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Public Bill Committee Debates

Draft Trade Marks (Relative Grounds) Order 2007



The Committee consisted of the following Members:

Chairman: Mr. David Wilshire
Burt, Lorely (Solihull) (LD)
Cash, Mr. William (Stone) (Con)
Ellwood, Mr. Tobias (Bournemouth, East) (Con)
Gray, Mr. James (North Wiltshire) (Con)
Havard, Mr. Dai (Merthyr Tydfil and Rhymney) (Lab)
Hepburn, Mr. Stephen (Jarrow) (Lab)
Kramer, Susan (Richmond Park) (LD)
McCabe, Steve (Birmingham, Hall Green) (Lab)
McCafferty, Chris (Calder Valley) (Lab)
McKechin, Ann (Glasgow, North) (Lab)
Palmer, Dr. Nick (Broxtowe) (Lab)
Prisk, Mr. Mark (Hertford and Stortford) (Con)
Shepherd, Mr. Richard (Aldridge-Brownhills) (Con)
Vaz, Keith (Leicester, East) (Lab)
Wicks, Malcolm (Minister for Science and Innovation)
Williams, Mrs. Betty (Conwy) (Lab)
Wood, Mike (Batley and Spen) (Lab)
Emily Commander, Committee Clerk
† attended the Committee

Second Delegated Legislation Committee

Tuesday 19 June 2007

[Mr. David Wilshire in the Chair]

