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Tuesday, 23 February 2010

"Hungarians" and Hungarians attack the CTM

The IPKat has been busily perusing an undated document which is being circulated through Europe's corridors of IP power by a body calling itself "the Hungarian delegation". It's called Ten good reasons for not distributing the OHIM’s surplus to “users” and, as its name suggests, this document argues against the refund to overcharged users of the Community trade mark system of the sums they should not have had to pay in the first place.

Right: "Charge!" But what about the overcharge ...?

The document reads as follows:

"Introduction

In its “Contribution to the study on the overall functioning of the trade mark system in Europe” the OHIM has once again put forward its proposal that “the remaining accumulated surplus [of the Office]… be returned to users themselves”. This paper is a response to that particular proposal and is deliberately limited to this, although the unsolicited and somewhat provocative “contribution” of the OHIM contains a number of other unacceptable and objectionable elements (such as the comments on the governing bodies or the one-sided, rather extreme views on genuine use). This document is just intended to put forward the ten most important reasons for not distributing the OHIM’s surplus to “users” [Why the use of quotation marks? Is it to suggest that the people who use the CTM system are not in fact users?].

1. Lack of political support

At the joint meeting of the Administrative Board (AB) and the Budget Committee (BC) held on 18 and 19 September 2008, the OHIM’s idea to return its surplus to applicants was discussed in depth and unanimously rejected [Might this not be a reflection on the composition and self-interest of the AB and the BC members, rather than on the merit of the proposal?]. By resubmitting that proposal the OHIM has, therefore, acted against the clear political will of the Member States. Before raising this issue again in a political context, such as that of the study on the overall functioning of the trade mark system in Europe, it should first have consulted the AB and the BC.

2. Illegality

No such refund is provided for by the applicable legislation [But, fortunately, over-charging was provided for ...]. The OHIM’s proposal cannot be implemented within the existing legal framework. It follows that “users” can have no legitimate expectation of this kind of refund [but it's no crime to recommend the enactment of amending legislation, is it?].

3. Lack of logic

Originally, it was foreseen that should the fees prove insufficient for the OHIM’s budget to be balanced, the OHIM would receive a subsidy from the general budget of the EU (i.e. no fee increases with a retroactive effect were envisaged to redress such a budgetary imbalance). This logic should work the other way round, too [It's not logic; it's a proposition that reciprocity should apply and it has no compelling effect]. Therefore, the remaining part of the OHIM’s accumulated surplus should be transferred to the EU’s general budget to be used preferably for IP-related purposes, rather than handing it out to all sorts of “users” [Why the somewhat derogatory jibe "all sorts"? Are we not talking about the businesses upon whose success the operation of the EU economy depends?].

4. No macroeconomic rationale

As about half of the CTM proprietors and applicants are not from Europe, returning the OHIM’s surplus to them would amount to a huge exercise of pumping European money into overseas companies – instead of using it in Europe’s own interests [Presumably the authors would be happy to tell any other trade mark-granting office that it was more than welcome to keep any Hungarian money that it had obtained through excessive charges].

5. No microeconomic rationale

What the OHIM proposes would never happen in the private sector. No company would ever pay back any money to its one-time consumers just because it made an unexpectedly high profit a few years ago [Really? They seem to manage it in the US. Look here, here and here for example]. Equally, it cannot be reasonably expected that those “users” that would receive a refund from OHIM would, at least partly, transfer it to the consumers of their goods and services sold under their CTM or CTMs concerned. (Please note that the OHIM’s applicants can by no means be compared to the shareholders of a private company. Should one be forced to draw such artificial parallels, one would rather compare them to the customers or clients of a company. The OHIM’s “shareholders” are the European Union and its Member States.)

6. Misconception of the role of the OHIM’s fees

Fees, in particular application and renewal fees, are not just there to simply cover the OHIM’s expenses, but they should also serve as the price one has to pay for a monopoly right covering a market of 27 states. This price should be commensurate with the effect the monopoly right can have on this market [If this were true, the fee would be vastly more!]. This element seems to have been totally neglected by the OHIM’s proposal for returning the surplus to “users”.

