Monday, 30 March 2015

OHIM Board of Appeal's broad discretion is still subject to general legal principles of judicial review

Author: Niamh Hall (FRKelly, Dublin & Belfast)

Royalton Overseas v OHIM–S.C. Romarose Invest (KAISERHOFF), Case T-556/12

Journal of Intellectual Property Law & Practice (2015) doi: 10.1093/jiplp/jpv050, first published online: March 22, 2015

Does the annulment of the OHIM Board of Appeal decision in Royalton/KAISERHOFF on suspension requests herald a new standard for procedural matters in appeals? The General Court has issued its first ruling annulling a substantive decision of the OHIM Board of Appeal on the basis of a manifest error of assessment. The particular issue concerned the Board's broad discretion in the procedural matter of refusing a suspension request.

Legal context

It is well recognized that the Office for Harmonisation in the Internal Market (OHIM) Board of Appeal has a broad discretion in many matters. For example, it is not bound by the same rules of practices on extensions and suspensions as the Opposition and Cancellation Divisions. Although this discretion in terms of suspensions has previously been challenged before the General Court, the actions of the Board of Appeal have to date been vindicated. In Case T-145/08 Atlas Transport GmbH v OHIM (para 70), it was established that the broad discretion of the Boards to suspend proceedings can be judicially reviewed only on the accepted administrative law principles of manifest error of assessment or misuse of powers. In that case, no manifest error or misuse of powers was identified. The present case, in holding that there was a manifest error of assessment, engaged in an informative examination of the principles that apply to such errors. It is also the first time that manifest error has been successfully argued in a substantive decision. The only previous occasion on which an appeal on manifest error was successful involved the award of costs in Case T-32/04 Lyco-A.

Facts

The applicant Royalton Overseas Ltd filed an application for a figurative Community trade mark for the KAISERHOFF logo for goods in classes 8 and 21. This application was opposed by S C Romarose Invest Srl on the basis of an earlier Romanian registration for KAISERHOFF for goods and services in classes 11, 21 and 35. The opposition was partially upheld and Royalton appealed.

In its statement of grounds and in additional observations filed afterwards, Royalton requested that the proceedings be suspended on the basis that a cancellation action filed by Royalton against the opponent's earlier registration was pending before the Bucharest Municipal Court, Romania. The Board of Appeal did not suspend the proceedings and instead issued a decision upholding the Opposition Division decision and dismissing the appeal.

The Board of Appeal's decision on the suspension issue was based on two main points:
The cancellation action could not be taken into account as it was brought after the appeal was filed and the statement of grounds was submitted.

The Board had serious doubts about the true intentions of the applicant in requesting suspension of the proceedings, especially as the applicant had filed other cancellation actions against the opponent's registration in the past which had been concluded.
The Board of Appeal also rejected the applicant's arguments that the registration certificate filed in respect of the opponent's registration was incorrect as it did not reflect limitations on the goods resulting from a third party opposition. It held that no copy of the original decision limiting the opponent's registration had been provided but, even if it had been provided, the outcome would not have been different in the light of the high degree of similarity of the marks. The General Court refused to admit additional documents provided for the first time before it confirmed the limitation to the opponent's registration, and this issue was not explored further.

In regard to the cancellation action against the opponent's earlier registration in Romania, the applicant filed a further certificate of the Romanian court, confirming the existence of that action, and the opponent filed evidence of two previous cancellation actions filed against that registration by the applicant. The court also refused to admit these additional documents provided for the first time to the court, in line with the decision on new evidence in ARTHUR ET FELICIE (Case T-346/04).

The Board of Appeal also alleged that no copy of the original cancellation action had been provided and that the English translation provided did not show that the opponent's earlier registration was currently the subject of the cancellation action. OHIM, before the court, accepted that a copy of the original action had indeed been provided along with the translation and that the documents filed identified the opponent's earlier registration as the subject. However, OHIM maintained that the Board of Appeal was correct to be uncertain whether this was a delaying tactic in view of the two earlier cancellation actions taken by the applicant. The court held that Article 76(1) of the Community Trade Mark Regulation (CTMR) requires that OHIM examines carefully and impartially all of the factual and legal aspects of the case (in line with Case T-427/11 BIODERMA) and that the Board of Appeal had failed in this duty of diligence by omitting to consider the evidence of the cancellation action which was before it. The court then considered whether the Board of Appeal could still validly refuse the request for suspension, notwithstanding the existence of the cancellation action.

The court confirmed that the Board of Appeal has a broad discretion as to whether to suspend proceedings. However, this discretion is not unfettered and can be judicially reviewed if a manifest error of assessment or misuse of powers has occurred (as established in Atlas Transport).

In this case, it was made clear that the Board does not automatically have to suspend proceedings because one party requests it or merely because the earlier registration is the subject of a cancellation action. Even if the Board had examined the file properly and identified the cancellation action, it could still have formed the view that the request for suspension should be refused, to strike a proper balance between the interests involved. The Board's line of reasoning would have led it to refuse the request in any event.

