The much anticipated and long awaited EU trade mark reform legislative package is now agreed and published in the Official Journal of the European Union on 24 December 2015. Community Trade Mark Regulation (EU) No 2015/2424 of the European Parliament and the Council and the Amending Regulation will accordingly enter into force on 23 March 2016. From that day, the Office will be called the European Union Intellectual Property Office (EUIPO) and the Community trade mark will be called the European Union trade mark (EUTM). The reform package also includes the replacement of the existing EU Trade Mark Directive (Directive 2008/95/EC of the European Parliament and the Council) in order to further harmonise the trade mark laws of the 28 Member States of the EU. The intention is to promote better cooperation, lower costs and complexity, increase speed, greater predictability and legal certainty between the national Offices and the EUIPO. Member States have three years to make the necessary changes to implement the above Directive into their national laws. For example, each Member State has to provide mandatory administrative proceedings for opposition, which Malta does not at present, to include provision for a jointly requested suspension period of at least two months. There is also to be a mandatory six month grace period for late renewal of registrations. Fortunately the UK IPO will not have many changes to make. Timewise, there is one exception: Member States will have seven years to provide an “efficient and expeditious administrative procedure” before their offices for revocation or invalidity. Whilst many Member States already provide such procedures, in Benelux, France, Italy and Spain a revocation or invalidity action must currently be brought in the courts, which can be time consuming and costly. We have set out below the principal changes from a practice perspective affecting the EU Trade Mark as well as some of the changes affecting national trade marks in the EU member states. 1. New terminology Community - Union CTM - European Union Trade Mark (EUTM) OHIM - European Union Intellectual Property Office (EUIPO) CTM Courts - European Union Trade Mark Courts 2. Changes in fees payable to the EUIPO There will be a new one-fee-per-class system for trade mark application and renewal fees as well as an overall decrease in trade mark application and renewal fees payable to the Office. Fees – Application There is a moderate reduction in application fees and applicants will be discouraged from seeking protection in up to three classes unless genuinely needed (no more 3-for-1). Current Fee (€) (E-Filing) New Fee (€) (E-Filing) 1 st Class 900 (covers three classes) 850 2 nd Class 900 3 rd Class 1050 4 th and subsequent classes Additional 150 Additional 50 Fees – Renewals There is a substantial 37% reduction in renewal fees. Current Fee (€) (E-Filing) New Fee (€) (E-Filing) 1 st Class 1350 (covers three classes) 850 2 nd Class 900 3 rd Class 1050 4 th and subsequent classes Additional 400 150 NB. Renewal of EUTMs must be filed in the six months before expiry, not on the last day of the month of expiry as at present. This may also be a point of national harmonization as currently there are differing calculation of expiry dates. Fees – Opposition, Cancellation and Appeal There are moderate reductions in these fees. Current Fee (€) (E-Filing) New Fee (€) (E-Filing) Opposition 350 320 Cancellation 700 630 Appeal 800 720 3. Identification of good & services – class headings (IP Translator (C-307/10)) Following clarification from the IP Translator case, use of the Nice class heading will no longer be deemed to be a claim to all goods or services in the class. Going forward, all goods and services will need to be defined with “sufficient clarity” to enable the protection sought to be determined. Class headings can be used if clear and precise, but these will only include goods or services covered by the literal meaning of the terms and there are certain class heading terms that the Office will not accept. Transitional provisions – There are transitional provisions for “old” registrations (filed before 22 June 2012) covering a Nice class heading. These provisions do not apply to EU Designations of International Registrations or pending (presumably opposed) EU Applications filed before 22 June 2012. Moreover it does not include use of class heading followed by terms such as ‘namely’. Proprietors will have six months from 23 March 2016 (23 September 2016) to declare if use of the class heading was intended to cover goods and/or services beyond the literal meaning of the class heading and then to identify to the EUIPO the extra goods and/or services intended to be covered. Only terms listed in the Nice alphabetical list in force at the filing date can be accepted. If no declaration is filed within that six month period, the EUTM shall be deemed to extend only to those goods and/or services clearly covered by the literal meaning of the indications. The following are illustrations of the potential issues for trade mark owners of “old” registrations. The Class 25 heading is reasonably clear and precise, “Clothing, footwear, headgear”, and so there may not be any need for further clarification. However a possible query may be whether “belts” are deemed to be items of “clothing” or are they bands worn to support clothing and thus need to be specifically itemised in the specification? A clear problematic class heading is Class 9 pre the 10th Edition of the Nice Classification issued in October 2012: “Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring, signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus and instruments for conducting, switching, transforming, accumulating, regulating or controlling electricity; apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs; automatic vending machines and mechanisms for coin-operated apparatus; cash registers, calculating machines, data processing equipment and computers; fireextinguishing apparatus.”