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Collective Trade Marks: An Overview

Prachi Gupta*

Collective marks are usually defined as signs which distinguish the geographical origin, material, mode of manufacture or other common characteristics of goods or services of different enterprises using the collective mark. The owner may be either an association of such enterprises who are members or any other entity. In other words, a or collective mark is a Trade Mark owned by an organization or an association), used by its members to identify themselves with a level of quality or accuracy, geographical origin, or other characteristics set by the organization. This article discusses collective Trade Marks vis-a- vis competition law and how there is a need to create a fine balance between the both.

Under the Intellectual Property Law of that the trader belongs to the association most countries, there are provisions on who own the collective Trade Mark. the protection of collective marks. Collective marks are often used to Collective marks are usually defined as promote products which are signs which distinguish the characteristic of a given region. In such geographical origin, material, mode of cases, the creation of a collective mark manufacture or other common not only helps to market such products characteristics of goods or services of domestically and occasionally different enterprises using the collective internationally, but also provides a mark. The owner may be either an framework for cooperation between local association of such enterprises who are producers. The creation of the collective members or any other entity. In other mark, in fact, must go hand in hand with words, a collective Trade Mark or the development of certain standards collective mark is a Trade Mark owned and criteria and a common strategy. In by an organization or an association), this sense, collective marks become used by its members to identify powerful tools for local development. The themselves with a level of quality or function of the collective mark is to inform accuracy, geographical origin, or other the public about certain particular characteristics set by the organization. features of the product for which the Collective Trade Marks are exceptions to collective mark is used and the owner of the underlying principle of Trade Marks the collective mark is responsible for in that most Trade Marks serve as ensuring the compliance with certain “badges of origin”; they indicate the standards (usually fixed in the individual source of the goods or services. regulations concerning the use of the A collective Trade Mark, however, can collective mark) by its members. Most be used by a variety of traders, rather than jurisdictions require that an application just one individual concern, provided for collective mark be accompanied by a

* Prachi Gupta, Advocate, currently Legal Expert at Competition Commission of India. She may be reached at [email protected].

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by anybody who complies with the Collective Trade Marks come in standards defined by the owner of the play when products which particular . The case of Chirimoya Cumbe1 is worth may have certain characteristics citing in this regard. Matildo Pérez, a specific to the producers in a peasant from a village community in the heights of Lima applied to the National given region, linked to the Institute for the Defense of Competition and Intellectual Property of Peru historical, cultural, social (INDECOPI) for registration of the Trade conditions of the area Mark “Chirimoya Cumbe.” His application was refused, however, owing to the fact that quite simply no exclusive copy of the regulations which govern the rights in generic names can be granted use of the collective mark. Collective to a single person. Don Matildo appeared Trade Marks come in play when again, with a delegation headed by the products which may have certain Deputy Mayor of Cumbe, seeking an characteristics specific to the producers appointment with the Head of the in a given region, linked to the historical, Distinctive Signs Office of INDECOPI. On cultural, social conditions of the area. A reading the power of attorney, the collective mark may be used to embody INDECOPI official smiled with such features and as the basis for the satisfaction: the people of Cumbe, marketing of the said products, thus gathered together on the main square, benefiting all producers. Associations of had empowered Don Matildo Pérez to small and medium enterprises register register the Trade Mark. It seemed utterly collective marks in order to jointly market incredible: the community had their product(s) and enhance product understood fully that securing recognition. Collective marks may be registration for the mark gave them used together with the individual Trade exclusive rights in the use of the Cumbe Mark of the producer of a given good. name. However, as the official told them, This allows companies to differentiate “Chirimoya Cumbe” is in fact an their own products from those of appellation of origin, not a Trade Mark. competitors, while at the same time To be more precise, the second is an benefiting from the confidence of the appellation of Peruvian origin, because consumers in products or services offered the valley of Cumbe is a geographical area under the collective mark. Collective may that gives certain distinctive properties therefore represent useful instruments to the Chirimoya. At the outset they were for SMEs assisting them to overcome delighted with this idea, and went back some of the challenges associated with to their village. small size and isolation in the market place. The following week, however, they were once again at the office: “We do not want Collective Trade Marks differ from an appellation of origin; our village does certification marks and the main not want one because it is said that with difference is that collective Trade Marks appellations of origin the State is the may be used by particular members of owner, and it is the State that authorizes the organization which owns them, use, and that is why we are saying no. while certification marks may be used We do not want the State to be the owner

