Publications > Some Aspects of Trade Mark law and IPR Enforcement of the Baltic States following Accession to the EU

Introduction

Of the ten countries that acceded to the European Union on 1 May 2004, three were barely more than a decade earlier still part of the Soviet Union and practically unknown to outsiders - namely the Republics of Estonia, Latvia and Lithuania which border the Baltic Sea, and hence are known as the Baltic States. These had been socialist societies with a centrally controlled or command economy. Within thirteen years - and just a decade from when the last Russian troops pulled out of the region, the newly restored sovereign Baltic States had joined NATO and achieved sufficient political democracy and a sufficiently stable free-market economy to be allowed EU membership. The result has been that trade with neighbouring countries and with the rest of the world has intensified and foreign investment been made much more attractive. Currently the strongest trading and investment links are with countries that include the Scandinavian region, Germany, the Netherlands, Great Britain, Russia and the US.

Part of the phenomenally fast transition process of these countries has been adaptation to the Intellectual Property systems of the world of market economies, to the World Trade Organisation (WTO) and in particular to the common market of the European Community. All three Baltic States have had to create IP legislation without the benefit of any IP tradition to speak of, and to adapt their legislative acts in order to implement the WTO Agreement on Trade-related Aspects of Intellectual Property Rights 1994 (‘TRIPS Agreement’) and European IP Directives. To put this into perspective, it is well to remember that just 16 years ago, the very concept of private property, let alone intellectual property, was undeveloped in Baltic legislation. Turning to trade marks, one can understand how the very notions of trade mark ownership by privately owned enterprises to prohibit unauthorised use of identical or similar signs for identical or similar goods/services (not to speak of dissimilar goods/services), licensing, franchising, and so much else that one takes for granted in trade mark law elsewhere were relatively alien concepts. The achievement of the Baltic States in catching up with most of the rest of the world is only matched by the challenges that have had to be overcome.

What does trade mark law look like in the Baltic States today, and how successful have they been in playing catch up? How have they been doing in enforcing the rights of trade mark owners? Here is a snap-shot of what is happening in each country.

ESTONIA

Estonia, (capital Tallinn, major cities Tartu, Narva & Parnu) is the smallest of the three Baltic nations with a population of about 1.3 million. It is culturally closer to Scandinavia, in particular Finland (with which it practically shares the same language) than to the other Baltic States. Finland and Sweden are its main export partners. Before being bought by eBay, the Internet call company Skype was a Scandinavian/ Estonian-owned company.

Estonia, like Latvia and Lithuania, are signatories to the Paris Convention, the Madrid Protocol, the Nice Agreement Concerning the International. Classification of Goods and Services, and the World Intellectual Property Organisation (WIPO) Trade Mark Law Treaty. Estonia has been a member of the WTO since 1999, and therefore a signatory to TRIPS. As a member of the EU, it has also put into effect the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to Trade Marks (the ‘Harmonisation Directive’), Council Regulation No. 40/94 of 20 December 1993 on the Community Trade Mark, and various other EU legislative acts.

Legislation modelled on the CTM

Estonian trade mark law therefore would be expected to have certain familiar features, which it of course does. The Estonian Trade Marks Act of 22 May 2002, which entered into force on 1 May 2004, reflects its international legislative commitments and is to a certain degree modelled on or directly inspired by pan-European legal acts, in particular the CTM Council Regulation. To take one less obvious example, Council Regulation Article 10 deals with the correct reproduction of community trade marks in dictionaries, encyclopaedias or similar reference works. Section 14 (4) of the Estonian TMA uses very similar language for all trade marks with protection in Estonia found in a ‘reference book, manual, textbook, professional journal or other publication, including electronic publications’. Section 14(3) applies the WIPO/Assembly of the Paris Union Joint Recommendation concerning Provisions on the Protection of Marks and Other Industrial Property Rights in Signs on the Internet to use of a trade mark on the Internet, expanding on the requirement for use that there has to be ‘commercial consequence in Estonia’.

Well-known Trade Marks

Estonian Trade Mark Law (and similarly with Latvian and Lithuanian law) gives ample space to the definition of and protection of well-known trade marks, reflecting its obligations according to Article 6bis of the Paris Convention and Article 16 nos. 2-3 of the TRIPS Agreement, as well as reflecting the Joint recommendation concerning Provisions on the Protection of Well-Known Marks. NIKE is one of the first brands to be given recognised well-known trade mark status in Estonia after Nike International successfully opposed an application by another party to register NIKE in class 3.