. This does not expressly include the term “computer software” and thus these goods may not be deemed to be covered by the literal meaning of the above terms in the class heading. Protection is provided to existing trade mark owners who might be prejudiced by the expansion of trade mark rights resulting from such declarations by previous trade mark owners. Consequently, once amended, the EUTM cannot be used to prevent third parties from continuing to use a trade mark where that use commenced before the register was amended and the use did not infringe the literal meaning of the goods and services at that time. The amendment also does not give the owner the right to oppose or apply for invalidity of a later trade mark where that later mark was in use or an application for registration was on file before the register was amended. It has primarily been the practice in mainland Europe to use the class heading to indicate a claim to all goods and/or services in the class. In the UK, if a class heading has been used in whole or part it would generally be followed by a list of the actual goods and/or services of interest as required by the UK IPO, so the need for amendment of UK originating EUTMs during the transitional period may be less. Clearly a review will however be required of “old” registrations (filed before 22 June 2012) to identify any comprising a class heading and then to determine if further clarification of the goods and/or services will be required. The online tool TMCLASS provides clear guidance on terminology acceptable to the EUIPO and other national offices and can be a useful tool for reviewing lists of goods and services. 4. Definition of a sign This is to be amended to remove “capable of graphical representation”. A mark must be capable of “being represented… in a manner which enables the competent authorities and the public to determine the clear and precise subject matter of the protection”. The definition will be broadened to specifically cover sounds. The representation can be in any appropriate form using generally available technology. This allows for non-traditional marks, such as hologram and motion marks in line with digital branding strategies. For example MP3 files can be used to record sounds which are not capable of being represented as musical notes, e.g. the roar of the MGM lion. The practical effect may be limited for taste and smell marks until the technology is available to enable them to be represented in a clear and precise manner. 5. New grounds for refusal - functional marks The functionality prohibition is to be expanded to include “or any other characteristics” which result from the nature of the goods themselves, is necessary to obtain a technical result or gives substantial value to the goods. It will only relate to goods not services. Previously it was only shape marks which were unregisterable if they had these qualities. An objection on these grounds cannot be overcome with evidence of acquired distinctiveness. This exclusion will apply to sound and colour marks too, e.g. clucking hens for eggs, and bright red for fire extinguishers. It will also apply to surface decoration which could mean the Burberry pattern may no longer be registrable as an objection on these grounds cannot be overcome with evidence of acquired distinctiveness. There are new grounds for refusal where a sign conflicts with designations of origin, geographical indications, traditional terms for wine, traditional specialities guaranteed and plant varieties. Marks shall be refused or could be declared invalid where there is a designation of origin or geographical indication that predates the application and confers the right to prohibit the use of a subsequent trade mark. 6. Shorter opposition period for an EU Designation of International Registration Registration of EU Designations of International Registrations should be quicker as the three month opposition term will begin one month after publication by the EUIPO (reduced from six months). A potential downside to this is that substantive examination may not be complete before publication and expiry of the opposition term. This may mean that opposition will have to be filed by a third party only for the opposed application to be subsequently refused on absolute grounds. Whilst the opponent will have a refund of the opposition fees, there will be no refund of attorney fees. 7. Searches of prior EU TMs now optional On filing an applicant will have the option of requesting whether or not to have (i) an EU search report (no additional fee), citing earlier conflicting EU TMs and/or (ii) national searches from those Member State offices who provide them (additional fees