Alternative Trademark Filing Strategies Regarding the Madrid Protocol, the European Union and National Offices
TABLE OF CONTENTS
Introduction and Statistics
Now that the Madrid Protocol has been available to trademark owners in the United States for one year, and now that the link through the Madrid Protocol to the Community Trade Mark is established, when should it be used for the creation of foreign trademark rights? Which filing route is best for Europe? Is there reason for caution? Should United States trademark owners look to the Protocol for consolidation of international trademark portfolios? There are many factors to be analyzed in answering these questions. The major issues that should be considered in weighing the option of using the Protocol, the Community Trade Mark or direct national filings are the focus of this paper.
As of the one year anniversary, approximately 1760 Madrid Protocol applications had been filed with the United States as the country of origin. The countries designated most often are Japan, China and Australia, followed by South Korea, Singapore, Switzerland, Norway, United Kingdom, Russia, Germany, France, Greece and Italy. Approximately two-thirds have relied on pending applications rather than registrations as the basic record. Of these, two-thirds have been intent-to-use applications. Of the filings based on existing US registrations, one-third have been incontestable registrations. The average number of classes of goods and services in the basic record has been 2 and the average number of countries designated has been 10. The average amount of time it has taken the USPTO to certify and send the application to WIPO has been 14 days.
As of the one year anniversary, the number of incoming Madrid Protocol applications designating the United States reached approximately 8,585, with 5,425 showing in the USPTO database. The top country of origin is Germany, followed by Switzerland, France, the United Kingdom and Italy. The early filings are now publishing for opposition in the Official Gazette
I. Overall Advantages
A. One Filing in English for 60+ Countries
A single application filed at the United States Patent and Trademark Office in English forms the basis for an International Registration. The Applicant may designate for protection any of the 65 Madrid Protocol member countries other than the United States.
B. No Upfront Associate Fees
The initial cost savings of the Madrid system stem from the central filing for protection in multiple jurisdictions without the help of a representative in the local country. Thus, there are no associate fees at the time of filing. Only in the case of an office action in a designated jurisdiction will the services of a local representative be required.
C. One International Registration with One Renewal
The International Bureau of the World Intellectual Property Organization issues a single International Registration number under which the holder centrally files changes in ownership or address and renews the International Registration with one filing directly with the International Bureau.
D. Subsequent Designations
The holder of an International Registration has the flexibility of adding additional countries to the International Registration through the holder’s office of origin or directly with WIPO. The term of protection of the subsequent designation runs from the date of receipt at WIPO to the end of the term of the original International Registration. Thus, it would not be cost effective to file a subsequent designation toward the end of the ten year term of an International Registration.
Existing national registrations for the same mark, held by the same owner and covering the same goods and/or services are automatically subsumed into the protection of the International Registration upon issuance of the extension of protection in that country. The rights afforded the holder of the International Registration extend to the prior established rights by operation of law. Section 74 of the Madrid Protocol Implementation Act of 2002. WIPO, the USPTO (Trademark Rule 7.28) and some other countries have mechanisms for noting replacement in the official records. However, the question of allowing prior national rights to lapse after replacement and opting to rely solely on the International Registration has not been sufficiently addressed in the courts to make trademark rights holders and their counsel comfortable with dropping prior national rights. In addition, there may be reasons not to do so. For example, the goods and services covered by the prior national registration may be broader than in the newer International Registration; or the renewal term for the prior national registration may fall within the five year dependency period of the International Registration, making official surrender of the prior national rights too risky.
II. Overall Disadvantages
A. Dependency and Central Attack
For the first five years from the date of the International Registration, whatever happens to the basic application or registration in the country of origin also happens to all designations under the International Registration. If the basic application or registration is successfully challenged in an opposition or cancellation, for example, known as “central attack,” all rights in designated countries also fail. If goods or services are deleted from the basic application or registration, whether voluntarily through examination or through the settlement of a potential proceeding, the deletion is reported to WIPO and the same goods and services are deleted from all designated countries in the International Registration.
