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Intellectual Property Holding Companies in the European Union
This document discusses factors to consider when establishing an intellectual property holding company (IPHC) in Europe to manage trademarks and designs. It provides an overview of key IP rights systems in Europe like the Community Trademark (CTM) and European Community Design, and examines IPHC jurisdictions like Ireland, Switzerland, and Luxembourg. Case studies are presented examining recommended IPHC strategies for rights holders from countries like India, the US, and Russia.
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Intellectual Property Holding Companies in the European Union
- 1. European Intellectual Property Holding companies IP management factors to consider Niall Tierney Barrister-at-Law (Ireland) Solicitor (England & Wales) European Trade Mark & Design Attorney T: + 44 20 782 499 6664 F: + 44 20 7820 1621 E: niall@contegoip.co.uk
- 2. 1. Introduction –Intellectual Property Holding Companies; 2. The Community Trade Mark (CTM); 3. The Madrid Agreement/Protocol; 4. Link between CTM and Madrid systems; 5. The European Community Design; 6. Overlap between RCD and CTMs; 7. Notable IPHC jurisdictions; 8. An overview. Copyright Niall Tierney, 2012. All Rights Reserved
- 3. Intellectual Property HoldingCompanies (IPHCs) An IPHC allows for efficient management and monetisation of Intellectual Property Rights; Numerous European countries offer attractive tax advantages through a locally owned holding company; Special factors apply when placing Trademark and Designs within an IPHC; To ensure that a Trademark and Design portfolio is managed to its maximum advantage care needs to be taken where to incorporate an IPHC; A country that is attractive from a tax advantage may not necessarily facilitate an effective IPR management strategy; The decision to locate will depend on factors such as existing commercial presence within the European Union, legal system, IPHC jurisdiction being a member of EURO zone, etc. Copyright Niall Tierney, 2012. All Rights Reserved
- 4. The Community TradeMark One of the most effective ways of owning, enforcing and managing a centralised Trademark portfolio in the European Union is by using the CTM system; The CTM is a unitary Trade Mark right that provides protection in all 28 Member States of the European Union; A CTM avoids the necessity of having to seek separate Trademark protection in each European Member State; Holder of a CTM is given an exclusive right to use the relevant Trade Mark throughout the European Union and to prevent others from using without consent, identical or similar signs in relation to identical and/or similar goods/services; In some cases, it is possible for the holder of a CTM to seek temporary relief against suspected infringers by way of an injunction through a 'Community Trademark' court in the European Union. If granted, the injunction will be enforceable in all EU Member States; Copyright Niall Tierney, 2012. All Rights Reserved
- 5. The Community TradeMark A CTM is an 'all or nothing' right; It is not possible for a CTM to cover some European Member States and not others; A CTM can be challenged by the holder of a prior right from any European Member State; If a CTM is cancelled, it is cancelled for the whole of the European Union; The holder of an unsuccessful CTM always has the option of converting it into separate European national registrations. A significant feature of conversion is that the converted applications can date back to the date the CTM was originally filed; Copyright Niall Tierney, 2012. All Rights Reserved
- 6. Enforcing European (CTM)Trade Marks by an IPHC Courts in the EU Member State where the Defendant is domiciled or has an establishment have jurisdiction in cases where a CTM is infringed; If Defendant is not domiciled in an EU Member State, then the courts of the EU Member State where the Defendant has an establishment will have jurisdiction; If the Defendant is not domiciled or has an establishment in an EU Member State, then the Courts where the Plaintiff is domiciled will have jurisdiction; If the Plaintiff is not domiciled in an EU Member State, then the courts of the EU Member State where the Plaintiff has an establishment will have jurisdiction. If neither the Plaintiff nor the Defendant are domiciled or have an establishment in an EU Member State, the Courts where OHIM is based (Spain) has jurisdiction. Copyright Niall Tierney, 2012. All Rights Reserved
- 7. CTM Infringement ScenarioOne Copyright Niall Tierney, 2012. All Rights Reserved
- 8. CTM Infringement ScenarioTwo Copyright Niall Tierney, 2012. All Rights Reserved