7. Exaggerated savings – better use of the surplus

The surplus is partly due to the exaggerated savings the OHIM has made to the detriment of the quality of its substantive work, in particular its examination practice, which has by now become so lenient and lax that “anything under the sun made by man” can be registered as a CTM [what a pity that OHIM applies the case law of the European Court of Justice and the General Court]. Thus, the surplus is partly due to the fact that the OHIM currently does not function as it should, namely as an institution exercising public authority and not as a “trade mark factory” trying to please its “clients” at any price, even to the detriment of the quality of examination and the underlying public interest [At the very least, the authors of this gratuitous and unjustified insult owe OHIM an apology]. Should there be a change to that management “philosophy” for the better, the OHIM could use its surplus for improving its operations through e.g.
- properly conducting examination as to absolute grounds,
- producing search reports by examiners instead of machines only,
- fully examining seniority claims,
- further developing its IT infrastructure, databases and their accessibility,
- revising its staff and recruitment policy, and
- surveying the satisfaction of all stakeholders.
In addition, the recent fee reductions only affected the “accession fees”, i.e. the fees to be paid for obtaining a CTM. But this approach is certainly one-sided, and it may lead to further tilting the balance in favour of CTMs at the expense of, and to the detriment of, national applicants and national trade mark proprietors. Therefore, a significant (namely, at least 40 %) reduction of the opposition fee and the so-called “cancellation fees” is absolutely called for and already overdue, as this would reduce the costs for parties most affected by the registration of CTMs, somewhat counterbalancing the effects of the fee reductions already carried out.

8. Danger of red tape

In view of the huge bureaucratic machinery proposed for allocating the EUR 50M Cooperation Fund, it is almost unthinkable how complicated and costly the framework for implementing the refund proposed by the OHIM could be – as the total amount to be returned would be EUR 300M. Unless, of course, the OHIM trusts private companies better than national offices [how many national offices would you trust?], and unless the applicable financial and budgetary regulations are less stringent in the case of distributing the income of an EU agency to private entities. In addition, there are a number of obvious practical difficulties that would stand in the way of a meaningful implementation of the OHIM’s proposal for that kind of refund [OHIM has all the necessary data on computer already, which should make the job quick and easy].

9. Favouring further CTMs – to the detriment of national trade marks

Flooding CTM proprietors with windfall profits [so giving back what you shouldn't have taken in the first place is a windfall -- or should that be a "windfall"?] in the form of retroactive fee refund would certainly, and unfairly, make the CTM system even more attractive to “users” – to the detriment of national trade marks [Heaven forfend that applicants might find CTMs attractive!]. In fact, it might deal a final, lethal blow to the national trade marks systems. One cannot, of course, be entirely sure that the OHIM could not live with that outcome.

10. Bad precedent, wrong incentive

Should the OHIM’s proposal for returning the surplus to “users” ever go through, it would set a bad precedent and create a wrong incentive. The biggest CTM owners would press the OHIM even harder for further savings and higher “profits” in order to obtain more refunds in future [Wrong way round: the Unilevers and Procter & Gambles of this world will scarcely notice a few thousand euros, but it can come in handy for small-time applicants]. That would certainly further distort the way OHIM operates and farther distance it from its original public mission".
The IPKat is truly disappointed that a document of this nature should be circulating. He finds it hard to believe that the Hungarians, whom he likes as individuals and respects as a nation, should have come up with this and hopes that it is a hoax or forgery of some sort, which the real Hungarian Patent Office will speedily denounce.

Meanwhile, there's more bad news from the Hungarian battle front, this time from the real Hungarian Patent Office. The IPKat's friend Ákos Süle (Bogsch & Partners) writes:
"After the decision of the Benelux Office for Intellectual Property ("BOIP") in ONEL/OMEL and the sympathetic statement of the Hungarian Patent Office (“HPO”) as reported by Class 46 and IPKat earlier, the HPO took a further step to join the new approach regarding the geographical extent of genuine use of a Community trade mark.

