Vortrag: United States Ratification of the Madrid Protocol

Vortrag von Dr. Georg Zanger über das Madrider Abkommen über die internationale Registrierung von Marken (Madrider Protokoll) vom 2. März 2004 bei der Austro-American Society.


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Consequences for the U.S. Trade Mark Industry in Europe and for
European Industry in the U.S.

I. Introduction

Good evening Ladies and Gentlemen! It is a pleasure for me to introduce you to such an interesting subject.

The subject matter of my speech is relatively simple. I propose to focus on trade mark law and its legal implications for industries in the U.S. and the EU on several different levels.

The reason why I have decided to deal with this matter is again quite simple: following years of negotiation and difficult discussions in the Senate and Congress, the U.S. has ratified the Madrid Protocol in November 2003. Originally, the idea of accession to the Madrid Protocol was the brain child born of the Clinton-administration and a follow-up to the TRIPs Agreement.

The E.U. has likewise given to the accession of the European Community to the Madrid Protocol.

The consequences of these legal acts are far-reaching and should not be underestimated:

U.S.-trade marks can be registered in Europe, designating the Community as the region of protection. U.S.-trade marks will be treated as equivalent to Community trade Marks. Conversely, European national trade marks and Community trade marks enjoy the same rights as U.S.-trade marks in the U.S.-market.

The Director General of the World Intellectual Property Organization (WIPO), Dr.  Kamil Idris, has welcomed the accession by the US to the Madrid Protocol. I quote: “The U.S. accession to this key treaty is an important and positive development for both U.S. trademark holders as well as nationals of other countries that are party to the Madrid Protocol and opens up new commercial  opportunities for al concerned”. End quote.

II. Globalization:  Enterprises and Individuals are directly concerned

The wave of globalization has not only changed people’s lives but has also engendered amongst enterprises and industry a need for a legal level playing field. For U.S. industry, it is essential that their products and services are protected by intellectual property law (IPL) all over the world.

Piracy, counterfeiting and even parallel imports are highly unwelcome to producers. Therefore, in the field of IPL a certain degree of minimal harmonisation has become necessary.

The TRIPs Agreement has provided one of the solutions to these problems. In addition, the Madrid Protocol constitutes an example of the principle of recognition.

Enterprises are familiar with this situation. In Europe, it is a well established principle that products and services may circulate freely, without the restrictions normally imposed by borders. Neither in Europe nor in the U.S. has this been clear in the past. In the U.S., the “commerce-clause” may be compared with the provisions of the EC-Treaty allowing the free movement of goods, which have opened up national markets.

A preliminary result of all this can been seen in the fact that national markets in the U.S. have opened up, as in the EU. However, there are fundamental differences between these markets. The legal framework, enforcement rules and even general principles applying in the U.S. are different from those in the EU.

This observation is not the end of the discussion but the starting point for my thoughts.

The crucial question is how to bridge these differences.

In the U.S., unlike in Europe, managers have learned the hard lesson that they risk jail if they commit a breach of anti-trust law. It is not the enterprises that have to pay the price, as in “good old Europe”; it is the managers, who are sent to prison – a pretty uncomfortable experience in the U.S.

For individuals, it came as a bit of a shock when they realised the first time the particularities of U.S. law, in the wave of claims against industry filed by the victims of slave labour.

These developments have not come about by chance; they are a logical consequence of globalisation. Therefore, one has to accept the realities of facts.

The former national players in industry have become international players, with business relations and production facilities all over the world. Therefore, in principle, claims in other states under different legal systems are possible. World wide, industry operates under different legal systems. For those in the industrial sector, it is essential to know the law in a target country.

III. Legal action in the U.S. “black box”

For individuals and business the legal system in the U.S. is like a black box. You can never be sure, what will happen. To be successful in the U.S. court system you need two things: money and again money. We read in the newspaper about claims involving enormous sums. Examples of this are to be seen in the claims brought against the tabacco-industry, Microsoft, etc., and indeed in many other cases.

As a result, business and individuals are at a significant disadvantage when they find themselves forced to rely on the U.S. legal system. In addition, in the field of trade mark law, it has in the past been difficult and costly to register a mark in the U.S.

