Intellectual Property Holding Companies in the European Union

European Intellectual Property Holding companies

Niall TierneyBarrister-at-Law (Ireland)Solicitor (England & Wales)European Trade Mark & Design AttorneyT: + 44 20 782 499 6664F: + 44 20 7820 1621E: [email protected]

IP management factors to consider

1. Introduction – Intellectual Property Holding Companies;

2. The Community Trade Mark (CTM);

3. The Madrid Agreement/Protocol;

4. Link between CTM and Madrid systems;

5. The European Community Design;

6. Overlap between RCD and CTMs;

7. Notable IPHC jurisdictions;

8. An overview.

Copyright Niall Tierney, 2012. All Rights Reserved

Intellectual Property Holding Companies (IPHCs)

An IPHC allows for efficient management and monetisation of Intellectual Property Rights;

Numerous European countries offer attractive tax advantages through a locally owned holding company;

Special factors apply when placing Trademark and Designs within an IPHC;

To ensure that a Trademark and Design portfolio is managed to its maximum advantage care needs to be taken where to incorporate an IPHC;

A country that is attractive from a tax advantage may not necessarily facilitate an effective IPR management strategy;

The decision to locate will depend on factors such as existing commercial presence within the European Union, legal system, IPHC jurisdiction being a member of EURO zone, etc.


The Community Trade Mark

One of the most effective ways of owning, enforcing and managing a centralised Trademark portfolio in the European Union is by using the CTM system;

The CTM is a unitary Trade Mark right that provides protection in all 28 Member States of the European Union;

A CTM avoids the necessity of having to seek separate Trademark protection in each European Member State;

Holder of a CTM is given an exclusive right to use the relevant Trade Mark throughout the European Union and to prevent others from using without consent, identical or similar signs in relation to identical and/or similar goods/services;

In some cases, it is possible for the holder of a CTM to seek temporary relief against suspected infringers by way of an injunction through a 'Community Trademark' court in the European Union. If granted, the injunction will be enforceable in all EU Member States;


The Community Trade Mark

A CTM is an 'all or nothing' right;

It is not possible for a CTM to cover some European Member States and not others;

A CTM can be challenged by the holder of a prior right from any European Member State;

If a CTM is cancelled, it is cancelled for the whole of the European Union;

The holder of an unsuccessful CTM always has the option of converting it into separate European national registrations.

A significant feature of conversion is that the converted applications can date back to the date the CTM was originally filed;


Enforcing European (CTM) Trade Marks by an IPHC

Courts in the EU Member State where the Defendant is domiciled or has an establishment have jurisdiction in cases where a CTM is infringed;

If Defendant is not domiciled in an EU Member State, then the courts of the EU Member State where the Defendant has an establishment will have jurisdiction;

If the Defendant is not domiciled or has an establishment in an EU Member State, then the Courts where the Plaintiff is domiciled will have jurisdiction;

If the Plaintiff is not domiciled in an EU Member State, then the courts of the EU Member State where the Plaintiff has an establishment will have jurisdiction.

If neither the Plaintiff nor the Defendant are domiciled or have an establishment in an EU Member State, the Courts where OHIM is based (Spain) has jurisdiction.


CTM Infringement Scenario One


CTM Infringement Scenario Two


CTM Infringement Scenario Three


Law governing CTM as an object of property

• Article 16 of the CTMR regulation stipulates that CTM as an object of property shall be dealt with as if it is a national trade mark registered in the European Member State where:-

• the proprietor has its seat or domicile, or• The proprietor has an establishment.

• Where the above two conditions do not apply, a CTM shall be dealt with as an object of property in the country where the European Trademarks Office (OHIM) has its establishment, i.e. Spain.

• The above is of importance because if there is an issue regarding the transfer of a CTM, care needs to be taken to ensure that CTM is owned by a company in a country with a preferential legal system

• It is suggested that if the parent of an Intellectual Property Holding company is itself based in a Common law jurisdiction, it may want to ensure that the law which potentially governs the transfer of CTMs held by an IPHC is also a Common law country. In such a scenario, it would be advisable to ensure that all CTMs are held in the name of an Irish IPHC.


Madrid Agreement/Protocol

A centralised system that allows for the protection of Trademarks on an international basis by means of a single application filed with the World Intellectual Property Office (W.I.P.O) in Geneva, Switzerland;

By designating the European Union (CTM) as part of the International application/registration, a trademark owner avoids the need to separately designate those countries of the European Union where it wishes to protect its International Trademark;

The CTM designation is examined in the same way as it would be if it was filed directly with OHIM;

Unless an objection is raised by OHIM within 18 months of filing, or the CTM designation is opposed, protection of the International Trademark is automatically granted;

Even if a CTM designation is rejected or successfully opposed, it is still possible to convert it into separate European Member state designations with the same filing date of the CTM designation.