Oppositions

A procedure that is not patterned on the Council Regulation, is that of opposition. Trade mark application filings are not routinely made public before ‘publication of the notice of the decision concerning registration’ in the official gazette of the Patent Office (‘Eesti Kaubamärgileht’). Following both absolute and relative grounds examination (Estonia is the only Baltic State to do a relative grounds examination), a decision is made whether to register the mark (this can take up to one year). Opposition is therefore by way of an appeal against the decision of the Patent Office and has to be filed with the Industrial Property Board of Appeal within two months. This places quite an onus on prior rights owners to have effective watch services in place unless the matter is to later go before the Tallinn City Court in a more costly cancellation action.

Post-2004

How well has Estonia coped in practice with the changes, becoming part of the EU?

After the initial seismic changes initiated on 1 May 2004 - imagine being a trade mark examiner coming back to the office on Monday morning and finding there are over 300,000 more marks on your data base for relative grounds examination? - things have settled somewhat. Latvia and Lithuania only have absolute grounds examination regimes, so they did not share this same headache with Estonia.

National procedures for registering trade marks are more complicated than applying for a CTM with protection now extended to Estonia, or indeed to an international Madrid Protocol filing designating Estonia. This is why many nationals, if they have business operations outside the country, sometimes seek protection locally via these other mechanisms.

IPR Enforcement

Regarding IP enforcement, imported counterfeit and pirated goods only have a small market within Estonia, but as this country along with the other Baltic States has brought the EU borders closer to the Russian Federation which is a massive consumer (as well as producer) of counterfeits or pirated goods, the problem of transit shipments and customs vigilance is a very real one. Counterfeits can have serious health and safety aspects. In 2001, for example, illicit vodka containing methyl alcohol killed 60 people in Estonia (source: 2004 anti-counterfeiting world congress fact sheet). Effective implementation of the EU Customs Regulation 1383/2003 relies also on trade mark owners taking action even on small quantities of intercepted goods. Unless they take this active interest in protecting their rights customs officials are hampered and even de-motivated in detecting and reporting counterfeits. Other agencies such as the police also have important roles in implementing IP enforcement within the country, but it is far from being really adequate. Lack of administrative capacity and lack of resources are an ongoing issue. As the Director General of the Estonian Patent Office, Mr Matti Päts, recently stated: “Legal protection of industrial property on both the national and international level is so complex, and is becoming increasingly complex, that even more serious problems are envisioned ahead. Estonia is making efforts to contribute to the solution of the problems”.

LATVIA

Latvia (capital Riga, major cities Daugavpils, Liepaja, Ventsplls), with its population of around 2.3 million, has as a result of its recent history an ethnic minority of Russians comprising almost 30% of the total population. It borders Estonia to the north and Russia and Belarus to the east. Culturally and linguistically Latvia is close to Lithuania (being properly ‘Baltic’ people and quite different from the Finnic Estonians). Latvia was the first Baltic State to join the World Trade Organization (in 1998).

Since 2004, Latvian legislation is being continually adjusted to implement already existing and new EU directives and regulations. Latvian patent & trade mark attorney Vladimir Anohin, with Katerina Imune, of Agency TRIA ROBIT in Riga, writes:

“Changes to the Law on Trademarks and Indications of Geographical Origin of the Republic of Latvia have been made a couple of times over recent years, namely in November 2001 and then twice after Latvia joined the European Union, namely in November 2004 and February 2007, as it was necessary to adapt the Latvian intellectual property protection system to EU standards. The principal changes include better protection for unregistered marks, broader recognition of trademarks as property, additional remedies for unlawful use of trademarks, and a new Part VIII, extending the European Community Trademark system to Latvia. In addition, Latvian Commercial law has been amended in respect of the relationship between company names and registered trademarks.

Substantial and significant changes have been implemented, and currently the Law on Trademarks and Geographical Indications may be considered to be more or less harmonized with the essential aspects of the EU intellectual property protection system.”

Aspects of Latvian Trade Mark Law

As with Estonian Trade Mark law, Latvian law also reproduces norms taken from the Council Regulation for Community Trade Marks, adapting them for national marks and other marks with protection in Latvia. Limitations of the effect of trade marks (‘restrictions on exclusive rights’) include the ‘said person’s forename, surname and address’ (Art 5 (1) (1)). The Regulation has ‘his own name or address’ (Art 12 (a)). The Latvian Patent Office also to some extent mimics the multi-language capabilities of OHIM by officially accepting documents in ‘English, French, German or Russian’ for supporting application material (even though the Office can demand a translation into Latvian (Art 10 (7)).