The holder, whose basic application or registration is limited or cancelled in whole or in part, has the right to transform the International Registration into national applications in the designated countries that retain the filing date of the International Registration. However, the new national applications will entail filing fees and examination anew. It likewise will be necessary to hire representatives in the local jurisdictions to prosecute the application, thus eliminating the cost advantage of using the Madrid Protocol.
With respect to the link to the Community Trade Mark, a Madrid Protocol applicant that has designated the European Union has the choice of conversion to national applications, which is expensive, or transformation through the Madrid Protocol, called “opting back,” by which national designations are less expensive and less cumbersome. The official fees generally would be less and no local representative would be required unless an office action issues in a particular country. Thus, with respect to Europe, the effects of central attack are significantly diminished.
B. Narrow Identification of Goods and Services
For trademark owners in the United States, the very specific identification practice of the USPTO is a major factor in deciding whether to use the Madrid Protocol. Since rights under the International Registration are only as broad as those in the basic application or registration, and since most other countries are less strict with respect to the identification of goods and services, the U.S. trademark owner may obtain broader rights by filing direct national applications or, with respect to Europe, a Community Trade Mark application.
However, the broader the identification, the greater the chance of drawing an opposition. With the expansion of the European Union, there are now 25 possible sources of prior national rights. Since most countries permit infringement actions on the basis of related or similar goods or services, the limited description of the International Registration based on a US record may not be such a large disadvantage. Companies are concerned about actual business damage, not theoretical rights.
C. No Amendments to the Mark
The holder of an International Registration is not permitted to amend the mark that is the subject of the registration. Thus, if the trademark owner is in an industry where it is common for marks to change over time, or if the trademark owner expects to update the mark over time, then the Madrid Protocol is not appropriate.
III. Selecting Country of Origin
The Madrid Protocol is not a totally open system. In order to take advantage of the system, the trademark owner must be a national of a Contracting Party, or be a legal entity that is domiciled in or has a real and effective industrial or commercial establishment in a Contracting Party. Any place where the trademark owner qualifies by means of the above can serve as the trademark owner’s country of origin. Thus, a trademark owner may have more than one country of origin and thus have the choice of more than one country for initiating a filing under the Madrid Protocol.
B. Using Related Companies
Large corporations often have divisions, subsidiaries or related companies that may qualify for filing where they are located. The issue of what constitutes a real and effective industrial or commercial establishment is a matter of national law. Generally, a mere post office box, address or local phone number is insufficient. Genuine business operations must be conducted from the location.
Much consideration has been given to using a related company’s country of origin for filing under the Madrid Protocol in order partially solve the problem of the narrower identification of goods practice in the US. In this way, designations under the system in countries other than the US would be able to have identifications of goods and services as broad as the country of origin allows, sometimes as broad as class headings. However, there may be tax consequences in exploiting a mark through a related company in another country that must be analyzed. Further, the notion of then assigning the rights back to the US parent is conceivable, but there are also limits to assignment, discussed below, that must be kept in mind.
C. Goals in Terms of Protection, Consolidation and Ultimate Ownership
As noted above, if the trademark owner’s goal is to obtain the broadest possible protection for an important mark in multiple countries, the advantages of the Madrid Protocol may not outweigh the ability to obtain broad protection by filing directly with the national offices. It may make sense for the trademark owner to test the benefits of the Madrid Protocol with a secondary mark rather than a primary mark.
Large companies often create holding companies solely for the purpose of consolidating ownership of trademark rights in a single operating entity in a favorable tax jurisdiction. This certainly can be done within the strictures of the Madrid Protocol. However, depending on the countries encompassed in the trademark owner’s portfolio, further consolidation through the Madrid Protocol may or may not be appropriate. Certainly, it is not currently available for companies whose interests lie in Central and South America. This may change now that Spanish has become a working language under the Madrid system. But it will likely take several years before a significant number of Spanish-speaking countries join the Protocol.