Draft Trade Marks (Relative Grounds) Order 2007

4.30 pm
The Minister for Science and Innovation (Malcolm Wicks): I beg to move,
That the Committee has considered the draft Trade Marks (Relative Grounds) Order 2007.
Mr. Wilshire, it is a pleasure to be here to discuss this important topic. The order is simple. It will ensure that our system of national registration and trade marks provides those with business in the UK with a useful and affordable alternative to the registration of their marks as EU Community trade marks; and it will remove the unnecessary impediments encountered by some businesses that want trade marks for new products.
The law has long required the registrar of trade marks to block new trade marks from registration if he thinks that they conflict with earlier trade marks. That is done automatically, regardless of whether the owner of the earlier mark is concerned by the prospective registration of the later mark. Although the Trade Marks Act 1994 continued that regime, it also made provision for changes to be made after the Community Trade Mark Office had opened and operated for 10 years. That office was established in 1996. Since then, it has been possible to protect a trade markin the UK by registering it here, or to protect it throughout the European Community by registering it at Community level.
The substantive provisions of national trade mark law have been largely harmonised following European directive 89/104. European law requires that Community marks be afforded the same rights and remedies as national marks. A new national trade mark can therefore be refused if it conflicts with an earlier mark, irrespective of whether the earlier mark is protected at Community or national level. Those are known as relative grounds for refusal. Although substantive trade mark law has been harmonised, member states have discretion regarding the procedures for achieving the rights and remedies. There are therefore differences between the registration procedures operated by different member states and those that apply at Community level.
Unlike the United Kingdom, the Community Trade Mark Office cannot block the registration of new trade marks on relative grounds. New Community trade marks are refused on such grounds only if they are opposed by someone with an economic interest in an earlier conflicting mark or right. The owner of an earlier mark is likely to oppose a new mark only if he thinks that it will cause damage to his existing mark in the marketplace. Consequently, despite the scope for conflicts with earlier marks being potentially greater for Community marks, a new UK trade mark is three times more likely to be refused registration on relative grounds than a new Community-wide trade mark. That has had several consequences.
First, as the number of marks protected at Community level has risen, it has become harder to register new trade marks in the UK. Secondly, inequitable anomalies have arisen because Community marks are not positively examined on relative grounds before their registration. For example, the registrar is rejecting national applications on the basis of a perceived conflict with two or more earlier Community marks, even though those marks appear to conflict with each other as much as they do with the new national trade mark.
That is an unsatisfactory situation. It is compounded by the fact that, under European law, the owner of trade mark registered for five years or more may object to the registration of a later trade mark only to the extent that he can show that his mark has been putto genuine use. Under UK law, that condition doesnot and cannot apply to objections raised before registration by the registrar himself. The registrar must therefore sometimes block new trade marks because of earlier marks, in circumstances where the owners would not be entitled to object.
There are sometimes ways in which such objections on relative grounds may be overcome. For example, the applicant may try to obtain written consent from an earlier mark’s owner, but that takes time and money. To avoid such obstacles, an applicant can apply for their mark to be a Community trade mark. However, that is more expensive, and the applicant will also expose himself to the risk of litigation throughout the Community. It is also not right that an applicant must base his decision on the potential obstacles that he may face, rather than on the nature of the right that he requires.
The better solution is to adopt a system whereby it is left to the owners of any earlier marks or rights to object to a new national trade mark. After all, the owner of the mark is best placed to judge whether a new trade mark is likely to affect their intellectual property. Furthermore, they are best placed to show that it meets any use conditions imposed by the law. There is a potential argument that it is the owner of the mark who has most responsibility for acting to protect his own property. The order will introduce such a system.
We should note that the order provides that the registrar may continue to conduct a search of the relevant registers for the purposes of notifying persons about the existence of relevant earlier trade marks. The search results will be sent to applicants for new trade marks so that they can assess the risks of successful opposition and decide whether to proceed. If the application does proceed, the owners of earlier marks who appear to have an interest will also be notified.
It is intended to introduce those notification requirements into the related trade marks rules. If the applicant opts to proceed with his application the registrar will notify the owners of any earlier trade marks identified in the search. That will be done automatically. It is also intended that owners of earlier marks protected at Community level will be given the opportunity to apply to receive such notifications. Accordingly, there will be a practical opportunity for the owner of any earlier mark or right to oppose the registration of any subsequent conflicting UK national trade mark.
Furthermore, if there is no opposition and the trade mark is registered, provision will remain for the registration subsequently to be declared invalid. That creates a more balanced and proportionate registration system. It also aligns the national system more closely with that operated for the Community trade mark. This should bring greater clarity and remove the confusion on the part of businesses, which often do not understand why the UK operates the same substantive law through different procedures from those that operate at Community level and in the majority of member states.
The order has been subject to extensive consultation with rights holders, prospective rights holders, legal professionals and their representative bodies. Around 70 per cent. of those consulted felt that a move to some form of search and notify opposition regime was necessary. My Department has worked proactively with interested parties to ensure that the order is workable and equitable to all parties. I therefore commend it to the Committee.
4.37 pm