The HPO has adopted a new approach in its decision regarding the CITY INN/C CITY HOTEL opposition, in which it has not accepted genuine use of a CTM used in only one Member State (in this case the United Kingdom), even though all other use criteria have been fulfilled, namely the nature, time and extent of use as well as the use relating to goods/services for which the mark was registered. You may access an English summary of the decision here.

The HPO – in line with the BOIP decision – argues that the contradictory Joint Statement of the Commission and the Council is not legally binding (see Antonissen, C-292/89). The HPO also relies on Ansul (C-40/01) and La Mer (C-259/02), adding that PAGO is relevant only when assessing the repute of a trade mark and that, in such cases, the repute can typically not be analyzed, since the trade marks cannot be taken into account due to the (geographically) insufficient use of the mark.

The new practice will be presumably continued until a Hungarian Court will confirm or deny it. Hungarian Courts may certainly also raise a question for reference to the ECJ for preliminary ruling.

[Background: the HPO and the OHIM held a regional conference on the coexistence of the Community and national trade mark systems in Europe in November 2009. For those seeking a deeper understanding of this issue, see the presentations of Mr Edmond Simon, Director General of the Benelux Office for Intellectual Property and of Mr Mihály Ficsor, Vice-President of the Hungarian Patent Office]."

14 comments:

Anonymous said...

As the EU Council works, this may originate from Hungary (although the use of very idiomatic English suggests an unusually fluent "Hungarian delegation"), but certainly has been circulated by other interested parties who prefer to remain unnamed.

Clearly, the only reason that really matters is #9: (some) national offices don't want an exceedingly successful European system.

Anonymous said...

Personally I think some of the money could be used by OHIM to get its house in order.

It quite often takes several months to obtain priority documents, sometimes we receive the wrong documents or documents that do not match the register, or it might take months for OHIM to report on a procedural event e.g. in an opposition.

There are probably other issues but these are just the ones off the top of my head. Compare with the procedural efficiency of the EPO (I'm not saying they're faultless but they do seem to get on with things much quicker there)

francois.griesmar said...

I am afraid the above IPKat’s position is merely a vicious attack against the Hungarian Patent Office, in which unfortunately “wit” replaces a much more needed serene analysis. Indeed, I am appalled by such methods which mainly consist in describing your opponents (in this case the HPO) as “anti-CTM” –subliminally meaning “anti-European” (the modern version of “heretics”: luckily we do not burn people any more in Europe!) – and, concerning the national TM Offices, as pathetic relics of the past desperately clinging to their fees and revenues whereas “Progress” is sealing their doom, e.g. their extinction as providers of now useless services.

I - What should be done with the OHIM’s « structural » surplus?

The OHIM’s proposal to distribute 300 million Euros to the CTM owners is in the same vein as the lowering of the OHIM’s official fees: there is nothing innovative there but simply another way of continuing this “dumping” practice as regards the amount of official fees making the CTMs far cheaper than the national TMs which incites applicants to file CTMs even if they need a TM protection in one or a few countries clogging thus the TM registers. Since May 2009, you pay a total of 900 or 1'050 Euros to register a CTM for 3 classes in 25 countries or territories, which represents 36 or 42 Euros per country or territory! We all know that the main costs are not here but are rather due to clearance strategies.

Certainly many applicants would rather prefer the filing, examination and registration proceedings to be much quicker (one must currently wait generally for significantly more than 1 year between the filing and the registration). Of course, the quality of the OHIM’s work must be maintained and even improved in particular to ensure more consistency among the various OHIM’s decisions (rejection, oppositions, etc.).

There is an increasing number of CTM applications. It would be thus quite justified and necessary to significantly increase the OHIM’s staff. It is time to acknowledge that there has been no significant improvement as regards the duration of the examination procedure during the last years and to pragmatically deduct that more human resources are needed to fulfill this core mission, which meets the increasing demand from the customers, in line with today’s business needs and constraints. By the way the Swiss IP Office ensures a registration within 6 months if there is no problem, not mentioning their fast-track procedure since January 2009 which is accessible to any applicant for an additional fee of CHF 400 (around 260 Euros).

