EU REGULATION: AGRICULTURAL GEOGRAPHICAL INDICATIONS AND DESIGNATIONS OF ORIGIN. Violations of the TRIPs Agreement

Transcription

1 EU REGULATION: AGRICULTURAL GEOGRAPHICAL INDICATIONS AND DESIGNATIONS OF ORIGIN Violations of the TRIPs Agreement August 1998

2 -2- EXECUTIVE SUMMARY The International Trademark Association ( INTA ) is a 120 year old worldwide membership organization, representing over 3,000 corporations, package design firms, law firms and professional associations in 110 countries. INTA s membership crosses all industry lines, including manufacturers and retailers, and is united in the goal of supporting the essential role trademarks play in promoting effective commerce, protecting the interest of consumers, and encouraging free and fair competition. Moreover, INTA frequently works with governments throughout the world to assist them in analyzing and improving trademark law and practice, including WTO TRIPs Agreement compliance. INTA s recent review of the European Union s system on geographical indications ( GIs ) concerning agricultural products and foodstuffs has uncovered a number of serious problems with this system, which are set forth in detail in this Memorandum. Pursuant to its obligations under Articles 68 and 71 of the WTO TRIPs Agreement, the Council for TRIPs shall continue its mandate to monitor compliance with the WTO TRIPs Agreement and take action if necessary to enforce compliance through the WTO dispute resolution mechanism. Moreover, the Council for TRIPs is specifically mandated under WTO TRIPs Agreement Article 24 to monitor the geographical indication protection process, more specifically focusing on wines and spirits but under certain more liberal interpretations of the WTO TRIPs Agreement on GIs generally. The 1992 EU Regulation on Protection of Geographical Indications and Designations of Origin for Agricultural Products and Foodstuffs (No. 2081/92) dated July 14, 1992 as amended by Regulation No. 535/97 dated March 17, 1997 (hereinafter collectively referred to as Regulation ; copies attached as Appendix I and Appendix II) is seriously flawed and violates the WTO TRIPs Agreement in several major aspects. Although the Regulation does attempt to address the issue of conflict between GIs and trademarks and remedy some of the more serious problems engendered by the existing EU wine regulations, it still falls far short of achieving a balance between protection for legitimate trademarks and legitimate GIs. Criticism of the Regulation is not limited to INTA. The recent resolution of the Executive Committee of the International Association for the Protection of Industrial Property (better known by its French abbreviation AIPPI ) at its Rio de Janeiro Congress in May 1998 severely criticized this Regulation as well. The AIPPI Resolution stated in pertinent part (Paragraph 4): The AIPPI recalls the criticisms of the Draft of EC Regulation Nr. 2081/92 which are contained in the Resolution of the Council of Presidents at Lucerne

3 -3- held in 1991, and notes that many of those criticisms remain applicable to the Regulation. In particular, the AIPPI notes with concern that a) the text of the Regulation is ambiguous in a number of important respects; b) the administrative procedure is unnecessarily cumbersome and complex; c) a party resident or established in the EU can only object to the proposed registration of a geographical indication through the competent authority of his Member State; d) the national treatment principle is violated in that a party not resident or established in the EU, including such a party having trademark rights in a Member State, has no right at all to object to a proposed registration of a geographical indication; e) the Regulation contains no provision at all to protect the right of a proprietor of a trademark which is used in a Member State but is unregistered, to continue the use of such trademark notwithstanding the subsequent registration of a conflicting geographical indication. (AIPPI Executive Committee Resolution on Question Q62, May 29, 1998) In summary, the principal aspects of these violations are: 1. Special treatment given to EU nationals in violation of the national treatment principle of the Paris Convention and the WTO TRIPs Agreement; 2. Violation of the trademark/gi resolution mechanism of the WTO TRIPs Agreement; and 3. Inadequate procedural remedies to address GI infringements.

