Harmonisation: New code, new options

8th Jun 2020

Wondering what EU harmonisation means for Italy’s trade mark owners? Paola Gelato breaks down three important changes.

Legislative Decree 15/2019 came into force in Italy on 23rd March 2019, implementing EU Harmonisation Directive 2015/2436 and introducing significant amendments to the Italian IP Code.

This article will focus on three fundamental aspects of the reform: enhanced protection of trade marks with reputation; the provision of new rules on acts preparatory or contributing to infringement; and the controversial reversal of the burden of proof in actions for revocation based on non-use.

Ramped up protection for marks with reputation

The new Decree has further extended the protection of well-known trade marks, amending Article 20 of the Italian IP Code. That Article now expressly protects the different functions of the sign, beyond its primary role as an identifier of commercial origin, from any form of infringement. In particular, this substantially enhances the investment and advertising functions of the trade mark. Further, amendments to Article 12(e) of the Code now expressly specify that protection for well-known trade marks extends to identical, similar and non-similar products and/or services.

The reform has implemented the general goals of EU Harmonisation Directive 2015/2436 and is in line with the overall aim of the EU trade mark package: that Member States shall enlarge the scope of protection of well-known trade marks. In this spirit, Italy has added, among the grounds of opposition, the notoriety of the trade mark. This is now expressly provided by Article 176(2) (b) of the Italian IP Code, in combined application with Article 12(e). These modifications will surely make it easier to oppose trade mark applications where they may prejudice a prior sign or its reputation.

It is clear that the enlarged protection of well-known brands enhances the advertising function of the sign and its message of quality and style, which often supersedes the original function of commercial identification.

This recent reform is perfectly in line with consolidated Italian case law, which had already tended to highlight and protect the different functions of the trade mark. For instance, in a decision of 30th June 2016, the Court of Milan expressly stated that the trade mark, being a fundamental company asset, does not exhaust its role in the primary function of commercial identification. It also plays a key promotional and advertising function, which deserves to be attentively protected.

The Court of Milan has also interpreted the traditional notion of competition in a broader way, stating that the functions of the trade mark, other than that of commercial identification, may be easily infringed by parties that are not direct competitors but that may harm the communicative value of the brand and its image.

This judgment has defined the notion of unjust profit taken from the distinctive character and/or the reputation of a trade mark, which it summarised as follows: “This notion is known as parasitism and free-riding, and is directly connected to the advantage taken by a third party from the use of an identical and/or similar sign, including the possibility of transferring the image of the renowned trade mark, with an evident undue exploitation of the brand’s reputation, also independently from the goods/characterised by the relevant sign.”

What’s more, over the past two decades, Italian courts have granted important damages where blatant violations of the image of a trade mark have resulted in the dilution of the reputation of a brand. In some cases, the evaluation of the prejudice to the image of the brand has amounted to 25 per cent of the award granted. For instance, in 2007 the Court of Florence granted an award for damages of €160,000 to a famous fashion house following infringement proceedings. Of that, €120,000 was for the economic prejudice and €40,000 was for the dilution of the image of the brand.

Consumers will also benefit from this new reform, since it will be more difficult for infringers to exploit the reputation of third parties’ trade marks, with the subsequent reduced risk of confusion among the public. Indeed, it is impossible to justify the enhancement of the protection of trade marks with reputation without also highlighting the concurrent enforced defence of consumers’ interests and rights.

Strengthened protection against infringement

The Legislative Decree has also enlarged the protection of trade marks in general. In particular, Article 20 of the Italian IP Code has been amended to allow trade mark owners to block unlawful behaviour even before the sale or circulation of infringing products. Trade mark owners may forbid third parties from applying their distinctive signs to labels, packaging, tags or security devices – conduct that is considered to be an act preparatory or contributing to infringement.

In this respect, Italian intervention perfectly mirrors the aspirations of the EU Harmonisation Directive. Article 11 of the Directive foresees that Member States shall provide rules for sanctioning acts preparatory to infringement.

Moreover, the Italian reform is in line with Article 10 of EU Trademark Regulation 2017/1001, which sanctions acts preparatory to infringement. The Regulation expressly notes that third parties are prohibited from affixing a trade mark owner’s signs on labels and the like.

The recent reform also extends protection against infringement and acts preparatory to infringement to goods in transit, for example products coming from a non-EU country and destined for an EU country other than Italy. Potentially infringing products will be released by Italy’s Customs and Monopoly Agency (ADM) when the holder proves that the trade mark owner does not have the right to prohibit the introduction of the goods into the country of final destination.