II – About the HPO’s “C City Hotel” decision of January 11, 2010

I recommend reading the English summary of this decision published on the HPO’s site, in particular to see that its solid legal reasoning deserves a much better treatment than a few scornful remarks.

I will simply remind that the main parameters for a fruitful discussion should be the following:
1 – Never forget the overall TM context in the EU, e.g. that consequences must be drawn from the coexistence of several TM protection systems in the EU, including the need to maintain a real balance between them;
2 – Make an honest assessment of the current legal situation which is to say the least complex and admit that we are facing an obvious loophole in the texts as regards the definition of sufficient use of CTMs;
3 – Consider the risks incurred by the alleged sufficient use of a CTM in one Member State such as the clogging of the registers, the increasing difficulty to clear a new TM, in particular for SMEs;
4 – Try to propose solutions to be stated in a text and/or by the jurisprudence: in this regard, even if this decision was rendered about the use of national TMs, the idea contained in the HIWATT judgment (T-39/01) is appropriate: § 37 states that “...genuine use means that the mark must be present in a substantial part of the territory where it is protected...”.

Anonymous said...

I hope that Mr. Griesmar would explain why there must still be several TM protection systems in a "Single Market", and why there is a need to maintain any sort of balance between them.

"Heretic" isn't quite the same as "stupid", anyway, especially when there are obvious economies of scale at stake.

Anonymous said...

I think quite a lot of the surplus could be spent on significantly improving the functioning of OHIM, e.g. spending more time per application (by employing more examiners) so as to examine applications properly instead of just issuing a "standard" rejection that only applies in part, improving the service provided when you telephone, eliminating mistakes in the adminstration process (e.g. publishing before the search is issued) and increasing the training provided to examiners so as to improve the quality of the examination process. Cheaper does not always mean better - if the fees are reasonable, then use those fees to increase the quality of the service provided. I think service quality at OHIM lags a long way behind that at the EPO.

francois.griesmar said...

To Anonymous of February 25, 2010 - 3:55:00PM

Even if do not agree with the suppression of the national and Benelux TM systems I consider that your position is intellectually consistent: I would not say the same about so many other opinions and practices the authors of which on the one hand do not (dare to?) advocate this suppression but, on the other hand, behave without really taking into account the coexistence of these different TM systems and even less drawing logical conclusions from this situation.

I did not write more here about the necessary coexistence of the national and Community TM systems because much more space than a post is necessary for addressing this issue seriously; however you can find some answers to this point in the comment I posted on January 28 after IPKat's comment of January 22 on the Benelux ONEL decision. Moreover, in cooperation with Dr Heymann, I wrote in 2006-2007 a 70-pages study about the geographical use of CTMs which is at least accessible (to the members) on the ECTA's web site.

Just one question: if you want to abolish all national TM systems (as this was done in 1971 in Benelux) are you prepared to:
- face the huge problems stemming from the extension to the whole EU of all TM rights existing prior to such a merger?
- accept much more demanding use requirements and other rules destinated to drastically eliminate deadwood as this is the case in Canada or in the USA, including (if you consider the US system) the complex procedures? Because without such "filtering" and "elimination" mechanisms, a fully “unified” EU TM protection system would promptly "choke"...

Finally, I used the term "heretic" because one should not just be making cheap jokes about berserk Hungarians who are "against the CTM" instead of seriously analysing the HPO's February 11, 2010 decision which is quite well conceived and written: really, we are facing real issues there which can be addressed only by serious discussions and not by attempts to make fools of people having opposite opinions, don’t you think so?

Yours faithfully

François GRIESMAR, IP Lawyer

An OHIM's employee said...

I am an employee of the OHIM, though I prefer to remain anonymous for reasons obvious to anyone who knows how the Office works. I would like to thank the IP Kat for giving us a place to give our opinion, especially when it’s different from his.