In Latvian law, earlier rights that could be grounds for invalidation include ‘commercial rights’, that is rights pertaining to a trade name, i.e. commercial designations, newspaper titles, names of television or radio stations, or other similar signs, in ‘an identical or similar business sector’ (Art 9 (3) (3)). Companies are also entitled to use the ‘own name defence’ (AIPPI Report Q195, Latvian Group). Domain names of organisations and companies registered with the Enterprise Registry and trade marks registered with the Patent Office can only be registered as domain names by their legal owners.

Unlike Estonian law, certification or guarantee marks are not recognised, nor are security interests. Neither is there a relative grounds examination. But like Estonian law, opposition takes the form of an appeal against a decision to grant.
With regard to licensing, Latvian law states that ‘A licensing contract may be declared null and void if the use of the trademark by the licensee intentionally or unintentionally misleads consumers as to the origin, nature, quality or other characteristics of the goods and/or services with respect to which the mark is used.’ (Art 26 (7)).

An addition to the usual recitals of what constitutes use of a trade mark is Art 23 (4): ‘Actual use of a trademark shall be construed as the use of a trademark in the course of trade, with the purpose of gaining or maintaining a certain market position for the respective goods or services.’

Bad Faith Registrations

Bad faith registrations are dealt with in law by being absolute grounds for refusal of registration (unlike in the CTM Regulation) or invalidation (Art 6(2)). Apart from the case of recognised well-known marks, it is difficult for an examiner to spot a bad-faith registration. Current law does not permit the Patent Office to correct its own mistakes either, if a registration was made in error. The matter would have to go to court, which alone has the power to cancel a registration. A recent case in point was the subsequent realisation by the Office that registration of the authentic signature of a world re-known ballet star (MAYA PLISETSKAYA) was done without her authorisation and therefore in bad faith. The court case was avoided by the applicant surrendering the mark. In another case, the Ukrainian owner of an established Ukrainian brand of alcoholic and non-alcoholic beverages ‘Zhyvchik’ (in Cyrillic characters), was able to force the owner of the identical Latvian registered mark to admit to their bad faith registration by presenting to the authorities as evidence of earlier rights a certificate of copyright protection issued by the Ukrainian government for the artwork of their figurative mark. The Latvian registrant was held to have sought to interfere with the business activity of the Ukrainian manufacturer by preventing legal importation of its goods into Latvia.

IPR Enforcement in Latvia

In its 2006 Special 301 Report, an examination of the adequacy and effectiveness of IPR protection for US rights holders in 87 countries, the Office of the United States Trade Representative (USTR) had this to say about Latvia:

“Latvia has improved IPR enforcement during the past year by promoting coordination among ministries responsible for IPR enforcement, increasing resources to combat IPR piracy and counterfeiting, forming a high-level IPR working group to focus on enforcement, and adopting a new criminal procedure code on IPR enforcement issues, among other initiatives. In addition, the Ministry of Interior established an IPR crime unit that has conducted numerous raids, seized infringing products, and referred cases for prosecution. There has been an increase in the number of IPR infringers who have been prosecuted and sentenced, although the United States encourages Latvia to ensure that its courts issue stronger penalties for IPR infringers that include deterrent fines and jail sentences. However, some key issues remain in need of attention, including copyright piracy, especially on the Internet, and the lack of effective border enforcement. The United States encourages Latvian customs officials to take increased action to inspect and seize transhipped pirated and counterfeit goods coming into Latvia from Russia and exported to Lithuania, Poland and other EU countries...”

Latvia is ideally placed to be the counterfeit bridge between the EU and Russia because of its ice-free Baltic ports and modern and developed railway infrastructure that connects to the Trans-Siberian Railway which runs through Russia all the way to the Chinese border.