The country of origin of a planned holding company is also important with respect to rights established under the Madrid Protocol. Due to the “safeguard” clause that dictates that Madrid Agreement rules govern with respect to those countries that are members of both the Agreement and the Protocol, the assignment of rights of an International Registration stemming from an Agreement or Agreement and Protocol country may not be recorded if the assignee is a holding company in a Protocol only country. See IV.E. below.
Using a country of origin other the US may give rise to tax problems that are beyond the expertise of the author. There may be no problem in filing through a subsidiary in Germany, for example, in terms of the income derived from sales through that entity under the mark. However, there may be problems in terms of income allocation as desired by the parent company or in terms of what is done with the income itself within the organization. Likewise, the tax consequences of a potential sale of the related company itself should be considered.
IV. Selecting a Basic Application or Registration
A. Nature of Mark
Not all marks are appropriate for central filing under the Madrid Protocol. Since the mark will be examined under the laws of each of the designated countries, consideration should be given to the distinctiveness of the mark..
A mark that is easily considered suggestive and protectable under US trademark practice may be considered lacking in distinctiveness in other jurisdictions. Searching for similar registered marks in the national registers may alleviate concerns to some extent. But the trademark owner should realize that it may be necessary to engage local counsel in order to convince an Examiner that the mark functions as a mark and is entitled to registration.
Although Supplemental Register registrations in the US may form the basis for Madrid Protocol filings, the trademark owner may be wasting his or her time and money in pursuing establishing rights in several countries through the Madrid Protocol. It would be better to take a cautionary and selective approach, with the advice of counsel, in the most important markets.
B. Status of Record
Before filing under the Madrid Protocol, the details of the basic application or registration should be thoroughly reviewed, both for accuracy and for potential issues during the dependency period. If there are any discrepancies in the record, with respect to ownership, address or some other error or omission, it would be best to cure the record before proceeding with a Madrid Protocol application. Otherwise, the application may be rejected or it may be necessary to correct the record before the Madrid Protocol Unit can certify the application and forward it to the International Bureau.
Is it too risky to base a Madrid Protocol filing on an intent-to-use based application? It depends on the situation. If the mark has been thoroughly searched and cleared, and if the application has proceeded through the opposition period, and if the trademark owner is confident that use will commence for a known and well-defined product or service, there may be little risk in initiating foreign protection. Indeed, it may be best to establish the International Registration in order that the dependency period may commence to run. Some commentators have considered filing a Madrid Protocol application designating a single country for this very purpose. Of course, there is no cost advantage in this approach, just a possible strategic advantage in later reducing the potential effects of dependency.
The author does not take the position that incontestable registrations only should serve as the basic record for proceeding under the Protocol. Many younger registrations, and indeed applications, are sufficiently unassailable and sound in terms of established rights to form the basis for an International Registration, and even incontestable registrations are subject to challenge on certain bases.
C. Nature and Extent of Goods and Services
If the trademark owner is satisfied with the identification of the goods and services in its US record and believes that broader rights via direct national filings are not important to its operations abroad, there should be little concern about taking advantage of the Protocol. In fact, going the broader national route may only draw significantly more oppositions than would relying on the extent of protection afforded by the US record.
On the other hand, however, if the client’s mark is quite important and quite distinctive, and its field of operations is such that broader rights would be very important to future competition and enforcement, serious consideration should be given to whether the Madrid Protocol or direct national filings are appropriate. If it is unlikely that broader identifications of goods and services in individual countries of interest will give rise to third party challenges, then national filings may be the better route.
D. Status of Use
If the trademark owner’s plans for use of the mark in commerce in the US are less than well-defined, the trademark owner is probably not ready to jump into seeking international protection through the Madrid Protocol. If use of the mark is, for the most part, well-established or if the trademark owner’s business already focuses on foreign markets, then committing to the establishment of an International Registration based on US filings may make perfect sense.