1 As available on World Intellectual Property organisation website, last visited on 03.10.2013, http://www.wipo.int/sme/en/case_studies/chirimoya.htm

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Published in Articles section of www.manupatra.com 2013] Collective Trade Marks: An Overview F-3 of the `Cumbe’ name, because we have bearing their name, but also marks out a been working with it for a great many framework for legislation on the years. Since the time of our grandparents protection of their knowledge. Successful all have been investing a great deal of experiments with collective marks have effort, and we are not prepared to ask not only enabled smaller businesses to you for permission to use our “Cumbe reduce their costs, but also made them Trade Mark.” After an arduous and more competitive on the market. Through creative search for solutions, it was this machinery, SMEs have protected and suggested that what should be registered distinguished their goods for less cost, was a “collective” mark, the owners of which in turn has given them the benefits which would be the people of Cumbe and of economies of scale and also increased which would be used according to rules their clients’ faith in them. Given that the that they themselves would lay down. cost of investing in the development of a Today the name “Chirimoya Cumbe” mark, and also that of the marketing and has its own characteristic and, more advertising campaigns, can be high for importantly, is registered in the name of an SME, collective marks have become a the village of Cumbe (in Class 31 of the cost-saving device which at the same International Classification), and the time serves to distinguish products latter are working to gain a competitive originating in Peru, and emphasizes edge over their rivals in Lima’s characteristics specific to the areas in Wholesale Fruit Market. In that way, which the products are made. Part of this thanks to the persistence and drive of strategy consists in developing a Don Matildo, and his ability to make use common concept and image which of the intellectual property protection identifies the SMEs or the products made system, his village has increased the by them, and in concluding “quality value of its individuality, its knowledge pacts” which have to be implemented by and its tradition of excellence. means of the rules on the use of the 2 The owner of the collective mark marks. registration is the village of Santo Toribio Similar is the APDL Cajamarca Peru - de Cumbe, composed of 106 residents Dairy By-products case3. Cajamarca is a duly recorded in the population census. department of Peru located more than The rules for the use of the mark relate to 3,000 meters above sea level. Owing to the proper handling of the Chirimoya its geographical location and natural product, which is produced in the valley attributes it has been able to carry on an of the same name (Cumbe), the climatic important production activity with its conditions of which give the product its livestock. It is well known for its cheeses, special characteristics. yogurt, blancmanges, butter and other In specifying that only the members of a products. The name Cajamarca is community - or someone else with due associated with that activity. The authorization - may register its name as products are sold in the zone (city), in a Trade Mark, the recent Industrial mini-markets and through travellers, Property Law not only protects the native and many of the products are of very high communities and gives them exclusive quality and have an established competence for the exploitation of goods reputation.

2 Text reproduced from World Intellectual Property organisation website, http:// www.wipo.int/sme/en/case_studies/chirimoya.htm 3 Text reproduced from World Intellectual Property organisation website, http:// www.wipo.int/sme/en/case_studies/apdl.htm