Although I do not agree with François’s opinion that the IP Kat’s post may be qualified as a “vicious attack”, I do not think either that describing the OHIM as “a “trade mark factory” trying to please its “clients” at any price, even to the detriment of the quality of examination and the underlying public interest” should be considered as an insult. It is an opinion that is shared by most of the employees of the OHIM, as the last Staff Opinion Survey has shown, and it is not less respectable than the opinion of other interested parties. Let’s not forget that most of us are, in one way or another (and often in several different ways), stakeholders of the OHIM, be it as clients, as representatives of the users, as employees of the Office, as citizens of the EU, as representatives of the Member States, etc. As a matter of fact, this document seems to be a reaction to the one published by the OHIM about its governance a few weeks ago. Of course, I can understand that Mr De Boer would like to be governed exclusively by organisations that shared his point of view, and which preferably depended on the OHIM’s money (who wouldn’t?), but that’s not the way this game is played: all the stakeholders must have a voice. And the Hungarian delegation, intendedly or not, is expressing also the opinion of other parties involved who do not have a voice, but who are stakeholders too.

In respect to the document, I would not be surprised if it was the Hungarian Delegation’s opinion indeed, since we all know in the Office that it is the only one which has an opinion of its own, being all the rest of delegations devoted to applaud Mr De Boer’s decisions without any criticism at all. I can understand the disappointment of the IP Kat, as a representative of the users, but not its incredulity, being the opinion expressed in this document a widely spread one (in the Office and in Alicante at least). I agree with the first anonymous contributor that the document may have been circulated by other interested parties who prefer to (or, as it is our case, have to) remain unnamed. I cannot agree with him on the fact that “the only point that really matters is point nine”. For me, other points are more important: the OHIM could use its surplus for improving its operations, revising its staff and recruitment policy, and surveying the satisfaction of all stakeholders. Of course, I can understand, and respect, that point nine is the only one that really matters for him.

But I, as a EU citizen, I am ashamed to see the EU allow the OHIM to regularly employ and fire, and re-employ and re-fire the same workers, every six months, for years on end, making a joke of the good practices the same EU recommends to the Member States. I am ashamed to see the EU permit this practices while the European citizens it is supposed to represent are obligating private companies like H&M or Zara to improve the working conditions of its suppliers’s workers in third countries. We are not talking of making them officials, for God’s sake, just of giving them the same kind of contract they would get in any decent company of Spain or the UK!

Anonymous said...

I´m afraid, Jeremy, I owe the OHIM an apology, because what for you is a "gratuitous and unjustified insult", for me is a fact as true as death and taxes. And I don´t even have the excuse of being Hungarian...

Anonymous said...

Question: EPO's AC is run by bureaucrats who essentially believe that the organisation is there for the welfare of the National Patent (and trademark) Offices they represent. (That's how their actions speak for anyway). Is OHIM dominated by the same bunch, or are we dealing with different suspects?


BTW, I stumbled upon some OHIM-related legal decisions and I was amazed to recognise wording apparently copied word-for-word from EPO forms.

Pseudonymous said...

@ francois.griesmar 8:15:00 PM
@ Part II
Yes, yes, and that’s what we lawyers call interpretation contra legem.

francois.griesmar said...

@Pseudonymus (March 01, 2010 - 9:02:00 AM)

I am not certain to understand your point: do you mean that the HPO's C City Hotel decision of February 11, 2010 was "contra legem"? If yes, which "law" do you mean since the sole text addressing the issue of the geographical use of CTMs is the 1993 Joint Statement which is, as all lawyers know, totally worthless on a legal standpoint? Or do you refer to the OHIM's internal rules, which are merely guidelines for the OHIM staff but no "law" of any kind?

Yours faithfully

F. Griesmar, IP Lawyer

Pseudonymous said...

