Trade Mark Use Doctrine in the European Union and Japan (*)
Invited Researcher: Martin HUSOVEC (**)
The scope of the regulatory power of the trademark law in the market-place is constantly being tested against the newdevelopments in technology. Today, the rights arising from the trademarks often cover many activities going beyond themere misrepresentation of goods and services. Market transparency, is not anymore the sole goal of the trademark law. In
this comparative study, we will contrast European and Japanese approach to the doctrine of trademark use, i.e. doctrinethat decides whether the trademark laws extend rights to regulate a particular use of a sign prior to any considerations ofconfusion or unfair advantage. Evolution of the law in the two countries illustratively shows the gradual departure fromorigins of trademark protection, still persisting in Japan, to more advanced, but not necessarily better, systems of protectionin the European Union.

IIntroduction

The scope of the regulatory power of the trademark
law in the market-place is constantly being tested against
the new developments in technology. Today, the rights
arising from the trademarks often cover many activities
going beyond the mere misrepresentation of goods andservices. Market transparency, is not anymore the sole goal.
To conceptualize the historical development, it is useful tocontrast two different roles of the today’s trademark law:(1) protection against misrepresentation and (2) protection
against misappropriation. The two are not hermeticallysealed water-tight compartments, to be sure. The twocategories help to roughly distinguish two distinct goals of
today’s trademark policy: the goal of (1) guaranteeing
market transparency for existing businesses and (2)guaranteeing exploitation of the other business
opportunities embodied in the sign, such as a possibility to
expand to dissimilar markets, to exercise control over thereferences to one’s own business or to engage in crossborder price discrimination.
It is virtually undisputed that the essential function of
the trademark is to grantee the source of products. If
consumers can rely on the indicators of origin of theproducts, they are able to reward and punish theirproducers. If the communication channel works and thetrade flourishes, it is inevitable that a trademark starts
accumulating a lot of economic value in itself. The markbecomes a value independent to products it is used to label.
Others, especially the competitors, will then naturally try
to take the advantage of this value by either comparing
themselves to established players or building upon theirproducts. Whenever the law tries to prevent this fromhappening, by allocating exclusive exploitation of thisaccumulated value with the trademark holders, even when
any effective distortion to the communication channel isabsent, it protects against misappropriation.

IITRIPSThe aim of Article 16(1) first sentence TRIPS is toguarantee certain level of protection against situations ofmisrepresentation. The provision requires that the use of asign is liable to confuse the addressees as to the source ofthe goods and services and thus protects only the essential
source-identifying function. Since the TRIPS Agreement
does not define the confusion, it is up to the Member States
to decide on their own test of its interpretation. The
situation is less clear with respect to Article 16(2) second
sentence of TRIPS. According to this provision, in cases ofdouble identity, “a likelihood of confusion shall bepresumed”. Regardless of whether the presumption isrebuttable or not, it is clear that protection was offered only
against the kind of uses that are liable to confuse at least inabstracto. Hence non-source identifying uses are notcovered by the said provision. The aim of Article 16(3)TRIPS on the other hand, is to guarantee certain level ofprotection
againstmisappropriation
without
misrepresentation and is therefore available only to a
subset of all trademarks – known as well-known
trademarks. The analysis concludes that even thisprovision does not force the Member States to relinquish
the concept of the source-identifying use.

(*) This is a summary of the report published under the 2014FY Industrial Property Research Promotion Project (2014FY-2016FY) Entrusted
by the Japan Patent Office.
(**) Doctoral Research Fellow, Max Planck Institute for Innovation and Competition, at our institute over a period of approximately 2 months
from September 2, 2015 through October 31, 2015, as an Invited Researcher for the Fiscal Year 2015.
Present Affiliation and Post: Assistant Professor at the University of Tilburg (Tilburg Institute for Law, Technology and Society & Tilburg
Law and Economics Center)●IIP Bulletin 2016 Vol.25

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JapanThe Japanese Trade Mark Act (jTMA) co-defines thescope of the trademark holder's right in several of its
provisions. An action of a potential infringer has to qualify
as “use” (Art. 2(3) jTMA) and has to constitute an act ofactionable infringement (Art. 37 jTMA). Following the2014-amendment, in order to commit a trademark
infringement, the sign also has to be “used in such amanner that consumers may recognize the goods orservices as those pertaining to the business of a particularperson” (Art. 26(1)(vi) jTMA). This requirement ofsource-identifying use is a codification of the case-law thathas developed this requirement since 70-ties by requiringuse “as a mark distinguishing the own [goods] from theothers”. According to some, it confirms that the burden ofproof with regard to “use as a trademark” lies with thedefendant. The source-identifying use is not only aprecondition for the trademark infringements, but equallyapplies to related torts of unfair competition under theJapanese Unfair Competition Act (jUCA), such as causing
confusion (Art. 2(1)(i) and Art. 2(1)(xiii) jUCA). Although
the anti-dilution protection of “famous indications” in theunfair competition law (Art. 2(1)(ii) jUCA) does not
explicitly require presence of confusion, the literature andcase-law generally demand source-identifying use also
here. Only the torts concerning protection against slavish
imitation of the configuration of another person’s goods(Art. 2(1)(iii) jUCA), use of domain names for illicit gain(Art. 2(1)(xii) jUCA) and circulation of false allegations
against competitors (Art. 2(1)(xiv) jUCA) do not requiresource-identifying use. Since the Japanese unfair
competition law does not contain a general clause of anticompetitive conduct and the list of prohibited practices
outlined in Article 2(1) of the jUCA is exhaustive, the nonenvisaged acts can be only actionable based on Section 709of the Japanese Civil Code. In the past, the courts weregenerally reluctant to extend the scope of wrongful actions
beyond the scope of the legislated intellectual propertyrights.

