The masked licensee or the enforceability of the license of a non-enrolled European Union trademark

The masked licensee or the enforceability of the license of a non-enrolled European Union trademarkOn February 4, 2016, the Court of Justice of the European Union (CJEU) had the opportunity to specify the scope of the first sentence of article 23 § 1, first sentence, of the Community Regulation (CE) n°207/2009 on the European Union trademark.

Despite a detailed reasoning resulting from a teleological reading of that regulation, we can question ourselves about the clarity and the merits of that decision.

1/ General context of the decision

As a reminder, the brand license agreement allows the owner of a trademark to grant to another person (the licensee) rights to that trademark, exclusively or not (http://www.legifrance.gouv.fr/affichCodeArticle.do?cidTexte=LEGITEXT000006069414&idArticle=LEGIARTI000006279716). The licensee thus becomes the owner of rights on the said trademark and may, under certain conditions, act on the basis of trademark infringement.

In this respect, formality conditions regarding these licenses depend on the applicable national law and differ from one State to another. For example, in German law, the license agreement is valid as of its signature and does not need to be registered with the German registry to produce its effects on third parties. On the contrary, French legislation provides  that “any transmission or modification of the rights attached to a registered trademark must be registered at the National registry of trademarks in order to be enforceable against third parties » (article L.714-7 of the French intellectual property Code).

What about the European Union trademarks? Inevitably, and despite a very clear European legislation on the subject, these national divergences have led to a lack of harmonization on the European Union territory and uncertainty regarding the enforceability or non-enforceability of the European Union trademark licences not registered in the concerned registry. It’s in seeking to clarify this point and to put an end to these questions that the ECJ has interpreted Article 23 § 1, first sentence, of Community Regulation (CE) n°207/2009 on third-party enforceability (CJEU, 4 February 2016, C-163/15, Youssef Hassan against Breiding Vertriebsgesellschaft mbH).

2/ A decision favorable to the licensor and the negligent licensee

In the present case, the Breiding company was granted a European Union trademark license, in particular authorizing it to act under infringement. The latter exercised this right against Mr. Youssef Hassan, reproaching him for marketing bedding articles in violation of his trademark right. The defendant, convicted at first instance in Germany, appealed against this decision based on the aforementioned article. He pointed out that there was no registration of the license granted in the trademark registry of the European Union and, therefore, argued that the licensee’s rights were unenforceable.

The Düsseldorf Court therefore stayed the proceedings and referred the following question to the ECJ for a preliminary ruling: can the licensee of a European Union trademark act as a counterfeit of the said trademark as soon as the license is not enrolled in the registry of European Union trademarks?

According to article 23 § 1, first sentence, of the said regulation, it appears very clearly that a trademark license is only binding on third parties if it has been registered in the registry of trademarks.

However, reading back the article point by point, the ECJ interprets this provision in the light of its context and the objectives pursued by the Regulation. Thus, it explains that the non-enforceability to third parties of legal acts (and in particular licenses) which have not been enrolled in the concerned registry, is intended to protect the person who has, or is likely to have, rights on a community trademark as an object of property and not the counterfeiting third party. In other words, the Court interprets here the article of the regulation by assigning it two different purposes according to the third-party and the situation concerned in the present case.

Consequently, the Court considers that the licensee of the European Union trademark may act on infringement even though that license has not been enrolled in the registry of trademarks.

3/ Observations

Certainly, this solution is consistent in the sight of the objective pursued by the regulation, which is, inter alia, to fight against counterfeiting. However, we cannot hold ourselves from regretting this distributive reading made by the CJEU, which is moving away from the letter of the article – yet very clear – and provides a somewhat flawed and unfounded interpretation.

In any event, this decision allows us to recall that the registration of the trademark license – whether national or European – remains useful and essential for the purposes of enforceability. Although the position of the Court is settled and that it was equally applied to the European Union’s designs and model (CJUE, 22 juin 2016, C-419/15, Thomas Philipps GmbH & Co. KG contre Grüne Welle Vertriebs GmbH), there is no guarantee that national courts will systematically follow that interpretation.

In conclusion, it is therefore advisable to remain cautious and to record with the trademark registry the relevant licensing contracts, otherwise there is a risk of being unenforceable to third parties. It is possible to enter only a confirmatory act of license in order not to reveal to third parties certain confidential elements of the license.