4 -4- THE REGULATION How does the Regulation operate? What are the procedural and substantive frameworks of the Regulation? APPLICATION PROCEDURE In accordance with Article 5 of the Regulation, a group or a natural or legal person can file an application to register a GI, such application being sent to the competent authority in a Member State in which the geographical area is located (Article 5(4)). The Member State will review the application and forward it to the European Commission (the Commission ) for further processing (Article 5(5)). Within a period of six months, the Commission shall verify whether the application includes all the particulars provided for in Article 4 (Article 6(1)). If the application is accepted, it will be published in the Official Journal of the Commission (Article 6(4)). An opposition procedure is available under Article 7, but such opposition procedure is only available to Member States (Article 7(1)). An indirect opposition can be filed by a private party pursuant to Article 7(3), but that opposition must be sent to the Member State, which will then forward it on to the Commission after examination by the competent authority of the Member State. Once the GI is registered, any application for registration for a conflicting trademark for the same type of product shall be refused if the application was filed after the date of GI publication pursuant to Article 6(2). This invalidation also applies if the application was pending when publication of the GI occurred (Article 6(2)). Existing registered trademarks in use are grandfathered but not unregistered trademarks, whether registration is applied for or not, as well as currently unused registered trademarks. In addition to the Article 5 application procedure, a second application procedure is available during the transitional phase of the Regulation and potentially with new countries joining the EU, namely pursuant to Article 17. Essentially, the Member States provide the Commission with lists of protected GIs within a six month period and such lists are not subject to opposition. In addition to these two application procedures, there are also two other methods for countries outside the EU which may be acceding to the EU to obtain protection, namely enter into a bilateral treaty with the EU and apply for protection under Article 12(1) of the Regulation or negotiate a GI provision within the Accession Treaty or by separate treaty.

5 -5- OPPOSITION PROCEDURE As stated previously, applications under Article 5 of the Regulation or external protection pursuant to Article 12 of the Regulation can be opposed under Article 7 of the Regulation (Article 17 or specific treaty protection cannot be opposed under Article 7). Article 7 reads as follows: 1. Within 6 months of the date of publication in the Official Journal of the European Communities referred to in Article 6 (2), any Member State may object to the registration. 2. The competent authorities of the Member States shall ensure that all persons who can demonstrate a legitimate economic interest are authorized to consult the application. In addition and in accordance with the existing situation in the Member States, the Member States may provide access to other parties with a legitimate interest. 3. Any legitimately concerned natural or legal person may object to the proposed registration by sending a duly substantiated statement to the competent authority of the Member State in which he resides or is established. The competent authority shall take the necessary measures to consider these comments or objection within the deadlines laid down. 4. A statement of objection shall be admissible only if it: - shows non-compliance with the conditions referred to in Article 2, - or shows that the proposed registration of a name would jeopardize the existence of an entirely or partly identical name or trade mark or the existence of products which are legally on the market at the time of publication of the regulation in the Official Journal of the European Communities, - or indicates the features which demonstrate that the name whose registration is applied is generic in nature. 5. Where an objection is admissible within the meaning of paragraph 4, the Commission shall ask the Member States concerned to seek agreement among themselves in accordance with their internal procedures within three months. If:

6 -6- (a) agreement is reached, the Member States in question shall communicate to the Commission all the factors which made agreement possible together with the applicant s opinion and that of the objector. Where there has been no change to the information received under Article 5, the Commission shall proceed in accordance with Article 6 (4). If there has been a change, it shall again initiate the procedure laid down in Article 7, (b) no agreement is reached, the Commission shall take a decision in accordance with the procedure laid down in Article 15, having regard to traditional fair practice and of the actual likelihood of confusion. Should it decide to proceed with registration, the Commission shall carry out publication in accordance with Article 6 (4). Within six months of the date of publication of an application by the Commission, Member States (Article 7 (1) of the Regulation) as well as legitimately concerned natural or legal persons (Article 7 (3) of the Regulation) may oppose the proposed registration. However, Article 7 (1) provides a direct opposition filed with the Commission only for Member States. Other interested parties may only oppose through the competent national authorities. The final decision will be left to the Commission after consultation of the concerned Member States. Natural persons and legal entities may only object to the proposed registration by filing a substantiated opposition with the competent authority of the Member State in which they reside or are established if they can show a legitimate concern (Article 7 (3) of the Regulation). Legitimate Concern should mean any legal or economic interest that would be affected by the registration of the respective GI. A legal interest would, e.g., be the ownership of a prior trademark whereas an economic interest could be the sale of goods under a third party s trademark. Authorities of the Member States may only review the oppositions with regard to their admissibility considering the legitimate concern and the existence of a substantiation of the opposition. A negative decision on the admissibility can be challenged under national trademark and/or GI laws. The Member States are not competent to review the opposition as to substance. Only the Commission is competent to decide whether an opposition is justified. Although the wording of Article 6 (3) the competent authority shall take the necessary measures to consider these comments or objections within the deadlines laid down does somehow suggest that Member States could consider the