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That reputation is causing producers • the conditions of membership, from other cities in the country to make • the conditions of use of the use of the Cajamarca name to market collective Trade Mark, products of their own, thereby improperly • the prescriptions relating to the making use of the reputation of the control of the use of the collective genuine Cajamarca products, and in Trade Mark, many cases detracting from the quality • the order of proceedings against associations of the name. unauthorized use of the Following an intense campaign in the collective Trade Mark. zone it has been possible to bring together 80 producers of milk derivatives whose The peculiarity of collective common objectives are the following: • to be able to launch their product marks is their ownership in Lima (the ideal market) and structure to market it in the main distribution network; The main purpose of the regulations is • one day, to be able to export; to protect consumers against misleading • to preserve the quality practices. associated with the origin The peculiarity of collective marks is (Cajamarca) and to prevent their ownership structure. The holder of others from taking advantage of the right is not an individual market the name; participant, but an association of • to adopt the strategy of operating producers of goods or suppliers of under the collective mark scheme. services. The members of the association Eventually 37 producers registered the entitled to use the collective mark may collective mark as an association of bring an action for infringement only if the association, as the proprietor, agrees. producers, and they are now working on Thus, collective marks are owned by one the marketing aspects of the product legal person, but they may be lawfully launch. In addition they have involved themselves in joint work on product used and enforced by a plurality of quality and homogenization aspects. persons. Three sub-categories of collective Trade Marks can be discerned: International Scenario • Conventional collective marks that Many countries like Finland, Germany, are capable of distinguishing the Hungary and Switzerland provide for goods or services of the members the filing of the regulations as an of an association from those of additional requirement for registration other undertakings according to of the collective Trade Mark. The their origin from a given enterprise regulations shall normally specify: • Collective guarantee marks that • the name and seat of the distinguish goods or services not organization, according to their origin, but • information on the members according to their quality authorized to use the collective • Collective Trade Mark, including their (GI) marks designating the names, addresses and seats, geographical origin of goods or services4

4 Alexander Peukert, “The competitive significance of collective Trade Marks” Individualism and collectiveness in intellectual property law, in Jan Rosén (ed.), Edward Elgar Publishing, electronic copy available at: http://ssrn.com/abstract=1685133

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According to Article 7bis paragraph 2 of regulations of the association i.e. the the Paris Convention5, each country object of the association, the persons shall be the judge of the particular and authorized to use the mark, the any peculiar conditions under which a conditions for membership, and the collective mark shall be protected, and conditions of use of the mark, be that country may refuse protection if the submitted in the course of application. proposed collective mark is contrary to The purpose behind submitting these the public interest. Similarly, Article 15 regulations is transparency. If the of the EU Trade Mark directive provides internal regulation governing the use of that Member States whose laws authorize the collective mark are contrary to public the registration of collective marks may policy, the application shall be refused, provide that such marks shall not be unless the applicant amends the registered, or shall be declared invalid, regulations accordingly and the ground on additional grounds other than those for refusal ceases to exist.6 specified for individual marks. In this Position in USA regard, the directive refers to the functions of collective marks. National In USA, a collective mark is a type of laws of different jurisdictions may Trade Mark that may be registered and prohibit the registration of collective protected under the Lanham Act. Two marks “where the function of those distinctly different types of collective marks so requires”. The EU directive mark are included under the Lanham Act explicitly ties the specific limits of as collective marks and collective protection of collective marks to their membership marks. The term “collective legally relevant functions. mark” includes both Trade Marks and service marks. The Lanham Act describes To understand the nexus between a “collective” as a cooperative, functions and limits of collective Trade association, or other collective group or Mark, the additional grounds of refusal organization; fraternal organizations have to be closely scrutinised. A collective and unions are both considered to be Trade Mark is held by associations rather collectives. The mark adopted by a than by individual undertakings and particular collective is only available for these association are established and use by its members. The members of a organized by a private agreement among collective use its mark to identify their the members. This internal regulation goods and services and distinguish them governs the use of the collective mark, from those of non-members. The collective i.e., who is entitled to use the sign and itself does not offer goods or services under which conditions. under the mark, but may advertise or The additional grounds for a refusal of otherwise promote goods and services protection of collective marks mentioned bearing its mark. If a collective offers its in the Paris Convention and the EU own goods and services under the mark, Trade Mark Directive also address this it is not considered a collective mark; it is internal agreement amongst owners of a Trade Mark for the goods and services collective Trade Marks and the offered by the organized collective. The corresponding regulations. The EU and second type of collective/community German Trade Mark law require that the mark recognized as a collective mark

5 Paris Convention for the Protection of Industrial Property as amended on 28 September 1979, available at http://www.wipo.int/treaties/en/ip/paris/ 6 Alexander Peukert, “The competitive significance of collective Trade Marks” Individualism and collectiveness in intellectual property law, in Jan Rosén (ed.), Edward Elgar Publishing, electronic copy available at: http://ssrn.com/abstract=1685133