The court confirmed that, in exercising its discretion, the Board must observe the general principles governing procedural fairness applicable across the European Union (EU). These principles include a requirement that the Board take into account not only the interests of the applicant but also those of the other parties. The decision on suspension therefore requires a weighing of the competing interests (as per Atlas Transport). The court then examined whether the weighing of interests was correctly performed in refusing the suspension.

The court considered that the Board had held that the cancellation action was irrelevant in any event as it had been brought after the appeal was filed and the written statement of grounds submitted. The court cited the STELLA decision (Case T-27/09) to the effect that it is possible for cancellation proceedings to proceed even if opposition proceedings based on that mark are pending. Cancellation and opposition proceedings are distinct, autonomous and independent. However, where the cancellation action follows after opposition proceedings, this can at most justify a suspension of the opposition on the basis that if the cancellation action succeeds, the opposition would be devoid of purpose (see further under ‘Analysis’ below).

The court held that it is not possible to conclude that the filing a cancellation action while opposition proceedings are still pending is evidence of bad faith. Thus the Board of Appeal could not validly base its refusal of the request for suspension solely on the fact that the cancellation action was filed after the appeal had been lodged and the written statement setting out the grounds of appeal had been submitted.

The Board had also based its decision on its serious doubts as to the applicant's true intentions, arising from the fact that the applicant had filed two previous cancellation actions while the opposition proceedings were pending. The Board believed that the motivation for these actions was to delay the outcome of the opposition proceedings in the present case or in other proceedings involving the parties. The court criticized the unelaborated reference by the Board to ‘other proceedings involving the parties’ and the lack of explanation as to what interest the applicant could have in delaying the opposition proceedings. The only reason that the court could deduce was that the Board believed the applicant anticipated a negative outcome in the opposition. The court considered this reason to be ‘not only abstract but also unsupported by any objective evidence and accordingly cannot justify the Board of Appeal's refusal to grant the request for suspension’. The court held that the previous cancellation actions had been concluded on procedural grounds (failure to pay stamp duty and withdrawal) and their merits had not been examined. This explained for the court why a third action had been filed. The court concluded that the Board's presumption that the applicant was seeking to delay the opposition without examining the circumstances of the earlier cancellation actions failed to take into account all aspects of the applicant's situation. The Board did not look at the whole picture and therefore could not be said to have properly weighed the various interests involved. Therefore the Board had infringed Article 76(1) CTMR in its consideration of the request for suspension. As this issue had to be dealt with before the consideration of the likelihood of confusion, the decision was annulled.

Analysis

The decision is interesting in that it reflects the high standard which it applies to consideration by OHIM Boards of Appeal of suspension requests. Although the Boards have a broad discretion in dealing with such requests, it is clear that it is incumbent on them to weigh the competing interests of all of the parties and to give proper consideration to the circumstances applicable to the request. Reasons that are abstract or insufficiently grounded in reality will not be sufficient. The General Court also referred to ‘objective evidence’ underlying the grounds of the decision. This decision makes it clear that the OHIM Boards of Appeal, although independent, are nonetheless still bound by the general principles of law governing procedural fairness such as weighing competing interests and cannot engage in manifest errors of assessment or misuse of powers in considering suspension requests.

This decision is also enlightening in its analysis of the interaction between cancellation and opposition actions. The court pointed out that, if a cancellation action filed after an opposition based on the challenged mark were to succeed, the opposition would be ‘devoid of purpose’. Significantly, the court did not say that the opposition would be bound to fail, merely that it would be devoid of purpose as the applicant could simply file a new application after the cancellation decision concludes, which also means that there is no advantage to the owner of the earlier mark to file opposition where its earlier mark is the subject of cancellation proceedings. The distinction between ‘devoid of purpose’ and ‘bound to fail’ presumably stems from the difference between a cancellation action such as invalidity, which renders the mark void ab initio, and a revocation action that would only cancel the registration from a particular date, which may be after the relevant date for the opposition (see the UK IPO Appointed Person's decision in Opposition O-338-10, re Application No. 2389521 NOW WIRELESS).

Practical significance

This decision is the first time a decision of the OHIM Boards of Appeal concerning suspension has been considered in the larger picture of overlying general legal principles and has been found wanting, notwithstanding the broad discretion of the Boards.

Although the administrative law principles of manifest errors of assessment and misuse of powers in procedural matters have only to date been explored in suspension requests, they could potentially have a role in analysing the exercise of other discretionary powers of the Boards.

The approach of the Boards to procedural matters can be difficult to predict, as they are not subject to the same rules of practice as the other divisions of OHIM. The practices and procedures of the Boards of Appeal are largely undocumented and different Boards often take different approaches to the same procedural issue. There seems to be little appetite in OHIM or the Boards to develop rules of practice for appeals, in case this is seen as interfering with the independence of the Boards. Against this background, the application of general legal principles – such as the need to weigh competing interests, the extension of the principles of manifest errors of assessment and misuse of powers from administrative law to judicial review of Board of Appeal suspension requests and perhaps other procedural matters in future and the willingness of the General Court to hold the Boards of Appeal to a high standard of assessment in such matters – are highly important safeguards.

