Documents considered by the Committee on 18 March 2015 - European Scrutiny Contents

20 Reforms to the EU's trade mark regime

Committee's assessment Legally important
Committee's decisionCleared from scrutiny subject to conditions
Document details(a) Draft Regulation amending Regulation 207/2009 on the Community trade mark (b) Draft Directive to approximate the laws of the Member States relating to trade marks (recast)
Legal base(a) Article 118 TFEU; ordinary legislative procedure (b) Article 114 TFEU: ordinary legislative procedure.
Department Business, Innovation and Skills.
Document numbers(a) (34807), 8065/13 + ADDs 1-2, COM(13) 161

(b) (34813), 8066/13 + ADDs 1-2, COM(13) 162

Summary and Committee's conclusions

20.1 A trade mark is a sign which can distinguish the goods and services of one undertaking from those of its competitors. European trade mark law is currently enshrined in Directive 2008/95/EC approximating the laws of the Member States relating to trade marks, and in Regulation 207/2009 on the Community Trade Mark (CTM).

20.2 The Regulation provides for an EU wide trade mark,[47] administered by the Office for Harmonisation in the Internal Market (OHIM),[48] a self-financing executive and regulatory agency of the EU. A CTM provides protection in all Member States. Alongside this, national trade marks, providing protection in the Member State of registration, are available from Member States' own registries (with the exception of the Benelux countries which offer a combined regional trade mark). This dual system allows businesses to decide how they wish to protect their trade marks to meet their business strategy — in one Member State, in several Member States or across the entire EU. According to the Government, business users are broadly happy with the current regime.

20.3 These proposals make extensive, albeit largely technical, changes to the two trade mark regimes, by aligning them more extensively, improving co-operation between national intellectual property offices (IPOs) and OHIM, and updating the governance of OHIM. Our Third Report of 21 May 2013 sets out the details.

20.4 The Government, whilst supportive of the outcome of negotiations in the Council, did not vote in favour of its General Approach in the Council because it retained provision for OHIM's surplus to be paid into the EU general budget. When we last considered this matter we had one outstanding question: namely how the percentage re-imbursement of OHIM's income to member States would be calculated and whether the sums involved would match the amounts currently made available.

20.5 The Minister for Intellectual Property (Baroness Neville-Rolfe) now provides an update on the progress of trialogue negotiations with the European Parliament and reports that the Latvian presidency remains determined to secure an agreement, which she thinks is a reasonable expectation.

20.6 The negotiations with the European Parliament have so far resulted in a number of technical changes beneficial to the UK. There remains under negotiation an overall deal on financing, including: the level of OHIM fees; the redistribution of a percentage of OHIM revenue to Member States; some possible redistribution to the benefit of the Court of Justice and the European School in Alicante; and the transfer of OHIM surpluses to the EU budget. She indicates that the UK red line of not transferring OHIM surpluses to the EU general budget is unlikely to be achieved.

20.7 The Minister's reply does not deal with the specific question we raised in our previous report concerning the calculation of the percentage of the redistribution of OHIM revenue to Member States and whether the resultant amount will match the amounts currently available.

20.8 We thank the Minister for the further update. Although the UK is unlikely to vote in favour of the text likely to emerge from first reading negotiations with the European Parliament, the Minister asks for clearance of these documents. We are prepared to grant this subject to conditions that (a) the text to be agreed makes no provision for the transfer of OHIM surpluses to the EU general budget; and (b) the percentage of OHIM revenue to be redistributed to Member States results in no decrease of such money being redistributed to the UK.

20.9 We ask that our successor Committee be updated early in the new Parliament, and that it be provided with any text that may have been agreed. Should the UK have voted in favour of any text we ask for an explanation of how the conditions attached to our scrutiny clearance have been met.

Full details of the documents: (a) Draft Regulation amending Council Regulation (EC) No. 207/2009 on the Community trade mark: (34807), 8065/13 + ADDs 1-2, COM(13) 161; (b) Draft Directive to approximate the laws of the Member States relating to trade marks (Recast): (34813), 8066/13 + ADDs 1-2, COM(13) 162.

The Minister's letter of 10 March 2015

20.10 The Minister gives this overall assessment of progress to date:

    "As I outlined in my previous letter we are broadly happy with the reform package as a whole: the modernisations and further harmonisation will bring real benefits for UK businesses. The European trade mark system is considered an enormous success, a view backed up by research, and is well used by UK businesses."

20.11 She outlines the remaining areas of negotiation:

    "It now looks increasingly likely that the co-legislators will try to reach an overall deal on financing including the level of OHIM fees, the redistribution of a percentage of OHIM revenue and, as outlined above, the issue of transfer.