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Published in Articles section of www.manupatra.com F-6 Manupatra Intellectual Property Reports (MIPR) [Vol. 3 under the Lanham Act is the “collective has made special provisions for the membership mark.” The collective registration of collective marks. membership mark is unique among those “Collective mark” is defined to mean a marks protected under the Lanham Act trade mark distinguishing the goods or in that it is not used in commerce to services of members of an association of distinguish the source or origin of goods persons (not being a partnership within or services; its sole purpose is to identify the meaning of Indian Partnership Act, the person displaying the mark as a 1932) which is the proprietor of the mark member of the organized collective. from those of others”. A collective mark, to be registrable must be capable of being represented graphically and meet other To qualify as a collective requirements as are applicable to registration of trade marks in India in membership mark, the mark general. While examining such must be in general use by application, the Examiner must keep in members of the collective for mind that: (1) The collective mark is owned by the purpose of indicating an association of persons not a membership partnership. (2) The collective marks belong to a group and its use thereof is reserved To qualify as a collective membership for members of the group. mark, the mark must be in general use by members of the collective for the purpose (3) The association may not use itself of indicating membership. Use of the the collective mark but it ensures mark on items such as membership cards, compliance of certain quality standards by its members who may wall plaques, personal rings or other use the collective mark. jewellery that is available to all members is required to support registration of a (4) The primary function of a collective collective membership mark. Occasional mark is to indicate a trade connection or personal use by individual members, with the association or organisation or use of the mark on an item that is who is the proprietor of the mark. available only to a specific member or Further, the draft regulations governing group of members is not sufficient to the use of the collective mark is to be support federal registration. submitted with the application on form Position in India TM-49 and shall include – After India became signatory to Paris (a) The name and object of Convention7, the Trade Marks Act 1999 association.

7 Article 7 bis , Paris Convention reads as follows: “Marks: Collective Marks (1) The countries of the Union undertake to accept for filing and to protect collective marks belonging to associations the existence of which is not contrary to the law of the country of origin, even if such associations do not possess an industrial or commercial establishment. (2) Each country shall be the judge of the particular conditions under which a collective mark shall be protected and may refuse protection if the mark is contrary to the public interest. (3) Nevertheless, the protection of these marks shall not be refused to any association the existence of which is not contrary to the law of the country of origin, on the ground that such association is not established in the country where protection is sought or is not constituted according to the law of the latter country.”

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(b) The persons authorised to use the the actual scope for price competition at mark and the nature of control the the final sales level may be limited. Since applicant would exercise over the use. such agreements may lead to exchange of (c) The condition of membership of sensitive commercial information, or if association. they influence a significant part of the (d) Conditions of use of the mark. parties final cost, they need to be closely scrutinised. An argument in favour of (e) Sanctions against misuse. such agreements is that it is not feasible (f) Procedure for dealing with appeals for the Trade Mark office to address and against the use of collective marks. scrutinise the competition due to lack of The Rules 127 to 133 of the Trade Marks necessary expertise, for the Trade Mark Rules, 2002 make special provision in office can only examine the regulations this context. It is expressly provided that on the ambit of public policy. The provisions of the Trade Marks Act will ownership structure, scope and purpose apply to collective marks subject to the of collective marks are interrelated. The special provisions contained in more legally protected functions of a Chapter 8. Accordingly, examination of collective mark are accepted, the broader an application for registration of the exclusive right becomes and the collective mark will also be subject to the harder it is to integrate competition- same standards as applicable to related concerns into Trade Mark law. registration of trade mark in general Conclusion subject to the additional requirements to scrutinise the draft regulations governing Issues relating to impact of collective use of the collective mark and statement agreements on competition primarily of case filed under Rule 129. require identification of relevant market and its players. These players may or may Competition Concerns in Collective not hold ownership of the collective Trade Trade Marks Mark but most of the times,they are a When a group of competitors agree to diverse assortment of entrepreneurs. How establish a collective Trade Mark, it these entrepreneurs act and how their amounts to a horizontal agreement and concerted actions affect competition in the hence arises competitive concerns. long run and the short run is a different Competition concerns arise not only question. In sum, one can observe a because a collective mark is established, correlation between the competitive but prices are fixed and information impact of collective marks on the one exchanged, production streamlined, hand, and additional requirements for markets divided etc. On the contrary, no and limits of protection on the other. The competition concerns arise if an more important it is to lawfully use the individual undertaking gets a Trade Mark sign, the thinner is Trade Mark protection. registered. The EU competition law The reason is that Trade Mark law should provides for closer scrutiny of such not support the formation of cartels. For agreements even if such agreements fall the most part, this is achieved via short of joint selling.8 Firstly, such safeguards built into Trade Mark law. The agreements provide a clear opportunity impact of multiple rights or owners on of exchange of sensitive and commercial exclusivity is thus twofold. Either information regarding pricing. exclusivity is limited vis-à-vis third Depending on the cost structure of the parties to allow access, incremental commercialization, a significant input to innovation and the free circulation of the parties final costs may be common and goods – this is the case for unilateral

