Los interlocutores

1.56 European trade mark law is strongly impacted by obligations incurred by the European Union and its Member States by virtue of their adherence to international conventions. All Member States are members of the Paris Convention (1967) as well as of the TRIPS Agreement (1994). The EU is party to the TRIPS Agreement, and is thereby bound to comply with Articles 1-12 and 19 of the Paris Convention (cf. Article 2.1 TRIPS). In addition, the EU as well as all Member States except Malta have adhered to the Madrid Protocol Concerning the International Registration of Marks (1989).

1.57 Furthermore, all EU Member States except Cyprus and Malta have adhered to the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks. The EU as well as all Member States except Bulgaria have signed up, and a majority of Member States has already acceded, to the Trademark Law Treaty (TLT; 1994). The more recent Singapore Treaty on the Law of Trademarks (2006), which builds upon the TLT, was also signed by a large majority of Member States, and accession procedures have been concluded in about half of them.

1.58 Recital 13 of the TMD sets out that, as Member States are bound to the Paris Convention, it is “necessary that the provisions [of the TMD] should be entirely consistent with those of the said Convention”, and that the obligations of the Member States resulting from that Convention “should not be affected”. Because of this situation, there was also no need seen to make provisions in the TMD implementing all Paris Convention obligations.

1.59 As far as the CTMR is concerned, when it was adopted the EU was not (yet) bound to observe any Paris Convention obligation. Nevertheless, it was clear that the CTMR must be compatible with the Paris Convention. The legislative approach was therefore to make specific provisions in the CTMR implementing all substantive Paris Convention obligations, such as the right of priority, the protection of well-known marks etc.

1.60 The CTMR was amended to create compliance with TRIPS (Regulation (EC) No 3288/94). It may appear unfortunate that at that time the Directive was not also amended.

1.61 As EU law is committed to the principle of compliance with international law, references to relevant provisions in the Paris Convention, the TRIPS Agreement, as well as to other international treaties will be made in the Study where appropriate.

II. Competence

1.62 The distribution of competence between the Community and its Member States to conclude TRIPS was the object of the ECJ’s Opinion 1/94. It was held that the Community and the Member States were jointly competent in the field, with the Community being exclusively competent to the extent that its internal competence to enact legislation in the areas covered by TRIPS had been exercised. The Opinion refers to trade mark law as one of the areas where only partial harmonisation has been achieved, as according to the Preamble of the TMD (recital 3), legislation is confined to the approximation of national laws “which most directly affect the functioning of the internal market” (Opinion 1/94, para 103).

1.63 In subsequent case law, the scope of the Community’s competence with regard to TRIPS has been interpreted rather broadly. In Case C-53/96 – Hermès International/FHT Marketing Choice, the ECJ held in a case concerning a preliminary injunction for alleged breach of copyright and trade mark law, that Community competence existed in both fields with regard to provisional and protective measures addressed by Article 50 TRIPS, due to the fact that the CTMR, which went into force briefly before TRIPS had been signed, includes an obligation to provide for injunctive relief in case of CTM infringement (Article 103 CTMR; then: Article 99).

1.64 After enactment of the TFEU, it has been questioned whether the ECJ’s Opinion 1/94 can still be regarded as good law, given that according to Article 3 e) in conjunction with Article 207 TFEU, the European Union is exclusively competent for issues concerning trade related aspects of intellectual property rights. Although there is no decision on the issue as yet, it is held by a majority opinion that all areas covered by TRIPS have thus become a matter of exclusive Community competence.

1.65 Without pursuing the issue further, it can be concluded that (at least) for trade mark law, it seems to be clear that all matters relating to protection of trade marks for goods or services fall into the scope of the European Union’s legislative competence. Of practical importance is the fact that this includes protection of marks for goods or services which are not registered, but which are well-known in the country where protection is sought in the meaning of Article 6^bis Paris Convention and Article 16 (2), (3) TRIPS. The issue is addressed in Chapter 2 F.

H. Markets

1.66 This section contains a review of the economic and marketing literature which is relevant to the question how integrated and unitary the common market presently is. This question is relevant to the discussion of the relevance and role of national trade mark systems within the common market. It may be expected that if the

common market is highly integrated, then the uses of national trade marks within this integrated market will be quite limited. In contrast, if the common market were highly fragmented the challenges facing a unitary Community wide trade mark would be very high. In a highly fragmented market it is much more likely that signs that are distinctive or that have acquired a reputation in one part of the market will not have done so in another or several others. Also, in such a fragmented market the question whether there is genuine use of a trade mark is much harder to answer as it can only be properly answered with reference to a part or parts of the common market. What then should the correct criterion be for genuine use in such a fragmented market? Finally, note that the role of national marks within the fragmented market is quite important as it will always be easier to establish whether such marks are genuinely in use or have a reputation with reference to an economically, culturally and linguistically integrated submarket within the common market. Thus such national marks will be subject to less legal uncertainty for smaller entities not interested in community wide trade.

