In a surprising decision this spring, OHIM's First Board of Appeal let the air out of the dictum that applicants not domiciled in the EU should be represented locally in proceedings before the Office. Following the ruling in Vietnam National Textile and Garment Group (Case R 1629/2010-1), it is hard to see how non-EU applicants can be compelled to appoint local representatives. Legal certainty and speed of outcome are the most likely casualties.
Home and Away
The issue arose in the context of an IR filed by Vietnam National Textile ("Vietnam Textile"), which designated the CTM.
Vietnam Textile was based in Hanoi, as were its advisors, but as long as the CTM designation sailed smoothly it had no need for EU representatives. Storm clouds began to gather, though, when an opposition was filed.
The Opposition Division notified Vietnam Textile's advisors and advised them that representatives in the EU must now be appointed, failing which the CTM designation would be refused. In the absence of a reply, the Office wrote directly to Vietnam Textile in the same vein. On the last day of the term allotted them, the Vietnamese advisors wrote to confirm that they would be acting as representatives. Consequently, the Opposition Division refused the designation on the ground that no EU representative had been appointed in due time.
Some two months later, Vietnam Textile appealed the decision through a newly-appointed EU-based representative, and simultaneously applied to delete certain goods and services in order to overcome the opposition.
But Home to Roost
In a decision that raised some eyebrows, Vietnam Textile secured the reinstatement of its IR (CTM) designation on appeal.
The First Board ruled that none of the legal bases cited by the Opposition Division provided for the refusal of applications on the sole basis that EU legal representatives had not been appointed. It ruled, in particular, that failure to appoint an EU representative was not an absolute ground for refusal, nor was it a breach of a "formal requirement governing CTM applications" that would allow refusal under Rule 9 (4) CTMIR.
Rather, requirement of a local representative for non-EU domiciled applicants or IR holders in proceedings before the Office was instead a "substantive requirement governing representation". In support of this rather fine distinction, the Board referred to Article 92 (2) CTMR's recognition that non-EU domiciled applicants may file CTM applications, even if they were later obliged to appoint EU representatives if objections or oppositions were raised. In the Board's view, this point weighed heavily in favour of a finding that the requirement to appoint an EU representative in Office proceedings was not a formal requirement governing CTM applications.
The Board accepted that Article 92 obliged non-EU applicants or holders of CTMs to designate EU-based representatives in proceedings before the Office, but considered that there was no sanction available for failing to do so, other than to suspend the further progress of such applications or designations until such time as a representative was appointed.
Consequently, even though Vietnam Textile appointed EU representatives out of time, the appointment was still valid and the CTM designation was still to be regarded as live.
This decision is notable, but for all the wrong reasons.
It is difficult to argue with the Board's reasoning on Article 92 (2), since the requirement to appoint an EU representative in Office proceedings can arise not only during prosecution but also after registration. Where, for example, a CTM is unopposed but an application for invalidation is later filed, it is hard to argue that the requirement to appoint an EU-based representative is a "formal requirement governing CTM applications".
The requirement applies equally to both applications and registrations, but it cannot seriously be contended that a breach has a consequence for one, but not the other. In light of that, it is difficult to find any sensible peg (at least in the provisions considered by the Board) on which to hang the refusal of an application by a recalcitrant overseas company who refuses to appoint EU advisors.
The upshot, though, is that there is no effective sanction against non-EU CTM applicants and registrants who fail to appoint local representatives when objections or other proceedings in relation to their CTMs arise. The only consequence of their inaction is that applications or proceedings remain pending indefinitely, until EU advisors are appointed, if ever.
The potential for mischief here is clear. For so long as applications or proceedings relating to CTM rights are kept pending, third parties can have no certainty as to the grant, validity or enforceability of the rights in question. Moreover, even if an opposed application in such circumstances can never proceed without representatives being appointed, the complete and indefinite suspension of the proceedings undoubtedly prejudices opponents, who have an interest in their claims being heard and determined with reasonable expedition. Where applications for invalidity are involved, such an interest is even keener since until the matter is resolved, the registrant retains ostensibly valid and enforceable CTM rights.
Even if the Board's interpretation of the law is correct, the outcome of this decision runs entirely counter to the public interest in legal certainty and the speedy resolution of legal proceedings pertaining to intellectual property rights.
The EU Commission is looking already at proposals to amend the CTM with an announcement expected this autumn. This small but potentially important loophole is one it should be looking to close.