7 -7- justification of the opposition, this sentence should be interpreted as meaning that the competent authority in the Member State shall take the necessary measures to ensure that the Commission can consider the comments or objections within the deadlines laid down in Article 7 (1), i.e., within 6 months. The position that Member States have no right to review oppositions as to substance is also confirmed by Joachim Friedrich Heine in an article published in GRUR 1993 (Joachim Friedrich Heine, Das neue gemeinschaftsrechtliche System zum Schutz geographischer Bezeichnungen, GRUR 1993, 96 et sec.). Mr. Heine is now Deputy General Director of DG VI - Agriculture. As soon as the Commission has received the opposition, it will, as a first step, decide whether it is admissible. An opposition is only admissible if it is justified by one of the exclusive grounds for opposition as provided in Article 7 (4) of the Regulation. If the Commission decides that an opposition is admissible, it has to instruct the concerned Member States, i.e., the Member State which forwarded the application to the Commission under Article 5 (5) of the Regulation and the Member State which either directly filed an opposition or has submitted an opposition of one of its residents to the Commission, to reach an amicable settlement within three months (Article 7 (5) of the Regulation). If an agreement is reached, the Member States will communicate the agreement to the Commission and the Commission will either register the GI (Article 7 (5) (a), 6 (4) of the Regulation) or, if there has been an amendment, it will publish the amended application and initiate the procedure of Article 7 again. If no agreement is reached, the Commission shall make a decision in accordance with the procedure as laid down in Article 15, i.e., the Commission will consult the Expert Committee and ask for an opinion. Should the Commission agree with the opinion issued by the Expert Committee, it will proceed accordingly. Should the Commission disagree, or should the Expert Committee not issue an opinion, the Commission will submit a proposal on the appropriate measures to the Council, who will decide with the qualified majority. If the Council does not decide within 3 months after the Commission has submitted the proposal, the Commission may proceed as proposed. If the Commission and/or the Council should not decide in favor of the opponent, the opponent may challenge the decision of the Commission to register the GI before the European Court of Justice under Article 173 (2) of the Rome Treaty.

8 -8- WTO TRIPs AGREEMENT VIOLATIONS The foregoing GI system violates the WTO TRIPs Agreement in several important aspects. These violations are as follows: I. WTO TRIPs Article 3(1) WTO TRIPs Article 3(1) reads as follows: Article 3(1) Each Member shall accord to the nationals of other Members treatment no less favorable than that it accords to its own nationals with regard to the protection of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In respect of performers, producers of phonograms and broadcasting organizations, this obligation only applies in respect of the rights provided under this Agreement. Any Member availing itself of the possibilities provided in Article 6 of the Berne Convention (1971) or paragraph 1(b) of Article 16 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for TRIPS. Paris Convention Articles 2 and 3 read as follows: Article 2 (1) Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with. (2) However, no requirement as to domicile or establishment in the country where protection is claimed may be imposed upon nationals of countries of the Union for the enjoyment of any industrial property rights.

9 -9- (3) The provisions of the laws of each of the countries of the Union relating to judicial and administrative procedure and to jurisdiction, and to the designation of an address for service or the appointment of an agent, which may be required by the laws on industrial property are expressly reserved. Article 3 Nationals of countries outside the Union who are domiciled or who have real and effective industrial or commercial establishments in the territory of one of the countries of the Union shall be treated in the same manner as nationals of the countries of the Union. The Regulation includes several provisions in favor of the EU Member States and their nationals at the expense of other WTO Member States and their nationals: - only Member States can apply for the protection of their GIs pursuant to Article 17 of the Regulation - an application to register a GI pursuant to Article 5 of the Regulation is only available for GIs indicating the origin of a product within a Member State - a legitimately concerned natural or legal person may only oppose the registration if it resides or is established within a Member State Third country GIs can only be protected within the framework of Article 12 of the Regulation if reciprocity is warranted and the third country provides an inspection arrangement similar to the one laid down in Article 10 of the Regulation. In addition, according to the Commission the protection of third country GIs requires the third country to enter into a bilateral agreement with the EU confirming that the prerequisites of Article 12 are met. Under the Principle of National Treatment (Article 3(1) of TRIPs) any Member State of TRIPs that decides to provide for more extensive protection of intellectual property rights in its national law than is specified by TRIPs must grant the same level of protection also to the nationals of any other TRIPs member, e.g., if the EU decides to provide a more extensive GI protection for EU GIs, the same protection must be available also for GIs of any TRIPs Member State. The Most-Favored-Nation principle (Article 4 of TRIPs) obliges a country to grant any privileges that it provides for a third country in bi- or multilateral agreements also to all

