One of the workshops at this year’s MARQUES Annual Conference is on “Managing Split Brands in the Age of the Internet”. In a preview for Class 46, Bahia Alyafi of the MARQUES Intellectual Asset Management Team discusses some of the IP issues raised by split brands:

Irrespective of whether we use the traditional definition of brands as an object or more current definitions of brands as ideas, experiences or relationships, the bottom line is a brand aims at identifying and differentiating one seller’s products and services from those of another.

If the chief objective of a brand is to provide an indication of ownership and source of products, then how can a brand be split, or jointly owned?

Due to the nature of a brand as an intangible asset, the interest of each owner/joint owner in the brand cannot cover part of the trade mark – ownership extends to the trade mark as a whole. Therefore, while split brands cover the entirety of trade marks, split agreements take on many forms. First of all, the split can be structured by type of product or service sold, such as the case of Davidoff cigars and Davidoff cigarettes on the one hand and Davidoff perfume on the other hand (pictured right). The split can also be structured based on field of use, such as the split of the Apple brand between Apple Corps Ltd for the Beatles and Apple Inc. Finally, the split can be by geography, such as the case of Persil between Henkel AG and Unilever.

How do split brands arise?

One might wonder how this happens and it raises the following question: what are the legal and commercial implications of such positions for brand owners and for consumers?

Split brands have been used as a means to monopolize markets and ensure high barriers to entry; a prominent example is the word Superhero which was jointly registered as a trade mark in 1979 by New York-based Marvel and California-based DC Comics in an effort to prohibit others from using it (pictured left). The two companies, which are usually fierce rivals, spent 37 years monopolizing the mark and targeted different businesses that use the term “Superhero” in their branding. It was not until 2016 that this trade mark was allowed for registration in conjunction with other words by a third party in the UK.

Split brands have also stemmed from geopolitical issues, such as the Havana Club trade mark, which is at the center of an ongoing dispute between Bacardi, which claims the rights to the US mark, and Pernod Ricard, which distributes the rum in 124 countries through a joint venture with the Cuban state-owned company Havana Club Holdings (see pictures right). The dispute mirrors the historic and current political issues taking place between the United States and Cuba.

The most common source of split brands stems from M&A deals that are typically consummated between two competing companies having the rights to the same brand in different jurisdictions. The Seven Up brand (pictured left) was the casualty of such a deal, whereby in 1986, Philip Morris sold its United States operations to a private investment group, which subsequently merged with Dr Pepper Company, and sold the international operations of the Seven Up Company to Pepsico Inc. Currently the rights to the Seven Up brand are held by Dr Pepper Snapple Group in the United States, and Pepsico Inc (or its licensees) in the rest of the world.

Rivalry between family members can turn vicious and as a result leading brands can have split ownership and independent operations. While this is common in brands that include family names such as the Rothschild’s and Valentino, other noteworthy examples are Aldi – the common brand of two leading global discount supermarkets owned by two brothers with over 10,000 stores in 18 countries. The businesses separated into two groups in the 1960s, Aldi Nord and Aldi Sud, after the two brothers had a disagreement about whether or not to sell cigarettes at the retail outlets.

Joint ownership of brands is also commonly used as an expansion strategy, whereby the parties involved jointly collaborate to achieve their respective strategies. In March 2017, ITOCHU Corporation agreed on the joint ownership of the Penfield’s trade mark with Yamato International, allowing each owner to focus its efforts on its strengths in developing and expanding the brand equity in North America and certain markets in Asia.

In situations where sales and profits are declining, stocks are devaluing and finally the company is filing for bankruptcy, intellectual property assets take on an ancillary role, as the pivotal goal becomes getting through the liquidation proceedings with the most possible value and least destruction. Split brands are often founded in such circumstances, which lead competitors, distributors and/or licensees, and independent third parties, to own the same brand. Converse is a fine example of a brand that split from bankruptcy proceedings, whereby Itochu Corporation, the holder of the registered trade mark CONVERSE for shoes (pictured), which manufactured and sold shoes under this trade mark, purchased the trade mark right in Japan from Converse Inc, an American company, in 2001. The company subsequently sold the shares to Nike Inc in 2003; however it kept a joint marketing agreement.

Impact of split ownership

The splitting of ownership, use and goodwill of a brand is detrimental to the distinctive character, reputation and equity of the brand thus having an impact on all stakeholders involved, including brand owners, investors and most importantly, consumers.

