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December 15, 2015 Vol. 22 No. 70 Back to Bulletin Main Page

EU Trademark Law Reform Series: The New Face of OHIM

This is the first in a series of articles analyzing key provisions of the European trademark reforms that INTA will be publishing in advance of the final texts, which are expected by the spring of 2016.

The new European Union Trademark Regulation (the Regulation) will result in changes for the Office for Harmonization in the Internal Market (the Office or OHIM), which could have a significant effect on trademark owners.

One important change is the explicit extension of the Office’s tasks. Will this be detrimental for trademark users? The Regulation emphasizes that, for reasons of legal certainty and greater transparency, the tasks of the Office need to be defined. The Regulation codifies the tasks of the Office to include:
  • The management of the EU trademark and design systems (to provide for effective, efficient and expeditious examination and registrations of EU trademarks and designs);
But also to include other tasks, namely:
  • To promote convergence of practices and tools in the fields of trademarks and designs in cooperation with national IP offices of the EU Member States including the Benelux Office for Intellectual Property (BOIP);
  • To manage the online EU-wide database for Orphan Works;
  • To run the European Observatory on Infringements of Intellectual Property Rights (the Observatory).
The Regulation states that the Office shall cooperate with institutions, authorities, bodies, industrial property offices and international and nongovernmental organizations in relation to these tasks. To mirror the extended tasks, OHIM will have its name changed to “the European Union Intellectual Property Office” (EUIPO).

These changes might not look very significant at a first glance, because these tasks are already being carried out by the Office today. Bilateral agreements between the Office and national IP offices already exist and the promotion of convergence of practices and tools is being carried out under the European Trade Mark and Design Network (ETMDN)—a hub that connects national and regional IP offices, user associations and other IP organizations, working together to achieve a harmonized trademark and design system in Europe. This cooperation was initiated in 2010 with the creation of a Cooperation Fund of EUR 50 million drawn from the Office’s surplus with a view to develop common tools for the Office, the national IP offices and BOIP. The Cooperation Fund was later complemented by a program for convergence of practices between the Office and the national IP offices and BOIP.

It is noteworthy that the new Regulation gives the tasks conferred to the Office equal standing. It does not single out examination and registration of EU trademarks and design rights as the Office’s core mission, even though the Office is financed through trademark and design fees. While INTA is generally supportive of the Observatory and the harmonization of tools and practices between the EU IP offices, it has also called for an explicit prioritization of the Office’s tasks so that managing the EU trademark and design systems continues to be the core and primary activity of the Office. Trademark owners could—at least in theory—risk getting poorer service if the Office shifts resources from trademark and design registrations to other tasks.

The Regulation also establishes the Observatory as one of the Office’s tasks. The Observatory, which includes public and private-sector representatives with the tasks of raising awareness on the value of IP and providing data to EU IP policymakers, was entrusted to the Office in 2012 by Regulation 386/2012. The new Regulation, however, places it at the same priority level as managing the EU trademark and design systems and the ETMDN. As the Observatory’s objectives are targeting infringements of IP rights in general and are not limited to trademarks and designs, it is very likely that trademark and design fees will be spent on projects related to enforcement activities concerning non trademark or design rights.

It is therefore welcome that the Office in its progress report of its Strategic Plan 2020 specifically mentions that “Registering trademarks and designs remains the Office’s focus and maintaining and improving the quality of services is the Office’s first priority.” However, it will be important to see how this will be translated in practice, given that the Strategic Plan 2020 is very ambitious and explicitly expands the ETMDN to a full “European IP Network”, despite OHIM’s admitted limited resources.

New Structure for Cooperation Between the Office and the National IP Offices
In the promotion of convergence of practices and tools in the fields of trademarks and designs, the Office shall cooperate with the EU Member States’ national IP offices including BOIP, in particular in the following areas:
  • Development of common examination standards;
  • Creation of common or connected databases and portals;
  • Exchange of data and information
  • Establishment of common standards and practices;
  • Exchange of technical expertise.
The Office’s Executive Director (previously President of OHIM) shall propose projects to the new Management Board (as described below), which shall define and coordinate them. The cooperation activities (which will replace the current “Cooperation Fund”) should be beneficial for the undertakings using the trademark systems in Europe, especially since the Regulation explicitly requires that the Office shall consult with user representatives particularly in the phase of defining projects and evaluation of their results. While the explicit consultation of users is a welcome development, what might weaken the outcome of the projects is that the national IP offices and BOIP are not required to participate but may opt out of projects or restrict or suspend their cooperation upon providing a written explanation.

To fund the projects, the Regulation stipulates that the Office shall provide financial support to the EU national IP offices and the BOIP of up to 15 percent of the Office’s yearly revenue, which for FY 2016 is estimated to be EUR 196.9 million, with a steady increase in 2020 expected to be EUR 237 million (according to simulations made by the Office in June 2015).

