Trade Marks and Tax Havens

Having recently returned from a trip to Gibraltar, I thought I'd write a piece on tax havens and intellectual property, specifically trade marks. It'll explore some jurisdictions in western Europe and the Caribbean and won't be an exhaustive tour of all tax havens; the definition of 'tax haven' varies depending on your sources anyway. The term 'tax haven' is often applied negatively these days but my aim is not to label these places - I have visited many of them, visited one regularly on business, and even lived in another and certainly did not regard myself as a tax exile.

Gibraltar

It can be tax efficient to own intellectual property by entities based in such tax havens. It is argued that this deprives Governments of significant income that could aid development, but I won't discuss any ethical issues. I'm also not a tax expert and will not look at the best jurisdiction for tax purposes. Furthermore, I will not advise on how easy it is to incorporate and manage companies in the referred jurisdictions.

I will look at the internal trade mark systems of such tax efficient locations. Given that a home jurisdiction can impact on how protection of trade marks in other countries is obtained there are things to be considered from this perspective, and the work involved in the management of such a trade mark portfolio. Any increases in trade mark costs are likely to be easily offset by the tax savings, but a trade mark owner (specifically those responsible in-house for the trade marks) who is thinking of such an ownership model should consider their additional budget required and resources (e.g. people) required to effectively manage this.

Beginning with Gibraltar, 'the Rock' is rebranding itself as a non-tax haven. Nevertheless, taxes are not as 'invasive' here as they are in other places.

Gibraltar has an ambiguous situation with respect to trade marks. As I have blogged before, OHIM considers Community Trade Marks to cover Gibraltar. This is based on an understanding of Gibraltar's status with the EU under Article 299(4) of the Treaty of Rome. However, there do not appear to have been amendments to Gibraltar's local Trade Marks Act to reflect this. As a Common Law jurisdiction, it should enact local legislation to reflect any European or International arrangements in place and so I believe the enforceability of a CTM in Gibraltar is questionable.

The existing trade marks law provides for the re-registration of United Kingdom National registrations.

Conversely, Gibraltarian companies can own Community Trade Marks and, being a part of the European Union, there is the possibility to file Madrid Protocol applications based on such Community Trade Marks. Perhaps a word of caution - although I admit I do not have personal experience of this situation - I would anticipate some designated countries would issue Provisional Refusals/Office Actions seeking clarification of the applicant's nationality; perhaps this could even come from WIPO. However, I think these could be overcome once and they would not arise again.

This could create a bizarre and unique situation where the home mark you base your Madrid Protocol application on does not actually cover your home jurisdiction.

Remaining on the Iberian Peninsula and the Pyrenean co-principality of Andorra has a trade marks law dating from the 1990s (its first trade mark legislation). Andorra has not joined the Madrid Protocol although it is a quick registration jurisdiction and would have little trouble meeting Madrid Protocol examination deadlines. Despite being sandwiched between France and Spain, neither French or Spanish enjoy official status; Catalan is the official language. Andorra is not part of the European Union and therefore not covered by a Community Trade Mark, although it uses the Euro.

Another mountainous European principality, Liechtenstein, has more registered companies than it does citizens. The local Trade Marks Office works efficiently and Certificates are issued quickly; note that there are no provisions for trade mark oppositions in Liechtenstein. At 400 Swiss francs (around £270/$425/€335) for the initial filing fee it is not the cheapest country around particularly when the population is little over 30,000. If you need to use an agent, quite possible if your Liechtenstein company is just a tax vehicle that employs few people, then expect high agent charges in this extremely wealthy country. However, Liechtenstein is a member of the Madrid System, and its simple domestic trade mark system minimises the risk of "central attack". Liechtenstein is not a member of the European Union although it participates in the European Economic Area.