- 9. CTM Infringement ScenarioThree Copyright Niall Tierney, 2012. All Rights Reserved
- 10. Law governing CTMas an object of property • Article 16 of the CTMR regulation stipulates that CTM as an object of property shall be dealt with as if it is a national trade mark registered in the European Member State where:- • the proprietor has its seat or domicile, or • The proprietor has an establishment. • Where the above two conditions do not apply, a CTM shall be dealt with as an object of property in the country where the European Trademarks Office (OHIM) has its establishment, i.e. Spain. • The above is of importance because if there is an issue regarding the transfer of a CTM, care needs to be taken to ensure that CTM is owned by a company in a country with a preferential legal system • It is suggested that if the parent of an Intellectual Property Holding company is itself based in a Common law jurisdiction, it may want to ensure that the law which potentially governs the transfer of CTMs held by an IPHC is also a Common law country. In such a scenario, it would be advisable to ensure that all CTMs are held in the name of an Irish IPHC. Copyright Niall Tierney, 2012. All Rights Reserved
- 11. Madrid Agreement/Protocol Acentralised system that allows for the protection of Trademarks on an international basis by means of a single application filed with the World Intellectual Property Office (W.I.P.O) in Geneva, Switzerland; By designating the European Union (CTM) as part of the International application/registration, a trademark owner avoids the need to separately designate those countries of the European Union where it wishes to protect its International Trademark; The CTM designation is examined in the same way as it would be if it was filed directly with OHIM; Unless an objection is raised by OHIM within 18 months of filing, or the CTM designation is opposed, protection of the International Trademark is automatically granted; Even if a CTM designation is rejected or successfully opposed, it is still possible to convert it into separate European Member state designations with the same filing date of the CTM designation. Copyright Niall Tierney, 2012. All Rights Reserved
- 12. Link between CTMand Madrid systems Another feature of the link between the CTM and the Madrid systems is that it is possible to use a CTM as the basis of an IR; Link facility is effectively only available to European domiciled businesses or businesses with a real and effective commercial presence in Europe; A corporation without a European Union domicile or real and effective commercial presence in the European Union cannot use its CTMs as a basis of a Madrid (IR) application; By placing Trademarks in a European Union incorporated company; businesses with no real and effective commercial presence in the European Union can overcome the hurdle of the ‘Link’ facility; Copyright Niall Tierney, 2012. All Rights Reserved
- 13. Designating CTM aspart of Madrid system International Registration (IR) may be centrally attacked if the base registration/application upon which the IR is based is successfully challenged during the first five years of the IR’s life; Note: an Irish IPHC that bases a Madrid Protocol IR application on a 'Part A' registration (Trademarks registered on the basis of inherent distinctiveness) registered before 1996 could avoid the ‘five year’ central attack provision; Under Irish Trademark law, pre 1996 'Part A' registrations are immune from invalidity attack on the grounds of non-distinctiveness; Pre 1996 ‘Part A’ registrations can still be cancelled if they fall into disuse for a continuous five year period; Copyright Niall Tierney, 2012. All Rights Reserved
- 14. When not todesignate CTM as part of Madrid system It is not possible to seek International protection for a list of goods/services wider than those of the base application or registration; Trademark owners seeking protection in Europe for goods/services broader than that sought in their home country would be better advised to file a standalone CTM outside of the Madrid Protocol; Unlike some countries (notably the US); there is no requirement to file proof of use in order to keep the CTM alive; If a US registration is likely to die as a result of a failure to file the required ‘Five Year’ Declaration of Use and that registration forms the basis on an IR designating the European Union, the entire IR would fail. Copyright Niall Tierney, 2012. All Rights Reserved
