The CJEU yesterday handed down its much anticipated decision in Leno Merken BV v Hagelkruis Beheer BV Case C-149/11, concerning the geographical extent to which a Community trade mark must be used to avoid sanctions for non-use.
For the unitary Community Trade Mark, owners are required to put the mark to "genuine use in the Community" within 5 years of registration or risk sanctions for non-use. For a number of years, there has been debate as to the meaning of "in the Community": does this imply use of a mark in more than one European Member State and, of so, how many Member States constitutes "in the Community".
The CJEU concluded that national borders should be ignored. Rather, an assessment is made of the market for the relevant goods and whether the trade mark owner has used the trade mark to create or maintain market share within that market. For certain goods (e.g. traditional German Lederhosen) the geographical extent of the market is very limited and therefore "genuine use in the Community" would be limited to use in that limited geographical area. In most cases however, the market for the relevant goods is likely to be far more geographically extensive and in these cases use of a trade mark within a single Member State would not be sufficient to establish genuine use "in the Community"
Applications to register trade marks in Europe can be opposed, and ultimately blocked, by holders of a variety of earlier rights. One such right is a Community Trade Mark ("CTM"). A CTM which is a unitary trade mark that applies equally in all Member States of the European Union. As with national trade marks in each of Europe's 27 Member States, a CTM becomes subject to "use" requirements five years after it has been registered, meaning that it can only be relied upon in litigation or trade mark opposition proceedings to the extent that it has been put to "genuine use in the Community in connection with the goods or services in respect of which it has been registered". Without proof of such use, the CTM may also suffer sanctions, such as removal from the register.
The present case concerned whether evidence demonstrating use in a single Member State could meet the requirement of "genuine use in the Community" and, if so, under what circumstances.
AG Sharpston, whose Opinion on this question we covered here, advised the CJEU to rule that national borders should be ignored in favour of determining whether, in all the circumstances, the use is sufficient to maintain or create market share in the Community market for the goods and services covered by the mark, and whether it contributes to a commercially relevant presence of the goods and services in that market.
In its decision yesterday, the CJEU has held that the phrase "in the Community" serves only to define the extent of the marketplace at issue and to make clear that use outside the Community cannot validate CTM usage. It does not introduce a US-style interstate requirement of trade mark use per se, the Court stating that "the territorial scope of the use is not a separate condition for genuine use" and therefore "territorial borders of the Member States should be disregarded".
As a result, whether a CTM has been put to genuine use in the Community will depend on whether the CTM has been used to create or maintain market share for the goods and/or services protected by the registration.
This common sense approach reflects the reality of a marketplace as large and diverse as Europe since the markets for particular goods or services may exist predominantly, or even entirely, within the territory of a single Member State. Introducing a cross-border requirement on these markets would prevent businesses from obtaining a CTM, thereby potentially restricting their ability to grow into new territories and dividing up the internal market.
The Court also ruled out imposing any kind of de minimis threshold for genuine use, stating that to do so would deprive national courts of the ability to look at all the circumstances of the market(s) in question. It did state, however, that there was no requirement that the use extend to a "substantial part" of the Community: that requirement, which was introduced by earlier CJEU case-law, applies only to CTMs that have a reputation or are well known. The "genuine use" requirements, which apply to all CTMs, pursue a different objective.
As to whether use in a single Member State can ever be sufficient to constitute genuine use "in the Community", the Court says that it can, but only in circumstances where the relevant market "is in fact restricted to the territory of a single Member State". This is unlikely to be the case for a large number of markets, meaning that for most businesses some degree of use in more than one Member State is likely to be required.
Many businesses will be relieved that the sufficiency of their trade mark use will continue to be assessed according to the circumstances of their own markets and not according to those of other markets or even a hybrid of several markets.
The Court's narrow wording regarding use within a single Member State, however, implies that cross-border use is likely to be a requirement for all but the most local of markets. Strictly speaking, of course, this is a factual and an economic question rather than a legal one, but the end result is the same.
The approach adopted by the CJEU and to be followed by national courts may be summarised as follows:
- Identify the market for the goods and/or services protected by the CTM.
- Has the use of the CTM been in more than one Member State? If not, is the relevant market limited to the territory of a single Member State?
- Has the use in accordance with point 2 above served to designate the origin of those goods or services?
- Has the use in accordance with point 3 above been for the purpose of creating or maintaining a share of the Community's market for those goods or services?
Unless questions 2, 3 and 4 above can all be answered "Yes", the use of the relevant CTM is unlikely to be "genuine use in the Community" and, if the CTM has been registered for more than five years, its continued existence on the Community Trade Marks register may be vulnerable.
The CJEU's decision in Leno Merken BV v. Hagelkruis Beheer BV Case C-149/11 can be read in full here.