Neighbouring Switzerland is also famed for its low tax status, most notably the Canton of Zug. Swiss domestic trade mark law is robust and efficient although with many well known and sophisticated businesses and a population attractive to foreign brand owners, its Trade Marks Register is much larger than that of smaller jurisdictions. Switzerland has been at the forefront of international trade marks being an original signatory to the Madrid Agreement effective 15 July 1892. Also dating from 1892 is the 'German-Swiss agreement concerning mutual recognition of patent, design and trade mark protection' that means use of an identical German trade mark, which is registered for the same goods/services in Germany and Switzerland, counts as valid use in Switzerland (and vice-versa) provided the owner has a place of business/legal seat in either country. I am not aware that this agreement would extend to German owned Community Trade Marks, and most will know that the proudly neutral Swiss have not joined the European Union and so CTMs do not provide coverage ordinarily.

Within the EU, the world's only remaining sovereign Grand Duchy, Luxembourg follows Liechtenstein and Switzerland in boasting wealth and low taxes. Covered by a Benelux Trade Mark (covering a market of over 28 million people) or a Community Trade Mark (covering a market of over 500 million) this would be one of the more difficult of tax havens to get a domestic trade mark registered because of larger numbers of existing trade mark registrations. Luxembourg has membership of the Madrid System (in addition to the European Community being a party to the Madrid Protocol).

Maintaining a francophone connection we will move on to the Channel Islands. The French language has official status in Luxembourg and the Channel Islands, albeit most use being in administrative or ceremonial circumstances. The larger of the two Channel Islands, Jersey, is in the midsts of revamping its IP laws. For now, the trade mark law allows for the re-registration of United Kingdom National Registrations (as per Gibraltar) and for the automatic protection of Community Trade Marks. This latter situation is different to Gibraltar as it is due to legislation enacted locally in Jersey. On the contrary, whilst a Jersey company can file for a Community Trade Mark (and it would provide protection to the island), it could not base a Madrid Protocol application based on a Community Trade Mark as it not a part of the European Union.

If it doesn't confuse matters further, International Registrations designating the United Kingdom also have automatic coverage to Jersey but a Jersey company cannot file a Madrid Protocol application based on a United Kingdom National trade mark. It's easy to see why Jersey wants to introduce new IP legislation as currently it is far more straightforward for foreign applicants to protect their trade marks in Jersey than it is for local applicants to protect them at home.

Just to the north, Guernsey has already introduced a far more sophisticated trade mark system, modelled to some extent on how the UK IP Office operates, and it wants to be seen as a very forward thinking and progressive intellectual property hub; it is planning on being the first jurisdiction worldwide to introduce Image Rights registrable protection.

The trade mark system allows for direct applications (although if you have a UK trade mark or CTM in place you can use this to 'support' your Guernsey application and benefit from lower official fees). Guernsey is not a member of the European Union or the Madrid Protocol.

We will remain in the 'Atlantic Archipelago' - the term British Isles, although currently geographically correct, is controversial in Ireland (the British Lions rugby team has been the British and Irish Lions since 2001). Ireland provides similar benefits to Luxembourg in being a member of the European Union and a party to the Madrid Protocol.

Perhaps useful to North American brand owners is that Ireland is an hour closer to them than continental Europe. This might not sound much but consider 09.00 in Los Angeles is 17.00 in Dublin, but 18.00 in Paris, (Gibraltar and Luxembourg). Ireland is also natively English-speaking, although so is Gibraltar and you would be hard pressed to find a business person not fluent in English (or French or German) in multilingual Luxembourg.

Moving to sunnier climes and the Cayman Islands, where there is a need for a UK registration or CTM registration or International Registration designating the UK to form the basis of a local application. Additionally, there is no membership of the Madrid Protocol.

The Bahamas can at least boast an independent trade mark system where registration in the UK or CTM is not a prerequisite. However, a single class system that uses the archaic former British classification is in place. This means you would need to 'translate' specifications of goods into the International Classification when ready to file in most other countries, there is no provision for service marks and the Madrid Protocol is unavailable. It can also take some time to obtain registration; the Registry's indication that this can "take up to 18 months" does not match my experience that has taken around double this timeline at times.

Returning closer to home (well closer to home for me and just a 30 minute flight away) and we have the Isle of Man. The birth place of the late Bee Gees brothers and the resting place of Sir Norman Wisdom, the island also lays claim to having the oldest parliament in the world, The High Court of Tynwald.

