Dreyfus

On December 7, 2016, the Conseil d’Etat(tenth Chamber), issued a judgment which confirms that the domain name is in fact an intangible asset.

The issue of the classification of property as expenses or assets

Intellectual property cannot be easily classified in a company’s balance sheet. an option is available for the owner of the property: he can record it as an expense in the company’s profit and loss account, or as an intangible asset under the fixed assets of the company.

This is a major issue because the corporate tax base will not be the same for companies depending on whether the property is an expense or an intangible asset. Profit will be diminished if the property happens to be an expense for the business, compared to if it were an asset. Profit, naturally, is the result of the difference between revenue and expenses.

Requirements for intangible asset qualification

To be qualified an intangible asset, the property must meet three criteria:

– the property must be a regular source of profit and thus generate revenues regularly;
– the property must be sufficiently durable; it must thus remain in the business for some time;
– it must be transferable. To qualify as an intangible asset, meeting these three requirements is mandatory.

If any of these conditions is not met, the property will be requalified as an expense.

The eBay case, an illustration of the issue surrounding classification

According to the Conseil d’Etat, a domain name is an asset insofar as it meets these three requirements.

eBay was subject to a tax audit because their domain name did not appear on its balance sheet. eBay was initially liable to pay additional corporate income tax and additional contributions to this tax for the years ended December 31, 2003 and 2005, as well as corresponding penalties. The internet Empire subsequently filed a complaint with the Paris Administrative Court on March 20, 2012 in order to obtain relief from these tax surcharges.

eBay also brought action before the Administrative Court of Montreuil (Tribunal Administratif de Montreuil) to obtain relief from the withholding tax which the company had to pay as well as corresponding penalties for the years ended 2004 and 2005.

Following the dismissal of these applications by the Administrative Court of Paris (TA Paris du 1-2 dated March 20, 2012, no. 1001793) and by the Administrative Court of Montreuil (TA Montreuil,dated February 9, 2012, no. 1000879), the Administrative Court of Appeal dismissed both of the claimant’s applications (CAA Paris, April 30, 2016, no. 12PA02246 and 12PA02678). The company then brought the appeal before the Conseil d’Etat.

The Conseil d’Etat confirmed the calculation of the tax administration as well as the judgments of first instance and of appeal considering that the domain name “ebay.fr” met the three requirements for qualification as intangible asset.

First of all, the domain name confers to its owner exclusive rights to use it, making it a significant source of revenue. In this particular case, the domain name “ebay.fr”, registered with the AFNIC (Agence française pour le nommage Internet en coopération) is duly owned by EBay France but the right to use had been granted to EBay International AG. In fact, eBay France had granted a free license to its parent company. The tax authorities nevertheless considered that eBay France indirectly transferred its profits to its parent company by granting this right of use without levying fees. This was, therefore, a regular source of revenue for eBay France which it failed to report, as a consequence of analysing the situation as a mere necessity for administrative approval.

Furthermore, this exclusive right of use must be renewed each year with the AFNIC (in accordance with the provisions of the AFNIC naming policy), against payment of applicable fees necessary to carry out this formality. As a result, the asset’s lifespan in the company is sufficient to satisfy the requirement of sustainability: as long as the domain name is renewed, the exclusive right in favour of the owner shall remain in force.

Finally, the renunciation to renewthe domain name “ebay.fr” by iBazar, by way of compensation by the Ebay group, enabled EBay France to register this domain name immediately. As a result, this action was perceived by the administrative courts as a rights transfer from iBazar to eBay to use this domain name. This renunciation by a company to renew the domain name so that another may benefit from it, against payment of a fee, could be said to be a transfer of ownership and therefore an assignment.

In this case, a domain name that did not appear in the balance sheet was considered fraudulent and gave tax authorities the opportunity to recover eBay France. In the case, eBay France was this domain name’s registrant but its use was managed by eBay International AG. The fact that it meets all the three requirements for qualification as an intangible asset should have placed the domain name in eBay France’s balance sheet.

The Court of Justice of the European Union (CJEU), July 21, 2016, C-226/15, Apple and Pear Australia Ltd/Star Fruits Diffusion

In this case, the Court of Justice of the European Union recalls the extent and limits of the powers and functions of the European Union Intellectual Property Office (EUIPO) and of the national courts seized as European trademark courts.

