Each year, top intellectual property professionals gather from all around the world to attend an yearly event organized by the International Trademark Association (INTA). This year, the 138th INTA Annual Meeting was held in Orlando, Florida, from 21 May to 25 May 2016. It was a proud moment for INTA, as the number of registrants surpassed the 10 000 milestone, making this the largest meeting in INTA´s history. Of course, LexDellmeier IP Law Firm attended the conference and continues to support INTA´s efforts by serving as a committee member on the Public Media Relations Committee. The Committee´s aim is to educate persons who do not deal with intellectual property on a daily basis.
The Annual Meeting is more than just a business event. With its diverse program it is considered to be the meeting point for all professionals working in the field of intellectual property, in order to learn something new, create new contacts and participate in the outstanding educational sessions on trademarks, designs and copyrights.
And what a year it was! On May 1, 2016 LexDellmeier IP Law firm turned seven. Founded in 2009, each year has brought exciting new challenges, cases, clients etc. leading to growth and success and a 2016 award as the Boutique IP Law Firm of the Year in Germany.
This year we decided to mark our anniversary with a new-and-improved LexDellmeier webpage at www.lexdellmeier.com. Our aim is to give you a full overview of intellectual property, whether you are an IP enthusiast or a newbie just getting interested in the subject. In particular, we have included our blog, which can now be found at http://www.lexdellmeier.com/de/blog.
Another reason to celebrate, Corporate INTL Awards awarded LexDellmeier with the honor of becoming a Corporate INTL Awards Global Winner 2016. The firm was chosen to be the boutique intellectual property law firm of the year in Germany! This award aims to commemorate those who have been successful over the past 12 months and have shown excellence not only in expertise, but also in service.
It is only left to be said that we are glad our efforts and hard work have been recognized and we look forward to meeting and working with you around the world regarding IP!
With the booming of online commerce, entering your personal information and sending it to the cloud has become inevitable. Along grew the concern of both citizens and businesses. The lack of control over given data worried many and the fragmentation of laws and complicated national systems of obtaining protection did not help. Therefore, it is no wonder that 90% of the surveyed EU citizens opted for an improved and unified EU data protection legislation.
On 4 April 2016 the European Parliament adopted the new Data Protection Regulation and Directive. The Directive entered into force on 5 May 2016, with a three-year transposition deadline, and the Regulation will enter into force on 24 May 2016, with the application date set for 25 May 2018.
The new legislation applies to organizations, based both in the EU and outside of it, when collecting EU citizens´ data.
Under the coordination of the European Data Protection Board (EDPB), each country will have to form a Supervisory Authority, a body responsible for sanctioning illegally collected data. Also, the new legislation predicts help in data controlling by a Data Protection Officer, a person with expert knowledge of data protection law, monitoring internal compliance with the Regulation. Under his scope of obligations is notifying the SA on established breaches.
The former “right to erasure” will now be replaced by a less lenient “right to be forgotten”. It is predicted that the number of deleted entries will from now on be on a rise, as more power is given to the individuals and not the controller.
Some dissatisfaction has been expressed concerning the new legislation. As most of it is pointed to forming the new bodies and difficulties reaching the high demands for protection the data, it is to be expected that private persons are to feel the benefits of the Regulation and the Directive.
With joined efforts, the Organization for Economic Co-operation and Development (OECD) and the European Union Intellectual Property Office (EUIPO) conducted a study on counterfeiting and the impact it had on economy from 2011 to 2013. Their results were published on 18 April 2016 under the name“Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact”. Although presuming the results would not be satisfactory, they have exceeded all expectations, with 2.5% of world trade including counterfeits and up to 5% of imports in the EU. This might not seem significant at first glance, but 2.5% of the world trade amounts to 461 billion USD, which is equal to the GDP of Austria. 5% of EU trade is 116 billion USD, almost the GDP of Hungary. Seeing these numbers in black and white should start the alarm in policymakers´ heads and show how much we are in need of a change in the legislation.
The study
The study was set on two pillars. The first one was the impact of crime and illicit trade on good governance and public safety.
The second one was what were the economic effects of these activities.