IV. European experts in U.S. law
1. Procedural law

The procedural system in the U.S. is completely different compared to the legal systems on the continent. Lay-juries in civil matters are to us an unknown legal concept.

2. Substantive law

Substantive law differs as well. There are relatively few learned lawyers in Europe who are familiar with U.S. law. In addition punitive damages are granted by U.S.-courts. However, there is a link between the lay-jury in civil matters and punitive damages. The system of punitive damages shows a certain “criminal-law” influence in these sorts of cases.

V. Uniform law

The solution to all these problems would be to have a common, uniform system of law applicable worldwide. Such a uniform system of law should be enforceable throughout the world under the same conditions. However, this will remain a pipe-dream.

VI. Trade marks in a globalized world
It is not only from the point of view of national law or, as the case may be, European law that intellectual property rights fall to be considered. They need to be seen in terms of the position, which they occupy under numerous international treaties and conventions.

Overall, intellectual property rights in Europe – and indeed, worldwide –are oriented, in terms of its content, at improving the protection afforded to holders of the rights concerned.

This reflects an international trend. The signing of the TRIPs agreement has for the time being marked the major step forward in this development.

Trade mark law as a field of jurisprudence is composed of 4 layers:

a. National law
b. Classic international law
c. European law (Trade Mark Directive, Community Trade Mark Regulation)
d. the TRIP’s Agreement
1. The function of trade marks: Common Understanding in the U.S./EU

Talking about trade marks means to discuss their functions as an Intellectual Property right as well. A patent may grant the inventor a monopoly for a time.

However, should the trade mark owner of “Coca Cola” really enjoy the same reputation in society as the inventor of penicillin ? The answer to this question depends on the function of trade marks. What are they for ? What can you do with your trade mark ? Who should be protected. On the one hand you find the trade mark owner with his interests. On the other hand interests of consumers, competitors and the market as such have to be considered.

The original function of trade marks – in the U.S. and in the EU - , was simply to indicate the origin of goods, by identifying the craftsmen who produced them. But those producers also saw in trade marks the opportunity to gain a competitive advantage over others.

Reflecting an the historical development of trade marks, we can see the dual function  served by this source of protection:

Firstly, it is a mechanism for providing identification.

Secondly, it operates a technique for providing a marketing advantage.

This dual function is as well the basis of EU-Trade Mark doctrine:

The basic function served by a mark is to distinguish a product from others: that is to say, the mark must give individual character to the product which it designates. The function of designating the origin of the product is based on that distinction. The most important function of a trade mark is regarded as its attribution of the product to a particular manufacturer or business. In short this is called the function of origin.

However, the classic manufacturers' trade marks have for a long time now been superseded by imaginary marks or by marks designating a trading group.  A mental link with the producer can no longer be made.

This has meant that greater significance now attaches to quality and advertising. The quality function emphasizes the right of the proprietor of the mark to instil consumer loyalty by offering products of consistent quality, thereby increasing the goodwill inherent in the mark.

Since it developed as a device to identify a business person´s goods, the trade mark, in the absence of any sale of those goods, had no function, and therefore no existence as a trade mark.

In a market composed of anonymous sources, trade marks are treated not so much as identifying the particular source, but rather as indicating a common source of ownership such as a product line.

The trade mark tends to trade on consumer loyalty rather than producer identity. It attributes to the product the image upon which the trademark is based. The consumer may prefer a certain product not because the trade mark has identified a source that the consumer values, but because the trade mark itself has a certain value.

Once the trade mark itself has acquired an independent value, legal protection will not simply depend upon the likelihood of confusion as to the source of origin.

In a market in which the function of the trade mark is to distinguish not on the basis of origin but rather on the basis of attributing to the product qualities of consumer preference based on advertising, its value to the owner is essentially one of good will. By investing resources in the mark itself as opposed to the product, its owner is developing a symbol of its reputation.

The development of a property right in the good will embodied in a trade mark is the basis of modern expanded trademark rights and antidilution concepts.

In European legal writing it is pointed out that from the standpoint of the proprietor of the mark, the quality function is closely linked to the advertising function. As a means of attracting customers, the trade mark fulfils a key function by helping to increase sales.