The Isle of Man is a self-governing Crown Dependency and the United Kingdom does not normally interfere with its internal legislation. However, when it comes to trade marks, the UK Trade Marks Act 1994 covers the Isle of Man automatically (and there is no separate local registration possible). Under Section 108(2), "references in this Act to the United Kingdom shall be construed as including the Isle of Man", and a Community Trade Mark is also effective although the Isle of Man is not a part of the European Union. Furthermore, the UK Government ratified the Madrid Protocol "with respect to the United Kingdom and the Isle of Man". A Manx company can therefore take advantage of the Madrid Protocol, although as with the EU-Gibraltar nationality entitlement example above, I would not be surprised in receiving the odd Office Action from overly ardent examiners requiring ownership clarification.

As with the examples of Ireland and Luxembourg and, to a lesser extent, Switzerland above, a Manx company (by virtue of its home jurisdiction being effectively the United Kingdom for trade mark purposes) would have to contend with having to deal with more crowded Trade Mark Registers domestically.

Do not overlook a general ownership concern for companies from Gibraltar, Jersey, Guernsey, the Cayman Islands and the Isle of Man. The foreign affairs of all of these are managed by the United Kingdom and the fact they do not have diplomatic recognition themselves can create issues in some foreign countries. Some explanations and proof that Gibraltar, etc. provide reciprocity to nationals of their country may need to be filed with a foreign Trade Marks Office.

Management of trade mark portfolios in tax havens can be complicated at the best of times but when these are your home jurisdictions - and thus impacting on your global trade mark portfolio - you will see there can be some added obstacles to navigate.

I'll conclude with a table summing up various places visited in this blog.

Jurisdiction	Currency	Time Zone	Local registration	Community Trade Mark	Madrid Protocol
Andorra	Euro	CET	Yes	No	No
Bahamas	Bahamian dollar (pegged to US dollar 1:1)	EST	Yes	No	No
Cayman Islands	Cayman Islands dollar (pegged to US dollar 1:1.2)	EST	Yes but must be based on UK National or IR, or CTM Registration	No	No
Gibraltar	Pound sterling (Gibraltar pound also in circulation (same value))	CET	Yes but must be based on UK National Registration	Questionable	Yes (based on a CTM)
Guernsey	Pound sterling (Guernsey pound also in circulation (same value))	GMT	Yes	No	No
Jersey	Pound sterling (Jersey pound also in circulation (same value))	GMT (proposal to switch to CET defeated in 2008 referendum)	Yes but must be based on UK National Registration	Yes	No
Ireland	Euro	GMT	Yes	Yes	Yes (based on national trade mark or CTM)
Isle of Man	Pound sterling (Manx pound also in circulation (same value))	GMT	UK is local	Yes	Yes (based on a UK trade mark)
Liechtenstein	Swiss franc	CET	Yes	No	Yes
Luxembourg	Euro	CET	Benelux is local	Yes	Yes (based on a Benelux trade mark or CTM)
Switzerland	Swiss franc	CET	Yes	No	Yes

Seniority Tool from OHIM

In addition to their TMView and EuroClass projects, OHIM is also heading up a cooperation tool with EU National Offices surrounding seniority.

As a quick briefing to those outside of the EU and not completely familiar with the concept of seniority, this allows earlier registrations in EU member states to be 'packaged' into a Community Trade Mark. The national registrations can then be allowed to lapse and renewal fees can be saved; significant savings can be achieved if there are a number of registrations across EU member states.

Named the 'Seniority Tool' this has an aim of harmonised seniority databases. It is not particularly well publicised so far and only 15 National Offices (out of 25) are participating at this moment in time: Benelux, Bulgaria, the Czech Republic, Estonia, France, Greece, Hungary, Ireland, Lithuania, Portugal, Romania, Slovakia, Slovenia, Sweden and the United Kingdom. The non-participation of Germany, Italy, Poland and Spain is particularly noticeable.

OHIM's literature on the Seniority Tool states:

"Several national offices and other national administrations such as enforcement authorities often treat earlier trade marks as 'expired' or 'cancelled', even when seniority has been claimed under the CTM Regulation for that mark. To better comply with Directive 2008/95/EC, EU national offices need to update their databases to include information regarding seniority. By harmonising the seniority information among national offices, the Seniority Tool will help better achieve this goal effectively."