The study included trademark, patent, copyright and design right infringements. The main focus is given to trademarks, as they represent the main identifier of the producer. Their value is constantly on the rise, especially for the scientific research, information and communication technology, agricultural, textiles and clothing and real estate sector.
The results
The first thing to be noted is the rise and importance of e-commerce. In the US, e-sales have been on a rise since 1999, and now hold 7% of total retail sales. In the EU, they have grown 5% in the last 6 years. The advantages of e-commerce are well-known: it is less expensive for both the producer and the consumer, and less time-consuming and more available to the customer. Unfortunately, it is also the easiest way to distribute counterfeits. They are available non-stop and the e-shops are easily transferrable from one site to another, making them harder to shut down.
For every of the three observed years, the number of counterfeited goods exceeded 100000. Most seized shipments come from East Asia, primarily China and Hong Kong. The goods in question are mostly luxury goods, like footwear, clothing, perfumes, leather and watches, but, can also be common goods, such as toys. The diversity of the seized goods is best described if said that even fake bananas and strawberries have been found. Another problem is that counterfeits can sometimes be a health hazard. When thinking about fake pharmaceuticals, food and drink, car parts or toys, it is obvious that their usage can put lives in danger.
Most seized products infringe IP rights of American producers (20%), followed by Italian (14.6%), French (12.1%), Swiss (11.7%), Japanese (8.2%) and German (7.5%). Interestingly, China has also made the list of the infringed, with the percentage of 1.3. This shows the impact of counterfeit goods on research and development in a country. With so many domestic counterfeits in the market, Chinese producers rarely dare to invest in R&D.
There seems to be a higher recurrence of seizure of specific brands like Rolex, Ray Ban, Louis Vuitton, and especially Nike. Special attention should be given to the growing number of credit card counterfeits. These are especially dangerous because of their connection to different types of credit card fraud. Usually, they are conducted using real credit card holder´s data, obtained by skimming the data from the magnetic strips, stealing the original cards or by obtaining data from the card holder in return for sales of inexistent products.
The end consumers can be divided into two groups: the ones who unknowingly buy counterfeits, expecting to get the original product, and the ones who willingly buy fakes, wanting and expecting a lower price for the good. Depending on the target group, a wide range of prices is offered. For example, Nike shoes go from 5 to 200 USD, and Rolex watches from 5 to 200 000 USD. The highest prices resemble the ones of the original product, but are usually marked as a special deal, a short-term discount, etc.
The image that comes to mind when thinking of seizure of counterfeits is usually a massive raid with hundreds of confiscated products. The reality is quite different. Most appropriations consist of ten products or less, usually only one. They are the easiest to ship, in small parcels via mail. Usually, there are multiple stops in different countries from the production line to the end consumer. This is necessary in order to mask the point of origin, adding parts or repackaging and re-labeling the product.
When mentioning provenance economies, the report is talking either about the economies where production is taking place or the economies used as a port of transit, where infringing goods pass. The report proves that any country can be a providence economy. They are geographically dispersed, with Hong Kong and China in East Asia, Turkey in West Asia and Europe, Tunisia in Africa, Tokelau, a tiny island situated between Hawaii and New Zealand, and many others.
It is hard to determine the total value of the counterfeit products. First of all, the pirate market changes so much and so often that any measurement would be highly imprecise. Secondly, the customs information is almost always confidential. The best that can be done is determining the upper boundary of the counterfeit trade. The final result of the study indicates that the pirate goods were worth up to 461 billion USD in 2014. This makes it 2.5% of the entire world trade. It is alarming information, because a 2008/2009 study conducted by the OECD resulted in approximately 200 billion dollars. Although that study showed a lot of imperfections in comparison to the 2015 one, it still shows an undeniable divergence.
The EU
With over 100 000 trademarks registered with the EUIPO, IP rights are of major importance in the EU. IP-strong companies have higher revenues, employ more people and offer higher wages.
The types of counterfeit goods are mostly clothing and footwear, watches and perfumes, but the list also includes tobacco, optical, photographic and medical instruments and metal tools.
