The Industrial Property Law Act has been recently amended, effective as of 16 March 2019. Among more relevant of those changes is a new regulation of exclusive and non-exclusive licensees’ right of action in trade mark infringement cases. Illegal use of a trade mark brings harm not only to its proprietor but also to its licensees, especially those with exclusive licenses who often distribute trademarked goods on certain territory. Their position becomes even more difficult when the proprietor fails to respond to infringements. A licensee loses the benefit of their license if the trade mark is used also by third parties. This is particularly visible in parallel imports and in use of trade marks in advertising – two practices that have been on the increase in step with the development of e-commerce.

 

What are the changes to licensees’ rights of standing?

The new regulation, which is modelled on Directive 2015/2436 and Regulation 2017/1001, reads as follows:

“Unless the licensing contract provides otherwise, the licensee may bring proceedings for infringement of a trade mark only if its proprietor consents thereto. However, the holder of an exclusive licence may bring such proceedings if the proprietor of the trade mark, after formal notice, does not himself bring infringement proceedings within an appropriate period.

A licensee shall, for the purpose of obtaining compensation for damage suffered by him, be entitled to join infringement proceedings brought by the proprietor of the trade mark.”

Upon the application of the interested party, a license shall be recorded in the register of trade marks.

When are non-exclusive licensees allowed to sue for trade mark infringement?

The new law lays down the following rules for non-exclusive licensees:

A non-exclusive licensee has a right of action in the case of infringement when:

  1. A non-exclusive licensee has a right of action in the case of infringement when:
    • such right is conferred on him by the contract (in which case he must make sure his originating process is accompanied by the contract or its part which confers such right of action on him); or
    • he has the licensor’s consent (in which case he must submit the proprietor’s written consent to bringing the suit and, to prove that he is a non-exclusive licensee, also the license or its relevant part). The consent may relate not just to a specific dispute but also to all future litigation.
  2. The licensing contract may expressly deny the non-exclusive licensee’s right to bring claims in the event of trade mark infringement.
  3. Regardless of the terms of his licensing contract, a non-exclusive licensee is entitled by operation of law to join pending infringement proceedings commenced by the proprietor and claim damages for himself. Unfortunately, the new law does not specify how such “joinder” is to operate procedurally. Here, as in many other places, the amended Industrial Property Law Act fails to accommodate the specificities of the Polish law of civil procedure.

What are the rights of exclusive licensees?

For exclusive licensees, the following rules apply:

  1. An exclusive licensee may file a trade mark infringement action if permitted to do so in the contract or by the proprietor.
  2. If there is no express permission for the licensee to sue, whether in the contract or separately from the proprietor, the licensee may nevertheless go to court if he has given the proprietor a notice of the infringement but the proprietor has not filed his action within an “appropriate period”. The law does not define an “appropriate period” for the proprietor to respond to a notice of infringement. But it means a reasonable period during which the proprietor could be expected to make his decision and prepare his suit (including the collection of all necessary evidence). Certain infringements call for an immediate response and the main suit may be preceded by an application for interim relief. Accordingly, an “appropriate period” may sometimes mean just a few days or weeks.
  3. It seems that an exclusive license may not exclude the licensee’s right to sue in the event the proprietor takes no action after receiving a notice of infringement.
  4. Similarly to a non-exclusive licensee, an exclusive licensee may, too, join a pending infringement suit brought by the proprietor and claim damages for himself. As said, the new law does not define any procedure for such a “joinder”.

What was the old law?

It will be recalled that, under the old law, the right of action in trade mark infringement cases was conferred solely on the holders of exclusive licenses who featured in the register of trade marks. Non-exclusive licensees or exclusive licensees who did not feature in the register of trade marks were not entitled to bring proceedings for trade mark infringement.

Is there a need to amend the existing licenses?

If the proprietor wished to exclude his licensees’ right of action, he should ensure that there is an express clause to that effect in the licensing contracts. This is particularly important for non-exclusive licenses, which did not need to address this issue before because non-exclusive licensees were legally not allowed to sue for infringement.

Licensing contracts may be amended to address the matter of collaboration in prosecuting trade mark infringements, provide for an obligation to give notice to the licensor, and indicate an appropriate period for the proprietor to take the matter to court or else the right of action will vest in the exclusive licensee. Such clauses may prove important in various situations, but especially where commencing an infringement claim could be responded to by an attempt to cancel or revoke the trade mark itself.

It is that latter risk, which affects trade mark proprietors, that makes conferring the special right of action on exclusive licensees in the event of proprietors’ inaction a  questionable development. The proprietors may thus in some cases find it advisable to instruct their exclusive licensees not to sue, given risks to the preservation of trade mark rights.

 

Check what we refer to:

  1. The Act of 20 February 2019 to Amend the Industrial Law Act.
  2. Explanatory Memorandum for the Act to Amend the Industrial Law Act of 30 June 2000 (Journal of Laws of 2017, item 776).
  3. Directive (EU) 2015/2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks (Recast) (OJ L 336 23.12.2015 p. 1 and OJ L 110 26.04.2016 p. 5).
  4. The Industrial Law Act of 5 April 2017 (Journal of Laws of 2017, item 776).
  5. Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark.