Madrid System Flourishes


Madrid System Flourishes

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Global trademark systems are becoming increasingly harmonized and, even though Brexit has threatened to act as a destabilizing force, the Madrid System is flourishing, as Aaron McDonald reports.


The United Kingdom’s withdrawal from the European Union—Brexit—is a source of major uncertainty in legal circles and beyond. Since the United Kingdom is the first major economy to leave the European Union in its current form (others, including Greenland, departed when it was the European Community), the world is watching to see how the country will navigate its way through rocky waters.

Released in March 2018, a joint draft withdrawal agreement on the United Kingdom’s departure have calmed—for now—some fears around a range of issues, including trademarks, but other questions have been left unanswered. Additionally, it cannot be overstated that the draft withdrawal agreement contains no guarantees, since “nothing is agreed until everything is agreed”—a key negotiating principle that the European Union and United Kingdom will strictly observe.

“The result of the U.K. referendum created a great deal of uncertainty over what IP rights the owners of registered EU trade marks (EUTMs) and registered Community designs (RCDs) would have (or would have to obtain) in the United Kingdom after Brexit,” says David Birchall, Partner at Venner Shipley LLP (UK).

While critics have expressed hostility toward the consequences of the Brexit vote, in June 2016, Mr. Birchall believes that it may not be all doom and gloom for owners of EU registered rights requiring IP protection in the United Kingdom, as had been feared.

He explains that since the referendum, some “cautious brand owners” have secured national U.K. trademark rights so they could be certain that they would have trademark protection after the nation leaves the European Union.

“The March 2018 draft of the withdrawal agreement between the European Union and the United Kingdom suggests that the impact on trademarks and designs might not be as dramatic as had been feared,” he says.

“The Madrid Protocol’s role in facilitating the international protection of trademarks is particularly important as the number of countries taking part in the global IP system grows."

Some sections of the withdrawal agreement were colored green, representing that consensus had already been reached. One of the green sections provides protection for EUTMs registered in the United Kingdom before Brexit. EUTMs and RCDs will be automatically transferred onto the U.K. Intellectual Property Office’s (UKIPO) registers by December 31, 2019, without any re-examination.

Mr. Birchall also notes that another green-colored paragraph provides that the United Kingdom will take measures to ensure that owners of trade mark or design protection in the European Union obtained through the Madrid and Hague Systems will, likewise, enjoy protection in the United Kingdom by December 31, 2019.

An Unclear Picture

Some issues may have been agreed, but there are still murky waters surrounding brand protection after the United Kingdom has left the European Union.

For example, arrangements for geographical indications (GIs) are still underway.

According to Mr. Birchall, after Brexit, the costs of IP protection for owners of trademarks and designs that are operating in the United Kingdom and in other EU member states will increase. This is because protection granted by the European Union Intellectual Property Office will no longer be effective in the United Kingdom post Brexit.

However, the draft withdrawal agreement contains a silver lining provision that no official fees will be payable for the creation of U.K. rights from the European Union.

“If this provision is agreed and contained in the final signed agreement, it will save rights owners the costs of official fees for creating new U.K. rights out of their registered EUTMs and RCDs—a drawback that had been widely expected,” says Mr. Birchall.

On the other hand, he adds, a downside to this will be official renewal fees that will be payable on such newly-created U.K. rights in due course.

Mr. Birchall explains that the withdrawal agreement merely provides that U.K. trademarks automatically created by EUTMs would be protected from non-use cancellation only until December 21, 2019.

“This seems a little harsh,” he comments. “It is hoped that the UKIPO will give owners of these newly-created U.K. trademarks a longer period of immunity from non-use cancellation.

“If so, from a brand owner’s perspective, this would provide a welcome opportunity of extended time to begin using their marks in the United Kingdom.”

Mr. Birchall believes that the U.K. government needs to prioritize providing clarity where necessary—for example, whether official fees will be payable and exactly how soon U.K. trademark rights created from EUTMs will be open to non-use cancellation actions from third parties.

“The U.K. Government needs to prioritize the creation of a structure for protecting GIs and similar rights in the United Kingdom,” he adds.

Madrid Protocol

Systems such as the Madrid Protocol are designed to be a convenient and cost-efficient solution to filing trademarks on an international level. In the United Kingdom, U.K. companies will still be able to apply for international trademark registrations via the system after Brexit.

Under the Madrid Protocol, trademark owners are currently able to file a single application and gain protection in up to 117 countries. Administered by the International Bureau of the World Intellectual Property Organization (WIPO) (Switzerland), the system covers countries which represent more than 80 percent of global trade.