Mr. Mark Prisk (Hertford and Stortford) (Con): I, too, welcome you to the Chair, Mr. Wilshire. I am grateful to the Minister for placing the view and policy of the Government on the record. After all, this is an important area. The protection of intellectual property, including trade marks, is vital to a knowledge-based economy. That is the case for innovative firms, whether they are small, medium or large, but particularly for smaller firms whose commercial future may be based on their ability to protect, maintain and exploit the research and development in which they have invested over a number of years. It would therefore be helpful to set the context of the order if the Minister could set out for us the specific penalties here in the UK for patent infringement.
The order, as the Minister has said, switches theonus from the UK Intellectual Property Office, a Government agency, on to the mark holder. The fundamental question is: which is the most efficient system for both the public and mark holders? Is it the current system or is it the one that is proposed in the order? The Minister has made a number of perfectly reasonable remarks and suggestions as to why there is benefit in his proposals. The order will, after all, bring our rules into line with those of other registries, and it is appropriate that those who benefit from the protection of their invention bear the burden of ensuring that what they have done has been protected.
There are a number of problems. They were highlighted in the Minister’s own regulatory impact assessment, which accompanies the order and which I know members of the Committee will have read. The first concern is that the change, despite the Minister’s warm and generous remarks about it, represents a significant new burden for mark holders. They will be the ones on whom the onus lies to check and to ensure that entries on the registers will not conflict with their existing property.
My second concern that the switch that has been described could effectively end the public policy decision to keep confusing marks off the register. I would welcome the Minister’s comments on that. My third concern is that the net effect for small businesses could be an unfair and disproportionate burden, especially if they had to monitor not only this country’s register, but every nation’s.
I have a couple of brief questions for the Minister. First, what assurance can he provide us and those directly affected by the order that the public policy decision of registry policy on trade marks is no longer needed? That is an important issue, as not only an administrative process but a public policy issue are involved.
Secondly, what further details can the Minister provide about the small firms impact assessment that has been made, so that we can be absolutely sure that the change will not be unduly burdensome? The Minister has alluded to the fact that 70 per cent. of those consulted supported the principles that underlie the order, but exactly how many people were consulted is unclear. Just as important, what balance of those who were consulted were smaller entrepreneurs, as opposed to major multinationals?
I am particularly concerned to know which sectors have been consulted by the civil servants who have checked and spoken to the industry. Clearly, different business sectors will have different perceptions. For example, in the biotech industry, for example, there are a significant number of complex intellectual property issues for which infringement and conflicts may well have more subtle aspects than in markets where products are being developed.
I should be grateful if the Minister provided assurances on those two fronts and put firmly on the record that the Government have consulted effectively and that they are clear about the public policy decision that underlies the order.
4.42 pm
Lorely Burt (Solihull) (LD): The Minister has clearly outlined how most of the order would work. The main driver seems to be Community trade marks and international trade marks, both of which provide legal protection in the UK. Under existing UK rules, those would block any new applications made in the UK, even when there was no significant UK presence. However, those trade marks are not themselves blocked by earlier UK registrations, as they fall outside the UK rules. To create a level playing field, everyone should abide by the same rules. In so far as the order achieves that, it is welcome.
However, I want to see a number of safeguards, and I would like the Minister to comment on them. Under the new proposals, the earlier owner is supposed to be notified. However, fail-safes would be needed to ensure that that happened. When trade marks are issued in error, mechanisms must be in place to recompense in full the original owner at no cost to them and to remove the trade mark from the new owner immediately. Mechanisms are alluded to, but not detailed; I should be grateful if the Minister elaborated a little.
After the earlier trade mark owner has been notified, what will the window of opportunity be for opposing the application? What will be the likely costs associated with any opposition by the original owner? Imagine10 people all applying for trade marks with names similar to one that has already been registered. The original owner would have to oppose 10 applications, whereas previously the registrar would just have blocked them.
Applications could be made frequently throughout the year, although I understand that that would be unlikely in practice. However, it would be useful to understand what time burdens would arise when opposing an application. Whether what I have said is accurate or not, the buck seems to be passing away from the registrar towards the trade mark owners. I would be interested to learn what savings the Government will make and, more important, how the money saved will be redirected to protect existing trade mark owners.
The Minister referred to the preliminary indication, which will greatly help trade mark owners and applicants to discern whether it will be a viable exercise to oppose. However, if a trade mark owner had a preliminary indication against opposing an application and still felt sufficiently moved to object, presumably, he or she would have to pay the costs if the case was taken to appeal. I should be grateful for the Minister’s comments on the matter.
In an ideal world, the onus should be on the registrar to block or oppose any application for a trade mark that is already registered. It should not be the responsibility of the person who made the registration, who believed that he was protecting the trade mark by doing so and that he would not be forced to oppose such applications.
Clearly, we need a level playing field. The World Intellectual Property Organization and Community trade marks are outside our jurisdiction and we cannot alter the law there. For the UK to ensure a level playing field, our rules need to marry with international and EU rules. Our mission is to ensure that there are adequate safeguards built into any system, so that people who register trade marks in good faith receive adequate protection and are not subject to inordinate costs.
4.47 pm