Seniority has been used apprehensively by practitioners, and while the absence of case law will continue to make many nervous at relying upon it, having seniority information on national databases in addition to the OHIM database should add some confidence to the concept.

According to OHIM, four of the participating National Offices, namely, the Czech Republic, Hungary, Ireland and Portugal have implemented the seniority tool into their Office website so I've checked out examples in the latter two databases to see how this works.

Unfortunately, Irish Registration No. 94544 for HEINEKEN shows as 'Removed' and no seniority information is referred to in the database, not even in the 'Notings' field. Not the most encouraging of starts and we must hope that the use of the word "implemented" by OHIM means "implementation in progress" and not "implementation completed".

For Portuguese Registration No. 148893 VIMTO (which I cannot link to) we do have a status of "REGISTRATION LAPSED - Seniority claimed for CTM" so here we have an example of how the tool is meant to work. I could anticipate there may be a need for some education of authorities here to ensure they look beyond the words "REGISTRATION LAPSED" when checking a registration's status.

In the United Kingdom - yet to implement this tool - where relative grounds examination is not performed, the Office does nevertheless notify owners of national marks should a potentially similar later application be advertised for opposition purposes. Conversely, they do not, as a matter of course, notify owners of earlier Community Trade Marks. It will be interesting to note if they may end up sending out notifications to owners of national registrations which have lapsed but are subject to a claim to seniority. I would anticipate not, but the underlying intention in such scenario is to keep the national registration and the benefits this entails (albeit within a CTM to avoid duplication and excess renewal fees).

OHIM continue to invest in tools that fit their name of being an "Office for Harmonisation" although let's hope this one does not prove to be a white elephant when many could prefer the continued (and rapid) development of TMView and EuroClass.

Madrid membership moving on up

Madrid membership has increased recently with the accession of the Philippines on 25 April 2012. It will be in force from 25 July 2012.

How this will work in practice is not clear to this writer and it may remain to be seen what happens as and when designations of the Philippines start to be requested. The Philippines, somewhat uniquely, has a trade mark law akin to that of the United States; the US took control of the islands in the aftermath of the Spanish-American War.

The trade mark law therefore contains provisions relating to use and it will be interested to see how these will be adapted for Madrid Protocol designations, if at all - there is no indication there will be a need to file anything like a Form MM18 as you must do when designating the United States. I have not been able to locate any amendments to the Intellectual Property Code of the Philippines - and the Philippines is a Common Law country - that reflect its memberships and commitments under the Madrid Protocol. I must say that it seems the Philippines has "sneaked in" without much warning. I'm totally in favour of an increase in Madrid Protocol membership, but a country must be ready (in terms of both legislation and organisational capabilities) or the rights obtained through International Registration could be limited and a country's IP image could suffer.

Filipino accession is part of a commitment from ASEAN member states to accede to the Protocol by 2015. I'm not quite sure this is a realistic timetable. Of the 10 members, the Philippines joins Singapore and Vietnam as members whereas the others require national filings for now.

Indonesia, Malaysia and Thailand - which, along with the previous three countries mentioned, represent the most significant economies of the ASEAN block - will need to ensure they have backlogs of trade mark applications under control. There will be times when they will struggle to meet the 12 or 18-month examination timetable otherwise. Malaysia will require some updating of regulations to reflect its membership.

Brunei's law - drafted along the lines of Singapore - should be largely Madrid compliant with some small amendments. Laos, which pretty much operates a deposit system, should not have any difficulty adopting Madrid although the the internationalisation of the agreement does not meet so well with a country that has often chosen to remain somewhat isolated.

Isolation would be a word used quite freely with respect to Myanmar (Burma). This country is making steps to come out from the cold but Madrid membership by 2015 is likely to be too ambitious, in my view. Myanmar does not currently have a trade mark law and relies on the publication of Cautionary Notices. A new substantive - and Madrid compliant - law may not be a priority to a newly democratic government. On the other hand, if the junta remains in place then they have not previously buckled under international pressure so any leverage put on them to join the Madrid Protocol could have little impact.

