WRITTEN QUESTION E-1434/97 by Freddy Blak (PSE) to the Commission (23 April 1997)

Subject: Misuse of trademark legislation in EU countries

Within the last three to four years, wily businessmen in the EU have begun to exploit the trademark legislation in EU countries in order to pressurize small firms into paying copyright royalties. What happens is that they acquire for a modest amount the right to use e.g., a specific name, expression or combination of words, signs or figures. They then claim copyright to the commercial use of such terms - which are often place names that are considered by most people to be common property - and levy royalties on small businessmen who have in good faith chosen to use these terms to market their business. Should these small firms refuse to pay, a law suit is simply taken out against them, resulting in additional costs in legal fees and hence an increased risk of bankruptcy.

A particularly serious example of this kind of misuse of the legal concept of a trademark is the 'Route 66' case in the Netherlands which is close to developing into a diplomatic crisis with the USA. The point at issue here is the use by a number of small companies of the name of a famous highway in the USA - Route 66 - as part of the designation of their products (restaurants, car repair centres, travel agencies, perfumes, etc.). Legal action brought by the Dutch owner of the copyright to the term 'Route 66', Mr Groeneveld, has in this case resulted in lengthy legal proceedings, contradictory court rulings, bankruptcies and company closures. Similar cases have since arisen in Denmark ('McDonalds versus McAllan' and the latest case concerning the purchase of the rights to Web domain names on the Internet), in the Netherlands (the copyright to the term 'EURO') and Germany (the purchase by a Hamburg firm of the right to use up to 90 well-known German names such as Goethe, Schiller, Wagner, etc.).

Is the Commission aware of this state of affairs and what is its position on the specific cases? In view of the distortion of the concept of trademark which these wily new 'middlemen' have chosen to exploit at the expense of small entrepreneurs in the EU, is it planning to make proposals for amending the EU legislation in this area that is so crucial for employment?

Answer given by Mr Monti on behalf of the Commission (7 July 1997)

Trade marks constitute valuable assets for undertakings, since they serve to distinguish their goods and services from those of their competitors. Trade marks have developed into important bearers of goodwill for their proprietors, who usually invest significantly in the development and advertising of trade marks as well as in the quality and reputation of the goods and services concerned. For these reasons legal systems providing for the protection of trade marks have existed for at least a century. They are fully justified and not subject to fundamental disputes.

The laws of the Member States on trade marks have been harmonized on the basis of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks ((OJ L 40, 11.2.1989. )). This constitutes one of the most modern instruments of trade mark law and embodies principles which have since developed into model provisions for use at international level (such as in the Agreement on trade related aspects of intellectual property (TRIPS) concluded within the framework of the World Trade Organization).

According to these principles, any sign which is capable of distinguishing the goods or services of one undertaking from those of other undertakings and which is capable of being represented graphically is in principle capable of registration as a protected trade mark. Registration may, however, be refused on certain grounds, which are exhaustively listed in Articles 3 and 4 of the Directive. According to Article 4, holders of earlier rights may oppose the registration of new marks, whereas Article 3 contains certain general exceptions to the registrability of trade marks, which include the exclusion of signs which are descriptive, misleading or devoid of any distinctive character.

The cases cited by the Honourable Member are not the consequences of inadequate legislation in the field of trade marks, but may constitute examples of using trade marks for questionable purposes. A general principle, however, of trade mark law is that the person who has first filed a trade mark application acquires the exclusive right to use that mark after its registration. For this reason it is extremely important that users of trade marks, be they small, medium sized or large firms, protect their trade marks before others complicate business by abusive filings of these trade marks in their own name.

Depending on the specific circumstances of a case, the use of an exclusive right to a trade mark, as explained by the Honourable Member, may constitute a questionable use of a trade mark system. The Commission has no detailed information on the cases to which the Honourable Member refers, which makes it difficult to judge whether they constitute a misuse of Community trade mark legislation.

Nevertheless, it should be noted that under trade mark law, the appreciation of whether or not a sign is capable for trade mark protection, is in principle based upon objective criteria, such as those of distinctiveness and visibility. Thus, a judgment of whether a sign can benefit from trade mark protection cannot in principle be based upon subjective criteria such as whether or not the applicant for protection has a bona fide intention with regard to the use of the trade mark. However, Article 3(2)(d) of the Directive contains a provision which the Member States may incorporate in their national law (optional), according to which a trade mark may be refused registration or may be invalidated if the application for its registration was made in bad faith. The interpretation of the concept of bad faith is left to the Member States.

Whereas the concept of bad faith may play a role in the appreciation of the validity of a given trade mark, it is not an element which is included in the conditions for enforcing rights relating to a valid trade mark. Thus, according to trade mark standards, the possibility to enforce a right relating to a given trade mark is in principle not limited where such rights are enforced in bad faith.

The Commission recognizes that recently and increasingly, problems have arisen from the use of trade marks within the framework of the Internet. However, these cases concern a different problem, namely the abuse by third parties of existing and protected trade marks as domain names on the Internet. The Commission is currently examining the problem within the framework of the Community as well as at the international level.