the successful applicant paying its own).

• The possibility of appeals of this type being resolved by a single judge has been introduced.

In addition, under the new rules the Advocate General may intervene in appeals of this type whenever the difficulty or complexity of the case requires it.

The new rules of procedure entered into force on 1 July 2015.

Author: Enrique Armijo Chávarri

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