The value of fakes in the EU comes up to 85 billion EUR (116 billion USD), which is 5% of all imports. They are imported or produced mostly in China, but also in Afghanistan, Greece, Hong Kong, Lebanon, etc.
The conclusion
The results of the study are worrying, as the numbers show that the impact on economy and research and development is undeniable. The next steps might be tracing the production of counterfeit goods, as well as conducting an additional study of the reasons behind the emergence of pirated products. With complete understanding of this phenomenon, the OECD countries should propose measures to reduce the rates of import of counterfeits.
1891 was the year basketball was created, American Express issued first travelers´ checks and Edison patented motion picture camera. However, the most significant date for intellectual property is April 14, 1891 as it marks the date the Madrid Agreement was adopted.
Madrid Agreement was the first international treaty concerning the implementation of receiving trademark protection in many countries. Back then, it had nine signatory countries and only a small number of registered trademarks. Dating from 1893, the oldest still active trademark belongs to Longines, a Swiss watch maker. Constantly changing to adapt the needs of the applicants, the biggest adjustment was the introduction of the Madrid Protocol in 1996. Presenting a number of changes in order to improve practicality and efficiency of the System, it soon became more popular than the original Agreement. The next significant amendment of the System occurred in 2015, with the incorporation of the Agreement and the Protocol into a single-treaty system.
Today, 125 years later, the Madrid System counts 97 member states (status: 29 April 2016) and covers 113 countries, with over a million registered trademarks. It requires only one application in one language and one fee, which is of major convenience for the applicant.
What the future holds for the System is crossing the 100 member state threshold, faster processing time and improvement of their E-services, leading to an easier and more efficient system.
After the European General Court’s (EGC) ruling on September 2015, the battle of the reptiles continues in front of the Court of Justice of the European Union (CJEU). As Lacoste protects their famous crocodile logo, Kajman is trying to prove the difference of their KAJMAN logo.
Background of the case
On February 1, 2007, KAJMAN, a Polish clothing manufacturer owned by Mrs. Mocek and Mrs. Wenta, filed an application to register their logo, a figurative mark KAJMAN (EUTMA no.: 5 686 845), for classes 18, 20, 22, 25 and 36 of the Nice Classification. A caiman is a reptile from the family of alligators. The French textile giant Lacoste opposed the mark on October 20, 2010, based on their registered EUTM (no. 002979581), the well-known crocodile logo, and word mark “CROCODILE” (EUTM No. 005567821) registered for all classes of the Nice classification, except class 8. Lacoste claimed the marks are similar and the average consumer is likely to mistake Kajman for Lacoste, especially given Lacoste’s reputation. The Opposition Division of OHIM (now EUIPO) stated the goods were identical, and their marks were conceptually similar, but disputed their visual and phonetic similarity. Although the Lacoste sign might enjoy a higher level of recognizance and the conceptual similarity, the average consumer would not mistake a Kajman product for a Lacoste one, and the opposition should be rejected.
Lacoste appealed this decision. OHIM’s Board of Appeal partially disagreed with the decision of the Opposition Division. More precisely, they believed that Lacoste did enjoy reputation in the classes 18 and 25. It agreed that the goods are identical and the signs were slightly visually similar. Next, it took into the account a survey conducted by Lacoste that showed public recognition of over 70%, gained through an extensive use during a longer period of time. However, they deducted that the likelihood of confusion was inexistent for products other than leather goods, clothing and footwear.
The decision of the EGC and future action
The decision was found dissatisfactory by Kajman, and they brought the case to the General Court of the European Union (EGC, case T-364/13). Upon observing the similarity of the signs, the EGC concluded that the level of similarity is higher than estimated by the Board of Appeal, at least average, definitely not low. Adding the high similarity of goods and the enhanced distinctiveness of the earlier mark, the average consumer might mistake the Kajman product for a version of Lacoste’s product, or deem the undertakings as economically linked. Therefore, on September 30, 2015, the EGC decided that Kajman’s appeal should be dismissed.
