Are your retail trade marks 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).

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 is, however, of the opinion that these two types of retail are very distinct. The EUIPO is taking the view that the retail services, offered by single-brand stores, should not be considered as genuine use of “retail services” as registered in Class 35 of the Nice Classification. Trade mark owners operating single-brand stores are therefore no longer able to enforce their current Class 35 registrations as soon as these registrations are older than five years.

This practice of the EUIPO provides clarity on a subject that has been debated about for many years. However, the question is whether applying this practice will lead to decisions that will be viewed as fair and reasonable.

What are retail services?

In the explanatory note of the Nice Classification “retail services” are defined as:

… the bringing together, for the benefit of others, of a variety of goods (excluding the transport thereof), enabling customers to conveniently view and purchase those goods; such services may be provided by retail stores, wholesale outlets, through vending machines, mail order catalogues or by means of electronic media, for example, through web sites 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 the 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 a justification to treat single-brand and multi-brand retailers differently. Since 1 March 2021, the guidelines of the EUIPO contain the following sentence: “the others benefiting from the bringing together of a variety of goods are the various manufacturers looking for an outlet for their goods”.

In the Guidelines, the EUIPO reasons that in the same way that a clothing company advertising its own clothing items 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 clothing manufacturer is merely selling its own goods from its shops or website. This sale is not an independent service offered to third parties, but simply an activity resulting from the manufacturing and necessary to sell these goods. It is afforded protection by a trade mark registration for those goods, and does not require a separate registration for retail services.

Furthermore, the Guidelines mention that ancillary services (such as shop assistant services, online shop assistant tools, and after-sales services) will usually also not be considered as genuine use for retail services, unless they do not form an integral part of the offer for sale of the goods. Although this leaves some room for owners of single-brand stores to claim that they are genuinely using their marks in respect of 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 regarded as genuine use for retail.

We have studied some recent decisions from the EUIPO’s Opposition and Cancellation Divisions and we noticed that they still seem to struggle to consistently apply the above-described practice. However, in the vast majority of the decisions the practice is already applied and we expect that the number of deviating decisions will decrease rapidly.

Although the EUIPO’s strict practice does not seem to have been followed (yet) by for example the Benelux Trademark Office (BOIP) or UKIPO, we do anticipate that the EUIPO’s practice will be adopted by national offices in the near future. Post Brexit, the UKIPO is of course no longer bound by decisions of the CJEU.

Example

What are the legal consequences of the fact that retail services offered by single-brand stores are not considered as “genuine” retail services?

For example, take company A, who owns a registration of trade mark X for clothing items (Class 25) and retail of clothing items (Class 35) and operates single-brand stores only, versus company B, who has applied for the identical trade mark X for retail of jewellery items (Class 35).

In the assessment of a likelihood of confusion, generally, when the trade marks in question are identical, and the goods/services are similar, a likelihood of confusion will be found.

Retail services versus retail services – even when these concern different goods – are often considered similar. This is because these retail services have the same nature and have the same purpose of allowing consumers to conveniently satisfy different shopping needs, albeit of different goods. Also they have the same method of use. When the goods in comparison are commonly retailed together in the same outlets and are directed at the same public, like in our example “retail of clothing” and “retail of jewellery”, they are typically considered as similar.

As such, company A’s earlier trade mark registration X registered for “retail of clothing items” (Class 35) will be able to block Company B’s application for the identical trade mark X for “retail of jewellery”.

However, what if company A’s registration for X would be registered for more than five years? In the EU, a trade mark becomes vulnerable for cancellation on the basis of non-use, five years after registration. A trade mark owner will not be able to enforce its registration after this term, if the trade mark has not been put to genuine use.

In our example, following the strict practice of the EUIPO, company A will not be able to show genuine use of the Class 35 services and could therefore only rely on its trade mark registration with respect to the “clothing items” in Class 25.

Clothing items and jewellery are however considered to be dissimilar products. As such, clothing items are also dissimilar to “retail of jewellery items” in Class 35. In this particular scenario, company A will not be able to block company B’s application.

Impact

Looking at the example above, the EUIPO’s practice could lead to an outcome where trade mark owners operate retail outlets under an identical name, but where a likelihood of confusion is not found, simply because company A only sells its own products, and not those of third parties.

Therefore, when the registration becomes subject to use requirements, the multi-brand retailer is clearly in a better position than a single-brand retailer that, after five years, can no longer invoke its Class 35 registration.

Whether there is a logic behind this difference in the level of protection available to single-brand and multi-brand retailers is in our view questionable. Both types of retail activity require huge investments in shop design, infrastructure and promotion. In our view, these investments deserve protection regardless the source of the products that are sold. We believe that consumers that encounter a single-brand clothing store X, next or close to a multi-brand jewellery store X, will likely believe that the goods and services in question, come from the same, or economically linked, undertakings.

Not accepting single-brand retail services as genuine use for retail services in Class 35 may go against the core principle of trade mark protection, namely to avoid a likelihood of confusion amongst the relevant public.

Going forward

While we wait and see how the EUIPO’s practice and practices in other jurisdictions develop, it is important for single-brand store owners to carefully consider the level of protection offered by their current trade mark registrations in upcoming opposition or invalidation proceedings they would potentially base on their Class 35 trademark registrations.

Trademark owners who operate single-brand stores, and who have Class 35 registrations in place covering retail for the broader categories of goods, but do not own trade mark registrations covering all these specific goods themselves, are advised to update their trademark portfolios as soon as possible.

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This article was prepared by HGF Partner & Trade Mark Attorney Kasper Radstake and Senior Trade Mark Attorney Susanne Bilderbeek.