Malcolm Wicks: This has been a useful debate and some important questions have been asked. I will do my best to provide answers, but I hope that hon. Members will agree to my replying in writing if I need to follow up the details of the important and specific issues that have been raised.
The hon. Member for Hertford and Stortford, perfectly properly, set the context: that Britain must become what many refer to as a knowledge economy, in which we will live by our science and inventions, and by our wits and ideas. Intellectual property, trade marks, patents and so on therefore become increasingly important. Indeed, the key assets of many companies, large and small, are not machinery but ideas translated into trade marks and patents. We have rebadged the Patent Office as the UK Intellectual Property Office, but it is not just a matter of rebadging; the office is doing very valuable work.
The order will allow us to warn holders of existing trade marks that a new application has been made for a trade mark in their field. As I said in my opening remarks, our intention is to introduce the notification requirements into the related trade mark rules. If the applicant opts to proceed with his or her application, the registrar will notify the owners of any earlier national trade marks identified in our search. That will be done automatically by the UK Intellectual Property Office so the burden will not be on an existing trade mark holder to make the effort to search on a monthly or weekly basis. That is an important safeguard.
I was asked about penalties. There are penalties, which can be quite severe, and rightly so, because a trade mark could be crucial for a smaller company such as a bioscience company—I am talking more broadly now about UK intellectual property. I am advised that penalties can involve civil damages, an injunction, or criminal sanctions. Indeed, a maximum sentence of 10 years’ imprisonment is possible for infringement, which shows how seriously British law takes these matters.
Mr. Prisk: I am grateful to the Minister for clarifying some of those points. He will recognise that a small business facing a multinational which is infringing its patent faces the difficulty of taking a legal action, which has a cost involved and is very often complex, before any of those penalties can be engaged. Is it not true that without legal action no financial penalties can be charged against someone who is clearly infringing the patent?
Malcolm Wicks: I think the hon. Gentleman is right. It is a question of the existing patent holder taking the initiative. If there is any further information that I can give the hon. Gentleman on that, I shall write to him.
I was asked about the consultation. I am advised that the consultation was brought to the attention of about 500 businesses across all fields, and therefore not just professionals. As I think I stated earlier, over 70 per cent. of small businesses felt that change was required. If I can add to that information, I will do so. We certainly went out of way to notify small companies as well as large.
On the theme of smaller or medium-sized companies and the question of costs, one of the aims of the order is to decrease the cost and time involved and the burdens. Under the new regime the number of oppositions is likely to increase from the current rate of 3.5 per cent., but it is unlikely to rise to anywhere near the 32 per cent. of applications to which the registrar currently objects on relative grounds. Thus the cost to business of the additional oppositions should be more than offset overall by a significant reduction in the cost of delayed and refused national applications.
That is an important balancing point. Understandably, some of the questions have been about the existing trade mark holder. We are also concerned about someone who wants to register a new trade mark when there is no logical reason why it should not be registered and no one is going to oppose it. Under the current regime they are often refused. The main thrust of our argument is that that would occur far less in future, which would be good for business.
Mr. Prisk: It may be something that is not immediately within the reach of the Minister’s memory, but could he tell us the IPO’s estimate of the potential saving? That is not made clear in the regulatory impact assessment. Clearly, there will be a saving because there will be a reduced burden on the IPO. It would be helpful to know what saving the Government anticipate from this shift.
Malcolm Wicks: I do not think that we anticipate a saving as such, but again, I will write to the hon. Gentleman. We do not think that there will be any savings of Government resources. The measure is intended to help the freer flow of trade marks. Again, if I have got that slightly wrong, I will write to the hon. Gentleman on that point. I think that the new system will be good for businesses and less burdensome on those that wish to register trade marks when there is no logical reason why they should not be registered. I may deal in writing with the other points that have been raised if that is acceptable. I hope that I have dealt with the most substantive ones.
Mr. Prisk: There is particular interest to see on the record that the Government are satisfied regardingthe public policy aspect of the order, in the sense that the process is not merely an administrative on. Conflicting marks on the registry have an important public policy aspect. Is the Minister satisfied that there is no public policy issue here? The answer may be beyond his reach now, and he may wish to come back to us in due course, but it would be helpful if his comments were on the record.
Mr. Prisk: Without wishing to stretch your patience too far, Mr. Wilshire, the question is whether, in the Government’s view, the public policy decision that ensures that the registrar polices conflicting trade marks is no longer needed, or is needed but the order will deal with the problem in a different way.
Malcolm Wicks: I think the order deals with the problem in a modern way. We are moving resources and effort from the UK Intellectual Property Office making the objections—as I said, that happens in about a third of cases; I think the figure is 32 per cent.—to a rather more sensible regime in which the assumption will be that a new trade mark can be registered. A proper search will be done, but the burden is placed on the owner of the existing trade mark, who will be notified by the UK Intellectual Property Office. There will be an objection only if the existing trade mark owner thinks there is a problem about a new trade mark. There will be far fewer refusals, so in terms of the flow of intellectual property—in this case trade marks—we are moving in the right direction. That is sensible public policy.
Mr. Wilshire, I think our proceedings may be coming to an end; I certainly am. We have had a useful debate. I promise once more to reflect on the questions, some of which were quite specific, and to write to hon. Members with better answers.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Trade Marks (Relative Grounds) Order 2007.
Committee rose at three minutes to Five o’clock.
 
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