Finally, Cambodia has Affidavit maintenance requirements on registrations. Perhaps these would not be requested for Madrid designations, but there is potential for an anomaly that they may wish to rectify before they can accede to the Madrid Protocol.

To go off on one of my typical tangents, I have just learnt that the Philippines have been less keen on accepting a previous Madrid Protocol from 1885.

Outside of ASEAN - much further to the south - noises from New Zealand suggest it is on course to join the Madrid party shortly. Colombia's membership could be in force as early as the end of this year - according to officials at the Colombian IPO, although local attorneys seem to feel Spring 2013 is a more realistic target.

Mexico has also got the ball rolling towards its eventual membership of the Madrid Protocol.

However, I had a discussion during the recent INTA conference with an agent from a smaller jurisdiction in the Americas (which shall remain nameless) and they were quite frank with me. They will fight their government tooth and nail for it not to join the Madrid Protocol. With local powerhouses like Mexico and possibly Brazil coming on board, coupled with pressure from the US and EU in particular, I wonder if they will be able to stop the Madrid juggernaut driving through their jurisdictions as it gathers more and more momentum. After a couple of years of stagnation with few new joiners, perhaps this momentum is about to build up.

Word perfect.... a tour of some of the world's roughest language terrain

It's only easy if you know the answer, as Chris Tarrant has been known to say on Who Wants To Be A Millionaire?, and it is surprising to me how many people do not know the answer to the question of what differentiates a translation and a transliteration - or that so many find themselves tongue-tied when asked to explain it.

The answer in short: a translation is what something means in another language, while a transliteration is how something sounds. I find the easiest way to explain is to translate and transliterate into English.

Take the word shown here: Коледа

This is Bulgarian Cyrillic (the EU's third alphabet). The word translates to (has the meaning) "Christmas", and it transliterates to (or is written) "Koleda".

While my Bulgarian pronunciation is far from perfect, if I muttered it on the streets of Sofia or Varna, I hope that I would be understood (particularly if I were there in December).

In the field of trade marks, however, translations are not always possible. For example, the compound word STARBUCKS doesn't mean anything. Meanwhile, those of you with foreign language skills will know that transliteration can be a complicated business. If, in a stuffy Munich conference room, you uttered the phrase, "Ich bin heiss", which taken word-by-word would mean "I am hot", this would be met by raucous laughter or awkward gasps of astonishment by your German peers. I'll omit explanation of the German meaning of the phrase here (the introduction of the .xxx sponsored top-level domain may provide ITMA Review with enough adult comment to comment on), but no doubt many of you will understand the potential for confusion and embarrassment.

Getting back to Mr Tarrant, a translatable trade mark I worked on many years ago was for the Millionaire show. Its translation into Spanish was cruel on this native English speaker, who was left more tongue tied than before: ¿Quién quiere ser millonario?

And other factors influenced the brand. In Hungary, a million Forints is less than £3,000 so being a millionaire in Budapest was probably within reach for the majority.  If I recall, the first Russian name of the show translated back as the fairly non-PC, "Lucky Man".

So it is clear that cultural differences and sensitivities become more prominent when dealing with translation and transliterations. (There can be difficulty with the product too. In the Russian version, "asking the audience" was not always a benefit. It is reported that audience members often deliberately gave a wrong answer. But I digress.)

The tyre company Continental apparently found the going tough when it entered the Taiwanese market. While the term "the Continent" for Brits means the whole of Europe from the other side of the English Channel onwards, "continental" in Mandarin can refer to Mainland China, which could evoke less-than-positive feelings in would-be customers in Taiwan.

No rules

We all have our horror stories and tales of success in the registration of translations and transliterations. It's important to realise there are no set rules that govern them. Translations often throw up dilemmas - how many words do the Sami people have for snow? (It’s a myth that the Inuit have many.) Meanwhile, transliterations can create different quandaries.

Cyrillic and Greek have clear letters and established equivalents in the Latin alphabet. The same can be said of the elegant-looking alphabets of Armenia and Georgia. But be careful. Think of "s" and "z" being almost identical in English, whereas the difference could be more marked in your transliteration language. Does the brand need the power of a harsh letter, or is a softer pronunciation going to serve the brand's message better?