On November 19, 2015, Mocek and Wenta filed an appeal again, and the case is expected to be heard in front of the Court of Justice of the EU (case C-619/15).
n its judgement of 18 March 2016, the General Court ruled that the wordmark “BIMBO” cannot be registered as a European Trademark. The Italian-speaking consumers of the Union would merely perceive the mark as indicating that the relevant products are intended for children (Judgement T-33/15).
“BIMBO”
Background of the case
On 28 February 2013 a Mexican company, Grupo Bimbo, SAB de CV, filed an application for a European Trademark (EU TM) at the European Union Intellectual Property Office (EUIPO). The wordmark “BIMBO” was sought registered for “Flour, bread and cereal preparations and products; products of pastry and biscuit” in Class 30.
The examiner rejected the application on the grounds that the relevant Italian-speaking consumers would interpret the word “bimbo”, which is an Italian word for “child”, as indicating that the products are intended for children. The wordmark was thus not considered to be capable of indicating the commercial origin of the products in question.
Grupo Bimbo appealed the examiner`s decision and argued that the mark, being a recognized brand worldwide, had acquired distinctiveness through use. Furthermore, they stated that the word “bimbo” was normally not used to designate a child in Italian and that the Italian rules on product labelling only provided that products for children should be labelled with the reference “per línfanca” or “per bambini”, not the term “bimbo”. Grupo Bimbo also made reference to the seniority of its brand “BIMBO” in Italy and that the mark was successfully registered in Switzerland, Germany and the UK. Lastly, Grupo Bimbo argued that the Court had previously recognised the reputation of the “BIMBO” brand in Spain (in Case T-357/11).
By decision of 19 November 2014, the Second Board of Appeal (BoA) dismissed the appeal as they found that the mark in question was descriptive and not distinctive in Italy.
The decision of the General Court
The General Court dismissed Grupo Bimbo`s action and upheld the decision of the Board of Appeal.
First of all, the General Court confirmed that the existence of absolute grounds for refusal must be assessed in connection with the Italian–speaking consumer of the Union.
The General Court noted that even though the term “bimbo” is not generally used in Italy to describe or designate the relevant goods in Class 30, the Italian-speaking consumers will interpret the word “bimbo” to refer to the recipients of those products as the goods in question are suitable for consumption by children. Thus, the wordmark was found to be descriptive of the characteristics of the products concerned.
The General Court stated that it is sufficient that one of the possible meanings of the word designates characteristics of the goods in question, meaning that the Italian understanding of the wordmark rendered the mark from being registered in the whole Union.
The General Court further rejected the arguments concerning the already existing Italian, Swiss, English and German registration for the wordmark “BIMBO”. They reminded that the trademark regime of the Union is an autonomous system where EUIPO is not bound by any national decision.
Furthermore, the Court noted that the similar marks which were accepted earlier were either different marks or registered for different goods and services. Either ways, the Court said that the possibility of registering a sign as a Community trade mark must in each case be assessed solely on the basis of the Trademark Regulation.
Lastly, the General Court concluded that Grupo Bimbo had not successfully proven that the mark had acquired a distinctive character through use in Italy.
On 15 April 2016, the European Trade Mark and Design Network published a Common Communication on Convergence on graphic representations of designs (CP6).
The Communication on the Graphical representations of designs is a result of the cooperation between the European Intellectual Property Office (EUIPO), National IP Offices and User Associations in a so-called Convergence Programme. The aim is to reach a common ground in areas where IP offices have different practices.
The CP6 is the first one published in the area of designs. The aim is to give guidance for the examination procedures on e.g.:
- How to use visual disclaimers.
- How to use different types of views.
- How to represent a design on a neutral background.
The document also provides recommendations to enhance the applicant´s understanding of how to reproduce their designs in the best way, in addition to an overview of the quality standards for design applications received by electronic means and by paper.
The purpose of the CP6 is to increase transparency, legal certainty and predictability for the benefit of examiners and users.
For more information, press here.
Press here for the Common Communication CP6: Convergence on graphic representation of designs.
Illustration: RCD No. 001282545-0001
[[{"type":"media","fid":"4695","view_mode":"default","alignment":"left","instance_fields":"override","attributes":{"height":266,"width":266,"style":"width:266px;height:266px"},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]A trademark can be any sign capable of distinguishing the products of one company from those of another. If you own a trademark, you have exclusive rights to use that trademark on the products you have protected and are offering on the market. This means that you can prevent any third party from using the same or a similar mark for the same products. Consumers usually base their purchasing decision on the good reputation of or their previous experience with a brand. The trademark attached to the products is therefore of great value to a company as it helps the consumers to pick out products from a specific commercial origin.
Through a license agreement the owner of a trademark, the licensor, can allow third parties, the licensees, to use his trademark under certain conditions in return for payment.
1. Why enter into a license agreement?
Sometimes the owners of intellectual property rights do not have the skills, capital and commitment to commercially exploit their rights themselves. In these situations it is a good solution to find someone who has that capacity and gr[[{"type":"media","fid":"4696","view_mode":"default","alignment":"right","instance_fields":"override","attributes":{"height":166,"width":265,"style":"width:265px;height:166px"},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]ant them a license. Others might have this capacity themselves, but wish to use licensing as a marketing and brand extension tool to expand and increase their brand value. Also, the licensee benefits from a license agreement as he can commercially exploit a trademark, in which he has not invested time and money in developing. Further advantages of license agreements will be highlighted at a later stage of this article.
2. The license agreement
When granting a license, the parties need to lay out in a contractual agreement the scope of how the licensee is allowed to exploit the granted right. The license agreement should be made in writing. However, it could be in oral if the law of the relevant country allows it.
a. Checklist for your license agreement:
What:
- Include clear definitions of which intellectual property rights are licensed, e.g. trademarks, design rights, patent rights etc.[[{"type":"media","fid":"4698","view_mode":"default","instance_fields":"override","attributes":{"height":203,"width":304},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]
- specify for which goods and services the licensee may exploit the trademark;
- the required quality of the goods and services and in which way the proprietor will monitor that such quality is delivered;
- how the royalty rates shall be calculated and under which criterions the royalty fee shall be paid;
Where:
- the territory, e.g. in which country, the licensee may use the trademark;
Extent:
- specify the degree of exclusivity that is granted, meaning whether it is an exclusive, sole or non-exclusive license;
- whether there are any restrictions on the right of the licensee to exploit the trademark;
- whether the licensee may grant sub-licenses or transfer its rights to others;
- whether the licensee has the right to take legal actions in respect of infringements of the trademark;
Duration:
- specify whether the agreement is for a fixed period of time, for indefinite duration or terminable by either party;
- under what circumstances a party might terminate the contract;
This list is not exhaustive. The parties may include individual clauses that they consider necessary.
b. Different types of licenses
The parties need to lay out in the agreement the degree of exclusivity that will be granted.
Exclusive license: The licensor is granted a right to use the trademark and exclude all others. The proprietor is thus not able to grant a license for the same trademark to any other parties and he can also not exploit the mark in trade himself. When granting an exclusive license, a minimum performance obligation is usually included in the agreement.
Sole license: The licensor is prevented from granting a license of the same mark to a third person, but, he is allowed to use the mark himself
Non-exclusive license: The agreement does not restrict the licensor from licensing the trademark to other third parties or from using the mark himself.
3. Recording of the license agreement
[[{"type":"media","fid":"4699","view_mode":"default","instance_fields":"override","attributes":{"height":203,"width":324},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]Before entering into a license agreement where your trademark will be used in a foreign jurisdiction, it is crucial to seek legal counsel in order to make sure that possible legal requirements applicable to trademark licensing agreements in that jurisdiction are met. A professional must, for example, examine whether the license agreement itself needs to be recorded in the national trademark registry. Many countries have such requirements and the failure to comply may result in the trademarks or the license agreements itself becoming either invalid or unenforceable. The failure to comply may also result in penalties for the contracting parties.
There are no legal formalities required under international law for the licensing of trademarks. Most license agreements are treated as regular contracts which are governed by the law of the country of the transaction, or any other law agreed upon by the parties.
Although international laws do not require a license to be recorded with the relevant trademark registry, some national countries require that there is an official and publicly accessible record of the permitted use. Under some laws the requirement is dependent on whether one of the parties requests such recordal. Under other national laws, such recording is not required in order for the agreement to be valid, but a failure to record a license may render the rights of the licensee ineffective against third parties.