- 15. Separately designating EuropeanMember States as part of an Madrid (IR) application IPR owner still has the option of separately designating those European countries where trademark protection is desired; As a CTM, and corresponding designations, in an International registration, can potentially fail in their entirety, having numerous separate European registrations for the same Trademark provides more security; Also, in some European countries, a domestic European Trademark registration provides a defence in the case of an infringement claim by the holder of an earlier Trademark. lt is doubtful that a CTM could provide a similar defence. Drawback of separate European designations is the administrative burden of having to respond to any objections and/or oppositions that may be raised against the national designation. As it is a requirement to appoint a local lawyer in the event of an objection and/or opposition, costs could easily spiral out of control; By designating the CTM, it will only be necessary to deal with OHIM in the event of an objection and/or opposition; Copyright Niall Tierney, 2012. All Rights Reserved
- 16. The European CommunityDesign In Europe, designs can be protected if: – They are novel, i.e. no identical design has been made available to the public; – Have 'individual character', an 'informed user' finds that its overall impression is different to other designs. One of the most effective ways of protecting designs in the European Union is through the 'Community Design' system; A European 'Community Design' can be protected in either, its registered or un-registered form. In its un-registered form, a Community Design is protected for a period of three years from the date it was first made available to the public within the European Union. A Community Design allows its holder to prevent third parties from using either identical designs or designs that have the same overall impression on an 'informed user'. It can however only prevent the direct copying of the protected design. Copyright Niall Tierney, 2012. All Rights Reserved
- 17. The European RegisteredCommunity Design (RCD) A Registered Community Design (RCD) allows its owner to prevent the use of identical designs or designs of the same overall impression even if they have been innocently created; The RCD system is effectively a 'deposit' system where the application is filed and registration is granted shortly thereafter; normally within three to four weeks of filing. An RCD registration lasts for an initial period of five years, but can be renewed thereafter for a further twenty years upon payment of a renewal fee. An RCD is enforceable throughout the European Union and, like the CTM, can be used as a tool to prevent the importation of counterfeit goods into the European Union. If a third party successfully challenges the validity of an RCD, it falls for the whole of the European Union and it is not possible to subsequently convert it into separate national registrations Copyright Niall Tierney, 2012. All Rights Reserved
- 18. The European CommunityDesign An alternative to filing an RCD would therefore be to separately seek registration in those European countries where protection is required. Design law has been harmonized throughout the European Union so the requirements of registration are effectively the same in each European Member state. Seeking EU national separate registrations is however costly and administratively cumbersome. Anybody wishing to challenge the validity of the design would then have the expense of bringing separate invalidity challenges in each country where the design is registered. Copyright Niall Tierney, 2012. All Rights Reserved
- 19. Overlap between RCDand CTM systems and Hague CTM and RCD systems both can afford protection to certain types of designs such as logos and graphic symbols; As it can take up to nine months for a CTM to be registered, filing an RCD may be a quicker route to protection for logos, designs and graphic symbols; Legal advice should however always be sought from European Intellectual Property counsel before pursing this route in view of the possibility that a pre filed CTM may destroy the novelty of the relevant design; Nationals of countries that are members of the Hague Agreement can designate the European Union in the same way a CTM can be designated as part of a Madrid (IR) Trademark application; Not possible to use an RCD as the basis of a Hague Design application. Copyright Niall Tierney, 2012. All Rights Reserved
- 20. Notable European IPHCjurisdictions Country CTM Madrid Hague Legal System EURO zone Corporate Tax Rate Cyprus Yes Yes Through EU Common and Civil Law Yes 10% Ireland Yes Yes Through EU Common Law Yes 12.5% Luxembourg Yes Yes Yes Civil Law Yes 5.7% on IPR royalty income Malta Yes No Through EU Common and Civil Law Yes 35% Netherlands Yes Yes Yes Civil Law Yes 25.5% Switzerland No Yes Yes Civil Law No 25% United Yes Yes Through EU Common Law No 23% Kingdom Copyright Niall Tierney, 2012. All Rights Reserved