10 -10- TRIPs States. A difference between both above-mentioned principles only occurs where a country protects intellectual property rights of another country to a higher extent than national intellectual property rights. In such case the national treatment would not apply. Since there are no bilateral Treaties entered into by the EU and/or its Members granting third countries intellectual property rights more protection than EU/Member States rights holders, the Most-Favored-Nation principle does not currently affect EU/Member States law on intellectual property. In addition the EU laws do not give rise to Most-Favored-Nation rights of third countries. Article 4 of TRIPs provides for an exception to the Most-Favored-Nation clause if the relevant legislation has been notified to the Council for TRIPs. On December 19, 1995, the EU and the Member States notified to the Council for TRIPs, pursuant to Article 4(d) of TRIPs, that both the Treaty Establishing the EU (Maastricht Treaty, covering EC Treaty) and the Agreement Establishing the European Economic Area (EEA) are to be considered as Agreements from which no rights can be derived on the basis of the Most- Favored-Nation clause. The notification covers not only the two treaties, but also any present or future secondary law issued by the EU and its Member States. The notification was part of a general notification also as to the GATT Most-Favored-Nation clause and thus was not effected under a particular intellectual property background. Contrary to the Most-Favored-Nation clause, the National Treatment Provision pursuant to Article 3 of TRIPs is not subject to exceptions other than provided in the Berne Convention, the Paris Convention, the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits, all of which are not applicable with respect to the Regulation. In conclusion, the EU is obliged to grant national treatment with respect to GIs to nationals of all WTO members even where the national GI protection exceeds the minimum standards as provided in TRIPs. This defect in the Regulation was also highlighted in the recent AIPPI Resolution. EU GI protection for third country GIs may not depend on any requirement of reciprocity as provided in Article 12 of the Regulation because reciprocity clearly contradicts the principle of national treatment. Third country GIs of WTO Members must be protected under the Regulation under identical prerequisites as provided for EU GIs. Further third countries that adhere to TRIPs and/or their nationals must have the same opposition rights as EU nationals and Member States. The current EU GI opposition procedure as outlined in Regulation Article 7, which will be discussed in greater detail later in the Memorandum, is clearly discriminatory against IP rights holders domiciled outside of the EU. Although Regulation Article 12 attempts to address the national treatment deficiency, a bilateral treaty is probably required

11 -11- and the additional restrictions of Article 12(1) apply, thus effectively undermining the national treatment. In effect, non-eu IP rights holders are discriminated against in violation of international law. The above-mentioned restrictions which the Regulation imposes on the registration and protection of third country GIs as well as the requirement for a residence within the EU as a prerequisite for an opposition, clearly contravene the Principle of National Treatment as provided for in TRIPs. II. WTO TRIPs Article 24(5) WTO TRIPs Article 24(5) reads as follows: Article 24(5) Where a trademark has been applied for or registered in good faith, or where rights to a trademark have been acquired through use in good faith either: (a) (b) before the date of application of these provisions in that Member as defined in Part VI; or before the geographical indication is protected in its country of origin; measures adopted to implement this Section shall not prejudice eligibility for or the validity of the registration of a trademark, or the right to use a trademark, on the basis that such a trademark is identical with, or similar to, a geographical indication. Perhaps the most serious TRIPs violation of the Regulation is the Conflict Resolution/Grandfather Clause Provision found in Regulation Article 14 as it does not comply with WTO TRIPs Article 24(5) (as also highlighted by the recent AIPPI Resolution). Article 24(5) clearly provides that a trademark which has been applied for or registered in good faith or where rights to a trademark have been acquired through use in good faith before the application of the WTO TRIPs Agreement or the GIs are protected in the home country should be grandfathered (i.e., allowed to coexist). This provision overrides Regulation Article 14(2), which states that only registered trademarks which are in use can be grandfathered. Moreover, Regulation Article 14(3) provides some additional protection for trademarks with reputation and renown, but it is unclear whether such reputed and renowned trademarks need to be registered. Additionally, Article 14(3) of the Regulation