8 European Commission (2001), Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements, OJ C 3/2, paras. 139 et seq.

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Published in Articles section of www.manupatra.com F-8 Manupatra Intellectual Property Reports (MIPR) [Vol. 3 combination or adaptation of protected transaction costs are also of lesser subject matter, for cumulation of different importance because each member may rights and for parallel territorial rights. use the sign for their own purposes. Or exclusivity is limited only with regard Moreover, geographical indications are to certain other affected right holders to not transferable to groups or persons prevent internal logjams – this kind of outside the respective geographical area. relative limitation concerns independent Instead, the relevant implication on creations and group innovation. exclusivity is how one may become a EU regulation on Community Trade member to lawfully use the collective Marks provides that any natural or legal mark or GI. In other words, the question person may become proprietor of a Trade is whether outsiders have a right to Mark. Companies or firms and other legal access the association or group. Even if bodies shall be regarded as legal persons registered, a collective mark is subject to if they have the capacity in their own additional limitations compared to name to have rights and obligations of regular Trade Marks. In particular, it all kinds. Thus, the owner of a Trade cannot be invoked against third parties Mark has to be a single person in legal using the sign in accordance with honest terms. The reason is that Trade Marks practices in industrial or commercial are not allocated to the person or group matters. These rules are influenced by having created the sign but to the natural competition concerns. The ability to use or legal person using it in commerce to a collective mark can be a tool of market identify itself or its product. A plurality power. A refusal of membership of independent, lawful users of a sign application can thus only be set aside on would thwart the purpose of Trade Mark the basis of general competition law. law to prevent confusion. To sum up, there is a correlation between Collective marks distinguish the goods the competitive impact of collective or services of the members of an marks and the right of third parties to association from those of other access the associations and groups that undertakings. These marks are not are exclusively entitled to protection and owned by individual market use. The purpose of this access right is to participants, but by an association of prevent a situation where Trade Mark manufacturers, producers or – under U.S. law supports the formation of cartels. law – even a nation or a state. The There is a very thin line of difference members entitled to use the collective when the conduct of the owner of a mark may bring an action for collective trade mark may encroach upon infringement only if the association as anti-competitive behaviour. There are the proprietor agrees. Thus, collective reasons to be sceptical about this marks are owned by one person, but they development. Trade Mark law has to may be lawfully used and enforced by a remain an instrument that ensures that plurality of persons.9 Collective marks competition is not distorted and vice and geographical indications have versa, i.e. competition law must ensure particular implications on exclusivity. In that every collective Trade Mark is not the case of joint ownership of patents or eyed with suspicion. It must not be copyrights, the balance towards all is not rededicated in a way that makes it easier modified since only one association or to collectively employ exclusive rights for group is entitled to protection. Internal strategic, anti-competitive purposes.

9 Peukert, Alexander (forthcoming 2010), Individual, multiple and collective ownership of intellectual property rights - Which impact on exclusivity? in Kur, Annette and Mizaras, Vytautas (eds.), Can one size fit all?, Aldershot, UK and Brookfield, U.S.: Edward Elgar, also available at http://www.ssrn.com/abstract=1563990.

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