    "The Commission has been working to explore ways to address the outstanding concerns, and is promoting a bundle approach. The bundle includes:

·  The proposal to use part of OHIM's revenue to compensate member states for costs related to the trade mark system, which I detailed in my previous update.

·  A new proposal to support the Court of Justice of the EU (CJEU) by providing it with a fixed percentage of OHIM's revenue. As there is a close link between OHIM's decisions and the percentage of trade mark cases lodged before the Court, the Commission's case for funding may have some merit. This idea has not met with much support.

·  Funding for the EU school in Alicante where the OHIM is based, as the employees of the OHIM are exempt from paying the usual fees for their children's attendance.

·  The possibility of the transfer newly accumulated surpluses to the EU budget.

    "The Commission is asserting that all aspects are required for an acceptable solution. The reticence toward the idea providing some funding to the CJEU, may be overridden by the importance the majority of member states put on securing compensation for the extra costs of the trade mark system. However, as outlined above, we will not be able to support any compromise solution which includes the provision on transfer to the EU budget.

    "Another remaining contentious issue is Delegated Acts since the Council and the European Parliament continue to hold opposite views, with the Council's proposing the removal of nearly all the Delegated Acts and the European Parliament aiming to preserve the majority of them. Whilst we support the reduction of the number of delegations, it is likely that the Council will be forced to accept the reinstatement of some of them in an effort to reach a compromise with the European Parliament. The UK position is that, if appropriately framed, some Delegated Acts may be acceptable as part of the negotiating package."

20.12 The more technical improvements achieved during the trialogue negotiations are described as follows. "Relative grounds" refers to objections to a trade mark based on the existence of an earlier mark, as compared to an objection based on the fact that the mark does not have the necessary characteristics to qualify for registration:

    "Goods in transit

    The European Parliament has agreed to support the compromise text agreed by the Council, which introduces a defence allowing the owner of the goods to prove that the trade mark is not protected in the country of destination. This is something for which we negotiated hard and we welcome the shift in the European Parliament's position.

    "Small consignments

    The Council and the European Parliament agreed to remove the provision allowing trade mark proprietors to prevent the importation of small packages containing counterfeit goods. We had raised concerns during negotiations that the clause could not be defined clearly enough, meaning that it would not achieve the intended policy goal. Further we believed it could have a negative impact on legitimate goods and private buyers. We are pleased that it has now been recognised that the provision was defective and so deleted.

    "Relative grounds

    The original provision preventing national offices from refusing applications ex officio on the base of early rights (relative grounds) has been removed. As outlined in a previous update we had concerns about the impact of this provision on our ability to maintain the current UK system, whereby examination based on earlier rights is not conducted ex officio, but upon request through opposition proceedings and we provide searches and notification to assist this process. A compromise amendment agreed on this article allayed some of our concerns, as it made clear that member states could retain their notification systems.

    "Technical provisions

    During Working Party discussions, the UK was successful in achieving the removal and amendment of a number of technical provisions that would require changes to the UK trade mark law. Some further technical improvements have been agreed at trialogue, including the removal from the Directive of the requirement that request for assignment must be made in writing, that contract must be signed from both parties and that the concerned trade mark cannot be enforced until assignment is recorded . We did not support these provisions during negotiations, considering them overly bureaucratic and unnecessary."

20.13 The Minister sums up her approach to these negotiations as follows:

    "research has indicated how important intellectual property, and in particular trade marks, are to competitiveness and productivity in the EU. Our view remains that the reform of the trade mark system is a positive step that will undoubtedly improve the functioning of a system that already delivers real benefits for UK businesses and our single market partners. It is on this basis that we have long supported the reforms. However, our support must be consistent with our broader principles, and it is unfortunate that the co-legislators continue to support the inclusion of the controversial and unnecessary proposal which will enable a transfer of OHIM surplus income away from intellectual property and into the general budget of the EU, leaving us no choice but to reject the package."

Previous Committee Reports

Thirteenth Report HC 219-xiii (2014-15), chapter 7 (15 October 2014); Eighth Report HC 219-viii (2014-15), chapter 2 (16 July 2014); Forty-fourth Report HC 83- xxxix (2013-14), chapter 4 (26 March 2014); Third Report HC 83-iii (2013-14), chapter 5 (21 May 2013).

47   Currently called a "Community trade mark" but to be renamed a "European trade mark". Back

48   To be renamed the European Union Trade Marks and designs Agency. Back

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Prepared 27 March 2015