1.67 As this first paragraph shows the central question to be answered here is that of the degree of fragmentation of the common market. First it should be noted that the integration of the common market advanced significantly between 1985 and 1992 in the phase leading up to the creation of the single market (Monti, 2010).

However, recent research confirms Monti’s view that the integration of the common market has slowed down in recent years (Balta and Delgado, 2009).

1.68 In order to answer the question of whether a market is integrated or fragmented it is necessary to have criteria or measures at hand that support such a conclusion.

Before turning to the substantive question whether the common market is integrated or not is therefore reviewed as to the antecedent question how integration can be measured.

1.69 The economic literature offers several ways of approaching this question. In the economic geography literature it has become common to exploit the Law of one price (LOOP) in order to determine how closely integrated geographically neighbouring markets are in an economic sense. The idea here is to measure how shocks to demand and supply conditions for a homogeneous good in one market affect demand and supply of that good in those neighbouring markets. In an important contribution Parsley and Wei (1996) showed that it can take four to five quarters for half of the shock to the price of a tradeable in the United States to wear off as a consequence of trade between neighbouring markets. This demonstrates that even in a highly integrated national market it may take a surprisingly long time for trade to react to imbalances within the market.

1.70 This literature has also provided results suggesting that national boundaries can have substantial effects on trade. For instance the national border between the United States and Canada has been said to reduce trade as much as a geographic separation of 2500 miles between two markets within Canada or the United States (Engel and Rogers, 1996). More recently it has emerged that such results are not robust to the inclusion of migration and past trade flows (Millimet and Osang, 2007).

1.71 However, this does not mean that national borders or even more importantly cultural and language borders do not have effects on trade. Rather it means that

economists could not properly account for these effects before. In recent work it has been shown that ethno-linguistic borders often have stronger effects on trade than national borders (Heinemeyer, Schulze and Wolf, 2008) and that business and social networks have very strong effects on trade flows and integration of markets even within a highly integrated market such as France (Combes, Lafourcade and Mayer, 2005).

1.72 The upshot of this literature is that it is the extent to which labour migrates between parts of the common market and the degree to which firms link production across national boundaries which determines the degree of market integration. As these linkages become stronger the market will become more unitary.

1.73 Having established that these factors determine the degree of market integration it remains to survey the evidence on integration of the common European market.

The economic geography and trade literature also provides some insight into this question. In a recent paper Wolf (2009) revisits the historical example of the integration of Germany after 1870. He shows that it took more than a generation (until 1925) for former borders within the newly unified country to become weaker barriers to trade than those constituted by the borders of Germany with other neighbouring countries. As an aside it may be interesting to note that Germany instituted a common trade mark system as of 1877.

1.74 More recent evidence is provided by Balta and Delgado (2009). They argue that consumption of goods within a fully integrated market should reflect production.

Thus if the share of local goods in the overall production of a market such as the common market is small, then the local consumption of locally produced goods should also be small. They test this prediction and find that the common market fails the test of strong integration – on average an EU 15 country spends 86percent on goods produced in that country and only 10percent on goods produced within the EU. As noted above they also note that there is little evidence that this home bias is getting smaller over time.

1.75 A similar result is provided by Goldberg and Verboven (2005) who study the integration of the European car market. They conclude that this is “ a market in which substantial cross-price differences still exist, but where progress towards integration is evident.”

1.76 Finally, Okazaki et al. (2007) survey marketing executives in the United States and in Japan and seek to answer the question whether the integration of the common market opens up the possibility for an integration of marketing activities across this market. The question whether firms can benefit from marketing integration across international markets is a long standing one, as there are substantial cost savings to be had. On the other hand it is recognized in this literature that over hasty integration of marketing activities can be damaging for firms where strong heterogeneity of local customs and preferences prevail. Okazaki et al. (2007) find that the managers they surveyed agreed that there was progress in the integration of the common market and that this did create opportunities for marketing integration. However, they also clarified that currently only very few firms are seeking to take advantage of these trends, which also suggests that these trends are not very strong.

1.77 Overall it can be concluded that there is not as much evidence on the integration of the common market as one might want to see. What evidence does exist suggests that market integration is far from full. This suggests that there still is a substantial role for national trade mark offices to provide local trade mark protection within those industries and markets that are currently not strongly integrated into the common market.

1.78 On a more positive note this review also points to those factors which can and ought to be measured in future to determine the extent of market integration within the common market: flows of migrant workers and networks of firm collaboration.

The denser these become the smaller will be the role for the national trade mark offices within the community trade mark system.

Bibliography

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