Workshop 3 during the Annual Conference will present and discuss the complex issues raised by split brands, and the discussion will provide practical guidance and experience in managing split brands in multiple industries and jurisdictions. The speakers will address topics including: the history of split brands; split brands in the 20th century; the in-house transactional perspective; and what happens when there is a family feud.

Find out more about all the workshops on the Annual Conference page here.

Bahia Alyafi is with Alyafi IP Group and a member of the MARQUES Intellectual Asset Management Team

Janet Satterthwaite reports on an important rule change from the USPTO affecting overseas trade mark applicants.

As of 3 August 2019, foreign-domiciled applicants must appoint US counsel to prosecute their trade mark applications. A “foreign-domiciled applicant” is an entity with its principal place of business outside the United States or an individual with a permanent legal residence outside the United States. 

The change was announced by the USPTO on 2 July (read the announcement here).

Who is affected?

MARQUES members with in-house legal teams who do their own global filings will probably be most affected by this new rule.

What do you need to know?

1. You may still file an application without US counsel unless you want to use the TEAS PLUS form, but you will get an office action requiring you to appoint US counsel.
2. You may still designate the US on an International Registration under the Madrid Protocol without US counsel for now, because WIPO has not yet added a line to the form for you to designate US counsel. If your application is in a condition to register without an office action, you will be grandfathered in, but according to the US Trademark Office, only around 3% of US designations sail through without an office action. For all other applications, you will get an office action requiring you to appoint US counsel.
3. Timing: The rule applies to applications filed before, but still pending on, 3 August, if an office action has issued. If you filed an application before 3 August that does not require an office action, you do not need to appoint an attorney.
4. Inter Partes: This rule also applies, in addition to appeals, to oppositions and cancellations. If you are involved in one of these, the Board will suspend the case and issue an order requiring you to appoint US counsel.

Why is this happening?

It is the trademark equivalent of law-abiding people having to put their toothpaste in a plastic bag and remove their shoes before getting on an aeroplane. 

While most jurisdictions do not require a showing of use to register or renew a registration, this is still an important concept in the US, which still strongly bases even registered rights on common-law use. There has been a surge of fraudulent filings and renewals at the USPTO claiming use where there is no use, with fake specimens, or where the person signing does not have authority to sign. Here is the USPTO’s stated justification as set forth in the Federal Register, which publishes new Agency rules:

[I]n the past few years, the USPTO has seen many instances of unauthorized practice of law (UPL) where foreign parties who are not authorized to represent trademark applicants are improperly representing foreign applicants before the USPTO. As a result, increasing numbers of foreign applicants are likely receiving inaccurate or no information about the legal requirements for trademark registration in the U.S., such as the standards for use of a mark in commerce, who can properly aver to matters and sign for the mark owner, or even who the true owner of a mark is under U.S. law. This practice raises legitimate concerns that affected applications and any resulting registrations are potentially invalid, and thus negatively impacts the integrity of the trademark register (84 FR 31498 (2 July 2019)).

The USPTO no longer wants to place the burden on applicants, for example to petition to cancel blocking registrations where the mark is clearly not in use.

Indeed, a corollary to the 2 July announcement is a new four-page Examination Guide, also dated July 2019, educating examiners on how to spot a fake or digitally altered specimen.

Surge of fraudulent applications

The same problems and misunderstandings about what is use in commerce and who is the owner of a mark also pertain to applicants domiciled within the US who file without an attorney. But the surge of fraudulent applications from foreign applicants prompted the rules. A number of US attorneys have even reported being contacted by a foreign individual asking to pay to use their US law firm address to do their US filings.

Janet Satterthwaite is a Partner of Potomac Law Group and a member of the MARQUES IP Emerging Issues Team. The illustration is by Marcelo Cozzolino (Wikimedia Commons)

Earlier this month, MARQUES hosted a Forum at the 11^th China Trademark Festival. Class 46 is pleased to publish an English translation of an article in the CTA Daily Report:

On the morning of 7 July 2019, during the 11th China Trademark Festival, MARQUES held a forum “Chinese Brands Going to Europe” in conjunction with China Trademark Association (CTA). This is the third consecutive year that MARQUES and CTA have held a forum at the China Trademark Festival.

The Forum was moderated by Alessandra Romeo, MARQUES External Relations Officer; Lian Yunze, Partner of Jadong IP Law Firm and Member of the MARQUES China Team; and Julia Hongbo Zhong, Vice President of Lee and Li – Leaven IPR Agency Ltd. and Chair of the MARQUES China Team. Experts and scholars from non-governmental organisations, enterprises, agencies and relevant government departments in the field of Chinese and foreign trade marks gathered together to provide guidance for brands of Chinese enterprises going to Europe.