E. Status of Ownership, Potential Assignments
Is ownership sound and unlikely to change for some time? Or is it likely that the trademark owner will sell his or her business in the short term? If a transfer of ownership is envisioned, then it should be analyzed, both for the continuity of rights and possibility of recording the assignments with the International Bureau. International Registrations are assignable, in whole or in part, by country designated or by division of goods or services. However, the assignee must be eligible to hold the right by having an establishment in, domicile in, or the nationality of an appropriate country in the Madrid system. This can limit a holder’s ability to transfer rights in a mark where the country involved is a Madrid Agreement country or a Madrid Agreement and Madrid Protocol country. Then the assignee must have a country of origin in either a Madrid Agreement only country or a country that is party to both the Agreement and the Protocol in order for the transfer to be recorded by the International Bureau. See Sections B. II. 60.01 to 60.04 of the Guide to the International Registration of Marks, WIPO Publication No. 455(E), 2001 (updated version available online at www.wipo.org).
A US Madrid Protocol Applicant should also be cautioned against assigning the basic application or registration apart from the designations of extension of protection during the dependency period. The danger is that the assignee could jeopardize the rights in the designated countries by discontinuing use, invalid licensing or invalid further assignment.
V. Selecting Countries in Which Protection is Desired
A. Current and Future Countries of Interest
What are the markets of interest to the trademark owner? There are currently 66 Contracting Parties to the Madrid Protocol, including the United States. The key markets of Europe, Japan and China are covered. See the attached list from the WIPO web site. Out of the 66, 21 are Madrid Protocol only countries and 45 belong to both the Madrid Protocol and the Madrid Agreement. All of the expanded European Union member countries, except Malta, are members of the Madrid Protocol. Thirteen European Union member countries are also members of the Madrid Agreement.
Out of the 66 Protocol members, 29 countries have opted to receive an individual national fee rather than the set complimentary fee of 73 Swiss francs. The same number of countries has opted for an 18 month notification term for conditional refusals rather than the 12 month notification term. Where a refusal results from an opposition, 16 countries may notify the refusal after the 18 month time limit.
B. Is the Community Trade Mark the Better Option for EU Member Countries?
Since the European Union has implemented its adoption of the Madrid Protocol and is in the process of developing examination guides for requests for extension of protection, it is now necessary to weigh the three options for establishing trademark rights in EU member countries: direct national filings, the Community Trade Mark or the Madrid Protocol, whether designating individual countries or the European Union as a whole. A brief comparison of advantages and disadvantages between the CTM and the Protocol follows.
As with national filings, a broader scope of goods and services is available in a CTM filing than in the US or with a US-dependent International Registration. The extension of protection designating the European Union will be examined the same as a directly filed CTM, and will have all of the same rights and requirements. The CTM is maintained by use in one EU member country, while individual extensions of protection under the Madrid Protocol are each subject to challenge for non-use, generally after 3 or 5 years. With the CTM, there is one examination on absolute grounds only. Each individual designation or request for extension of protection under the Madrid Protocol is examined by the national office, many of which examine on relative grounds also. The mark in a CTM registration may be amended in some instances, whereas one is unable to amend the mark in an International Registration. The CTM is enforceable throughout the entire EU. Rights established through the Madrid Protocol on an individual country basis are enforced on a country-by-country basis. CTM rights automatically extend to the 10 enlargement countries as of May 1, 2004 (with some limitations with respect to prior national rights in conflict). Enlargement to the same group of countries under the Madrid Protocol requires subsequent designations on an individual basis, unless the whole of the European Union has been designated.
Designating the EU through the Madrid Protocol is much less expensive than the direct CTM upfront, since no local representative fee is involved unless OHIM issues an action, which is relatively rare. Designating more than a handful of individual EU member countries through the Protocol would also be more expensive than designating the whole EU. The entire CTM is subject to failure based on a problem stemming from one country, whether on absolute grounds or because of a successful opposition. Conversion to selected national applications with the same filing date is available within a three month time limit, but entails national fees, local representatives and examination. With the Madrid Protocol, one could be selective and avoid countries where there is a clear conflict or you expect a refusal on absolute grounds, but not if you are designating the EU as a whole.