Recent academic writings in Europe have placed emphasis on the communication function of trade marks. In choosing a certain trade mark consumers send a signal to others which enables them to know much more about the personality, income, life-style etc. of the person concerned.

The functions of the modern trade mark in the U.S. and in the EU thus have expanded, as the modern market has evolved, to include

(1) an indication of origin,
(2) a guarantee of quality, and
(3) a marketing and advertising device.

Courts in the U.S. and in the EU have identified three interests that are protected by modern trade mark law´s incorporation of the dilution doctrine. These are the right of the prior user to enter a related field, the right to protect its reputation from association with inferior goods, and the right of the public to avoid confusion and mistake.

2. Legal Level Playing Field

The industrial nations consider it essential, for long-term economic reasons, that intellectual property rights should enjoy a high level of protection.

According to the formula prevailing in third-world countries, by contrast, intellectual property rights constitute a common heritage belonging to all mankind. Therefore, it is claimed, such rights should be shared free of charge with the developing nations.

Intellectual property rights now form the subject matter of bilateral, multilateral, regional and global agreements.

a. TRIPs-Agreement

The TRIPs Agreement 1995 is based on a trade formula which is simple but nevertheless has significant consequences:

The industrialised nations open up their markets in the fields of agriculture and textiles to products from the developing countries. In return, the standards of protection applied to intellectual property rights and the mechanism used to implement them are improved by the various countries throughout the world - that is to say, in the developing countries as well.
b. The Madrid System

Unlike the TRIPs Agreement, the Madrid System seeks to establish not uniform standards, but a simple system of designation with a view to obtaining protection under the national law of another state following an international registration.

The Madrid System is governed by two treaties:

The Madrid Agreement (1891)

The Madrid Protocol (April 1996)

There are some differences between the Agreement and the Protocol. The Madrid Protocol was adopted in order to introduce certain improvements into the system of international registration of marks existing under the Madrid Agreement concerning the international registration of marks of 14th April 1891 as amended.

As compared to the Madrid Agreement, one of the main innovations introduced by the Madrid Protocol (Article 14) is the possibility for a intergovernmental organisation which has a regional office for the purpose of registering marks with effect in the territory of that organisation to become party to the Protocol. This means that the European Union as such has been able to become party to the Agreement.

The Madrid Protocol entered into force on 1st December 1995 and became operational on 1st April 1996. The Community trade mark system also became operational on the latter date.

The Community trade mark system and the international registration system as established by the Madrid Protocol are complementary. Therefore, in order to enable firms to benefit from the advantages of Community trade marks through the Madrid Protocol it is necessary to allow Community trade mark applicants and holders of such trade marks to seek international protection of the marks by filing an international application under the Madrid Protocol; conversely, holders of international registrations are free under the Madrid Protocol to apply for protection of the trade marks under the Community trade mark system.

The establishment of a link between the Community trade mark system and the international registration system under the Madrid Protocol promotes a harmonious development of economic activities and will eliminate distortion of competition. Furthermore, it will be cost-efficient and will increase the level of integration.

VII. The Madrid Protocol

Let me say a few words about the filing-mechanism of the Madrid Protocol.

The Madrid Protocol is a mechanism for obtaining trade mark registration in Contracting States party to the Protocol.

1. International trade mark registration covering multiple countries

The ratification of the Madrid Protocol enables trade mark holders to apply for protection of their marks in any of the countries party to the Protocol by filing one single application.

2. No substantive trade mark law

The Madrid Protocol does not result in a harmonised system of law in the contracting countries. Harmonisation takes place only via the TRIPs-Agreement.

VIII. How does the system work?
1. Home state office

The first step under the Madrid Protocol is a so called basic or home application. This means that a national trade mark must have been registered in a state party to the Protocol. On the basis of this national registration, the applicant can seek international registration. When doing so, the applicant designates a state party to the Protocol, with the consequence that trade mark protection is granted in that state. The legal consequence is a “national treatment” of this application.