Strengthening communication and cooperation

In the opening remarks, WU Dongping, Deputy General Secretary of CTA and Uwe Over, Past Chair of MARQUES and Corporate Vice President of Hekel AG & Co., KGaA, representing non-governmental organisations in the trade mark field between China and Europe, reviewed the exchanges between the two sides in recent years.

By strengthening communication and cooperation, and sending personnel to participate in annual meetings, forums visits and exchanges, the two associations of China and Europe have further established a platform for trade mark and brand exchange, especially in the process of promoting Chinese enterprises to enter the European market, have effectively circumvented the legal risks in the trade mark field encountered in Europe, and have increased the internationalisation level of Chinese enterprises.

Another guest speaker, Gunther Marten, Minister Counsellor and EUIPO IP attaché at the EU Embassy in Beijing, also said that the theme of this year's MARQUES Forum, “Chinese Brands Going to Europe” is in line with the background of the increasing number of Chinese trade mark applications in the EU. He expressed the hope that more and more Chinese enterprises enhance the value and influence of their trade marks in Europe in favour of business development.

Differences between China and Europe

In the first session of the forum, Betty WANG, Deputy Director of Intellectual Property Department of Tencent Technology (Shenzhen) Co., Ltd. and member of the MARQUES China Team and Reinout van Malenstein, Senior Counsel of HFG Law & Intellectual Property (Shanghai), made speeches on the development of Chinese brands going to Europe and the differences between the European and Chinese trade mark legal systems.

Among them, as a company that has been at the forefront of China's brand value ranking for many years, Betty WANG said that Tencent’s business currently involves social, gaming, music, film, consulting, payment tools and many other aspects, whose brands are Interlaced in many complex product lines, which brings great difficulty in brand management.

At present, the company has filed 30,000 trade mark registration applications, covering more than 120 countries and regions. In the process of Tencent’s trade marks going to Europe, it faces various difficulties, such as many country’s databases need to be searched, all classes cannot be covered in the countries based on use, urgent cases cannot be completed on the same day due to the time difference, the number of applications is limited by cost and the high cost of a single case. Today, Tencent’s main strategy is to actively use international priorities in overseas trade mark planning, while deeply understanding and carefully following the EU trade mark procedures, and actively using the EU intellectual property customs protection system.

Expanding internationally

In the second session of the forum, three speakers gave speeches one after another. Uwe Over took the example of Henkel Group as a support for Chinese enterprises to go to Europe. He said that for Chinese enterprises, the ideal overseas trade mark management structure should include three levels: (1) to possess a trade mark, (2) to protect the trade mark, and (3) to make good use of the trade mark.

In the process of going to Europe, we must do a good job in trade mark planning and control costs to build a reasonable trade mark protection price structure. Before expanding the existing trade mark portfolio, we must also do a risk assessment, consider the market as a whole, and do market monitoring.

In her speech, Mirjam de Werd, Vice-Chair of the MARQUES China Team and trade mark attorney at the Dutch firm Abcor, provided guidance on protecting and managing Chinese brands abroad. She believes that the first thing to do is to search and monitor the trade marks that are allegedly infringed or infringed, and then to protect rights through three procedures: administrative, judicial and Customs enforcement procedures. She specifically explained the relevant ways and methods of rights protection, and briefly discussed the impact of Brexit on the protection of trade marks in Europe.

Trade mark litigation in China

Finally, Zhang Xiaojin, Chief-Judge in the Second Trial Division and Member of the Adjudicatory Committee in Beijing Intellectual Property Court, made a speech entitled “Practice on Rights Protection of Foreign Trade Mark Owners in China”. She exchanged views with Chinese and foreign guests on four aspects, including the relevant introduction to trade mark litigation in China, the practice on rights protection in trade mark administrative cases, the practice on rights protection in trade mark civil cases, and the equal protection of the legitimate rights and interests of trade mark parties.

During the questioning and post-conference exchanges in the two sessions of the Forum, the participants and the Chinese and foreign guests had extensive and energetic discussions. Participants said that, with China’s continuing economic and social development, Chinese enterprises are facing more trade mark challenges in Europe.

Using a platform such as the MARQUES Forum to strengthen China-EU cooperation is conducive for Chinese brands to raise awareness of overseas rights protection, to establish the pillars of brand portfolio management and internationalisation and to provide guiding principles for the management and operation of trade marks at home and abroad.