With the link between the CTM and the Madrid Protocol is in place, the trademark owner that has designated the EU through the Protocol has the option, in the case of a failure of the CTM, of converting to independent national applications, as before, or transforming the CTM to the extent possible to requests for extension of protection through the Protocol. This is known as the “Opting Back” provision and it must be accomplished through the intermediary of OHIM. Such subsequent designations must be submitted on a special official form and will bear the date on which the designation of the EU was recorded in the International Register. Rule 24 of the Common Regulations. See WIPO Information Notice No. 2/2004, January 12, 2004. Since, by this mechanism, the applicant retains the cost advantages of the Madrid System, some view the “link” as the best of all possible worlds. The opting back provision for the EU greatly lessens the effect of dependency and central attack for EU designations.
The second language to be designated by applicants requesting an extension of protection to the EU must be one of the five official languages of OHIM, namely, English, French, German, Italian or Spanish. The second language serves as an alternative language in which third parties may file opposition or cancellation proceedings before OHIM.
When basing an application for an Internatinal Registration on a CTM application or registration, the filing with OHIM must be in one of the five noted official languages. However, if the language of the application is German or Italian, the applicant must indicate French, English or Spanish as the second language.
For the purposes of claiming the seniority of an earlier national mark in an EU member, WIPO will provide a separate official form (MM17) that will be attached to the international application form.
C. Must Protection Be Established Quickly?
If it is important for litigation purposes or for customs enforcement or some other reason to establish protection in a particular jurisdiction, consideration should be given to which option will take the least time. Under the Madrid system, member countries have either 12 months or 18 months to advise WIPO of a refusal or a potential opposition. If the notice is not given, rights are established. This means that for some countries it may be quicker to file through the Protocol than to file a direct national application.
However, in some countries that have minimal examination, a registration will be issued more quickly through a direct national filing than a filing through the Protocol, which must be certified by the country of origin and accepted by the International Bureau before being sent to the country of interest. For example, Benelux, France and Switzerland all issue registrations very quickly. Thus, direct national filings in those countries may be the quickest route to establishing protection.
VI. Cost Comparisons
A. Check Madrid Protocol Costs on the WIPO Fee Calculator
The fee calculator on the WIPO web site will automatically calculate the fees owed to the International Bureau depending on the countries designated and the number of classes in the proposed application. It also adds in the basic fee collected by WIPO, which is higher for a color mark. All fees are quoted in Swiss Francs. Added to this would be the USPTO processing fee of $100 per class if the filing is based on a single basic application or registration, and $150 per class if the filing is based on more than one basic application and/or registration. Trademark Rule 7.6(a).
Many countries, as noted above, have opted to set their own individual fees, which cannot be higher than the filing fees for direct national filings. Slightly more Protocol countries (37 out of 66 as of September 24, 2004) however, have opted for the standard fee structure that includes the following: a “basic” fee to WIPO (653 Swiss Francs); a “complementary” fee for each country designated (73 Swiss Francs); and a “supplementary” fee for each class of goods or services beyond three (73 Swiss Francs). The member country under the standard fee structure obtains a proportion of the complementary and supplementary fees according to the number of designations for that country.
The European Union, similar to the United States and 29 other Protocol countries, will operate on the basis of an individual fee system. The individual fee set for designating the European Union is slightly less than the normal official fees owed to OHIM for a direct filing.
B. Compare to National and CTM Costs
The cost savings upfront with respect to representative’s fees is not insignificant. It can easily be seen that the more countries designated the more the savings, particularly if they are countries that may be designated for the 73 Swiss Franc complimentary fee. Even greater cost savings no doubt apply in connection with the post registration activities mentioned above. Renewal and changes in ownership are accomplished in a single step with a single fee. This is also a tremendous savings on the time and effort spent on maintenance and the recordation of transfers in ownership. Note that the scheme for individual or complimentary fees also applies to renewals.
As noted above with respect to the Community Trade Mark, filing through the Protocol and designating the CTM is the least expensive route.
A. Search the International Register
It is now important for those conducting domestic clearan