Background

In 2009, the Belgian company Carolus C filed an application with the EUIPO for registration of the word sign “English Pink” as a Community trademark. In 2010, Apple and Pear Australia Ltd and Star Fruits Diffusion, filed a notice of opposition with the EUIPO based on three earlier trademarks, including the word mark “Pink Lady”.

Meanwhile, Apple and Pear and Star Fruits Diffusion brought an action for infringement against Carolus C, before the Tribunal de commerce de Bruxelles (Commercial Court, Brussels), in its capacity as a Community trademark court.

The Belgian trademark court annulled the “English Pink” trademark, ordering Carolus C to refrain from using the mark in the EU.

In view of the fact that, the Tribunal de commerce de Bruxelles (Commercial Court, Brussels) gave its decision before the EUIPO had decided on the opposition ruling, the European Union Trademark Office could thus have taken into account the judgment of the Belgian trademark court of the EU.

The EUIPO nevertheless rejected the opposition on the grounds that the marks were not visually, conceptually or phonetically similar. The appellants therefore applied to the General Court of the European Union for annulment of  the decision of the EUIPO.

The General Court of the EU granted the application for annulment on the ground that the EUIPO, although not bound by the decision of the Belgian Community trademark court, did not take into account the potential impact of this judgment on the outcome of the opposition proceedings.

The General Court of the EU however objected to the registration of the contested trademark on the grounds that it does not have jurisdiction to substitute itself to the assessment of the Board of Appeal.

Solution

Since the applicants found the decision of the EU Court unjustified, they then appealed to the CJEU.

The CJEU in turn rejected the appeal and recalled first of all that EUIPO is the EU body with exclusive jurisdiction to authorise or refuse the registration of an EU trademark.

The Court also held that EU trademark courts have jurisdiction to give judgment prohibiting the pursuance of infringement actions of a Community trademark extending throughout the territory of the European Union.

Consequently, any proceedings brought before the  EUIPO will have a subject matter different to an infringement action before a national EU trademark court.

Since the proceedings involve different subject matters, the EUIPO is not bound by final judgments of national EU trademark courts.

On the other hand, EUIPO should assess the potential impact of any judgment given by an EU national trademark court on the outcome of proceedings brought before it.

The defense strategy and timeline should therefore be established carefully in order to defend a Community trademark right.

The “.BRAND” Tld is a new gTLD that is becoming increasingly appealing. Companies are interested in this concept in order to own an extension of their own brand. This practice is an excellent marketing opportunity to present products of the brand.

Some statistics on the “.brand” 

• 596 TLDs among which 536 were delegated
• 184 TLDs with more than 5 currently active registrations
• 4312 domain names but only 437 active websites
• 54 .BRANDs appear in the Alexa Rankings, representing a 69% increase in one month.
• The top 5 terms to the left of .BRAND:
  • Home
  • www
  • mail
  • careers
  • support

sources 2016

What about companies having their “.brand”?

The actual impact of the “.brand” has not yet been established. However, these extensions are widely used in the banking sector, where security and authenticity are primary concerns.

Companies by now should have knowledge of their new websites using a “.brand” – notably the home.TLD used as a main site. While many companies have not yet given up their traditional domain names (.com, .fr, .co.uk, etc.), they no longer hesitate to promote their “.brand” amongst their clients.

Large companies have already made the transition: CERN, The Weir Group or even BNPParibas almost exclusively use their “.brand”. Others, like Barclays, are currently making the transition over towards complete use of their new extension.

Should one acquire a “.brand”?

There are many advantages to a “.brand” – particularly in terms of reputation with internet users and clients.

As a Tld exclusive to companies, internet users will thus be able to trust them, to value their reliability and will be able to feel safe in accessing these sites. Internet users will  know with whom they are dealing and will not be misled by a potential cybersquatter. The company maintains full control of its extension and it can therefore apply any desired policy to promote its brand image.

A “.brand” is an excellent opportunity for businesses to promote their brand image and enhance communication. Companies would also at any time be able to use reliable statistics to determine their marketing and communication policy.

Will you make the transition?

Following the completion of the first round of new gTLDs, ICANN has scheduled a second one for 2018, even though it seems more likely that will take place in 2020.

