Weighing pros and cons of filing for Madrid Protocol international registration for US businesses

The accession of the United States to the Madrid Protocol, has given US trademark owners the option of filing a single online application for an International Registration (IR) with the United States Patent and Trademark Office (USPTO) in English, pay the fees in US dollars and obtain protection for the mark in any or all of some 61 Madrid Protocol countries. Previously, a trademark owner seeking equivalent protection was required to file an individual application in each country, in the language and also currency of that particular country.

However, a closer examination of both the IR filing requirements and the experience of trademark owners in other countries which have recently been inducted into the Madrid Protocol, suggest that US owners may need to think twice about IRs. The best strategy will only be achieved through an effective prior cost and business analysis keeping in view the following points:

Filing Benefits

An American business operating on a multi-jurisdictional basis will have the additional means of filing an IR to save costs and streamline the administration of its global trademark portfolio. The IR system derives from two sources – the Madrid Protocol and the Madrid Agreement. An IR is centrally filed, registered and renewed, but it consists of individual national rights, which can be assigned, licensed, challenged or cancelled separately.

For countries that are parties to the Madrid Protocol, an IR may be obtained by filing an international application with the International Trademark Office at the WIPO on the basis of a national application or registration in the applicant’s home country. For countries that are parties to the Madrid Agreement, however, an IR can only be obtained on the basis of a national registration in the applicant’s home country.

An IR will be valid for a period of 10 years commencing from its application filing date. Subsequently, the IR can be renewed for successive periods of 10 years. The IR filing date is the same as the home country filing date if WIPO receives the application within two months. Finally under the Madrid Protocol, the priority claim only requires that the application for the IR be filed within six months after the basis application is filed in the originating state. The IR then, will be granted the priority filing date of the basis application.

Besides saving costs and providing administrative efficiencies to US applicants, a Madrid Protocol IR also provides a single IR cover key for US trading partner countries. However, any objection to an IR would arise on a country-by-country basis and would have to be addressed by local counsel.

Filing Risks

US trademark owners should closely consider the legal risks and business concerns arising from using IRs for their international trademark coverage. If an application is rejected or successfully challenged within five years from the date of application, the IR will be invalid for all covered countries. This is a phenomenon called “Central Attack”, which can cause a domino effect.

This means that if the USPTO rejects the application at the examination stage (and all appeals are unsuccessful) or if a third party successfully challenges the national US application/registration within this five-year term, the corresponding IR will also be cancelled. This situation can be salvaged somewhat since, under the Madrid Protocol, the trademark owner then has an opportunity to convert its IR into a national application in each of the contracting party countries within three months after the lapse of the base application/registration. However, such conversion means considerable extra expense and administrative work.

Another disadvantage is that IRs cannot be transferred to a business of a non-contracting state. For US entities, this means that an IR cannot be assigned to a business that is not qualified to file an IR under the Madrid Protocol. US companies must also bear in mind that this restriction means that IRs cannot validly be transferred to any potential purchaser from a non-Madrid Protocol country.

A further disadvantage of an IR is that it does not allow for variants in the mark or its specification of goods and services. For a US business, the IR in each designated Madrid Protocol country must be for the same mark and the same or narrower goods and services as the basis US mark. Perhaps US businesses should keep firmly in mind that an IR, despite its name, is not all encompassing. Many of the largest US trading partners , such as Canada, Mexico and virtually all of Latin America, are not members of the Madrid Protocol. Thus, the IR will not be of any help in obtaining trademark protection in some countries of great interest to many US companies.

Depending on their commercial strategies, US businesses will have to pick and choose among registering their marks as IRs, community trademarks (CTMs) and/or national marks to gain global protection.

Moreover, there can be only one owner for the IR. If the structure of the US business is such that there are various companies within the group rather than one single entity, an IR cannot be used to cover one mark for all applicable countries.

Foreign Experience

Use of an IR to cover many Asian member countries is quite popular with European and Asian trademark owners from a wide range of industry areas. However, many of these owners protect their marks with a combination of a CTM for the EU and an IR for selected Asian member state countries. European owners often continue to file separate national applications in Japan rather than including it as an IR filing. In this way, one can be certain that he has a secure registration in the world’s second largest economy rather than an IR extended to Japan, which may be subject to “central attack” for the first five years from the basis country application’s filing date.

Owners also often file an IR for most if not all member countries, including the more “exotic” small market countries. If the IR “sails through” without objection, registered protection is obtained at nominal cost. However, should problems arise in such small market countries (eg office actions or oppositions) often owners then simply do not pursue the case, specially where business interest is low.

The Action Plan

In developing an effective global filing strategy, the following action plan could be considered by United States businesses:

(i)Identify the countries in which filing is desired and the corresponding costs: From a strict cost perspective, a combination of following key market countries may be best. (a) a US national mark; (b) a CTM; (c) an IR for applicable key market non-EU Madrid Protocol countries; and (d) national marks.

(ii)Confirm existing or anticipated corporate structure: Answering ‘Yes’ to the following questions may make US trademark owners think twice about filing for an IR. (a) Will several related entities own your same marks worldwide? (b) Will an offshore holding company hold your trademark rights? (c) Do you anticipate that you may sell your trademarks?

(iii)Do you anticipate significant problems in registering your U.S. Mark(s):Answering ‘Yes’ means thinking twice about filing for an IR given the threat of “central attack”. A combination of CTM and national foreign filings in that case may be preferable. This question also emphasizes the enhanced necessity for doing a thorough clearance search prior to filing US marks.

(iv)Do you use the same mark (and goods and services description) globally?:Using variants of the mark and/or local language versions of your mark on a country-by-country basis could also mean IRs since one IR cannot capture all such variants.

The bottom line is that an IR is not a panacea solution. Quite simply, different trademark portfolio needs require different portfolio strategies.