This translation of an article in the CTA Daily Report was prepared by Julia Hongbo Zhong and Lian Yunze of the MARQUES China team. The photos are by CTA photographers.

CTA will be hosting a workshop at the MARQUES Annual Conference in Dublin on combatting malicious registrations in China. For more details, see the online programme.

Class 46 readers might be interested in attending IP Horizon 5.0: Mapping opportunities and challenges in a globalised economy, which will take place in Alicante on 26 and 27 September.

This conference is co-organised by EUIPO and the McCarthy Institute in San Francisco.

Issues to be covered will include cutting-edge developments and artificial intelligence initiatives in the field of IP, opportunities presented by global e-commerce and transformative technologies, and the future of IP jobs.

Speakers include representatives of IP offices, international businesses, policy makers, practitioners, academics and enforcement authorities.

There is a Gala Dinner on 26 September and a thematic arrangement on the afternoon of 27 September. The conference language will be English.

A number of MARQUES members are planning to take part in the conference. If you would like to join them, registration is open until 12 August and costs €150 (including breakfasts, lunches, dinner on 26 September and closing cocktail).

Hotel accommodation is not included in the price, but EUIPO provides a list of suggested hotels with negotiated rates.

Find out more about the Conference here.

Register your place here.

Brazil submitted its accession document to the Madrid Protocol to WIPO on 2 July. This means the Madrid System will enter into force for Brazil on 2 October 2019.

With Brazil’s accession, the Madrid System will cover 121 countries, including all of the world’s 10 largest economies.

Read more about the accession in WIPO’s announcement.

MARQUES has long championed the Madrid Protocol in Brazil, sending delegations of members to the country to discuss the benefits of joining. Read more in this recent blog post.

Eduardo Machado of the MARQUES International Trade Mark Law and Practice Team said that discussions are continuing regarding whether there will be a requirement to have a Brazilian attorney appointed for every application.

The news comes soon after the European Union and Mercosur (which comprises Argentina, Brazil, Paraguay and Uruguay) signed a trade agreement. This agreement spans a wide range of topics including geographical indications.

Ehud Gabrieli, Chair of the MARQUES Education Team, reports on a ruling that Cannabis is not eligible for trade mark registration and also cannot be protected under passing off (קנביס - קנאביס Civil Case (Haifa District) 44032-04-17 Leibowitz v Sasson – Haifa District, Judge Gidon Ginat (14 June 2019)).

The Israeli District Court in Haifa has ruled that a plaintiff, who owns a domain name for the word Cannabis in Hebrew, cannot appropriate to himself the name Cannabis, and that there is no passing off by the defendant, who owns a second domain name for the word Cannabis (with an extra vowel letter).

Facts of the case

Plaintiff's website logo

The plaintiff, a journalist, has owned a website, the domain of which in Hebrew is קנאביס.com, since 2011. This website is a magazine on political, cultural and social issues concerning the cannabis plant and drug.

The defendant, a computer developer, owns the domain קנביס.com. The defendant's site is a website for licence owners for the use of medical cannabis, dealing with advice regarding options to shorten bureaucracy to receive such licences. The defendant’s website started operating in 2014.

The names "קנאביס" and "קנביס" were not registered as trade marks when the lawsuit was filed. The plaintiff contended that the defendant's use of the word "קנביס" constitutes passing off in accordance with Section 2 of the Israeli Commercial Torts Act. The defendant contended that the name Cannabis in any language is generic and at least descriptive and the plaintiff cannot appropriate it to himself. The defendant further contended that even if that were not true, the plaintiff had not proved that the public consumer identifies the name "קנאביס" or "קנביס" exclusively with him (no reputation) and that the logos that the parties use online are not misleadingly similar:

Ruling

Defendant's website logo

The Court has accepted the defendant’s contentions and ruled that Cannabis is a descriptive name. It was further ruled that the name Cannabis describes the contents of the internet site and therefore the plaintiff is not entitled to appropriate the name to himself. Anyway, the defendant should not be considered as causing a civil wrong.

The Court made also a syllogism from the provision of paragraph 11(10) of the Trademarks Ordinance, in accordance with which marks that describe the goods or services for which their registration is sought, are not eligible for registration, to the arrangement concerning passing off. According to the Court, one can learn that names describing the goods or services for which their protection is sought, do not pass off.