To prepare for the above, companies need to perform an impact assessment: an analysis of the market, of the company’s activities and its competitors’ position in order to enable a brand to identify its needs.

Becoming a manager and a registrar of an extension requires preparation and particular technical skills and expertise. One must for example pay ICANN fees, manage the registry database and offer various services such as a 24/7 maintenance service.

If a business plans to have its brand name extension, all departments must be involved: marketing, communications, production, legal, technological, risk, etc. An internal strategy should be devised to efficiently determine the advantages and disadvantages and to carry out a study on the company’s return on investment. Finally, the technical conditions and compliance with ICANN standards are minor compared to this internal strategy. Businesses should consider integrating the “.brand” in their communication strategy.

Choosing not to have a “.brand” is already a strategy. One should therefore take a stand and ensure they are fully prepared before engaging in the .brand process.

Please feel free to contact Dreyfus for more information.

Brunei is a Southeast Asian country located on the island of Borneo. Its GDP is among the highest in the world.

With Brunei’s accession on December 6, 2016 to the international trademark system, the Madrid System now has 98 members.

Brunei thus becomes the 6^th member country, out of a total of 11 South-East Asian countries (ASEAN), to join the Madrid System.

Broad geographic coverage

Since January 6, 2017, the effective date of entry into force of the Madrid Protocol in Brunei, national trademark owners will be able to protect their trademarks in the 114 territories of the 98 members of the Madrid System.

In addition, foreign trademark owners can expand the protection of their trademark to the Southeast Asian market and more specifically to that of Brunei.

A convenient and cost-effective system

The main advantage of the Madrid System, is the simplification of the filing and management procedures of international trademark registration.

Following a simple application for trademark registration, or a trademark registration with a national or regional intellectual property office, one can apply for a single international registration with the same office, which will then arrange for submission of the application to the WIPO.

Filing an international application is therefore equivalent to filing multiple national applications, thus effectively saving time and money.

International registration as most national registrations is valid for 10 years.

Future accession of Thailand

Thailand should be the next ASEAN member state to become party to the Madrid System.

Only Indonesia, Malaysia and Burma as well as East Timor will then be left to obtain their accession to the Madrid Protocol so that all ASEAN countries become part of the international trademark system.

France : opposition procedure before the French Trademark Office and local communities

Since the decree no. 2015-671 dated June 15, 2015, an alert procedure has been made fully available for local communities and public establishments for cooperation between local authorities (EPCI), pertaining to registration trademark applications containing their designation.

This service, which is free on behalf of the NIIP’s public service mission, allows them to receive alerts when a trademark application contains their name and it also allows them to file an opposition within a 2 month deadline following trademark publication. The procedure has been implemented by new Code of Intellectual Property Articles D712-29 and D712-30. They provide that an Alert be issued by the NIIP « within five work days following the trademark’s filing date if the trademark contains the name of the local community or the country concerned ».

A valuable legislative policy change for french trademark law

Before the modification, legislation did not grant protection to local communities and EPCI’s against abusive use of their names, and the criteria that allowed to qualify for likelihood of confusion were difficult to fulfill. The NIIP’s means were, as a consequence, very limited as to defence of local communities’ rights.

The LAGUIOLE case of 2012 before the Paris Court of Appeals (Cour d’appel) illustrated the issue, because the judges reacted to only one of the plaintiff’s claims based on provisions of Code of Intellectual Property Article L714-5 for failure to meet the requirement for genuine use of the trademark during 5 years.

In this case, a Val-de-Marne restaurateur registered 27 trademarks containing the name « LAGUIOLE » seemingly looking to take advantage of the small town of Laguiole’s reputation, which is worldwide for the quality knives that are made there. French NIIP Director said that the trademark « enjoys no notoriety within restaurant and food industry businesses. Used as a brand to identify these different services, the word « Laguiole » will conjure up (…) the common name for that particular type of knife, not the Proper name designating a town in the Aveyron region ».

Protection made easier in pursuance of the NIIP’s public service mission

The decree currently in force allows for local communities to defend ownership rights to their own name without having to hope for a favorable decision based on incidental facts that are foreign to the actual legal issue, as was the case with LAGUIOLE in 2012. That decision has been the subject of judicial review before the French supreme Court (Cour de Cassation) in October 2016, and is currently still waiting for a referral date before the Paris Court of Appeals in 2018.