payable). There seems little point in not continuing to request an EU search report. The EUIPO will still continue to undertake searches of earlier conflicting EU TMs and will still notify later trade mark proprietors of those earlier EUTMs of, upon publication, regardless of whether the applicant has elected to receive the search report. EUTM owners will be able to opt out of receiving notifications from the EUIPO of later filed potentially conflicting EUTMs, useful if a registration is no longer of interest. To complement these optional searches, the intention is to have free access to all-encompassing, fast and powerful search engines within the context of cooperation between the EUIPO and member states through TMVIEW. This platform now provides data on trade marks from 53 Offices, with the recent addition of Japan, Switzerland and the African Regional Intellectual Property Organization (ARIPO). 8. Third party observation Any third party may submit written observations on absolute grounds or now on proprietorship grounds as soon as they become aware of the application and the deadline for filing observations will be at the end of the opposition period or once opposition proceedings have concluded. The EUIPO can re-open examination at any time before grant of an EUTM. 9. Mediation The EUIPO is to establish a mediation centre whose services can be used on a voluntary basis with the aim of arriving at a friendly settlement of disputes. 10. Certification marks There will now be provisions for new EU certification marks, although this is unlikely to be available for 18 months from the commencement date on 23 March 2016. The new EU certification mark will be very useful to certifying bodies that have interests in multiple EU member countries, especially as some national countries still do not have certification marks. 11. Proof of use Infringement - A defendant may require the owner of EUTMs registered for more than five years to provide proof of use (or suitable reasons for non-use) for the five years immediately preceding commencement of the infringement action. This new requirement conforms to the proof of use requirement for oppositions and cancellation proceedings. It removes the need (though not the option) to counterclaim for revocation. A trade mark owner can only enforce its rights to the extent its mark is in use in commerce. Opposition - The period for which an opponent must provide proof of use of a mark will be amended so that the five year use period now precedes the filing/priority date of the EUTM application being opposed, NOT the publication date. NB. Under the provisions of the New Directive, in those territories with post-registration opposition proceedings, the five year non-use period shall be calculated from the date when the mark may no longer be opposed or, if opposed, the date on which the opposition was complete, either because it was withdrawn or because the opposition decision became final. Required geographic scope of Use of EUTM - The previous standpoint of the EU courts has always been that the use of a registered EUTM in one member state of the EU is sufficient to maintain an EUTM, defining borders between EU countries as invisible. However, three recent decisions intimate that this view is rapidly changing and the ‘use’ of a mark in one country may no longer be enough. The key case which sets out what level of use is required to support an EUTM is ONEL v OMEL: Case C-149/11 (reported on our website). This held, purely in relation to the territorial extent of use, genuine use in general requires use in more than one EU Member State unless the market for the relevant goods or services is restricted to one EU member state. This case was followed by the following, full details of which can be found on our website: November 2014 – Opposition No. 400331 by Intermar Simanto Nahmias to UK trade mark application no. 2652113 JUMPMAN by Nike International Ltd – Currently waiting appeal decision. 55,000 pairs of shoes sold to one customer in Bulgaria and 170 pairs of shoes sold in Romania, equating to $476,000, was not considered by the UK IPO as genuine use in the EU and so rejected the opposition. July 2015 – The Sofa Workshop Ltd v Sofaworks Ltd  EWHC 1773 (IPEC) The UK’s Intellectual Property Enterprise Court (IPEC) held that SW’s use of their mark in the UK only, despite being extensive, was not sufficient to constitute “genuine use” for the purposes of maintaining their registrations and therefore, their marks were cancelled from the CTM register. SW’s claim against Works for Passing Off was successful, thereby bringing an end to their use of the name SOFAWORKS. Very Recent Update - The UK IPO has just indicated that it does not intend to follow this narrow interpretation of CJEU case law by the UK’s Intellectual Property Enterprise Court (IPEC). IPEC suggested a default requirement that use must cross national boundaries if it is to be considered genuine. However, the ONEL case expressly indicated that territorial borders are to be disregarded: “’Genuine use in the Community’ is not to be approached from the perspective of whether there has been use of the mark in more than one, two or any other particular number of EU Member States.”