2. CTM-Office (Community Trade Mark Office)

Instead of registering the trade mark in the home state office, the applicant may choose to register the trade mark at the CTM Office. This office fulfils the requirement of the Protocol. The applicant has only to be a national of a country party to the organisation. In such a case the CTM is the home registration office.

Council Regulation (EC) No 1992/2003 of 20th October 2003 gave effect to the accession of the European Community to the Protocol relating to the Madrid Agreement concerning the international registration of trade marks.

This means a “level playing field” for industries in the US and EU.

The consequences of the ratification of the Madrid Protocol by the US and the European Union are as follows:

US trade mark holders can designate the European Union as such, in order to obtain trade mark protection all over Europe.

On the other hand, European trade mark holders can designate the US.

3. Central attack and transformation

The Madrid Protocol contains a number of specific provisions concerning the question as to what it is happen, in the event that a national trade mark is declared null and void by national courts or trade mark offices. What are the consequences of such nullification for the international registration? This is an issue that also arises in the European patent system.

One of the drawbacks of the Madrid Systems is the so called central attack. Whereby, if a of home registration is limited or cancelled for any reason within five years of the international registration date: all dependent registration will likewise be limited or cancelled.

To minimise the consequences of central attack, the principle of transformation has been introduced by the Madrid Protocol. An international registration subject to central attack may, following a request from the office of origin, be transformed into a series of national or regional trade mark applications with a filing date corresponding to the date of the international registration. Priority claims will be upheld. The fact that one national trade mark office is unwilling to register the trade mark should not lead to a situation in which the right is declared void all over the world.  

4. International applications designating the U.S.

The USPTO (U.S. Patent and Trade-mark Office requires applicants for, or a holders of, an international registration designating the U.S. to attach to their application a declaration of a bona fide intention to use the mark in commerce. This is the direct consequence of the so called use-requirement applying under U.S. law. Reflecting the principle “first use” in the U.S., as opposed to “first register” in the EU, this requirement offers a good example of the special features of U.S. trade mark law. The solution reached on the international level has been a compromise. The applicant has to declare his intent to use the mark but does not have to do so at the time of registration. Furthermore, an application for an extension of protection may not be refused on the ground that the mark has not been used in commerce in the past.

An international application or registration designating the U.S. is examined by the USPTO as an application for registration on the Principal Register.

IX. Consequences for Industries

The mere fact that trade marks can be registered by means of one single application in the U.S. and in the EU has certain repercussions for industry.

1. Procedural matters

The Austrian Supreme Court has accepted that Austrian Courts have jurisdiction on cases involving an existing - trade mark right. This means that claims may be brought against US enterprises before Austrian courts on the ground that those enterprises are holding trade marks in Europe. As a result it is easier to sue U.S. enterprises in Europe -  based on the jurisdiction granted by the trade mark-  than to sue them in the U.S. It remains to be seen whether U.S. enterprises may use this possibility to go against each other in front of European Courts. This might be a convenient possibility because for the procedure for example Austrian law would apply. In substance the Austrian judge would apply U.S. Law. For U.S. enterprises doing business in Europe this possibility should not be underestimated.

2. Consequences of these development:

The approach of “national treatment” in IPL is limited. However, the possibility of obtaining protection by filing a single application constitutes a highly positive step in the right direction.

On the basis of this procedure, we may reasonably expect before long to see discussions taking place amongst the authorities in the different states, in relation to not only procedural matters but also substantive law. A direct application sent by a foreign home office will lead not only to a possible registration but also, in consequence, to dialogue between experts who  can question their “iron principles” in national law.

The consequence may be a competition between legal principles.

To conclude, my practical advice to enterprises is as follows:

1. If you want to register a new mark, you should be aware of the possibilities offered by the Madrid Protocol

2. For trade mark holders: make sure that your original trade mark application is carefully formulated and designed with a strategic goal in mind.

3. Check that trade marks already registered do not undermine your application in the long run.

4. Monitor new trade mark applications. Challenge any that may limit your legal interest.

To sum up: new possibilities mean new risk.

I hope that I have given you an insight into the world of trade mark law and I wish you all the best for your future experience with trade mark law and lawyers.
Have an enjoyable evening.

Dr. Georg Zanger

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