This change in the legislation is a positive one. With the NIIP alert system in place, local communities are now equipped to prohibit trademark registration if said registration is inimical to their interests. It is through enforcement of new Code of Intellectual Property Article L711-4 h) and decree no. 2015-671 dated June 15, 2015 that the trademark PARIS BY PARIS could not be registered, none of the proposed products being made in France.

A growing number of local communities and townships have put the Alert system to good use by filing oppositions before the NIIP when the trademark registry application is inimical to « the name, image or repute of a local authority » per Code of Intellectual Property Article L. 711-4 h). Local communities are now better equipped to control brand name recognition and can avoid name hijacking by entities trying to piggyback their reputation with misleading representation and deceptive practices.

The extent of protection still unclear

The question that still remains to be answered concerns the full extent of the abovementionned protection and interpretation of Article 711-4 h) by the French NIIP.

In the PARIS BY PARIS case, the French NIIP ruled that « Code of Intellectual Property Article 711-4 h) does not prevent all third parties from registering a sign that identifies a local community as a trademark, but reserves such prohibition for cases where trademarking would be detrimental to public interests ».

It is a very engaging start, and a welcome change !

In a decision of the Paris Cour d’appel dated November 8, 2016  (Pole 5, ch. 1, Mr X. / Team Reager AB and Stone Age Limited), the judges reversed an expert’s decision at the WIPO Arbitration and Mediation Center dated July 29, 2013 who ordered the transfer of a domain name to a community trademark owner prior to the registration of the disputed name.

Transfer of the domain name ordered by the WIPO

The Swedish company Team Reager AB, created on September 9, 2010 and specialized in design of products and services related to mobile phones, had launched through Moobitalk UK Limited its sister company, a hands-free device called “Moobitalk”. On February 10, 2011, it registered the community word mark Moobitalk, designating particularly telecommunication services, and assigned its rights on the trademark to Stone Age Limited on April 14, 2014.

Mr. X., managing director of companies operating in the Middle East, particularly in Yemen where he was born and is resident, had for several years operated communication services based on the “moobi” suffix (phonetic transcription of “mobi” meaning “mobile phone” in Arabic), and especially “chat” type services called MoobiChat and Moobitalk, in different countries of the Near East and the Middle East. On April 17, 2011, he registered the domain name <moobitalk.com>.

Team Reager had filed a UDRP complaint with the WIPO against Mr. X, and the Expert had ordered the transfer of the domain name <moobitalk.com> on July 29, 2013 on the grounds that Team Reager was the owner of the community trademark Moobitalk prior to the disputed name.

An ownership claim to the name

However, on August 27, 2013, 8 days following notification of the decision, Mr. X brought Team Reager before the TGI of Paris to settle whether he was the legitimate owner of the domain name <moobitalk.com> and to obtain its restitution. However, the TGI rejected the arguments put forward by Mr. X. It upheld the acts of infringement committed against the community trademark Moobitalk and ordered the transfer of the domain name ‘moobitalk.com’ as compensation.

However, Mr. X appealed against that decision in order to reclaim ownership of the disputed domain name. Indeed, the Cour d’Appel held that there was no trademark infringement insofar as the <moobitalk.com> site was not targeting an audience in the European Union but only in the Near and Middle East. Neither the use of the generic extension “.com” nor the use of the English language on the website demonstrated <moobitalk.com>’s owner’s will to target the European public.

The court therefore reversed the TGI judgment and dismissed the claims of Team Reager and Stone Age with respect to infringement of the community trademark Moobitalk and the violation of TeamReager’s rights over that trademark, and ordered restitution of the domain <moobitalk.com> to Mr. X., its owner.

Can we appeal a UDRP decision?

The decision recalls the rules for an appeal of a UDRP decision. This action is possible provided that it is brought within ten days following the notification, in order to avoid cancellation or transfer of the name. Thereafter, the competent court is either where the registered office is located or where the domicile of the domain name owner is located. In the context of proceedings relating to the domain name <moobitalk.com>, the independence of French judges from the WIPO must be emphasized, since the Paris Cour d’appel reversed the judgment of the WIPO experts and ordered restitution of the disputed name.