The Court had also compared the case before it to a famous case dealt in the Supreme Court [Civil Appeal 5792/99 "Family" newspaper v. "Good Family" paper] and ruled that a descriptive name would receive protection on the ground of passing off only if it had acquired a secondary meaning. This secondary meaning is only a derivative of the goodwill which the bearer of the descriptive name has acquired, which, in this case, is a website on the internet.

The Court asserted that the plaintiff before it did not prove the existence of the reputation as required for the tort. For the sake of the argument the Court further assumed, as claimed by the plaintiff, that his website has received extensive exposure, and concluded it was not enough to prove that the public consumers, which in this case are the website’s visitors, identify the name Cannabis only with the plaintiff's website, or that they find special importance in the specific site as the origin of its content.

The Court had also ruled that even if there was a similarity between the websites’ contents, the name Cannabis is not protectable.

Differences between sites

The Court concluded that while the plaintiff focused his contentions on the similarity between the two domain names (as in their addresses), he ignored and disregarded the difference between the logos of the two sites. The Court further highlighted that the logo of the plaintiff’s site is completely distinctive from the logo of the defendant’s site, partly due to the slogans included in them.

The Court ruled that in the matter of passing off, one should not examine the confusing similarity only with regard to the addresses of the sites. One cannot ignore the full names of the sites which are displayed as a logo at the top of the pages of these sites.

At the end of the day the lawsuit was dismissed and the plaintiff was ordered to pay the expenses of the defendant as well as his attorneys fees in the amount of NIS 20,000 (€5,000).

An appeal can be filed within 45 days of the judgment to the Supreme Court.

Ehud Gabrieli is Chair of the MARQUES Education Team and a partner of Seligsohn Gabrieli & Co. He represents the defendant in this case

On 19 June 2019 the General Court (Ninth Chamber, extended composition) handed down its judgment in Case T-307/17 adidas AG vs EUIPO/Shoe Branding Europe BVBA (intervener). Tobias Malte Müller, Chair of the MARQUES Amicus Curiae Team, discusses the key points.

The Adidas three-stripe mark

This case concerned the validity of one of Adidas’s three-stripes trade marks registered as an EUTM in 2014. Shoe Branding Europe filed an application to declare the mark invalid. The EUIPO Cancellation Division granted the application and held Adidas's EUTM invalid due to lack of distinctive character, both inherent and acquired through use. The EUIPO Board of Appeal rejected Adidas’s appeal and, in particular, Adidas’s plea of acquired distinctiveness. Adidas then brought the matter before the General Court.

MARQUES supported Adidas in this case, which is of utmost importance of its members and all brand owners. The MARQUES Amicus Curiae Team submitted its brief on 22 January 2018 and pleaded in favour of a liberal interpretation of Article 7(3) of Regulation No. 207/2009 and of the evidence to be submitted in support of this provision.

MARQUES advocated the position, following which Article 7(3) does not only refer to use of the mark in the form in which it was submitted for registration, but also to the use of the trade mark in forms which differ from that form solely by insignificant variations and that are, therefore, able to be regarded as broadly equivalent to that form (“law of permissible variations”, paragraph 59). MARQUES further emphasised that a narrow interpretation of Article 7(3) would inevitably raise the bar for proving acquired distinctiveness so as to become extremely costly and burdensome for trade mark owners and therefore unachievable in practice, especially for smaller and mid-sized companies.

However, the General Court, having regard to the alleged simplicity of the mark at issue, considered the evidence showing a reversed colour scheme to be a significant variation of the registered form, even if the same sharp contrast between the three stripes and the background was preserved in both versions. Therefore, and in contrast to MARQUES’ position, the General Court adopted a restrictive approach in holding that the part of the evidence which did not show the mark as registered, but another sign – in particular a reversed colour scheme – was to be dismissed (paragraph 77). It concluded that various pieces of evidence adduced by Adidas did not prove that the mark at issue had acquired, throughout the territory of the European Union, distinctive character following the use which had been made of it.

Nevertheless, the General Court pointed out that in order to successfully claim distinctive character acquired through use, it would be unreasonable to require proof of such acquisition for each individual Member State (paragraph 145). This view is based on the Court of Justice’s judgment of 25 July 2018, Société des produits Nestlé and Others v Mondelez UK Holdings & Services (Case C‑84/17 P, C‑85/17 P et C‑95/17), where MARQUES also intervened and supported exactly the position that no provision of Regulation No 207/2009 requires that the acquisition of distinctive character through use be established by separate evidence in each individual Member State (paragraph 146).

Tobias is a partner of TALIENS in Munich and Chair of the MARQUES Amicus Curiae Team