No registration require­ment for a license to use a EUTM

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On February 4, 2016, the CJEU confirmed with its Judgment in Case C-163/15 that a licensee may bring proceedings alleging infringement of a European Union Trademark (EUTM) which is the subject of a license, despite the fact that the license has not been entered in the Register of European Union Trademarks.

In the main proceedings in Germany, the holder of a license to use a EUTM took court action against a third party because of trademark infringement. Under the license agreement, the licensee is not only entitled but also obliged to enforce the trademark rights of the licensor and proprietor in its own name. The license is not entered in the Register of European Union Trademarks.

The request for a preliminary ruling of the Higher Regional Court Düsseldorf, Germany, concerns the interpretation of Article 23 (1) EUTMR (European Union Trademark Regulation), according to which legal acts concerning a EUTM, such as a license (Article 22 EUTMR), shall have effects vis-à-vis third parties only after entry in the Register of European Union Trademarks. However, contrary to the wording of the relevant legal provision, the CJEU found that there is no registration requirement for a license to use a EUTM in order to bring proceedings alleging trademark infringement before EU-trademark Courts. It is held that it follows from a systematic and teleological interpretation of the European Union trademark regulation that licensees, in general, can enforce the right to use the EUTM vis-à-vis infringers without entry in the Register.

In this relation, the CJEU puts forward the following observations: Firstly, according to the first sentence of Article 22 (3) EUTMR, the licensee’s right to bring proceedings for infringement of a EUTM is subject only to the proprietor’s consent thereto. Secondly, a provision such as Article 17 (6) EUTMR, which explicitly prescribes the requirement of registration in the event of transfer of a EUTM, would serve no useful purpose if Article 23 (1) EUTMR had to be interpreted as precluding reliance, vis-à-vis all third parties, on all of the legal acts referred to in Articles 17 (transfer), 19 (rights in rem) and 22 (licensing) EUTMR as long as they have not been entered in the Register. Finally, the purpose of the rule laid down in the first sentence of Article 23 (1) EUTMR, namely third party protection, does not come into play in case of trademark infringement.

The judgment improves legal certainty and clarity for licensees, proprietors and assignees. Further, it is likely that the findings of the CJEU can also be applied with respect to rights in rem (Article 19 EUTMR) and since Article 33 CDR (Community design regulation) is a corresponding provision to Article 23 (1) EUTMR, there are good reasons to say that the same applies with respect to Community designs.

Nevertheless, it is still highly recommendable to enter a license to use a EUTM in the Register of European Union trademarks. The following two scenarios should be borne in mind: After granting an exclusive license which is not entered in the Register, a trademark proprietor could grant another exclusive license to a third party which is entered in the Register with the unfavorable result that the “earlier” license could simply vanish. The same applies in the relevant case if a EUTM, which is subject to a non-exclusive or exclusive license, is assigned to a third party. Without entry in the Register, it should be difficult for the licensee to furnish proof that the assignee was actually aware of the license to use the EUTM (second sentence of Article 23 (1) EUTMR).

News on the Unitary Patent

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In our Bulletin, we report regularly (most recently on the renewal fees in the December 2015 issue) on the route to a unitary European patent system. The recent progress comprises in particular the surprising decision of Italy to participate, the enactment of the procedural regulations for the Unitary Patent Court, and the abandonment of the opt-out fees.

The unitary European patent (sometimes also referred to as Community Patent) shall for the first time create a unitary patent protection for the European Union including a new judicial system which allows to enforce patents or declare them invalid on a pan-European basis.

For a long time, Italy was very critical of the plans for a unitary patent. The Italians were particularly bothered by the fact that Italian will not be an official language of the new patent system, and since 2011 had even been trying, together with Spain, to stop the unitary patent before the European Court of Justice. But Italy stayed absent from Spain’s second lawsuit, which failed in 2015. Now, Italy has finally completed the U-turn and joined the unitary patent system as the 26th member state on 30 September 2015. This is great progress for the unitary patent and its acceptance, as Italy represents an economic heavyweight which lies in fourth place in the list of patent validations Europe-wide (behind Germany, Great Britain and France). Spain and Croatia are now the only EU states which are still missing.

The establishment of the unitary patent system and new judicial system have also progressed considerably. The eighteenth draft of the code of procedure for the Unified Patent Court was accepted in October as the final draft. In December and February, a series of agreements relating to the court fees, the budgetary and financial rules and the distribution of the renewal fees between the EPO and the participating member states have been passed. As part of these agreements, it was decided to suppress the opt-out fee. This fee – formerly proposed at Eur. 80 per patent – would have become due during a transitory period for opting out of the new system in favour of the established national courts, or to opt-in again. The abolishment of these fees, which could have added up substantially for large patent portfolios, will allow patent holders a free and unrestricted choice between the established and the new system, and hence is a welcome development.

