HomeInsightsDo you need to record a Community trade mark to sue for infringement? No, according to the CJEU

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Youssef Hassan v Breiding Vertriebsgesellschaft mbH Case C-163/15 (4 February 2016)

The Court of Justice of the European Union (CJEU) has ruled that licensees of Community trade marks (CTMs) do not need to register those licences in order to pursue others for trade mark infringement.

Facts and background to the CJEU reference

The request for a preliminary ruling concerned the interpretation of the first sentence of Article 23(1) of the Community Trade Mark Regulation (EC) no. 207/2009 (the “Regulation”).  Essentially, the CJEU was asked whether this sentence must be interpreted as meaning that a licensee of a CTM cannot bring proceedings alleging infringement of that CTM if the licence has not been entered in the Register of Community trade marks (the “Register”).

The request to the CJEU for a preliminary ruling was made pursuant to trade mark infringement proceedings in Germany between Mr Hassan and Breiding Vertriebsgesellschaft (“Breiding”).

Breiding is the holder of a licence for the CTM ‘ARKTIS’ for bedding and blankets.  The licence is not recorded in the Register, but the terms of the licence agreement between the proprietor of the CTM and Breiding stipulate that Breiding is able to assert, in its own name, rights arising from infringement of the trade mark.  Breiding sought to enforce its rights against Mr Hassan who was selling duvets by reference to the mark. The court in Düsseldorf asked the CJEU to confirm whether, as the licence was not registered in the Register, Breiding was entitled to bring infringement proceedings against Hassan, or whether this was prevented by the operation of Article 23(1) of the Regulation.

For context, the first sentence of Article 23(1) states: “Legal acts referred to in Articles 17, 19 and 22 concerning a Community trade mark shall have effects vis-à-vis third parties in all the Member States only after entry in the Register”.

The legal acts covered by Articles 17, 19 and 22 are, respectively, the transfer of a CTM, the creation of rights in rem over that mark and the grant of a licence.

CJEU judgment

The CJEU confirmed that because Breiding had the consent of the CTM owner to assert rights of enforcement (as required by Article 22(3) of the Regulation), it was therefore entitled to do so, even without the licence being registered.

The court noted that if read in isolation, Article 23(1) could be interpreted as meaning that the licensee cannot, if the licence has not been entered in the Register, rely on the rights conferred by that licence vis-à-vis third parties.  However, the court stressed the need to consider not only the wording of the provision but also the context in which the wording occurs and the objectives pursued by the rules which it is part of.  Therefore, following a detailed analysis of the Regulation, the CJEU took the view that the impact of Article 23(1) is intended to protect a person who has, or may have, rights in a CTM as an object of property.  As a result, the first sentence of Article 23(1) of the Regulation does not apply to a situation, such as that in the main proceedings, in which a third party, by infringing the mark, infringes the rights conferred by the mark.

In reaching its conclusion, the court stressed that according to Article 22(3) the only limitation on the licensee’s rights to bring infringement proceedings is the proprietor’s consent. The court also noted that pursuant to Article 22(5) of the Regulation, the licence is entered in the Register only on the request of one of the parties (rather than this being a compulsory requirement) and there was no provision within Article 22 which set out the consequences of not doing so.  This was in comparison to the clearly spelt out consequences of failure to register a transfer in Article 17(6).  The court also noted that if Article 23(1) was meant to be interpreted so prohibitively – i.e. to prevent any legal action being taken without registration – then Article 17(6) of the Regulation would serve no useful purpose.

Comment

From an English law perspective (and therefore so as far as UK registered trade marks are concerned) this situation is already envisaged in Section 25(4) of the Trade Marks Act 1994 (the “Act”).  This section expressly provides that in most circumstances a licensee cannot recover its costs if it has not registered its licence before bringing an infringement action – the implication being that there is nothing per se which prevents the licensee bringing the infringement action itself.

The only material difference between the position of licensees under the Act (governing UK registered trade marks) and the Regulation (governing CTMs) is that under the Act a non-exclusive licensee may bring an infringement action if either the licence itself provides express permission to do so, or if the licensee makes a request of the proprietor to bring an action and the proprietor either fails to do so within two months or otherwise refuses. Under the Regulation, unless the licence agreement permits, it is only exclusive licensees that may bring an infringement action in their own name if the proprietor does not do so “within an appropriate period” once given “formal notice” of the alleged infringement.

As made clear by the CJEU’s decision, what Article 23 of the Regulation is really seeking to protect is a party that has acquired rights in a registered CTM without knowledge that the mark has previously been the subject of a transfer, security or licence. The ‘legal act’ that does not take effect is the act of, in this case, licensing itself – i.e. any future acquirer of the trade mark will take it free of the licence if it is not registered (and, according to the second sentence of Article 23(1), provided that the third party does not have actual knowledge of the licence).   However, as the CJEU’s decision has confirmed, what this does not mean is that a third party is safe from an infringement action being brought against it by an unregistered licence holder.