The EU is reaching the final stages of agreeing its trade mark reform package.
Although many of the changes are positive for trade mark owners and widely accepted, the UK refused to vote in favour. Why?
The UK government explained that it would be refusing to approve the text because:
“we cannot support the Regulation since it includes a provision that enables the transfer of future surpluses accumulated from trade mark and design fees to the general EU budget”
So what was the UK objecting to?
Article 139 of the reformed trade mark regulation deals with the budget of the granting office in Alicante. Much of it is perfectly sensible. The office is to aim for a balanced budget. And is to maintain a reserve fund to cover a year of operational expenditure. The objectionable provision is new paragraph 8, which says:
“… where a substantive surplus is generated over five consecutive years, the Budget Committee, upon a proposal from the Office and in accordance with the annual work programme and multi-annual strategic programme… shall decide by a two-thirds majority on the transfer to the budget of the Union of a surplus generated from [the date the regulation takes effect].”
This proposal has been the subject of considerable comment and objection. As explained in an open letter from a wide range of industry representative bodies to the EU legislators in April:
“the surplus that should rightly be used to improve the trade mark and design systems would instead be diverted elsewhere. … This would be an unacceptable tax on industries relying on IPRs, while Europe’s growth and innovation depend on them.”
The European Parliament is expected to vote before the end of the year, approving the Council's position without amendments. The reforms to the central EU trade mark system are expected to become law in spring 2016, with the changes to national laws following three years later.
We have yet to see how the budget of the central office will play out, but any significant surpluses being transferred to the central EU budget are likely to be pounced on by users of the system.