IVEuropean Union

In Europe, harmonization of the trademark law took
place in 90-ties, when the European Community enacted
the Directive 89/104/EEC (harmonizing the nationaltrademark law) and the Council Regulation (EC) No 40/94(creating a supranational trademark system). Prior to theharmonization, some countries such as Germany protected
only source-identifying function in their trademark laws
and other than source-identifying uses of signs were dealt
with under the auspices of more flexible unfair competition
laws. Among other things, this meant that preharmonization status quo in countries like Germany, theNetherlands and Switzerland did not generally prohibit●IIP Bulletin 2016 Vol.25

international parallel imports. In some other Member
States, however, the trademark law would protect against
unauthorized uses in general unless some opposite
justifications could have been offered.
When the Directive 89/104/EEC was adopted, noexplicit agreement existed on how to bridge the two worlds.
However, in its Article 5(5), the Directive stipulated thatthe above-mentioned scope of rights “shall not affectprovisions in any Member State relating to the protectionagainst the use of a sign other than for the purposes of
distinguishing goods or services, where use of that sign
without due cause takes unfair advantage of, or isdetrimental to, the distinctive character or the repute of the
trade mark”. The protection of trademarks was thendivided into a) double identity cases, i.e. use of same signfor same services (Art. 5(1)(a) TMD) and b) similarity
cases (Art. 5(1)(b) TMD). Moreover, the Directive
envisaged optional anti-dilution protection for reputed
trademarks (Art. 5(2) TMD). Thus for ordinary nonreputed trademarks, as a general rule, likelihood ofconfusion was meant to be required. In the double identity
cases, however, no such condition was stipulated. The
protection was mean to be absolute. This absolute
protection soon started conflicting with the limiting natureof Art. 5(5) TMD. Although one might argue about thescope of the provision, it is undeniable that Art. 5(5) musthave had some purpose. Arguably, the idea was that whilesource-identifying uses are being harmonized under Art.
5(1-2) TMD, non-source-identifying uses were left intact
and thus unregulated in the hands of the Member States.
The Member States could then either regulate such uses intheir trademark laws, unfair competition or other laws, ornot regulate them at all.
The Court of Justice of the European Union then stepby step extended 5(1-2) TMD to cover also non-sourceidentifying uses, such as pure references to a competitor(O2, Hölterhoff) and to competitor’s products (Gillete,BMW), or indications for the purposes of illustration(Adam Opel). By doing this, the Court basically gradually“hovered up” any economically sensible meaning fromArticle 5(5) TMD and “dumped it” in the area of Article
5(1-2) TMD. Although the case-law of the CJEU might
have seemed to have oscillate for a long time between
traditional and extensive approach, in L’Oréal v eBay
(2011) the framework of the Court became clearer.
The picture of exclusive rights, as painted by theCJEU today, is very asymmetric. Although the common
notion of the trademark use now covers probably most of
the non-source-identifying uses, the impact of this on thescope in the non-identity (similarity) situations (Art.
5(1)(b) TMD) at first appears to be zero because there thenegative effect on the essential function is always required.
2 ●In other words, for all the similarity scenarios the extensionof use seems of no avail. However, this is not completely
true for two reasons. First, the trademark holder can avoid
its application by broadening his list of the registered goods
and services. Second, as soon as the trademark becomes
reputed, the trademark holder obtains protection for theseother functions as well, since the CJEU extended
applicability of Art. 5(2) also to similarity scenarios. The
impact of these two circumstances should thus not be
underestimated. Very easily, the Court can slip into de facto
protecting also other functions in a large number of cases,
which would mean an important switch to a very generally
offered protection against misappropriation in thetrademark law.

To remove the pressure from the formalized forms of IP
protection that are harmonized, the EU legislator could, asa first step, consider harmonizing also pure B2B unfair
competition law. Maybe the judges of the CJEU would
then themselves naturally push the genie back into thebottle. Unless this happens, the EU unfair competition law
is likely to develop under the cover of other intellectual
property rights, such as trademark law, which is far frombeing optimal.

The European Commission has recently attempted tolimit protection available in the context of non-sourceidentifying uses with its recast of the Trademark Directive.

VConclusions

The above discussion provides several lessons forboth Europe and Japan.
In Japan, the marked difference in legal situations
with the western countries led several scholars to proposea more extensive protection, usually modeled after theEU's system, arguing that the Japanese trademark systemshould protect also other functions than the essentialfunction of indicating the source of goods and services. In
fact, I believe that is the last thing that Japan should do – atleast as far the trademark law is concerned. If the European
situation teaches any lessons, it should be that nonexistence of common unfair competition law, in which thecase-law could “ventilate” its ad hoc appeals to justice orinefficiency, only leads to pressure on the formalized typesof intellectual property protection. Apart from thetrademark law, also sui generis database law and even thecopyright law in the European Union provide richexamples of this. To prevent this inflation of IP rights,
provided that such pressure occurs in the case-law, Japan
could at most consider making its own unfair competition
law more flexible.
For the European Union, the Japanese situation
illustrates that even when the source-identifying use isrequired, trademark law is generally able to take a goodcare of the needs of the market and the trade can still
flourish under these conditions. Although the European
Commission should be credited for trying to bring thegenie of trademark functions back to the bottle, maybe it
would be more useful to remedy more general pattern that
goes beyond the trademark law – the lack of a flexible
instrument such as unfair competition law on the EU level.
●IIP Bulletin 2016 Vol.25

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