Are your retail brands at risk?

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

However, following the decisions of the Court of Justice of the EU (“CJEU”) in Apple Store (C-421/13, 2014) and Burlington Arcade, (C-155/18, 2020), the EUIPO considers that these two types of retail are very different are. The EUIPO considers that the retail services offered by single brand shops should not be considered as genuine use of “retail services” within the meaning of Class 35 of the Nice Classification. Trademark owners operating single-brand businesses can therefore no longer enforce their current Class 35 registrations once these registrations are more than five years old.

This EUIPO practice brings clarity to an issue that has been discussed for many years. The question, however, is whether the application of this practice leads to decisions that are considered fair and reasonable.

What are retail services?

In the explanation of the Nice Classification, “retail services” are defined as follows:

… the bringing together, for the benefit of others, of a variety of goods (excluding the transport thereof) to enable customers to conveniently view and purchase those goods; such services may be provided by retail outlets, wholesale outlets, vending machines, mail order catalogues, or by electronic means such as websites or television shopping programmes.

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

Single brand vs. multi-brand

This third element of the definition is actually used as justification for treating single brand and multi-brand retailers differently. Since March 1, 2021, the EUIPO guidelines have included the following sentence: “The others who benefit from the merging of different goods are the different manufacturers who are looking for a market for their goods”.

In the Guidelines, the EUIPO argues that just as a clothing company promoting its own garments does not genuinely use its mark for ‘advertising’ services in Class 35, there is no use in relation to retail in Class 35 where the garments The manufacturer only sells his own goods through his shops or his website. This sale is not an independent service offered to third parties, but merely an activity resulting from the manufacture and necessary to sell these goods. It is protected by a trademark registration for those goods and does not require a separate registration for retail services.

In addition, the Guidelines mention that ancillary services (such as seller services, online sales assistant tools and customer service) also typically do not qualify as genuine uses for retail services unless they are not part of the offer to sell the goods. Although this leaves some leeway for single-brand store owners to claim that they are using their marks seriously in relation to retail services, in most cases such ancillary services will form an integral part of the offer for sale of the goods and will therefore not be considered genuine use be considered for retail.

We have examined some recent decisions by EUIPO’s Opposition and Invalidity Divisions and found that they still struggle to consistently apply the practice outlined above. However, the practice is already in place for the vast majority of decisions and we expect the number of deviating decisions to decrease rapidly.

Although the strict practice of the EUIPO does not appear to have (yet) been followed by, for example, the Benelux Trade Mark Office (BOIP) or the UKIPO, we expect that the practice of the EUIPO will be adopted by the national offices in the near future. After Brexit, the UKIPO is of course no longer bound by the decisions of the ECJ.

example

What are the legal consequences of not considering retail services offered by one-brand stores as ‘genuine’ retail services?

For example, take Company A, which holds an apparel (Class 25) and retail apparel (Class 35) brand X registration and only operates single brand stores, versus Company B, which has applied for identical retail trade X brand jewelery (class 35).

When assessing likelihood of confusion, likelihood of confusion is generally established where the marks in question are identical and the goods/services are similar.

Retail services versus retail services – even if they relate to different goods – are often seen as similar. This is because these retail services serve the same nature and purpose of enabling consumers to conveniently meet different shopping needs, albeit different goods. Also they have the same method of use. When the comparable goods are typically sold together in the same outlets and target the same audience, as in our apparel retail and jewelry retail example, they are typically considered to be similar.

Therefore, Company A’s earlier trade mark registration X, registered for “retail trade in clothing articles” (Class 35), may block Company B’s registration for the identical trade mark X for “retail trade in jewellery”.

But what if company A’s registration for X was registered for more than five years? In the EU, a trademark can be canceled five years after registration due to non-use. A trademark owner cannot enforce his registration after this period if the trademark has not been put to genuine use.

In our example, according to the strict practice of the EUIPO, Company A will not be able to demonstrate genuine use of the Class 35 services and will therefore only be able to rely on its trade mark registration in relation to the “Articles of clothing” in Class 25.

However, clothing and jewelry are considered dissimilar products. Therefore, articles of clothing are not comparable with “retail sale of jewelery” in Class 35 either. In this particular scenario, Company A cannot block Company B’s request.

effect

Looking at the example above, EUIPO’s practice could result in brand owners operating retail stores under an identical name, but no likelihood of confusion, simply because Company A only sells its own products and not those of third parties.

Therefore, when the registration becomes mandatory, the multi-brand dealer is clearly better off than a single-brand dealer who can no longer rely on his Class 35 registration after five years.

From our point of view, it is questionable whether there is any logic behind this different level of protection for single-brand and multi-brand retailers. Both types of retail activity require huge investments in store design, infrastructure and merchandising. We believe these investments deserve protection regardless of the origin of the products sold. We believe that when consumers encounter a single-brand clothing store X next to or near a multi-brand jewelry store X, they are likely to believe that the goods and services in question come from the same or economically related businesses.

Not accepting single brand retail services as genuine use for retail services in Class 35 may breach the core principle of trade mark protection, namely to avoid confusion among the relevant public.

Go forward

While we await how the practice and practices of the EUIPO evolve in other jurisdictions, it is important for single brand business owners to carefully consider the level of protection their current trademark registrations offer in any upcoming opposition or nullity proceedings they may be relying on would their Class 35 trademark registrations.

Brand owners who operate single brand businesses and have Class 35 registrations covering retail for the broader categories of goods but do not hold trademark registrations covering all of those specific goods themselves are advised to update their trademark portfolios as soon as possible.

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