In addition to the funding of common projects, the Office shall on a yearly basis offset the costs incurred by the IP offices of the Member States, the BOIP and other relevant authorities in carrying out tasks stemming from the implementation of the EU trademark system. These tasks include opposition and invalidation procedures involving EU trademarks, enforcement activities (including counterfeit goods in transit) and information on the EU trademark system. The offset shall correspond to 5 percent of the yearly revenue of the Office (which can be increased to 10 percent upon suggestion by the Office and approved by the Management Board), to be distributed to the Member States according to a distribution key that takes into consideration four indicators, one of them being the annual number of EU trademark applications originating from the applicants in each Member State. The Regulation requires some indicators to support the distribution key but not that Member States evidence the nature or costs of the tasks they perform and for which they will be compensated. However, the obligation by the Office to offset the costs incurred in a given year shall only apply to the extent that no budgetary deficit occurs in that year.

New Governance and its Potential Impact on Trademark Users
The Regulation aims to align the Office with the rules governing other European Agencies. For example, the Office will be governed by a Management Board (substituting the current Administrative Board) and a Budget Committee both consisting of one representative from each Member State, two representatives from the EU Commission (as opposed to one in the old Administrative Board) and one from the EU Parliament (which is new). The representative of the EU Commission and the EU Parliament will have voting rights as opposed to the former structure where the EU Commission representative had an observing function only. The Management Board and the Budget Committee may invite Observers to attend their meetings. Currently there are five permanent Observer organizations and two rotating Observer organizations. INTA is one of the permanent Observers.

The Competences of the Office remain the same, but documents presented by the Executive Director that were previously discussed at the Administrative Board meeting, such as the Strategic Plan, the Annual Work Program and the Annual Report of the Office, shall now be adopted by the Management Board. It shall elect a chairperson and a vice chairperson for a term of four years (instead of three years), which term can be renewed once. The Budget Committee shall adopt the budget of the Office. The Regulation explicitly states that the revenue and the expenditure of the budget shall be in balance. Nevertheless, should a budget surplus occur for five consecutive years, the Budget Committee can, upon proposal from the Office, decide to transfer the surplus to the general budget of the EU. INTA has strongly advocated against this, arguing that it is not justifiable that EU trademark and design owners shall pay for activities within the EU that are not related to IP rights let alone to trademark and design rights.

The forecast of the budget of the Office shows an increase in trademark applications with a steady 5 percent yearly. However, since the Regulation allows the payment of a fee for one class instead of three, there is an uncertainty of how users will react and this makes it difficult to estimate the financial situation of the Office for the coming years. A simulation from the Office of the budgetary impact of the legal reform shows, with a prudent calculation, a deficit (even if steadily decreasing) during the coming years up to and including 2020. With the expected future increase of trademark applications by 5 percent, it is nevertheless difficult to exclude the existence of a surplus in the future. Since the fee structure is determined by the Regulation, there is no flexibility to adjust the fees should a surplus occur. This would require a new legislative process. The demand of users and others that the Office continuously increase its efficiency could as a result lead to the creation of yearly surpluses. INTA therefore continues calling on the Office to ensure that the revenue be spent on meaningful trademark and design-related projects.

Will the New Mediation Center at the Office Be Flexible Enough?
The Regulation also focuses on mediation. It contains provisions supporting this dispute resolution method and is therefore in line with the EU Mediation Directive. INTA favored a separate provision requiring a simple addition to the opposition section whereby the Office would invite the parties to look for amicable resolutions and use the assistance of mediators (from the Office as well as external) to find a solution. The approach favored by INTA also supported the suspension of the Office proceedings during the period where the parties attempt to resolve the conflict via mediation.

Instead, the Regulation follows a more bureaucratic and formalistic approach by establishing a specific Mediation Centre (Art. 137a). This provision contains several requirements for the Mediation Centre and for the mediation process which take away much of the flexibility, which is one of the major advantages of mediation. Parties might be reluctant to use the Mediation Centre located within the Office, as they might have concerns with respect to its neutrality. The list of mediators mentioned in Article 137a is also open to mediators who are not employed by the Office so that, for example, INTA’s Panel of Trademark Mediators or panelists from the WIPO Center of Arbitration and Mediation could be listed. However, they would be bound by the other bureaucratic requirements in Article 137a and by the fee which will be fixed by the Executive Director of the Office. It is therefore questionable whether this Mediation Centre will encourage the use of mediation as a dispute resolution mechanism. Parties can still use mediators without the binding provisions of Article 137a to resolve trademark disputes, if they decide to use the general provisions of the cooling-off period and suspension of the proceedings.

Anticipated New Practices of the Office
The Office will publish draft guidelines on the implementation of the Regulation, and which users can comment on between December 14 and January 22. Many changes are anticipated in the Office’s practices, such as the elimination of the graphical requirement for trademark application, the reduction of the renewal fees, new absolute and relative grounds for refusal and invalidity and classification of goods and services for certain trademark registrations, just to name a few. INTA Trademark Offices Practice Committee- OHIM Subcommittee will carefully review these guidelines and communicate about them in due course, to ensure a smooth and fair implementation of the trademark reform.

For more information on the EU Trademark Reform, please visit INTA’s topic portal on the subject.

Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.

© 2015 International Trademark Association