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Downsides of Madrid International Registration trademark system

Tuesday, June 18, 2019 @ 2:43 PM | By Christopher Aide

Christopher Aide %>
Christopher Aide
On June 17 Canada joined the Madrid International Registration (IR) trademark system. In the first part of this two-part series, I explained why Canadian brand owners should care and I outlined the advantages of the IR system. In this second column, I talk about disadvantages of an IR and include some tips for moving forward.

Disadvantages of an IR

So what’s bad about an IR? There are two things that jump out — “Central Attack” and also Transfer Restrictions.

“Central Attack” occurs when your basis application or registration in Canada is rejected or cancelled within the first five years after you apply for an IR, that rejection in Canada also invalidates your IR for all your covered countries.

This means, for example, that if a third party successfully opposes your basis Canadian application (and all appeals fail) within this five-year term, your corresponding IR will also be cancelled. That’s bad.

Now you can mitigate Central Attack since the Madrid system allows you to convert (at an extra expense) your IR into a national application in each relevant covered country within three months of the lapse of your base Canadian application/registration.

This process is known as a “transformation,” and under it each national application is deemed to have been filed on the date of the IR application, and also gets the IR’s priority date as its priority date. So if you act quickly you won’t lose any rights. But it is expensive and a big hassle. I don’t recommend it.

Another disadvantage is Transfer Restrictions. Remember that IRs cannot be transferred to a business that is not qualified to file an IR under the Madrid Protocol. So for example if your tax team wants to set up a Bahamas company to hold your trademarks for general tax purposes — alarm bells should go off since the Bahamas is not a Madrid member state and so you may not be able to assign your IRs to the Bahamian holding company. Just saying.

IR or EU Trade Mark or National Mark … or combo?

Each case is different — but I usually end up recommending some combination of all three to clients.

So what’s the best global filing strategy?

Typically I find that clients who have one monolithic core brand that has been registered and unchallenged for many years in their home country find the IR system a good and cost-efficient way to extend that brand into many other Madrid system countries. They are not going to change their core brand and the practical risk their home basis registration would be successfully challenged by Central Attack is probably low.

However, for clients who have just filed new key brands in their home country, they tend to use the IR system for secondary “nice to have” markets but for their core foreign markets they file applications for national marks or EU Trade Marks.  

One of my clients terms this his “cover the ’Stans” strategy — he files an IR to cover the nice-to-have secondary market countries like Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, while he covers his key markets such as the U.S., Canada, China, Hong Kong, Japan, Australia and Brazil with national applications, and files an EU Trade Mark to cover the EU.

There’s no one right answer. That’s half the fun.

The bottom line is that different trademark portfolio needs require different portfolio strategies.

The best strategy, naturally, will only be achieved through an effective prior cost and business analysis.

This is the second part of a two-part series. Part one: What Madrid International Registration trademark system means to you.

Christopher Aide heads Baker McKenzie’s Intellectual Property Practice Group in Toronto. He has more than 20 years’ experience advising on global trademark and design portfolio management, global brand protection, intellectual property enforcement, licensing and anti-counterfeiting matters. He has co-authored and published the second volume of Markenvertragsrecht (Trademark Contracts Law), as well as numerous articles on various IP topics. He is also a speaker at a wide range of client and academic conferences and presentations.

Photo credit / Panuwat Sikham ISTOCKPHOTO.COM
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