. In contrast to the Sofaworks decision, the General Court of the EU has acknowledged that the CJEU’s approach does not introduce a cross-border requirement. For example, Now Wireless Ltd v OHIM, Case T-278/13, found internet and computing services provided in London and the Thames valley to be sufficient. See also Case T-398/13, TVR Automotive Ltd v OHIM, paragraph 57. The UK IPO acknowledges these conflicting decisions of the EU and UK courts. In line with Section 3(1) of the European Communities Act 1972 it has recently indicated that it intends to follow the General Court’s interpretation in line with the Now Wireless case rather than that adopted by the national court in the Sofaworks case. In opposition and cancellation proceedings the UK IPO will therefore “continue to entertain the possibility that use of a CTM in an area of the EU corresponding to the territory of one Member State may be sufficient to constitute genuine use of a CTM. This will apply even where there are no special factors, such as the market for the goods/services being limited to that area of the EU”. It does not automatically follow that use in one Member State will suffice, and the UK IPO is careful to stress that much will also depend on the scale, frequency and nature of use, and the goods and services concerned. September 2015 – Iron & Smith Kft v Unilever NV (C-125/14) Evidence of large quantities of sales of products in the UK and Italy (5% market share in the UK and a 0.2% market share in Italy) was held by the Hungarian IPO as evidence of substantial reputation in other parts of the EU and sufficient to defeat IS’ application in Hungary. Currently there is no further detailed guidance from the CJEU on what constitutes genuine use in the EU. Therefore, if there is use in one country only it may still prove wise to bolster existing EUTM protection with national registrations. 12. Bad Faith It is mandatory that Member States now provide a ground of invalidity in cancellation proceedings. 13. Acquired distinctiveness Marks which are non-distinctive, descriptive or generic shall not be refused if, before the application date, they have acquired a distinctive character. Similarly they will not be declared invalid if they have acquired distinctiveness before the date of application for invalidity. Member States also have a discretion regarding distinctiveness acquired after the application was filed but before the registration date. 14. Reputation marks It is now mandatory for Member States to refuse registration or declare marks invalid if an earlier mark has a reputation and the use of the later marks would take advantage of or be detrimental to the distinctive character of the earlier mark. For example it is not possible to do this currently in Cyprus or Lithuania. 15. Comparative Advertising It is clarified that trade mark owners may prevent use of their trade mark by competitors if it breaches the EU Comparative Advertising Directive (2006/114/EC). 16. Counterfeit Goods in transit Use of marks on counterfeit goods in transit through the EU may now infringe an EUTM. This reverses the controversial decision in Philips and Nokia (C-446/09 and C-495/09) that had ruled that goods could only infringe in the EU if they were released into free circulation in the EU, were intended for the EU market or were the subject of a commercial act directed to EU consumers. Now, EU trade mark owners will be able to prevent the bringing into the EU of goods bearing a mark that "cannot be distinguished in its essential aspects from that trade mark" using any customs procedure (including transit, internal processing, temporary storage or free trade), unless the importer can prove that the trade mark owner would not be able to prevent the sale of the goods in the country of destination. The new regulations will also allow EUTM owners to take action against third parties who offer, stock, import or export packaging or labels with counterfeit marks. It is worth considering having an EUTM, even if use of the mark may only be primarily in one country, just to take advantage of these new counterfeit goods in transit provisions, bearing in mind the volume of goods that pass through the EU. 17. “Own name” defence in Art 12 (1) limited to natural persons. Use of a company name or trade mark confusingly similar to a registered mark constitutes infringement. A defence based on the use of a personal name will still be available. This clarifies that the “own name” defence will no longer apply to company names. 18. Capacity to file EUTMs and Exhaustion of Rights in EUTMs Extended to EEA countries The EEA countries include all the 28 EU countries plus Iceland, Liechtenstein and Norway. Switzerland is neither an EU nor EEA member. Summary and some practical tips The changes to the EUTM Regulation come into force on 23 March 2016. Brand owners with EUTMs filed before June 2012 should check if they cover the Nice class headings and determine if clarification of goods and/or services are required. Brand owners considering multi-class (three or four classes) filings might consider taking advantage of the cheaper official fees prior to 23 March 2016. When planning annual IP budgets, allow for reduced renewal fees after 23 March 2016. Consider registration of non-traditional marks. Consider national registration if use is only in one or two EU countries. Brand owners with counterfeit issues should consider how to help Customs authorities seize counterfeits in transit in the EU.