- 21. Suggested IPHC strategy An Indian IPR Holder • Majority of business in the Europe with EURO zone countries. • Newly established presence in the European Union. • India not a member of Madrid Protocol; • India has a Common law legal system; IPHC jurisdiction - Ireland • Ireland is a member of Madrid Protocol –therefore an Irish based (Indian owned) IPHC can own and file Madrid applications; • Irish based IPHC can use CTMs it holds as the basis of a Madrid IR application; • Ireland has a same legal system as India; • As Ireland is a EURO zone country there are no currency downsides when an Irish IPHC files CTMs where fees are in EUROS. • Ireland has a Double Taxation Treaty with India. Copyright Niall Tierney, 2012. All Rights Reserved
- 22. Suggested IPHC strategies A Swiss based IPR Holder • Majority of business in the Europe with EURO zone countries; • Switzerland is a member of Madrid system; • Switzerland has a Civil law legal system. IPHC jurisdiction - Switzerland • Switzerland is a member of Madrid Protocol –therefore a Swiss company can own and file Madrid applications; • Swiss based IPHC can designate CTMs as part of a Madrid IR application; • Swiss based IPHC will not be able to use its CTMs as the basis of a Madrid (IR) application because it is not domiciled in EU Member State and does not have a real and effective commercial presence; • Corporate Tax Rate is 25%, but can be reduced depending on which Canton where the IPHC is located. Copyright Niall Tierney, 2012. All Rights Reserved
- 23. Suggested IPHC strategies A US IPR Holder • Majority of business in the Europe with EURO zone countries. • USA is a member of Madrid Protocol; • USA has a Common law legal system; • No real and effective operation in the European Union. IPHC jurisdiction - Ireland • Ireland is a member of Madrid Protocol. Therefore an Irish company can own and file Madrid applications; • An Irish (US owned) based IPHC can use CTMs it holds as the basis of a Madrid IR application because it is based within in the EU; • Corporate Tax Rate is 12.5%. Can be reduced to 2% under over 15 year under amortization rules; • Ireland is a member of the EURO zone. Therefore the are no currency exchange implications when dealing with OHIM. • Ireland has same legal system as the USA. • Ireland has a Double Taxation agreement with the USA. Copyright Niall Tierney, 2012. All Rights Reserved
- 24. Suggested IPHC strategies A Russian IPR Holder • Majority of business in the Europe with EURO zone countries. • No real and effective operation in the European Union. • Russia is a member of Madrid System; • Russia has Civil Law legal system; IPHC jurisdiction: Luxembourg or Netherlands • Luxembourg and the Netherlands are members of Madrid Protocol. Therefore Russian owned IPHC companies incorporated in these countries can own and file Madrid applications; • A Dutch or Luxembourg based IPHC can use CTMs it holds as the basis of a Madrid IR application because it would be based within in the EU; • Corporate Tax Rate can be as low as 5.178% in Luxembourg; • Luxembourg and the Netherlands are both members of the EURO zone. Therefore the are no currency exchange implications when dealing with OHIM. • Along with Belgium, Luxembourg and the Netherlands are part of the unified Benelux Trade Marks Office; • Luxembourg and the Netherlands have a Civil Law legal system Copyright Niall Tierney, 2012. All Rights Reserved
- 25. Factors to considerwhen choosing a European IPHC Will the IPHC be able to use CTMs it owns as the basis of a Madrid (IR) application? Will the IPHC be located within a EURO zone country? Is the parent company from a Common law or Civil law country? Does the ultimate parent originate from a country with the same language where IPHC is located? May have to take CTM infringement proceedings in a country where language and legal system is not familiar to parent company . Does the IPHC have a Double Taxation Treaty with the country of the ultimate parent company? Do the tax advantages ultimately outweigh the disadvantages of not locating in a country where the management of an IP portfolio is easiest? Copyright Niall Tierney, 2012. All Rights Reserved
- 26. Thank You CopyrightNiall Tierney, 2012. All Rights Reserved
Editor's Notes
- #4 The European Union is the world’s largest single market with a population of 500 million people. It is a loose confederation of 27 sovereign Member States and its single open market generates 20% of global GDP in terms of purchasing power. European Union Member States like Ireland, Luxembourg and the Netherlands are noted for offering attractive tax advantages to Intellectual Property Holding companies. There are 27 Member States of the European Union There are 17 Member States of the Eurozone. Further information about the European Union - http://europa.eu/index_en.htm
