Registration of a trademark license: the result of the CJEU is reasonable, but what about the Court's reasoning?

In the best of circumstances, the law of licensing is the murky side of trademark law. A broad chasm in approach between the common law and civil

law traditions has characterized trademark licensing for over a century and even within each of the legal traditions, differences remain. This Kat, having penned a treatise on the subject two decades ago, continues to prowl the legal landscape for current developments, although he admits to sometimes missing an event worthy of notice. For this reason, he is grateful to Eckhard Ratjen, a member of the Bremen office of Kat friend Boehmert & Boehmert, for discussing, in the firm’s most recent newsletter (and sharing his thoughts with this Kat), the judgment given by the CJEU on February 4, 2016 (Case C‑163/15, Youssef Hassan v Breiding Vertriebsgesellschaft mbH).

At issue is a question that has occupied trademark law and practice for many decades: must a trademark license be registered for a licensee to be authorized to bring an action for infringement? In the words of the referral—

“Does the first sentence of Article 23(1) of [the Regulation] preclude a licensee who is not registered …from bringing proceedings alleging infringement of a Community trade mark?”.

Member States of the EU differ on the answer to the question (e.g., Spain— “yes”; Germany— “no”). The answer given by the CJEU is that no registration is required. While this Kat believes that the result is reasonable, the legal analysis given shows how inadequate the nature of CJEU decision-making can sometimes be in providing a compelling explanation in support of it ruling.

The focus of the Court’s attention is Article 23(1) of the European Union Trademark Regulation, which provides that—

“Legal acts referred to in Articles 17, 19 and 22 concerning a Community trade mark shall have effects vis-à-vis third parties in all the Member States only after entry in the Register. Nevertheless, such an act, before it is so entered, shall have effect vis-à-vis third parties who have acquired rights in the trade mark after the date of that act but who knew of the act at the date on which the rights were acquired.”

The Court states (para. 18) that--

“Read in isolation, that sentence could be interpreted as meaning that the licensee cannot, if the licence has not been entered in the Register, rely on the rights conferred by that licence vis-à-vis third parties, including the party infringing the trade mark.”

However, the Court goes on to qualify what seems to be the plain meaning of Article 23(1) in favor or requiring registration of the license, stating that (para. 19) –

“… in interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part (citation omitted).”

Given this analytical framework for resolving the question, the Court reaches the conclusion that (para. 25)--

“With regard to the purpose of the rule laid down in the first sentence of Article 23(1) of the Regulation, the Court takes the view that … the lack of effects, vis-à-vis third parties, of the legal acts referred to in Articles 17 [transfer], 19 [rights in rem] and 22 [licensing] of the Regulation which have not been entered in the Register is intended to protect a person who has, or may have, rights in a Community trade mark as an object of property. It follows that the first sentence of Article 23(1) of the Regulation does not apply to a situation, such as that in the main proceedings, in which a third party, by infringing the mark, infringes the rights conferred by the Community trade mark.”

With all due respect, this Kat finds the Court’s reasoning conclusion unconvincing why the plain meaning of Article 23(1) should be disturbed. Even if we acknowledge that Articles 17, 19 and 22 all deal with trade marks as on object of property, this still does not explain why Article 23(1) does not govern the legal effect of a registration pursuant to Article 22(5) (“On request of one of the parties the grant or transfer of a licence of a trade mark shall be entered and published’). One gets the sense that the CJEU reached the result that it wanted and then it imposed a restriction on the scope of Article 23(1) to comport with this result, what Eckhard Ratjen calls a “teleological” construction of the Regulation.

The question of whether registration of a trademark license is mandatory or permissive has arisen in various jurisdictions and the ultimate result is not uniform. At the end of the day, the tribunal decides either “yes” or “no”. As such, whatever their decision, courts that place a value on fully disclosing the underlying policy grounds for their decision will need to address two major issues; (i) do we want to require registration in such circumstances, and (ii) if so, it is workable? It is unfortunate that the CJEU did not do so to provide a helpful window into its policy considerations in connection with its ruling on trademark licensing.