Link between CTM and Madrid systems

Another feature of the link between the CTM and the Madrid systems is that it is possible to use a CTM as the basis of an IR;

Link facility is effectively only available to European domiciled businesses or businesses with a real and effective commercial presence in Europe;

A corporation without a European Union domicile or real and effective commercial presence in the European Union cannot use its CTMs as a basis of a Madrid (IR) application;

By placing Trademarks in a European Union incorporated company; businesses with no real and effective commercial presence in the European Union can overcome the hurdle of the ‘Link’ facility;


Designating CTM as part of Madrid system

International Registration (IR) may be centrally attacked if the base registration/application upon which the IR is based is successfully challenged during the first five years of the IR’s life;

Note: an Irish IPHC that bases a Madrid Protocol IR application on a 'Part A' registration (Trademarks registered on the basis of inherent distinctiveness) registered before 1996 could avoid the ‘five year’ central attack provision;

Under Irish Trademark law, pre 1996 'Part A' registrations are immune from invalidity attack on the grounds of non-distinctiveness;

Pre 1996 ‘Part A’ registrations can still be cancelled if they fall into disuse for a continuous five year period;


When not to designate CTM as part of Madrid system

It is not possible to seek International protection for a list of goods/services wider than those of the base application or registration;

Trademark owners seeking protection in Europe for goods/services broader than that sought in their home country would be better advised to file a standalone CTM outside of the Madrid Protocol;

Unlike some countries (notably the US); there is no requirement to file proof of use in order to keep the CTM alive;

If a US registration is likely to die as a result of a failure to file the required ‘Five Year’ Declaration of Use and that registration forms the basis on an IR designating the European Union, the entire IR would fail.


Separately designating European Member States as part of an Madrid (IR) application

IPR owner still has the option of separately designating those European countries where trademark protection is desired;

As a CTM, and corresponding designations, in an International registration, can potentially fail in their entirety, having numerous separate European registrations for the same Trademark provides more security;

Also, in some European countries, a domestic European Trademark registration provides a defence in the case of an infringement claim by the holder of an earlier Trademark. lt is doubtful that a CTM could provide a similar defence.

Drawback of separate European designations is the administrative burden of having to respond to any objections and/or oppositions that may be raised against the national designation. As it is a requirement to appoint a local lawyer in the event of an objection and/or opposition, costs could easily spiral out of control;

By designating the CTM, it will only be necessary to deal with OHIM in the event of an objection and/or opposition;


The European Community DesignIn Europe, designs can be protected if:

– They are novel, i.e. no identical design has been made available to the public;– Have 'individual character', an 'informed user' finds that its overall impression is

different to other designs.

One of the most effective ways of protecting designs in the European Union is through the 'Community Design' system;

A European 'Community Design' can be protected in either, its registered or un-registered form.

In its un-registered form, a Community Design is protected for a period of three years from the date it was first made available to the public within the European Union.

A Community Design allows its holder to prevent third parties from using either identical designs or designs that have the same overall impression on an 'informed user'. It can however only prevent the direct copying of the protected design.


The European Registered Community Design (RCD)

A Registered Community Design (RCD) allows its owner to prevent the use of identical designs or designs of the same overall impression even if they have been innocently created;

The RCD system is effectively a 'deposit' system where the application is filed and registration is granted shortly thereafter; normally within three to four weeks of filing.

An RCD registration lasts for an initial period of five years, but can be renewed thereafter for a further twenty years upon payment of a renewal fee.

An RCD is enforceable throughout the European Union and, like the CTM, can be used as a tool to prevent the importation of counterfeit goods into the European Union.

If a third party successfully challenges the validity of an RCD, it falls for the whole of the European Union and it is not possible to subsequently convert it into separate national registrations


The European Community Design

An alternative to filing an RCD would therefore be to separately seek registration in those European countries where protection is required.

Design law has been harmonized throughout the European Union so the requirements of registration are effectively the same in each European Member state.

Seeking EU national separate registrations is however costly and administratively cumbersome.

Anybody wishing to challenge the validity of the design would then have the expense of bringing separate invalidity challenges in each country where the design is registered.