As with the other Baltic States, part of the problem of effective and adequate enforcement is that border controls in this transit territory have to be effected by an insufficient number of officials trained in spotting counterfeits and pirated fakes, who also must work in cooperation with interested IP owners - which is not always the case. IP owners, for example, have to bear the cost of transportation of counterfeit goods and/or their eventual destruction. There is also the problem of ‘consignment dilution’ where in a batch of genuine goods there are counterfeits, and one has to take the time and trouble to separate the two. Added to this is still a prevalent mentality - found also in the other Baltic States (and indeed elsewhere) - that IP infringement is not always ‘theft’, or not in any major way and so not deserving of custodial criminal sentences, only at most civil pecuniary penalties. IP awareness at the consumer level is still an on-going issue, and the message of the relationships between counterfeits, dangers to health and safety, piracy and organised criminal activity still requires emphasising. Some years back in 2001, the US-based Coalition for Intellectual Property Rights (CIPR) organised a public burning, in the presence of Latvian Government officials, law enforcement representatives, diplomats, trade mark owners and the media, of a seized consignment of 25 million fake Benson & Hedges, Marlboro, and Marlboro Lights cigarettes, well-known trademarks belonging to Philip Morris and BAT..” This was to send out a signal to the world - a very visible ‘smoke signal’ - that counterfeits are not welcome in Latvia.

LITHUANIA

Lithuania (capital Vilnius - a UNESCO world heritage site and known as ‘the new Prague’ - major cities Kaunas & Klaipeda), is the largest of the Baltic States in terms of population (around 3.6 million), territory and economy. Unlike Estonia and Latvia, Lithuania does not have an eastern border with Russia, but instead has it with Belarus. However, it shares its western border with the Russian region of Kalingrad, a territory on the Baltic Sea that is completely surrounded by Poland and Lithuania and cut-off from main-land Russia (the territory was annexed by Russia in 1946 as a booty of war; it was formerly East Prussia with its capital known for 700 years as Koenigsberg, now renamed as Kalingrad). Lithuania was the first of the Soviet republics to declare independence - on March 11, 1990. Since then it has become a very attractive country for the expansion of global operations of corporations such as Volvo, SAAB, Volkswagen, Siemens, Samsung and IKEA, to name but a few. Economists have drawn analogies with Ireland for Lithuania’s potential within the EU, and back in 2003, The Economist magazine labelled Lithuania the ‘Baltic Tiger’ (comparing it to Ireland, the ‘Celtic tiger’) for what is being expected of it.

Some Statistics

Lithuania became a member of the Madrid Protocol in 1997 and within ten years there have been well over 38,000 Lithuanian designations for protection. Since 1991, when the State Patent Bureau was first established, there have been a little over 54,000 national applications for trade marks. In 2006 there were 2457 national applications, 18% of which were by foreign applicants, the top 7 filing countries being the USA (by far - 142), the Russian Federation (27), Estonia (24), Great Britain (18), Poland (15), Japan (14) and Finland (12). The Community Trade Mark, of course, since 2004 provides protection within Lithuania. Statistics published by the Office for Harmonization in the Internal Market (OHIM) on 31 October 2007 reveal that as of that date there were 415,714 registrations currently in force with protection in Lithuania (and the other Baltic States). Recent trends reveal about 70-80,000 new filings each year. The Baltic States to date have not been great filers of CTM applications. Against Germany’s 12,726 applications in 2007 and the UK’s 7884 and an EU total of 51,142, Lithuania’s 49, Latvia’s 30 or even Estonia’s 86 are not particularly impressive, even making allowances for population size. However, allowance should be made for the fact that these are transitional economies and were former Soviet Union Republics.

Applying for a Registration - a Lithuanian Attorney’s Perspective

Regarding national application procedures, a local attorney, Erikas Saukalas from Metida Patent and Trademark Agency, has both positive and negative things to say. He praises the fact that there are no relative grounds examination - “the procedure for unnecessary application rejection based on previously registered trademarks,” for in countries such as Estonia where this is carried out “experts often reject applications based on previously registered trademarks whose owners perhaps might not object to the registrations.’”

As a point of interest, concerning absolute grounds examination, the Appeals Division recently allowed the registration of the trade mark ‘Lithuanian vodka’ (application no. 200423850) in class 33 for vodka. The ruling came as a result of evidence of acquired distinctiveness, the name apparently indicating for most consumers a sole producer - the company Stumbras.

Saukalas goes on to say:

“One shortcoming of the trademark registration procedure is the fact that the Trademark Law does not provide a deadline for the evaluation of trademarks. Therefore, evaluations take a considerable time (for instance, at present, decisions are being made regarding registration of trademark applications which were filed in December of 2006). Unfortunately, the Republic of Lithuania Trademark Law regards faster processing of the evaluation as an exception only.”

