Are your retail brands under threat?

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It is safe to say that the average consumer will make no distinction between the retail services offered by mono-brand stores and the retail services offered by multi-brand stores (department stores).

Following the decisions of the Court of Justice of the EU (“CJEU”) in the cases Apple Store (C 421/13, 2014) and Burlington Arcade, (C-155/18, 2020), the EUIPO is however d I believe that these two types of businesses are quite distinct. The EUIPO considers that retail services, offered by single-brand stores, should not be considered as a genuine use of “retail services” as registered in class 35 of the Nice Classification. Trademark holders operating single-brand stores are therefore no longer able to enforce their current Class 35 registrations as soon as these registrations are more than five years old.

This EUIPO practice brings clarity to a subject that has been debated for many years. However, the question is whether the application of this practice will lead to decisions that will be considered fair and reasonable.

What are retail services?

In the Explanatory Note to the Nice Classification, “retail services” are defined as:

… the aggregation, on behalf of third parties, of a variety of products (excluding their transport), allowing customers to easily view and purchase these products; these services may be provided by retail stores, wholesale outlets, vending machines, mail order catalogs or by means of electronic media, for example via websites or teleshopping programmes.

This definition includes three elements, namely 1) the purpose of these services is the sale of goods to consumers, 2) the retail service allows consumers to easily view and purchase the goods, and 3) the service is provided for the benefit of others.

Monobrand vs Multibrand

This third element of the definition actually serves as justification for treating single-brand and multi-brand retailers differently. Since March 1, 2021, the EUIPO guidelines contain the following sentence: “the other beneficiaries of the approximation of various products are the various manufacturers seeking an outlet for their products”.

In the Guidelines, EUIPO considers that, just as a clothing company advertising its own clothing items does not actually use its trade mark for Class 35 “advertising” services, it there is no use in relation to retail falling within Class 35 where the clothing manufacturer only sells its own goods in its stores or on its website. This sale is not an independent service offered to third parties, but simply an activity resulting from the manufacture and necessary for the sale of these goods. It is protected by trademark registration for these products and does not require separate registration for retail services.

In addition, the guidelines mention that ancillary services (such as seller services, online seller tools and after-sales services) will generally also not be considered genuine use for retail services. , unless they are not an integral part of the offer. for the sale of goods. Although this leaves some leeway for single-brand store owners to claim that they are actually using their brands for retail services, in most cases these ancillary services will be an integral part of the retail offering of the products and will therefore not be considered genuine retail use.

We have studied some recent decisions from the Opposition and Cancellation Divisions of the EUIPO and have noticed that they still seem to struggle to consistently apply the practice described above. However, in the vast majority of decisions, the practice is already applied and we expect the number of divergent decisions to decrease rapidly.

Although the strict EUIPO practice does not seem to have been followed (yet) for example by the Benelux Trademark Office (BOIP) or the UKIPO, we anticipate that the EUIPO practice will be adopted by national offices in a close future. After Brexit, the UKIPO is of course no longer bound by the decisions of the CJEU.

Example

What are the legal consequences of the retail services offered by single-brand stores not being considered “genuine” retail services?

For example, consider company A, which holds a registration of trademark X for clothing (Class 25) and retail clothing (Class 35) and operates only single-brand stores, for report to company B, which filed an application for identical trade mark X for the retail sale of jewelery items (class 35).

In the assessment of a likelihood of confusion, generally, when the marks in question are identical and the goods/services are similar, a likelihood of confusion will be found.

Retail services versus retail services – even when they relate to different goods – are often considered to be similar. Indeed, these retail services have the same nature and have the same objective of allowing consumers to easily satisfy different shopping needs, even if they are different products. Moreover, they have the same method of use. When the goods being compared are commonly sold together at the same outlets and to the same audience, as in our example “retail clothing” and “retail jewelry”, they are generally considered to be similar.

Thus, the prior registration of company A’s mark X registered for the “retail sale of articles of clothing” (class 35) may block the application of company B for the identical mark X for the “retail sale of jewelry”.

However, what if company A’s registration for X has been registered for more than five years? In the EU, a trademark becomes vulnerable to cancellation for non-use five years after registration. A trademark owner will not be able to enforce his registration after this period if the trademark has not been the subject of serious use.

In our example, in accordance with strict EUIPO practice, Company A will not be able to demonstrate genuine use of Class 35 services and will therefore only be able to rely on its trademark registration in respect of “articles clothing” in Class 25.

However, clothing and jewelry are considered dissimilar products. As such, articles of clothing are also different from “retail sale of jewellery” in Class 35. In this particular scenario, company A will not be able to block the demand from company B.

Impact

Considering the example above, EUIPO’s practice could lead to a result where trademark owners operate retail outlets under an identical name, but where there is no risk of confusion, simply because company A only sells its own products, not those of third parties.

Therefore, when the registration becomes subject to conditions of use, the multi-brand distributor is clearly better placed than a single-brand distributor who, after five years, can no longer invoke his class 35 registration.

Whether there is any logic behind this difference in the level of protection available to single-brand and multi-brand retailers is in our view questionable. Both types of retail business require huge investments in store design, infrastructure, and promotion. In our view, these investments are worth protecting regardless of the source of the products sold. We believe that consumers who encounter a single-brand clothing store X, next to or near a multi-brand jewelry store X, are likely to think that the goods and services in question come from the same company or from economically related companies.

Not accepting retail services of a single mark as genuine use for retail services falling within Class 35 may run counter to the fundamental principle of trademark protection, namely to avoid a risk of confusion among the relevant public.

Go forward

While we wait to see how EUIPO practice and practices in other jurisdictions evolve, it is important that single-brand store owners carefully consider the level of protection afforded by their current trademark registrations in trademark registration proceedings. future opposition or invalidation upon which they would potentially rely on their Class 35 trademark registrations.

Trademark holders who operate single-brand stores and have Class 35 registrations in place covering retail for the broader product categories, but do not themselves have trademark registrations covering all of those specific products, are encouraged to update their brand portfolios as soon as possible.

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