Germany: The German Trademark Act does not demand recording of trademark licenses. However, it could help in enforcement to demonstrate use of the mark.
European Union: The license agreement is only required to be recorded where one of the parties requests it.
Other countries:
United Kingdom: There is in general no legal requirement that a trademark license must be recorded with the national trademark office. However, such licenses may be recorded and can be helpful to demonstrate use of the mark.
United States: Recordation of licenses with the national trademark office is not mandatory in this jurisdiction. However, such licenses could help to demonstrate use of the mark.
Russia: A license of a registration must be recorded to maintain the validity of the registration if it is used under the license. The license for a renewed registration need not be re-recorded.
China: In general a license of a registration does not need to be recorded. However, such licenses could help to demonstrate use of the mark.
4. Quality control
[[{"type":"media","fid":"4695","view_mode":"default","instance_fields":"override","attributes":{"height":266,"width":266},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]The main functions of a trademark are to indicate the source of origin and subsequently guarantee a certain quality. Products which are delivered by a licensee will naturally not emanate from the trademark owner himself. When making a purchasing decision, the consumers will rely on the reputation of and the previous experiences with the brand. It is thus crucial that the quality of the goods and services offered by the licensee are of the licensor’s standards in order for consumers not to be deceived and the proprietor’s reputation damaged. The inclusion of quality control provisions in the license agreement is therefore crucial to trademark licensing.
In practice, most trademark owners see the important commercial purpose served by quality control requirements and do generally include them in their license agreement. Some countries also place a duty on the licensor to exercise a quality control over the licensee’s goods and services. If the licensor fails to take reasonable measures to control the products of the licensee it can result in the loss of trademark rights or the trademark may become vulnerable to attack.
5. Advantages of license agreements
There are several reasons why it makes sense for a company to exploit its intellectual property rights by entering into license agreements. Such agreements can be a valuable part of a strategic business plan for both a licensor and a licensee:
a. Additional revenue
[[{"type":"media","fid":"4700","view_mode":"default","instance_fields":"override","attributes":{"height":190,"width":253},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]By licensing, one can enhance the value of the trademark and increase financial returns for the trademark owner. Product manufacturers are often willing to pay significant royalty rates for the right to identify their goods with an established and widely recognized trademark. The royalty rates will usually amount to a certain percentage of the expected profits from the products that incorporate the licensed trademark. The criterions for the royalty rates are determined after negotiation between the parties.
The trademark owner can grant several businesses a permit to exercise his rights at the same time. By each licensee the licensor will create an additional revenue stream without having to shoulder the risk of manufacturing the products.
b. Strategic partnerships
A license agreement can be a “win-win” situation for both the licensor and the licensee. The licensor can enjoy the licensee’s local knowledge and manufacturing- , distributing- and marketing capacity, while the licensee can commercially exploit a trademark, in which he has not invested time and money in developing. This is beneficial for the licensee who will get his products and services to the market faster. Through licensing agreements one can gain strategic partnerships where one can rely on the ability of the partner to meet challenges one cannot meet alone.
c. Increase of brand recognition
[[{"type":"media","fid":"4701","view_mode":"default","instance_fields":"override","attributes":{"height":166,"width":318},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]Brand recognition is crucial for a trademark proprietor, and the more the mark is used, the greater the recognition among the consumers will be. A licensed trademark may be used on products other than the proprietor’s core products, and thus extend its visibility to consumers. It may also expand the brand to territories where the proprietor himself is not active. The risks and costs of territorial expansion are eliminated when the brand is manufactured and distributed in the new territory by a local licensee. Furthermore, expansions to new territories and markets mean that new revenues may be extracted. This can thus be achieved without having to do big investments or research.
d. The license agreement as a tool to keep your trademarks rights
Sometimes a license agreement is necessary for the proprietor in order to meet the requirements of use of the mark for the goods and services it is registered for. The situation could be that the proprietor himself cannot use the mark himself for a period of time because of mergers, acquisitions, bankruptcy etc. It could also be that the proprietor does not provide all the goods and services the mark is registered for. As trademark use of the licensee is in general considered use by the proprietor himself concerning the obligation to use the mark, the granting of a license can in these situations be a great tool for the proprietor to keep his trademark rights. In addition, the license agreement makes sure that there is a continuous revenue stream until the proprietor can use the mark himself again.