Some court buildings have already been designated across Europe. Work on the sophisticated IT infrastructure of the new court is progressing. The recruitment of the legally and technically qualified judges has meanwhile begun as well.

In order that the agreement on the Unitary Patent and the Unitary Patent Court can finally come into force, the ratification by 13 member states is required. Up to now, nine states have ratified, most recently Finland in January 2016. While the threat of a Brexit might conceivably result in further delays, currently we assume that the Unitary Patent will become reality in 2017 – almost fifty years after the first initiatives!

Uniform protection for trade secrets in the EU is in the offing

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The upcoming EU directive on trade secrets will provide enhanced protection for trade secrets almost on a par with intellectual property rights.

For some three years now there has been discussion among the parties affected of a proposed EU Commission directive concerning the protection of confidential know-how and confidential business information (trade secrets) against unlawful acquisition, use and disclosure (COM (2013) 813 final dated 28 November 2013). In December 2015 the EU Council, together with representatives from the EU Parliament, came to a provisional agreement on this Directive. On 14 April 2016 the EU Parliament returned the Directive to the trilogue process with only minor changes so that its adoption may be anticipated shortly. It is likely to be implemented in national law within two years at the most.

    1. German law has long recognized the protection of trade secrets in civil law. While the relevant standards in the Act Against Unfair Competition (Secs. 17, 18) are criminal law standards, it has long been acknowledged that violations of these standards may also be subject to civil law action. However, this protection under civil law contains some gaps and is not easy to enforce. In addition to these unfair competition law provisions, there are also the usual non-disclosure agreements / confidentiality agreements customary in international dealings, which can also be enforced under civil law in the event of violations, even if violations are often difficult to prove.
    2. The concept of the EU directive extends far beyond this; it places trade secrets and their protection on the same level as intellectual property rights and their enforcement. This is not without problems, since trade secrets are even less tangible than intellectual property rights, and often there is inadequate definition of the scope of protection, which may be unclear to the infringer. It remains to be seen how the lawmakers in the European countries will implement the corresponding standards of the directive. For instance, it is not clear whether the German lawmaker will pursue the path of a separate complex of standards, since as criminal standards, Secs. 17, 18 of the Act against Unfair Competition are not covered by Reason 9c of the directive.The definition of infringing acts goes significantly beyond the existing scope of Secs. 17, 18 and encompasses the illegal acquisition, use and disclosure of business secrets, including the infringement of a confidentiality agreement.
    3. First, the definition of a business secret (Art. 2 I of the Directive) is important. It must be information that is confidential in that it is not known or easily accessible, in whole or in its exact structure, to persons that usually handle this type of information. Furthermore, the information must have a commercial value and be subject to appropriate confidentiality measures.The other feature, known from the Technology Transfer Group Exemption Regulation, i.e. that the information can be identified, for example, that they are set forth in an Annex, is not required at first sight. However, for proof of any infringement it is advisable, that written identification be undertaken. Finally, it is noteworthy that the Directive (as opposed to existing German law) does not require an explicit wish for secrecy; however, the requirement for confidentiality measures should ultimately be attainable easier than before.
    4. The Directive contains several restrictions to protection, of which only an overview can be presented here. As long as the business secrets were acquired in a way that is “consistent with good business practice,” there will be no infringement. Also, the customary regulations known from confidentiality agreements, such as disclosure without infringement, disclosure for legitimate interest, as well as for media interest or to cope with labour law requirements, are excluded. It is interesting that the exception for reverse engineering, for example the disclosure of a single product design, which the previous draft version did not contain, has been deleted. That is appropriate, for it is possible to have contractual obligations that preclude reverse engineering. However, they have no absolute effect, which means that in the chain of agreements and when products are passed on, the party that is not contractually bound to these restrictions does not have to comply with this regulation.Other exceptions are provided to protect the freedom of the press, the mobility of workers, and whistle blowers.
    5. Along with the usual claims in the event of infringement (cease-and-desist), the Directive also contains further regulations that will impact products and compensation provisions.
    6. In practice it will be important to examine existing contractual regulations not only in confidentiality agreements, but also especially in know-how agreements, as to whether they still comply with the Directive’s requirements, especially with regard to the definition of what is a business secret and how its existence can be proven in a given case. Only then will it be possible to pursue infringement also with the help of the Directive and the requirements contained therein.