- #5 The advantage of the CTM is that it avoids the necessity of having to separately seek Trade Mark protection in each European Member state. Typically, if goods and/or services are exported to at least three European States, it is much cheaper to protect the relevant Trademark as a CTM rather than in each Member State. Effectively the holder of a CTM is granted an exclusive right to use the relevant Trade Mark throughout the European Union and to prevent others from using anywhere in the European Union, without consent, identical or similar signs in relation to identical and/or similar goods/services. In some cases, it is possible for the holder of a CTM to seek temporary relief against suspected infringers by way of an injunction through a ‘Community Trademark’ court in the European Union. If granted, the injunction will be enforceable in all EU Member States. If a business already has a number of separate Europe Member State trademark registrations, the cost of renewing them every ten years can be avoided by using the CTM ‘Seniority’ system. This system works by allowing the holders of European Member State registrations to claim their ‘seniority’ against the corresponding CTM, provided the Trademark owner and goods/services are identical. In claiming the ‘seniority’, a CTM owner ensures that their CTM dates back to the date of the senior national registration. The ability to claim seniority can greatly reduce the cost of maintaining a European Trademark portfolio. Any transaction involving a CTM (licences, security interests and assignments) only has to be registered centrally through OHIM.
- #6 The CTM comes with a significant proviso. It is an ‘all or nothing’ right. If a CTM is cancelled, it is cancelled for the whole of the European Union. The holder of an unsuccessful CTM always has the option of converting it into separate European national registrations. The one significant feature of conversion is that the converted applications date back to the date the CTM was originally filed.
- #7 The rules relating to jurisdiction in relation to civil and commercial matters in the European Union are normally governed by Council Regulation (EC) No.44/2001. There are however different rules relating to jurisdiction in cases of CTM infringement. Jurisdiction relating to CTMs is governed by Article 97 of the Community Trade Mark Regulation.
- #11 The rules relating to jurisdiction in relation to civil and commercial matters in the European Union are normally governed by Council Regulation (EC) No.44/2001. There are however different rules relating to jurisdiction in cases of CTM infringement. Jurisdiction relating to CTMs is governed by Article 97 of the Community Trade Mark Regulation.
- #12 The European Union is a signatory of the Madrid Protocol; the centralised system that allows for the protection of Trademarks on an international basis by means of a single application filed with the World Intellectual Property Office (W.I.P.O) in Geneva, Switzerland. For further information, see http://www.wipo.int/madrid/en/ Designating the CTM as part of a Madrid Protocol may not always be a viable option for some businesses because of the possibility that the International Registration (IR) may be centrally attacked during the first five years of its life. Businesses still have the option of separately designating those European countries where trademark protection is desired. The one drawback of separate European designations is the administrative burden of having to respond to any objections and/or oppositions that may be raised against the national designation. As it is a requirement to appoint a local lawyer in the event of an objection and/or opposition, costs could easily spiral out of control. In contrast, by designating the CTM, it will only be necessary to deal with OHIM in the event of an objection and/or opposition. Accordingly, unless a business is going to confine use of a Trademark to one or two European countries, it is always better to designate a CTM.
- #13 Another feature of the link between the CTM and the Madrid systems is that is possible to use a CTM as the basis of an IR, but this facility is only available to European domiciled companies and businesses with a substantial presence in the European Union. By establishing an IPHC within a European Union country, IPR holders can overcome this obstacle. As a result of the ability to file a CTM for a wider range of goods/services than a US application/registration, using an Irish owned CTM as the basis of an IR is a significant advantage.