The Court of Justice of the European Union (CJEU), June 22, 2016, C-207-15P, Nissan/EUIPO

Nissan is the owner of a figurative Community  trademark “CVTC” for which registration was sought in classes 7, 9 and 12. Nissan requested the renewal of the trademark, due in April of 2011, in respect of goods and services in classes 7 and 12 only.

During the grace period (an additional 6 month period, which shall take effect after the registration expires, allowing the trademark owner to issue a request for late renewal upon payment of a surcharge), Nissan also requested to include class 9 goods in the renewal of that mark, on the basis of Articles 47 and 48 of Regulation No. 207/2009.

The European Union Intellectual Property Office (EUIPO) refused Nissan’s request. The decision to refuse Nissan’s request for renewal of the “CVTC” trademark in class 9 was confirmed by both the First Board of Appeal of the EUIPO and the EUIPO General Court.

Nissan then appealed to the CJEU seeking annulment of the judgment of the General Court of the EU, which rejected the application for partial renewal of the mark in class 9.

The Court of Justice finally ruled in favour of Nissan and annulled the EUIPO decision.

The CJEU acknowledges the possibility to request successively for partial renewal of a trademark in different classes, not only before, but also during the grace period.

Therefore, the only prerequisite for successive requests for partial renewal of a Community trade mark to be accepted, is compliance with the grace period, together with payment of the surcharge.

Before the entry into force of the “EU Trademark Law reform”, requests for renewal should have been submitted “within a period of 6 months ending on the last day of the month in which protection ends” (Article 47 of the Regulation No 207/2009).

By way of this decision, the CJEU establishes that the new Article 47 of the EUTMR, provides that the request for renewal should be submitted within a period of six months prior to the expiry of registration. In other words, 10 years following the date of application for registration.

Following the French Digital Republic Law of October 7, 2016, Dreyfus presents a trilogy of articles on three essential features of the law.

The Digital Republic Law is centered around its’ title II called “Protection of rights in the society”. Within this Title II is the Second Chapter,  entirely dedicated to “Protection of personal privacy online”, including “Protection of personal data”.

The specific feature of the chapter

This chapter is particularly relevant in that it ensures a smooth transition to the new Regulation (EU) No. 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data (“GDPR”). Although the GDPR entered into force on April 27, 2016, its provisions will apply only as of May 25, 2018 in order to give companies enough time to comply with the new rules.

These new rules entail profound changes that the French legislator wished to anticipate in order to guide and the stakeholders and ensure compliance when processing personal data.

Power given to the data subjects

Both the Digital Republic Law and the GDPR focus on the person whose personal data will be processed (hereinafter called the “data subject”).

Article 4 of the GDPR defines personal data as “any information relating to an identified or identifiable natural person”. However, an identifiable person refers to “one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to his or her physical, physiological, genetic, mental, economic, cultural or social identity”. Therefore, data is personal when it allows the identification of a natural person. This data does not have to identify the data subject directly, as it shall be sufficient to identify them with data roll-up.

However, concerning personal data, the Digital Republic Law amended Article 1 of Act No. 78-17 of January 6, 1978 on Information Technology, Data Files and Civil Liberties by adding a second very important paragraph: “Any person has the right to decide and to control the use of his or her personal data, pursuant to the conditions set out in this law.”

A self-determination right is thus conferred on the data subject.

Control of Post-mortem data

The Digital Republic Law also incorporates the right for data subjects to control their post-mortem data by amending the Act of January 6, 1798, and Article 40-1, with the aim to empower them to exercise their right over their personal data. The law thus creates a system of directives on storage, deletion and communication of the data subject’s personal data.

These directives may be amended or revoked at any time by the data subject. The directives define the manner in which the person intends to exercise his various rights following his or her death.

There are two types of directives:

• General directives: they concern all personal data relating to the data subject. They may be registered with a trusted third party certified by the National Commission on Informatics and Liberty (CNIL). The CNIL will be responsible for managing a single registry where the references to the general directives and the registered and trusted third party will be recorded.
• Specific directives: they concern the processing of personal data mentioned in these directives. They shall be registered with the relevant data controllers and shall be subject to specific consent of the data subject. Thus, the mere approval of the general terms and conditions of use (GTC) does not allow the definition of these specific directives.

