Mis-Sold Community Trade Marks

Following the judgement of Mr Justice Hacon in The Sofa Workshop Ltd v Sofaworks Ltd [2015] EWHC 1773 on 29 June 2015, there have been a flurry of case notes from the great and the good of the UK trade mark profession drawing attention to the fact that community trademark registrations maybe inappropriate for many clients who don't maintain a presence on the European Union market, but something rather smaller and more local. These case reports include ones from  Cleveland, Marks & Clerk, Dehns, Mewburn Ellis and others.

Those links will take you to the articles which describe the background to the case and the decision.  Essentially, since the mark had been used and promoted only on the UK market for sofas, it was held not to have been used in the manner required by the European Court of Justice when it decided C 149/11 Leno merken, the ONEL reference from Benelux. This was in December 2012, so why the long hiatus before we realised what this all meant.

But wait, the opposition divisions of OHIM and national patent offices have been trying to apply Leno merken all this time. Opposition decisions, though, do not create precedents and are frequently not studied in any detail by academics or the trademark profession.

Leno merken was a clever academic decision that said (unhelpfully, if politically correctly) that we were to  ignore the territorial borders in the European Union. This rather detracted from the important point that it was the use in accordance with its essential function and for the purpose of maintaining or creating market share within the European Community for the goods or services covered by it we had to look at. In particular we should  a"take into account the characteristics of the market concerned, the nature of the goods or services protected by the trade mark and the territorial extent and the scale of the use as well as its frequency and regularity".

The European market for anything is typically bigger for most goods and services like sofas, but it is often quite difficult for a trade mark agent to provide evidence of the European market for their goods. The CJEU did recognise that some markets could be restricted to a single member state (paragraph 50) but in this world we need to know more about the economic features of a market and (perhaps) provide evidence about it. Help!

On 20 May 2014 in a first instance case 000008263  - the Cancellation Division considered the board game market and made this damning assessment:

The remaining invoices which are dated within the relevant period only show sales to customers in Germany which is a relatively small part of the European Union. In territorial terms and in view of the unitary character of the CTM, the appropriate approach is not that of political boundaries but of markets. As the Court indicated in 'Leno Merken', it is impossible to determine a priori and in the abstract what territorial scope should be applied in order to determine whether the use of the mark is genuine or not (para. 55). All the relevant facts and circumstances must be taken into account, including the characteristics of the market concerned, the nature of the goods or services protected by the trade mark and the territorial extent and scale of the use as well as its frequency and regularity (para. 58)....     these 15 invoices are only billed to customers in Germany and as such invoices for three years for a low amount in one country are not sufficient to prove genuine use of the earlier mark.

Nevertheless on 27 February 2015, paying lip service   to Leno the Fifth Board of Appeal decided in RAPIDO  a case concerning goods and services related to lotteries, said:

The evidence submitted in the present case essentially covers France, which considering its geographical size and population density constitutes a substantial part of the European Union. The evidence, therefore, shows that the contested CTM was used in the territory of the European Union

One might have thought that the characteristics of the lottery market in a world of EUROMILLIONS  were such that a presence on it required a little more to sustain a Community Mark as opposed to a French national mark, but no.

The principle of  use relative to the market has brought in a de minimis standard by the back door (not a rule, you understand, a relative standard that takes into account all the circumstances).  This even applies in judging genuine use of national registrations. See Case C-141/13 Reber WALZERTRAUM from 17 July 2014. The case is in German but you can refer to the IPKAT report here.

Nike has added a interesting dimension in its heroic fight to register JUMPMAN in Europe. Its CTM succumbed in  Case T‑233/10 to an opposition based on earlier Spanish registration and was duly converted to national marks, at least in the UK and Benelux, and the same opponent raised an opposition based on an earlier community trade mark for JUMP which was subject to proof of use.

The shopping in Varna

In the UK in October 2014 Oliver Morris assessed the evidence and found it wanting to show genuine use on the market for shoes in the European Union. He applied Leno Merken  with the same aggressive verve as Mr Justice Hacon did later, and also considered Reber. The decision in O/451/14 is here. It was appealed to the Appointed Person and the hearing was on 21 July 2015. Rouse, who acted for the opponent at first instance, have provided an interim report here. The real decision is awaited.

Meanwhile, in Benelux, on a parallel case, where we must assume the evidence was pretty similar, the Benelux IPO decided exactly the same way on 12 August 2015. 

In both cases the decisions stopped at the proof of use stage and did not consider what would have happened if they had been wrong. I suppose there was no need with Case T‑233/10 lurking in the background.

Now did these two independent tribunals stretch Leno Merken for the benefit of a big brand owner or are their decisions correct. They deny genuine but small use in a shop in Varna, Bulgaria as an  insufficient presence on the European Union footwear market, which Mr Morris held was manifestly huge. He was supplied with a Euromonitor report, but he said its hugeness was self-evident. This leaves us a little in the dark as to when evidence may be required and when not. The Benelux decision does not refer to any evidence about the European footwear market.

OHIM's cancellation division on 30 June 2015 in the case of CECCONI'S had to consider the EU market for celebrity restaurants. The Decision in C000008943 held that one location in Mayfair was enough to sustain a CTM for "restaurant and bar services" but they revoked it for the broader category of "Services for providing food and drink; catering services.". In this case the characteristics of this esoteric market and a nice continuous stream of TRIPADVISOR reviews across the relevant period and from other Europeans,saved the validity of this CTM.

It would be interesting to have input on other cases if you have suffered any surprises.

Although consistency may not always be there in a Europe, which doesn't believe in precedent, it does seem that the selling spiel we were all encouraged to give that the CTM was validated by use in a single country is now wrong. OHIM has become extremely wealthy on the back of a misrepresentation.

Indeed if your client is a lifestyle business with a local footprint and no intentions to expand, the right advice may be to leave even the UK Trade Mark register alone. After all most fights start when a big brand notices and opposes a  startup. Of course, that leaves the lifestyle business relying on a section 11(3)  or Art 111 defence if someone else later registers the same or  a similar mark in the UK or OHIM respectively.

For other clients we now need to make a more careful choice before opting for the hitherto bargain CTM. In some cases it might be wise to surrender and convert a vulnerable CTM. What say you?