“The Madrid Protocol’s role in facilitating the international protection of trademarks is particularly important as the number of countries taking part in the global IP system grows, along with the increasing awareness of the importance of IP protection for innovation and economic growth,” says Marcus Höpperger, Director of the Madrid Registry, Brands and Designs Sector at WIPO.

One of the countries that joined the Protocol more recently is Thailand, which became a member in August 2017, with an effective date of November 7, 2017.

“Thailand would like to welcome foreign investments,” says Darani Vachanavuttivong, Co-Managing Partner and Managing Director of the Intellectual Property Department at Tilleke & Gibbins (Thailand).

“The country seeks to provide easier access to foreign trademark owners to come to Thailand and protect their trademarks in Thailand, and at the same time offer a wider solution for Thai trademark owners to protect their own IP in other countries.”

Somboon Earterasarun, Partner at Tilleke & Gibbins (Thailand), adds that joining the Protocol is “another indication for Thailand to reiterate to the world that we are committed to IP protection.”

Last year, Thailand was removed from the U.S. Special 301 Report’s Priority Watch List for the first time in several years. The report identifies trade barriers to U.S. companies because of IP-related problems.

“We believe joining the Madrid Protocol was one of the contributors to that success,” adds Mr. Earterasarun.

He says while there is not much difference between smaller and larger countries joining the Madrid Protocol because it works the same way regardless of size, some less-developed countries, such as Laos and Cambodia, may benefit from the low costs of the Protocol.

Mr. Höpperger adds that the Madrid Protocol opens up a pathway for countries to enter international markets.

“Trading blocs such as the Association of Southeast Asian Nations (ASEAN) help enhance regional cooperation between independent economies and facilitate cooperation and intraregional trade, while increasing the trading bloc’s international competitiveness,” he says.

He explains that reducing trade barriers ultimately allows for increased revenue and sustainable economic growth.

“ASEAN’s commitment to the protection of IP as a driver for innovation and a conduit for technology transfer across borders has led to the expansion of the Madrid System across the region, further contributing to development and industrialization of its smaller nation members,” Mr. Hopperger says.

Harmony for Asia

According to Mr. Earterasarun, ASEAN countries have been in discussion over whether there should be a harmonized system in place covering the 10 member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam).

“If that does happen, it would make this particular regional bloc more attractive to investors,” Mr. Earterasarun explains.

Of the countries making up the ASEAN bloc, Brunei has the smallest population, at 423,000. At the other end of the scale, Indonesia has the largest population, with 261.1 million inhabitants. Thailand has a population of 69 million.

Although the Madrid Protocol has been welcomed by Thai brand owners and IP practitioners since the country joined, there are still some teething issues, predominantly around the language barrier. Thailand’s Department of Intellectual Property has the job of translating international applications into Thai for examination purposes. As with any translation, this can result in some discrepancies.

Currently the issue isn’t too problematic as there aren’t many applications—Thailand is new to the Protocol. “But in the future, when many thousand applications come in, the size of the Madrid Protocol Office in Thailand will have to be increased to gain sufficient manpower to translate the applications,” says Ms. Vachanavuttivong.

Mr. Earterasarun explains that according to the Department of Intellectual Property, Thailand currently has 800 incoming applications and 37 outgoing applications seeking protection. Of the trademark owners using the Madrid Protocol in Thailand, roughly 95 percent are foreign, with Thai brand owners representing the remaining 5 percent.

More for Madrid

Since Thailand’s 2017 accession to the Protocol, others have joined the club. Afghanistan is the most recent member, having joined in March 2018.

“A number of countries from Africa, Asia, and the Americas are actively working toward accession,” says Mr. Höpperger. “By the end of 2020, we expect to see South Africa, Brazil, Canada, and Malaysia in the Madrid System. A number of other countries have also expressed serious interest in joining, and we continue to provide the necessary support to help with their preparations.”

WIPO is aiming to bring some improvements to the Protocol to simplify it and make it more user-friendly.

 “The development of a more modern, agile, and robust IT platform will improve the operational efficiency and customer service,” notes Mr. Höpperger.

“To achieve this goal, we are focused on simplifying the legal framework and on developing self-service tools to facilitate the centralized management of international trademarks.”

The Madrid System will continue to evolve with the business demands of its users, he adds.

“This means taking a more proactive and anticipative approach to changes in market trends and technologies, and providing users with more responsive portfolio management tools,” he says.

Mr. Höpperger points out that 2017 was a record year in terms of new international applications filed—with 56,200 applications filed, representing a growth of 5 percent from the previous year.

“The Madrid System will continue to meet the demands of an ever-increasing user community and we will make all efforts to provide the expected services,” he says.

Madrid System, Brexit, harmonization, INTA, INTA 2018, Venner Shipley, David Birchall, EUTM, WIPO, Marcus Höpperger, Tilleke & Gibbins, trademark