The directives may designate a person who, upon the death of the data holder concerned, will be responsible for executing directives and requesting their implementation from the data controllers. In the absence of the designated person and unless otherwise instructed, the heirs of the deceased shall take note of the instructions and request their execution.

Providers of a public online communication service are responsible for informing users about what is done with their personal data upon their death and must allow  them to choose whether or not to communicate their data to a third party they designate. Additional information on this issue should be included in the GTC specifically, but also in the data protection policy.

The rights granted to a person to decide what should be done with their post mortem data cannot be limited. Thus, a clause in the GTCs regarding the processing of personal data limiting these prerogatives is considered null and void.

Strengthening information available to users

Article 32 of the French Data Protection Law already required certain informations to be communicated to data subjects by whose data is being processed. Thus, the data collection forms had to mention the identity of the data controller, the purpose of the data processing, the mandatory or optional character of the data, the recipients of the data, and so on. The Digital Republic Law includes an eighth point on the storage period in terms of the categories of data processed or, if not possible, the criteria used to determine this duration.

Thus, any data collection form, data protection policy and any general terms and conditions of use shall henceforth indicate the data storage period.

Expansion of the CNIL’s powers

The main point addressed by the French Digital Republic Law is perhaps the expansion of the CNIL’s powers, specifically thanks to the amendment of Article 45 of the Act dated January 6, 1978 with respect to sanctions that can be imposed by the CNIL.

Henceforth, when a data controller fails to comply with his obligations, the CNIL’s chair shall be entitled to issue a formal notice to put an end to any identified infringement within a time limit set by him. In case of extreme emergency, this delay may be reduced to twenty-four hours. Previously, the timeframe was five days. If infringement does not cease, the CNIL Restricted Committee may then issue, following an adversarial hearing (procédure contradictoire), a warning, a penalty (except where the processing is made by the State), an injunction to cease the processing or a withdrawal of the authorisation issued pursuant to Article 25 of the Law of January 6, 1978.

Monetary penalties are a novelty because prior to the French Digital Republic Law, monetary penalties were set only in cases of violation of a formal notice. This penalty may not exceed three million euros.

 Article 83 of the RGPD provides for penalties, proportional to the breaches :

 – up to EUR 10,000,000 or, in the case of a company, up to 2% of the total annual worldwide turnover for the previous financial year, whichever is the greater;

– or up to EUR 20 000 000 or, in the case of a company, up to 4% of the total annual worldwide turnover for the previous financial year, whichever is the greater.

Since the European regulation is of direct application, these amounts should be applied by the CNIL as of May 25, 2018.

Such measures may also be taken by the Restricted Committee, without prior formal notice and following an adversarial hearing (procédure contradictoire), where the identified infringement cannot be brought into conformity in the context of a formal notice.

Where there has been a violation of rights and freedoms of the data subject following execution of the processed data, the Restricted Committee may also, when the matter is brought before it by the chairman of the CNIL andin the context of emergency proceedings defined by a decree of the Conseil d’Etat and following an adversarial hearing (procédure contradictoire):

– decide to suspend processing, for a maximum period of three months,

– issue a warning,

– decide to lock certain processed personal data, for a maximum period of three months,

– or, for certain processing, inform the Prime Minister so that he may take action toward putting an end to the infringement identified.

In the event of a serious and immediate violation of human rights and freedom of the data subject,  the CNIL chair may request a court of law to order, by way of summary proceedings, any measure necessary to safeguard these rights and freedoms.

The Restricted Committee should take into account :

• the intentional or negligent nature of the breach,
• measures taken by the data controller to mitigate the damage suffered by the data subjects,
• the level of cooperation with the CNIL in order to remedy the breach and to mitigate its possible negative effects,
• categories of personal data,
• and finally the way in which the breach was communicated to the Committee.

The Restricted Committee may make public the sanctions issued. It may also order sanctioned parties to inform the data subjects of this sanction individually, at their expense.

The Restricted Committee may also order the publication of sanctions in  newspapers and other media, at the sanctioned person’s expense.

Certain developments and clarifications on this law will be specified in the decrees. To be continued…

Please see our two other articles on the Digital Republic Law:

• Part 1: French Digital Republic Law – online platforms
• Part 2: French Digital Republic Law – data recovery