Tuesday, 24 March 2015

Guest editorial: Counterfeiting in the 21st century

The guest editorial for JIPLP's April 2015 special issue on counterfeiting is by Marius Schneider and James Bikoff.
Counterfeiting in the 21st century

Although examples of product counterfeiting can be traced back to Roman times, it was in the 1970s and 1980s that the growth of product counterfeiting accelerated, first with luxury products and then with products in other sectors such as automotive and aircraft parts as well as pharmaceuticals.

Products were generally shipped from manufacturing countries in the Far East to ports in the United States and Europe where they entered commerce and were distributed through street vendors and wholesalers/retailers to the general public

Increased penalties, both criminal and civil, against product counterfeiting were enacted in the United States in 1984, followed several years later by deterrent legislation in Europe.

With the advent of the internet in the 1990s counterfeiters were able to take advantage of technological advances so that from the beginning of the 21st century we have seen a significant change in the pattern of counterfeit manufacturing and distribution. Instead of container shipments to major ports, counterfeit distribution today relies more on small shipments through the post or by courier to individual purchasers, making the likelihood of detecting and stopping such shipments very difficult.

Counterfeiters try to stay a step ahead of laws and detection methods and take advantage of new technologies to develop their products and distribution methods. Since they do not develop new products or advertise them, they are able to maximize their profits at very low risk. Online stores are easy to set up. If an infringing website is taken down by right holders or by law-enforcement authorities, it can easily be duplicated simply by taking advantage of the almost limitless domain names available. Internet orders of fake goods are mainly delivered by post, which is quick, inexpensive and suitable for small quantities. For the authorities and right holders, the massive flow of packages containing infringing goods poses a serious challenge, because of their sheer quantity as well as their ability to blend into the mass of postal packages, which makes them more difficult to detect by Customs.

Since counterfeiters do not play by the rules and are often linked with criminal enterprises internationally, legitimate businesses and civil/criminal enforcement authorities have to constantly adapt and update their legal remedies with creative solutions. The comparison Geraldina Mattsson makes between the coyote and the road runner is amusing but accurate as her article focuses the counterfeit enforcement problems car manufacturers face.

In the copyright sector, illegal music-sharing platforms have been so successful that the industry has developed the business model into a legitimate business. Pirated copies of music, movies, video games and books have proliferated, with remedies being hard to obtain in many countries where the pirates operate with impunity. The copyright industries have had to rely to a large extent on the Custom services in many countries and international enforcement agencies to seize domain names and stop infringing websites as is illustrated by the articles contributed to this journal by Amanda Denton and the US Immigration and Customs Enforcement, better known as ICE.

Lawmakers, rights holders and courts have come up with new solutions for the postal and courier traffic of small quantities of counterfeit goods and, as Marius Schneider and Christophe Maillefer explain, further reform should be encouraged in the European Union when it comes to trafficking in fake “holiday souvenirs”.

A substantial part of the counterfeiting problem stems from the far east and particularly China. More than 80% of counterfeit products seeking entry into the United States and Europe come from China and Hong Kong. Despite the passage of laws to improve remedies against counterfeiting in China, the large-scale problem continues to exist, which makes it important for right holders to work with government authorities and counsel in China in order to deal with online sales platforms, as Michele Ferrante explains in his article.

Trade associations and Chambers of Commerce can assist in the battle of counterfeiting through their position papers and studies. A recent study by the ECTA Anti-Counterfeiting Committee on dangerous counterfeits, analyzed by Jim Bikoff in his article, illustrates the need for legislative reforms when it comes to counterfeit products that can harm consumers. This article hopefully will stimulate and foster best practices and harmonization among nations to stop the scourge of unsafe counterfeit products, including pharmaceuticals, aircraft and auto-parts, toys and defence/military products.

Africa has its own problems and a look at potential solutions is provided by Vanessa Ferguson and Marius Schneider. The battle in these countries is fought with less sophisticated legal techniques than elsewhere in the world but counterfeiters find these markets extremely lucrative and fight to ensure that their distribution networks are not interrupted. Unfortunately a number of courageous Customs and police officers in these countries have given their lives as they engaged in the battle to stop counterfeiting.

Not only does counterfeiting in the 21st-century violate laws and deprive businesses of profits, it also poses serious health and safety risks for consumers and deprives governments of tax revenues and workers of jobs. It is also frequently engaged in by organized crime families because of the high profit/low risk nature of counterfeiting.

Besides a coordinated international effort to stop the activities of counterfeiters, education of consumers is essential so that they will avoid the purchase of counterfeit and pirated products.

April comes early with a special issue on Counterfeiting

Bristling with goodies, featured below is the contents list for the April 2015 issue of JIPLP -- which you can also check out online here.  This issues focuses on counterfeiting and what to do about it, as the guest editorial by seasoned practitioners Marius Schneider and James Bikoff explains (this editorial will be posted in full, for the benefit of all readers, later today on this weblog). As usual, all of the items listed below are already available to our electronic subscribers, but the print version will be available shortly.  Even if you don't subscribe to JIPLP, you can still purchase short-term access to individual items via the journal's website.

The April issue looks like this:

Guest Editorial

Current Intelligence

Articles

From GRUR Int.

IP in Review