Overlap between RCD and CTM systems and Hague

CTM and RCD systems both can afford protection to certain types of designs such as logos and graphic symbols;

As it can take up to nine months for a CTM to be registered, filing an RCD may be a quicker route to protection for logos, designs and graphic symbols;

Legal advice should however always be sought from European Intellectual Property counsel before pursing this route in view of the possibility that a pre filed CTM may destroy the novelty of the relevant design;

Nationals of countries that are members of the Hague Agreement can designate the European Union in the same way a CTM can be designated as part of a Madrid (IR) Trademark application;

Not possible to use an RCD as the basis of a Hague Design application.


Notable European IPHC jurisdictions

Country CTM Madrid Hague Legal System

EURO zone Corporate Tax Rate

Cyprus Yes Yes Through EU Common and Civil Law

Yes 10%

Ireland Yes Yes Through EU Common Law Yes 12.5%

Luxembourg Yes Yes Yes Civil Law Yes 5.7% on IPR royalty income

Malta Yes No Through EU Common and Civil Law

Yes 35%

Netherlands Yes Yes Yes Civil Law Yes 25.5%

Switzerland No Yes Yes Civil Law No 25%

United Kingdom

Yes Yes Through EU Common Law No 23%


Suggested IPHC strategy

An Indian IPR Holder

• Majority of business in the Europe with EURO zone countries.

• Newly established presence in the European Union.

• India not a member of Madrid Protocol;

• India has a Common law legal system;

IPHC jurisdiction - Ireland

• Ireland is a member of Madrid Protocol –therefore an Irish based (Indian owned) IPHC can own and file Madrid applications;

• Irish based IPHC can use CTMs it holds as the basis of a Madrid IR application;

• Ireland has a same legal system as India;

• As Ireland is a EURO zone country there are no currency downsides when an Irish IPHC files CTMs where fees are in EUROS.

• Ireland has a Double Taxation Treaty with India.


Suggested IPHC strategies

A Swiss based IPR Holder

• Majority of business in the Europe with EURO zone countries;

• Switzerland is a member of Madrid system;

• Switzerland has a Civil law legal system.

IPHC jurisdiction - Switzerland

• Switzerland is a member of Madrid Protocol –therefore a Swiss company can own and file Madrid applications;

• Swiss based IPHC can designate CTMs as part of a Madrid IR application;

• Swiss based IPHC will not be able to use its CTMs as the basis of a Madrid (IR) application because it is not domiciled in EU Member State and does not have a real and effective commercial presence;

• Corporate Tax Rate is 25%, but can be reduced depending on which Canton where the IPHC is located.



A US IPR Holder


• USA is a member of Madrid Protocol;

• USA has a Common law legal system;

• No real and effective operation in the European Union.

IPHC jurisdiction - Ireland

• Ireland is a member of Madrid Protocol. Therefore an Irish company can own and file Madrid applications;

• An Irish (US owned) based IPHC can use CTMs it holds as the basis of a Madrid IR application because it is based within in the EU;

• Corporate Tax Rate is 12.5%. Can be reduced to 2% under over 15 year under amortization rules;

• Ireland is a member of the EURO zone. Therefore the are no currency exchange implications when dealing with OHIM.

• Ireland has same legal system as the USA.

• Ireland has a Double Taxation agreement with the USA.



A Russian IPR Holder


• No real and effective operation in the European Union.

• Russia is a member of Madrid System;

• Russia has Civil Law legal system;

IPHC jurisdiction: Luxembourg or Netherlands

• Luxembourg and the Netherlands are members of Madrid Protocol. Therefore Russian owned IPHC companies incorporated in these countries can own and file Madrid applications;

• A Dutch or Luxembourg based IPHC can use CTMs it holds as the basis of a Madrid IR application because it would be based within in the EU;

• Corporate Tax Rate can be as low as 5.178% in Luxembourg;

• Luxembourg and the Netherlands are both members of the EURO zone. Therefore the are no currency exchange implications when dealing with OHIM.

• Along with Belgium, Luxembourg and the Netherlands are part of the unified Benelux Trade Marks Office;

• Luxembourg and the Netherlands have a Civil Law legal system


Factors to consider when choosing a European IPHCWill the IPHC be able to use CTMs it owns as the basis of a Madrid (IR) application?

Will the IPHC be located within a EURO zone country?

Is the parent company from a Common law or Civil law country?

Does the ultimate parent originate from a country with the same language where IPHC is located?

May have to take CTM infringement proceedings in a country where language and legal system is not familiar to parent company .

Does the IPHC have a Double Taxation Treaty with the country of the ultimate parent company?

Do the tax advantages ultimately outweigh the disadvantages of not locating in a country where the management of an IP portfolio is easiest?


Thank You