- #14 An Irish IPHC with Irish Trademark registrations registered before 1996 can use these registrations as the basis of an International registration. Under Irish Trademark law, pre 1996 registrations are essentially immune from invalidity on the grounds of non-distinctiveness. This is significant because, as an IR falls in its entirety if its base registration is successfully attacked during its first five years, basing the IR on a pre 1996 Irish registration effectively safeguards it from attack during its first five years. It should be noted that the above would however not apply if the Irish base registration was successfully challenged on the grounds of non-use.
- #15 Designating the CTM as part of a Madrid Protocol may not always be a desirable option for some businesses because of the possibility that the International Registration (IR) may be centrally attacked if the home registration/application upon which the IR is based is successfully challenged during the first five years of the IR’s life. As it is not possible to seek International protection for a list of goods/services wider than those of the base application or registration, Trademark owners seeking protection in Europe for goods/services broader than that sought in their home country would be better advised to file a standalone CTM outside of the Madrid Protocol. An added advantage of a standalone CTM is that there is no requirement to file proof of use in order to keep the CTM alive, unless it is challenged by another party.
- #16 Even if a business decides that a CTM designation is not appropriate, it still has the option of separately designating those European countries where trademark protection is desired. The one drawback of separate European designations is the administrative burden of having to respond to any objections and/or oppositions that may be raised against the national designation. As it is a requirement to appoint a local lawyer in the event of an objection and/or opposition, costs could easily spiral out of control. In contrast, by designating the CTM, it will only be necessary to deal with OHIM in the event of an objection and/or opposition. Unless a business is going to confine use of a Trademark to one or two European countries, it is always better to designate the CTM system. As a CTM, and corresponding designations in an International registration, can potentially fail in their entirety having numerous separate European registrations for the same Trademark provides more security. In some European countries (e.g. Ireland and the United Kingdom), a domestic European Trademark registration provides a defence in the case of an infringement claim by the holder of an earlier Trademark. lt is doubtful that a CTM could provide a similar defence.
- #17 In its un-registered form, a Community Design is protected for a period of three years from the date it was first made available to the public within the European Union. A Community Design allows its holder to prevent third parties from using either identical designs or designs that have the same overall impression on an 'informed user'. It can however only prevent the direct copying of the protected design. An RCD registration lasts for an initial period of five years, but can be renewed thereafter for a further twenty years upon payment of a renewal fee. An RCD is enforceable throughout the European Union and, like the CTM, can be used as a tool to prevent the importation of counterfeit goods into the European Union.
- #18 A Registered Community Design (RCD) allows its owner to prevent the use of identical or similar designs even if they have been innocently created. Unlike CTMs, RCD applications do not undergo a formal examination process. The RCD system is effectively a 'deposit' system where the application is filed and registration is granted shortly thereafter; normally within three to four weeks of filing. If a third party successfully challenges the validity of an RCD, it falls for the whole of the European Union and it is not possible to subsequently convert it into separate national registrations.
- #19 An alternative to filing an RCD would therefore be to separately seek registration in those European countries where protection is required. Fortunately, Design law has been harmonised throughout the European Union so the requirements of registration are effectively the same in each European Member state. While seeking separate registrations is costly and administratively cumbersome, consideration should be given to pursuing this route if the validity of the design in question is questionable. Anybody wishing to challenge the validity of the design would then have the expense of bringing separate invalidity challenges in each country where the design is registered.
- #20 There is some overlap between the CTM and RCD systems in that both can afford protection to certain types of designs such as logos and graphic symbols. Both systems can therefore be used in combination. As it can take up to nine months for a CTM to be registered, filing an RCD is a quicker route to protection for logos, designs and graphic symbols. Legal advice should however always be sought from European Intellectual Property counsel before pursing this route in view of the possibility that a pre filed CTM may destroy the novelty of the relevant design. All subsequent CTM and/or RCD rights can then be held by the IPHC along with any separately registered European Member State rights
- #21 It should be noted that Ireland requires that at least one director of an Irish incorporated company should be resident within the European Union. Some countries such as Ireland will also require evidence that administration and management of an IPHC is run from that country. ‘Brass Plate’ style operations will be frowned up. It may therefore be necessary for an Irish based IPHC to have at least some personnel based in Ireland.