Dear Mr Griesmar, let me explain that I distinguish between law and act. To be hypnotized by the act wording solely means to return back to the times before Paul Laband and before his act in formal sense and act in material sense. So contra legem means interpretation blind for the principles of interpretation.
To this end the Joint Statement is not an act indeed. But ‘totally worthless’…? Isn’t it the kind of instrument creating the interpretative context? (Please, pay attention to the Vienna Convention on the Law of Treaties and its rules of interpretation, which are common sense and would be not specific for treaties actually) Could we render a R while divorced from the historical background? Could we hold judgments returning to views, repealed from the draft proposal, i.e. back to a point, where the law-makers did not arrive to consensus? Isn’t the Statement ‘such instrument’ testifying the conjecture of this lack of consensus?
Your advice is exclusively interesting, but I am afraid we could not achieve this point of view by way of interpretation. That’s why I am convinced the the HPO's C City Hotel is an attempt to creating parallel ‘act’ and therefore is contrary to the law. Kind regards

francois.griesmar said...

Dear Ms or Mr Pseudonymous

Be assured that I am familiarized with teleological interpretations of laws and other texts; but in the case of the geographical use of CTMs we have simply no text apart from this worthless (yes) 1993 Joint Statement [“JS”]; this means that rather than interpretation we have been witnessing during these last years what I call “legal tinkering” e.g. dubious attempts to deduct solutions from decisions rendered in different matters or to twist the meaning of words (ex: Austria being considered as a substantial part of the EU; anybody reading the entry “Substantial” in any serious dictionary will see what I mean). Sorry we will not solve the problem with such methods even if they can entertain some lawyers.

One must remember that drafts preceding the CTMR, such as the 1976 “Memorandum on the Creation of an EEC Trade Mark", contained precise terms, namely "use in a substantial part of the common market"; but further to pressures in particular from persons fearing that the future CTM would not attract enough applicants, these terms were replaced by "genuine use in the Community", a much less precise formulation from which one can draw opposite interpretations. This ensured the needed unanimity to adopt the CTMR. Simultaneously –but separately– the Council and the Commission issued this JS stating “that use which is genuine within the meaning of Article 15 in one country constitutes genuine use in the Community.” In other words, an undisputable lack of consensus was by-passed by a parallel maneuver to promote an “extreme” interpretation for "genuine use in the Community": it would obviously never have been possible during the normal procedure to insert these terms into the Regulation because this would have been opposed by some of the Member States. You write “Isn’t the Statement ‘such instrument’ testifying [sic] the conjecture of this lack of consensus?”: unless the verb “testify” has unknown meanings (stemming from a creative semantic interpretation?), I cannot figure out a witness testifying with one hand raised and the other frantically tipping the scales… No, the JS is not a neutral (cf. “testify”) posture but a deliberate and most disputable attempt to impose one interpretation against many other possible ones. Thus, instead of “totally worthless”, one could use much nastier terms to qualify this JS. Completed by ingenious or far-fetched exegesis of a few decisions addressing different issues (mainly the use of national TMs), such is the solid legal base on which we are commanded to believe that use in one sole Member State is sufficient!

15 years after, with 27 EU Member States instead of 15, where do we stand? The overdevelopment of the CTM seriously threatens the balance between the TM systems in the EU, it clogs the registers and increasingly handicaps many SMEs for which filing a TM in their own country is more and more difficult because of the huge number of CTMs (often not used in said country), in particular in the smaller Member States where CTMs represent up to 90% of the TM rights. Thus the clearance strategies are increasingly complex and obviously too expensive for many SMEs.

A most disputable legal reasoning no more hiding a gaping loophole in a significantly different environment is leading to a serious risk of congestion for the TM systems in the EU. The conjunction of the ONEL and C City Hotel decisions with the launch by the European Commission of a thorough Study on the TM systems in the EU is a golden opportunity to (i) think freely (calling the BOIP or the HPO “anti-CTM” not to say “anti-European” is a wicked and totally unacceptable attempt to quench any debate) and (ii) to find solutions addressing our current needs and anticipating future evolutions. In this regard I keep on believing that a use requirement in a substantial part of the EU would be the cornerstone for a sustainable TM system in the EU.

F. Griesmar, IP Lawyer

francois.griesmar said...

LAST MINUTE: The DKPTO [Danish Patent & TM Office] supports ONEL and C City Hotel; see “DKPTO statement on the ONEL case” published on March 05, 2010 on the DKPTO’s site (http://www.dkpto.org/updates/dkpto-statement-on-the-onel-case.aspx)

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