The opposition procedure, which is like the laws of the other Baltic States, is something that leaves things to be desired. Saukalas writes:

“If a trademark complies with the absolute requirements set by the Law, then the experts take the decision to register the trademark. Having received the above-mentioned expert decision, the trademark applicant must pay the registration fee within the time period set by the Law (three months), and only afterwards the trademark will be entered in the trademark register and be published in the official bulletin. Within three months of the date of publication, interested parties may present claims regarding recognition of the published trademark registration as invalid. This stage of the registration procedure differs from the practice adopted in some other countries, and from the procedure set in the EC Regulation No. 40/94, where article no. 45 states that the Community trademark is registered only if a claim is not filed within the set time period, or the claim is rejected by a final decision, and the registration fee is paid within the set time period. Thus under the Republic of Lithuania Trademark Law, the following situation is possible: the applicant pays the registration and publication fees, the trademark is entered in the register, later a claim is filed regarding acknowledgment of the registration as invalid, and upon fulfilment of the claim, the trademark registration is removed from the register. Thus the applicant must pay the registration fee without being sure whether a claim in relation to the registration in question will be filed or not”.

Another negative is that claims of invalidity have to be filed before the Appeals Department accompanied by a power of attorney (if the case is being represented as it usually is). Time deadlines cannot be extended (including submission of power of attorney), thus unless all the paper work is correct a last-minute filing of an opposition may not be possible. Neither is the outcome of an invalidity claim particularly fair:

“The Republic of Lithuania Trademark Law does not require the losing party to compensate the representation costs incurred by the other party, and such provisions make it possible for parties to abuse the right to present claims and to file insufficiently substantiated claims.”

Nor is there provision to request proof of use of the earlier mark relied upon in the invalidity claim if registered for more than 5 years. The only mechanism available is to file a counterclaim for revocation and to ask for suspension of proceedings. Saukalas concludes with a poignant criticism of current law:

“In our opinion, the procedure in place in this country limits the interests of the owner of the trademark in relation to which a claim has been filed, and is more favourable to the person filing the claim, thus the principle of equality of rights of the parties is violated.”

Well-known marks

Regarding protection of marks, well-known marks continue to receive broadest protection as they have “commercial magnetism” leading other business entities often to seek to exploit the goodwill and reputation of the mark and to derive unfair benefit, (Supreme Court case of March 22 2006 regarding the unauthorised use by a business of the name LEGO). In its Annual Report of 2006, the State Patent Bureau of the Republic of Lithuania lists ten other trade marks which the Bureau has on its list of well-known marks which include CAMEL, NIKE, CHIVAS REGAL and some others. The list only expands (as with the further addition of LEGO) whenever there is a challenge before a tribunal, but not before (hence no mention of other brands such as MICROSOFT, McDONALDS etc).

IPR enforcement

Statistics for 2006 show that customs activities have increased in intercepting counterfeits - 79 interceptions of 620,000 items, although improving border controls is still a key priority. IP owners have to be willing to cooperate and to agree to pay the costs of storage of goods, the destruction of goods and its own court costs. The considerations made for Latvia also apply mutatis mutandis to Lithuania. The main manufacturing source for counterfeit goods - traditionally clothing, footwear, luxury goods and goods such as cigarettes- is considered to be China (Erikas Saukalas - in ‘Your anti-counterfeiting guide to eastern Europe’: Managing Intellectual Property September 2007). The export and distribution to the rest of the EU of pirated optical media produced in Russia is also still a serious problem, with the result that Lithuania was, in 2006, and still is in 2007, on the Watch List of the USTR Special 301 Report.

Conclusion & Summary

One of the greatest achievements of the Baltic States following regaining sovereignty from the Soviet Union was accession to the European Union in 2004. As part of the process which prepared the Republics of Estonia, Latvia and Lithuania to integrate within Europe, the whole IPR system - not just trade mark protection which has been the focus of this article - on which market economies are today reliant, had to be built practically from scratch, as there was no legislative tradition to speak of. This achievement, which includes the first-time establishment of Offices of Industrial Property with all their components and administration, the training of officials and examiners, the creation at large of at least rudimentary IP awareness, is huge by any standards. Naturally, with the tornado-like rapidity of the changes involved there would still be many things to improve upon and big challenges to meet. Legislative activity continues to implement European IP norms, and national court jurisprudence is still in its infancy. Given their recent track record, one has high expectations of all the Baltic States, not least for their future contribution to the IP world.