To sum up, license agreements may reduce the investments needed to access the marketplace for both the licensor and the licensee. While the licensor receives revenues from the use of the mark, but does not take the risk of manufacturing, promoting and selling the products, the licensee can exploit the IP right without the expense and risk of the research and the costs of developing the trademark.
6. Disadvantages of license agreements
[[{"type":"media","fid":"4702","view_mode":"default","instance_fields":"override","attributes":{"height":188,"width":251},"field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""}]]One should also be aware that there could be some disadvantages of trademark licensing. As mentioned above the trademark indicates the origin of the products bearing it. The fact that a trademark is licensed to a third party might confuse the consumer and lead to dilution of the brand if the quality of the products does not hold the same standards as that of the trademark owner. Furthermore, the licensor may suffer severe damages if the licensee does not meet the quality that is expected behind the brand. There is also a risk to be drawn into product liability disputes.
To prevent the effect of these disadvantages, the licensor should carefully line up an agreement where he can terminate the license if the licensee damages the reputation of the licensor’s brand, if the quality of the products does not hold the standards of the proprietor or if the licensee does not maximize the opportunities to exploit the mark. The licensor may sue for trademark infringement and breach of contract if the licensee contravenes to the provisions laid out in the license agreement.
7. Different ways of licensing a trademark
a. Brand extension
This type of licensing is common where one wants to extend the trademark to other products or services than what it is originally used for. “Porsche” and “Ferrari” are for example not only used for cars, but is extended to a large variety of products such as watches, sunglasses, clothing, umbrellas, chairs and toys. Further, the “UCLA” trademark which originally stands for “University of California, Los Angeles”, is today licensed for a wide range of products e.g. clothes, headwear, watches, backpacks, towels and sports equipment.
To grant a license in this way is a good marketing strategy as the licensor extends the brand to other product categories while the licensee may offer products containing well-developed marks.
b. Franchising
Licensing may also appear as a part of a more comprehensive cooperation project called “franchising agreements”. The franchisee will be allowed to use a particular business model and is granted a license to use the specific trademarks. The franchisee will also be supported by training, technical support and mentoring. The franchisees will run the businesses on their own account, but will for the customers appear as a strong unity under the same trademark. Examples of businesses who are under such agreements are: McDonald´s, Subway, Domino`s Pizza, Dunkin` Donuts and 7-eleven.
c. Merchandising
The licensing of trademarks and designs, as well as fictional characters and real personalities protected by these rights, can also be conducted through merchandising. Manufacturers of ordinary consumer’s goods are through a licensing agreement allowed to apply well-known marks and designs to their goods. Trademarks of, for example, popular sports teams or entertainment distributors have huge consumer recognition and appeal to the consumers and are thus licensed for products such as towels, toothpastes or clothing.
d. Co-branding
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Co-branding is where two or more trademarks are combined in one product to make a stronger appeal to the same clientele or conquer a new market. The product will thus be associated with strengths from both brands. An example is where the well-known mark “UCLA” is used in combination with “Adidas” on sportswear. Another move for two brands to extend brand recognition can be illustrated with the partnership between the brand owners of “Kinder” (chocolate eggs) and “STAR WARS” as shown on the picture to the left.
e. Component or ingredient branding
A product manufacturer may license the right to use the trademark of an ingredient. A key ingredient in a product may often affect the consumer`s decision to buy a product, even though the consumer might not even be aware of it. Such ingredients can for example be “Gore-Tex” for sportswear of “Teflon” for cookware.
f. Standards
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Some trademarks communicate to the consumers that the relevant product complies with certain standards. When a product is bearing such a trademark the costumer appeal of the product will enhance and can thus increase revenue for the licensee. An example of such a mark is the well-known international “FAIRTRADE" mark (EU TM No. 007408917) which is licensed to a wide range of manufacturers and distributers.