12 -12- requires that such trademarks be used for a specific length of time, which is not required in WTO TRIPs Agreement Article 24(5). Regulation Article 14(1) states that any particular trademark application which conflicts with an EU GI may not be registered after publication of the EU GI is made, pursuant to Article 6(2) of the Regulation. Accordingly, in effect only used trademarks registered in good faith could be grandfathered without due regard to trademark rights arising out of trademark application and/or trademark use. Additionally, the grandfathering of existing trademarks does not permit the prior trademark owner from preventing the registration of an infringing GI as envisioned by the first in time, first in right principle of TRIPs Article 16(1) read in connection with TRIPs Article 24(5). As the International Trademark Association stated in its September 1997 Board of Directors resolution on GIs: WHEREAS, the International Trademark Association has reviewed the principal international treaties and agreements requiring protection of geographical indications; WHEREAS, in attempting to implement the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs) and multilateral and bilateral agreements, there appears to be some confusion as to the relationship between geographical indications and trademarks; BE IT RESOLVED, that the International Trademark Association supports the principle of "first in time, first in right" priority when resolving conflicts between geographical indications and trademarks. This Regulation provision clearly violates the balance mechanism set forth in the WTO TRIPs Agreement and gives supremacy to GIs at the expense of trademarks. The mandatory phase-out of bona fide trademarks which are not registered is unfair and illegal, and clearly violates the letter and spirit of TRIPs Article 24(5). III. WTO TRIPs Articles 41(1) and 42 WTO TRIPs Articles 41(1) and 42 read as follows: Article 41(1) Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this

13 -13- Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements. These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse. Article 42 Members shall make available to right holders civil judicial procedures concerning the enforcement of any intellectual property right covered by this Agreement. Defendants shall have the right to written notice which is timely and contains sufficient detail, including the basis of the claims. Parties shall be allowed to be represented by independent legal counsel, and procedures shall not impose overly burdensome requirements concerning mandatory personal appearances. All parties to such procedures shall be duly entitled to substantiate their claims and to present all relevant evidence. The procedure shall provide a means to identify and protect confidential information, unless this would be contrary to existing constitutional requirements. The WTO TRIPs Agreement makes clear in Article 42 that all IP rights holders must have fair and equitable procedures available to them to resolve IP property rights disputes. Pursuant to Article 42, WTO Member States must make available to IP rights holders direct legal remedies such as opposition procedures, cancellation procedures and direct legal action in court. The convoluted opposition procedure in the Regulation effectively denies IP rights holders their day in court, since Article 7 only permits Member States to take direct legal action against a conflicting GI. From a practical point of view, it is unlikely that a Member State would be interested in pursuing an individual company s trademark infringement claims, whereas it might undertake action under a generic term claimed as a GI which affects a local industry, as was seen in the current FETA cheese litigation. Accordingly, Article 7(1) of the opposition procedure available to Member States violates WTO TRIPs Agreement Article 42 by failing to provide the IP rights holder with an appropriate remedy (as highlighted by the recent AIPPI Resolution). Not only does the limitation of the opposition mechanism to Member States violates the fair and equitable procedures of the WTO TRIPs Agreement, it also violates national treatment under Article 3 of the WTO TRIPs Agreement as well as Articles 2 and 3 of the Paris Convention. If an infringing GI were promulgated in the state of California, any interested party, either from California or another state in the U.S. or from France, would be able to challenge this infringement in a federal court in California. The corresponding situation is not true in the EU.

14 -14- There is an indirect opposition procedure available, namely Regulation Article 7(3), but such indirect opposition procedure only permits the IP rights holder to submit appropriate arguments and evidence to the competent authority of a Member State, who will then in turn send it to the European Commission. This inadequate opposition procedure may even violate the general provisions concerning enforcement in WTO TRIPs Agreement Article 41(1), which states that IP rights holders must have procedures to permit effective action against IP rights infringement. Apart from the inadequate opposition procedure in Article 7, Regulation Article 17 provides a direct registration system which is not subject to opposition. Accordingly, Article 17, which may also be applied to new countries acceding to the EU, more clearly violates WTO TRIPs Article 42, since not even the rudimentary opposition procedures available in Article 7 can apply to direct Article 17 GI registration. Although an European Court of Justice appeal may be possible under Article 173(2) of the Rome Treaty, this appeal procedure is difficult and expensive. There may also be remedies under national law, but these remedies are likewise inadequate. Between Articles 7 and 17, the IP rights holder is provided with inadequate procedural remedies in violation of WTO TRIPs Articles 41 and 42. CONCLUSION The foregoing is a detailed review of the operation of the Regulation and the serious WTO TRIPs Agreement violations which the Regulation engenders. The most serious violations are: 1. Special treatment given to EU nationals in violation of the national treatment principle of the Paris Convention and the WTO TRIPs Agreement; 2. Violation of the trademark/gi resolution mechanism of the WTO TRIPs Agreement; 3. Inadequate procedural remedies to address GI infringements. These three major issues must be addressed and remedied in order for the Regulation to comply with the WTO TRIPs Agreement and thereby become an equitable mechanism for balancing legitimate rights in