DESCRIPTIVE MARKS

A Matter of Mere Local Significance

In its recent decision in Compass Publishing BV v. Compass Logistics BV, the High Court threw a searchlight on the question of just how local an unregistered right has to be before it loses the capacity to block the registration and use of later conflicting Community Trade Marks.

Unregistered rights are well-known as a basis for challenging CTMs. Under Articles 52 (1) (c) and 8 (4) of the Community Trade Mark Regulation (Council Regulation 40/94), a CTM may be declared invalid, and a pending CTM may be refused, on the basis of a non-registered trade mark or another sign used in the course of trade of more than mere local significance, to the extent that, pursuant to the law of the member state governing that sign, rights to it were acquired prior to the application or priority date of the CTM and the sign confers on the proprietor the right to prohibit the use of the CTM there.

These provisions derive from the need to reconcile conflicting Community and national rights. The CTM system was intended to work in tandem with national rights, not to replace them, so national rights have to be respected. Nevertheless, as the judge observed, if all unregistered rights in a European Union of 25 member states were a basis for challenging CTMs, few CTMs could ever be validly registered. Much turns, therefore, on what “of more than mere local significance” means.

In Compass, Laddie J. applied a purposive construction. He held that of the twin purposes of Articles 52 (1) (c) and 8 (4), the first was to ensure that earlier unregistered right owners could rely on their rights to stop the use of later conflicting CTMs. This was achieved by Article 106, under which the owner of an earlier right under national law can prohibit the use of a later CTM in that territory, unless he has acquiesced in the use of the CTM there for five years.

The second of the twin purposes was to ensure that the owners of unregistered rights could continue to use their earlier rights without infringing later CTMs. This was more complex. It was achieved by the availability of invalidation under Article 52 (1) (c), but only where the rights were of more than mere local significance. In such cases, an earlier unregistered right owner could see off an infringement action by counterclaiming that the CTM was invalid due to conflict with the earlier unregistered right. In contrast, where the rights apply only in particular localities, Article 107 (3) provides that later CTMs cannot be asserted against the use of the prior rights in those localities. Against such earlier local rights, CTM holders do not have the power to sue for infringement. What do these different methods of protecting the continued use of different types of unregistered rights say about how the scope of those rights should be determined?

In answering, the court construed the law as dividing unregistered rights into those that are Community-wide and those that are not. It held that an earlier right that only applies to a particular locality under Article 107 (1) refers to any non-Community right, namely any right of less than Community-wide scope. Owners of such unregistered rights could invoke the shield of Article 107 (3) against efforts to enforce later CTMs against them. Moreover, in accordance with Articles 106 (1) and 107 (1), such rights could be invoked against the use of later CTMs in those localities as far as national law permits. In the view of the court, rights of Community-wide scope also enjoyed the same protection.

The equality stopped here, however. Not all earlier rights were a basis for invalidation of later CTMs. Only those which were of “more than mere local significance” conferred this power. Owners of rights applicable only in particular localities had to satisfy themselves with the ability to fend off any commercial forays into their territory by the CTM owner. This, the judge observed, was as much protection as the owner of purely local rights needed. Consequently, the need to protect the owner of unregistered earlier rights was provided for by Article 107 (3) and was therefore not a consideration for determining whether a later CTM should be registered under Article 8 (4). The words “of more than mere local significance” in that provision therefore had to be construed as preventing the registration of CTMs only on the basis of an unregistered right that is “of sufficient width that it would significantly impair the ability of the CTM to deliver the Community-wide rights which the Regulation is seeking to encourage.”

The judge remarked, “a mark should be considered as having mere local significance within the meaning of Article 8 (4) if its geographical spread is restricted to substantially less than the whole of the European Union and that, from the perspective of the Community market in the services or goods in question, the mark is of little significance.”

Whether or not unregistered rights are too local to prevent registration of a later CTM was therefore to be assessed from a Community perspective. A mark used in more than one member state could, in certain circumstances, be regarded as merely local, but all relevant factors must be considered. Use in the wine-producing field in a small part of the Community might not be merely local from a Community perspective if, for example, it covered most or all of the area in which wine was made.

 

 

Comment

This decision acknowledges that the distinction between an earlier mark that is too small to invalidate a later CTM, and one that is not, is imprecise. In the view of the judge, however, such imprecision is inevitable.

The court’s finding suggests that even nationwide unregistered rights may be of mere local significance when it comes to challenging later CTMs. The holder of such a right may not be sued for infringement by later CTM owners, and can prevent the use of the CTM in his own territory, but further than this he cannot go. For the smooth functioning of a trade mark registration system in a market of 25 countries, the court regarded this outcome as pragmatic and necessary.

The Community perspective advocated by the judge may lead to what appear to be extreme results from a national perspective, where a strong but unregistered brand is anything but “merely local.” If followed, this decision is likely to be of considerable importance in assessing the ability of unregistered right owners to challenge later CTMs. It also emphasises the preference of the law for earlier registered rights, which are always a basis for opposition to and invalidation of later CTMs.