Further references:
Press here for a comprehensive guide to trademark licensing written by WIPO´s Committee on Development and Intellectual Property.
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Disclaimer: The information provided in this article does not constitute legal advice. Please be aware that laws might change, leaving this article outdated
In its preliminary ruling of 3 March 2016, the European Court of Justice (ECJ) ruled that actions on trademark infringements in online advertising cannot be brought against a third party who is not in direct or indirect control of the act constituting the trademark use (Judgement C-179/15).
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Background of the case
Daimler AG, a German motor vehicle manufacturer, is the proprietor of the international figurative trademark “Mercedes-Benz”, No. 321168, as shown above. Együd Garage is a Hungarian company engaged in the retail sale of motor vehicles and parts and their repair and servicing.
In 2007, Együd Garage and Mercedes Benz Hunaria Kft, a subsidiary of Daimler, concluded an after-sale services contract where Együd Garage was entitled to use the “Mercedes-Benz” trademark and describe itself as “authorised Mercedes-Benz dealer” in its advertisements. The contract expired on 31 March 2012.
While the contract was still in force, Együd Garage ordered a company providing online advertisement services (MTT) to publish advertisements for the year 2011 to 2012 where Együd Garage would be named as an authorised Mercedes-Benz dealer.
Following the termination of the contract, Együd Garage asked MTT to amend the advertisement so that the public would not assume that there still was a contractual link between Együd Garage and Daimler. Együd Garage also wrote to operators of other websites requesting the removal of the online advertisement, which had been published without its consent. Despite the efforts, online advertisement containing references to Együd Garage as an “authorised Mercedes-Benz dealer” continued to be distributed online.
Daimler brought an action before the Municipal Court of Budapest seeking a declaration that Együd Garage infringed its “Mercedes-Benz” trademark by the references in the advertisements.
The Municipal Court of Budapest referred a question to the ECJ for preliminary ruling concerning the interpretation of art. 5 (1) of the Trademark Directive. In short, the question was whether the trademark proprietor could prevent a third party named in an advertisement on the internet from making use of the mark, even though the advertisement was not placed on the internet by the person featuring in it or even though the third party took all reasonable steps to have it removed, but did not succeed in doing so.
The decision of the Court
The Court first dealt with the question regarding the continued reference to Daimler in the advertisement published by MTT. The Court ruled that Együd Garage, as the advertiser, cannot be held liable for the acts or omissions of a provider who, intentionally or negligently, disregards the express instructions to stop the use of the mark. The Court was of the opinion that when MTT failed to comply with Együd Garage`s request to remove the reference to the mark in the advertisement, the publication of that reference can no longer be regarded as use of the mark by Együd Garage.
Secondly, the Court dealt with the question regarding the publication of the advertisement on other company referencing websites. The Municipal Court of Budapest explained that it is the common practice of some operators of such sites to take up advertisements published on other advertising sites, without the knowledge or consent of the advertiser, to promote the use of their own site, in order to suggest to potential paying users that they are dealing with a popular website with a solid basis.
The Court ruled that an advertiser cannot be held liable for the independent actions of other economic operators with whom it has no direct or indirect dealings and who do not act by order and on behalf of that advertiser, but on their own initiative and in their own name. The Court reasoned that the ordinary meaning of the word “use” involves active behavior and direct or indirect control of the act constituting the use. That is not the case if the act is carried out by an independent operator without the consent of the advertiser, or even against his express will.
In addition, the Court argued that the law cannot be interpreted in a way of allowing prohibition solely on the ground that the use could possibly provide a financial benefit to the advertiser. In cases like this, the advertiser is not effectively able to stop the use and the Court stated that it cannot legally oblige someone to do the impossible (impossiblium nulla obligation est). The Court thus ruled that under these circumstances Daimler was not entitled to take actions against Együd Garage on the grounds of Art. 5 of the Trademark Directive.
However, the Court does not rule out the possibility for the trademark proprietor to claim reimbursement of any financial advantage on the basis of national law, nor that of taking action against the operators of the referencing websites.