Restricting CTMs: Knowing When and How to Push the Limits

When CTMs are attacked, brand owners often seek to defuse the conflict by restricting their goods or services. However, not all restrictions are equal, and OHIM can and does reject proffered limitations for a variety of reasons. Moreover, timing can be key: a limitation entered too early might prove a concession too much, but one entered too late might be rejected altogether. It can be hard to judge how much to rule out and when to do it, but careful drafting and strategising can help gain the edge.

Be Positive

Restrictions typically involve either deleting items from a specification, or expressly excluding items or categories of items. Normally they are entered in an effort to overcome an objection that a mark is descriptive or devoid of distinctiveness, or that it conflicts with third-party rights. Deletions are positive restrictions; exclusions are negative ones. OHIM’s approach to each is different.

Negative restrictions have long been problematic. Although excluding specific goods may be clear enough, excluding categories of goods or goods with certain characteristics may result in a specification that is ambiguous as to scope. In line with the ECJ’s ruling in Koninklijke KPN Nederland (POSTKANTOOR) (Case C-363/99, [2004] ECR I-1619), negative restrictions are not acceptable where they would result in registration “only in so far as the goods or services concerned do not possess a particular characteristic” (POSTKANTOOR, para. 114). The ECJ reasoned that such restrictions would leave third parties uncertain as to the scope of the registrations and whether proposed use could infringe.

The power of positive wording is clear, therefore, but it is not always obvious how to achieve it. This point was underlined in a recent CFI appeal, Tegometall International AG v OHIM (Case T-458/05), in which a registrant sought to deflate a challenge to its CTM by restricting it to “shelves and parts of shelves, in particular hanging baskets for shelves, all the aforesaid goods of metal and not of imitation wood.”

The restriction was offered for the first time on appeal to the CFI, and was rejected as out of time. However, had the CFI considered its compliance with POSTKANTOOR, the outcome would probably have been the same. While the restriction to “goods of metal” is positive, “not of imitation wood” arguably excludes a characteristic of certain types of metal shelving, namely those that imitate the look of wood.

It is difficult to imagine a fully positive wording that would have achieved the same result. However, with careful drafting, it is not impossible. One might, for example, restrict one’s goods to “all being of metal and in metallic finishes.” Where the challenge is mounted by a third party, an applicant or registrant could, as a private matter, undertake in a settlement agreement to refrain from use in imitation-wood finishes.

By remaining positive on the register and leaving the negative for private agreements, a party can achieve a restriction that gives an adversary adequate comfort, while at the same time strengthening the restricting party’s hand in the proceedings in case settlement ultimately fails.

Timing is Everything

Purely positive restrictions avoid the POSTKANTOOR trap, but even those sometimes face special difficulties, as highlighted by the CFI’s decisions in Tegometall and Georg Neumann GmbH v OHIM (Case T-358/04).

In Tegometall, the registrant saw its restriction rebuffed as too late. It may have been considered had it been offered before OHIM or OHIM’s Board of Appeal. However, the CFI held that restrictions offered for the first time before the Court could only be considered if they amounted to a withdrawal or surrender of protection in respect of certain goods or services, or to a withdrawal of the appeal in relation to the excluded items. They would not be considered where they sought instead, as in Tegometall, to alter a characteristic of the goods or services claimed. Such restrictions would effectively change the subject matter of the appeal and, as the CFI’s role was to review the legality of OHIM Board of Appeal decisions, could not be considered.

In Georg Neumann, another restriction entered before the CFI was rejected on grounds of timing. In this case, an application to register the shape of a microphone head for “microphones, in particular studio microphones, condenser microphones, pressure-gradient microphones and their parts” in Class 9 met with a nondistinctiveness objection. The CFI rejected the applicant’s argument that the goods were directed at a specialist audience, finding (in line with OHIM’s practice) that the words “in particular” were exemplary rather than limiting. The applicant then attempted to limit to “studio microphones and their parts” to remove the doubt as to the specialist nature of the relevant consumer.

Although the restriction was positive and clear, the CFI rejected it. It held that its effect would be to alter the relevant public for the purpose of assessing distinctiveness. As such, it would alter the subject matter of the appeal and could not, therefore, be allowed.

Comment

Well-worded restrictions can add punch to an argument for registrability and strengthen a defence when a CTM is challenged. However, the outcomes in POSTKANTOOR, Tegometall and Georg Neumann highlight the pitfalls that lurk.

It is clear from POSTKANTOOR that better restrictions will almost always be positive ones. Negative restrictions, if necessary, should take their place in a private undertaking if settlement is on the table. If settlement fails or is not an option, an accepted positive restriction at the right stage might secure the desired result for the restricting party and avoid the need for further appeals and the associated costs and uncertainty.

It is also imperative that restrictions, to be effective, must be entered at the right time. Most critically, they should be offered before OHIM or OHIM’s Board of Appeal, and not for the first time before the CFI. Unless a restriction is purely a withdrawal of certain goods or services, chances are good that it will be regarded as altering the scope of the proceedings under appeal. Georg Neumann shows that even the mere deletion of certain goods or services before the CFI can be risky if it has the potential to alter the relevant public. Restrictions intended to overcome distinctiveness or descriptiveness objections will often have this effect.

Determining when the time is right to offer a restriction is frequently a matter of fine judgment. A restriction may avoid a negative outcome, but if there is a chance of success without it, it is tempting to press on with the broader claim in the hope of achieving better protection. These conflicting desires must be balanced by realism: while it may be reasonable to withhold a restriction at first instance, holding it back before the Board of Appeal can involve real risks. When the stakes are high, it may often be better to secure a partial victory than lose everything by restricting too late.