Take particular care with Cyrillic. This issue is notable in Ukraine, since the Ukrainian and Russian languages use slightly different Cyrillic alphabets. With the exception of the autonomous Crimea, Russian is not an official language of Ukraine. However, nearly a third of the Ukrainian population speak Russian as their mother tongue, so it can be important to register both Ukrainian Cyrillic and Russian Cyrillic trade marks if they are indeed different and if the budget allows.

Be clear, also, in how your mark should be said in the first place. The sports brand Nike often rhymes with bike in British English, whereas Mikey wears Nike in the US. I am sure the American version would generally prevail, but would the British version be better suited in countries with closer links to the UK, for example, as Hindi or Urdu equivalents for India and Pakistan?

Chinese represents a difficult language group and Chinese branding consultants find themselves in a lucrative business. The complexity of the Chinese language means transliterations are translatable back into English. Let's take COCA-COLA. The transliteration adopted would be pronounced along the lines of "ke kou ke le". This can be translated into English as "tasty and enjoyable".

Display difficulties

Displaying your translated/transliterated trade mark can present additional challenges. You may wish to maintain consistent branding across the world, so ensuring your trade mark in various scripts is proportionate will be an important task for a design team, especially when a translated or transliterated mark is longer or shorter than the Latin trade mark.

In Iraq, trade mark applications for Latin script marks must be accompanied by an Arabic transliteration. You can take this as a benefit: you get your regular trade mark and an Arabic transliteration for the price of one. Iraqi agents are accustomed at devising the Arabic equivalent, which must be bigger, and sticking it on the application papers. However, be proactive if you can and see if there is already an Arabic version devised, because what the agent comes up with might not be the same.

Iraq is the only country in which transliterations are currently compulsory. And, with its own sub-classification system and 15-year registration terms, it is one of the quirkier trade mark jurisdictions around. If you come across some older Registration Certificates from Qatar, you may notice that transliterations were mandatory there too, although this situation has now changed.

In the People's Republic of China, the applicant's name must be transliterated in Chinese on the trade mark application, so be careful when filing for house marks and ensure there's consistency between them. Russia has strict advertising laws regarding elements appearing that are not in Cyrillic, which can place greater onus on Cyrillic equivalents. Take particular care with slogans and names that are likely to appear on shop signs and seek local advice.

It's clear that you or your client should contact local partners or a branding agency to ensure they get the right translations/transliterations. Can you register defensively in the meantime? For Chinese, in particular, this is difficult because of the diverse nature of the languages. Those with specific alphabets (Cyrillic, Greek, Armenian, Georgian) are easier. However, in many of these countries Latin marks will be cited against local scripts and vice-versa (although I'd make sure there was a watch in place in case an Examiner has an off-day).

To close, a final word on the use of the Madrid Protocol. It's most relevant for the filings of Cyrillic translations/transliterations in the former Soviet republics, as Madrid is far more cost-effective than national applications. However, you would need to file a base application at the UK IPO. Many companies in western Europe take this route and file at their national IPO, so the risks could be considered negligible, but would the Cyrillic mark be treated as a stylised mark by the IPO? If so, the Madrid Protocol registration should be regarded as stylised.

Furthermore, unless you are exporting direct packaged goods from the UK, there is potential that no use of the Cyrillic mark will be made, and it will be vulnerable to cancellation. To be fair, provided the Madrid filing follows hot on the heels of the UK filing, you will get through the five-year "central attack" period. However, would there have been a bona fide intention to use the mark in the UK in the first place?

These concerns are removed when you base your mark on a CTM as Cyrillic is an official alphabet. Clearly it will also have some worth if your Cyrillic translation/transliteration will be used in Bulgaria or other parts of the EC.

Sadly, there is no easy-to-follow strategy when it comes to this subject, but I hope this piece will have least lit the way, and will have left you a little less lost in translation (or transliteration).

This article originally appeared in Issue 392 March/April 2012 of ITMA Review, the journal of the Institute of Trade Mark Attorneys.