The aim of this significant enlargement of the protection is to help trade mark owners
prevent the circulation of the infringing products and, consequently, to substantially reduce the damages produced by third parties’ unlawful behaviour. However, the effectiveness of the reform will require a deeper co-operation between trade mark owners and the authorities, especially the ADM and the Guardia di Finanza (the Italian Financial Police).

Finally, it is worth noting that Article 122 of the Italian IP Code has been amended so that exclusive licensees are entitled to start an infringement proceeding, having informed the trade mark owner, if the latter does not take the initiative. What’s more, non-exclusive licensees may have the right to act as plaintiff or defendant in infringement proceedings with the prior authorisation of the trade mark owner. Although this may appear to be a minor procedural adjustment, a more prominent role for licensees in the enforcement of trade mark protection constitutes a remarkable development, since licensees may intervene more promptly than trade mark owners as a result of their deeper knowledge of the relevant markets and local legal systems.

In broad terms, the reform has now codified the consolidated Italian case law, which already tended to grant to exclusive licensees active legal standing, unless the relevant license agreement expressly excluded the licensee’s entitlement.

A real reversal of the burden of proof?

The Decree has also modified Article 121 of the Italian IP Code, relating to the burden of proof concerning trade mark use in cases where an action of revocation is based on non-use. Previously, the burden of proof was on the petitioner (ie, the party claiming the relevant right or raising an objection). However, it is often very hard to prove the non-use of a third party’s distinctive sign. The challenge is sometimes so great that the standard required has been called the probatio diabolica (the devil’s proof).

Article 121 now provides for the burden of proof to be put on the trade mark owner. This remarkable reform follows the general principle of “proof proximity”, according to which it is reasonable that the party that may give evidence more easily is charged with the burden of proof.

As a result, trade mark owners are well advised to keep evidence of use of their distinctive signs so that they are ready at any time to discharge the burden of proof. This evidence might include promotional material, accounting documents and any document attesting to the sale of products bearing the relevant trade mark, such as catalogues.

However, the real extent of the reform is somewhat disputed, especially by those commentators who try to interpret the new Regulation in line with the EU Harmonisation Directive. Indeed, Article 17 of the Directive refers to actions of infringement, in which the defendant may object to the plaintiff on the grounds of the latter party’s non-use of the trade mark in question, discharging the burden of proof to the plaintiff. The aim of the European intervention, then, was to balance the parties’ positions in the context of infringement proceedings.

On the other hand, the Italian implementation has apparently extended the reversal of the burden of proof to actions of revocations for non-use, so that the plaintiff claiming the revocation of the defendant’s trade mark is not required to give any evidence of the other party’s non-use, whereas the burden of proof would be exclusively discharged by the defendant. In fact, within infringement proceedings, Article 121 of the Italian IP Code does not introduce a difference between actions of revocation for non-use and objections raised.

It is clear that a similar interpretation implies several problems of balance between the parties, since it would be illogical to charge the defendant of an action for non-use with the entire burden of proof such that the plaintiff, paradoxically, would obtain the requested decision without giving any concrete evidence.

As such, it is likely that the new rule will be interpreted in line with the aim of the EU Harmonisation Directive, thereby distinguishing between actions of revocation for non-use and objections within infringement proceedings.

In this sense, it may be argued that, especially in the case of actions for revocation, the burden of proof will not be entirely discharged by the trade mark owner, since the party claiming the revocation will, in any case, provide hints of the other party’s non-use.

We should also remember that prior to the recent reform, Italian case law had repeatedly stated that the burden of proof as it pertained the party that had to give evidence of the non-use was somewhat weakened and could rely upon hints and presumptions.

All told, the revolution of the reversal of the burden of proof may be less substantial than it appears at first glance. The practical extent of the changes, though, will largely depend on the interpretation of the courts of merits.

Significant benefits

The implementation of EU Harmonisation Directive 2015/2436 has resulted in amendments to several other sections of the Italian IP Code too. In particular, there have been significant changes in the relationship between opposition proceedings and actions on the merits, with greater emphasis on the role of the Italian Patent and Trademark Office. These new procedural rules will enter into force in 2023. The reform has also introduced new rules on certification, collective and geographical trade marks.

However, the changes highlighted above constitute the most prominent good news for trade mark owners, enabling them to enforce their exclusive rights more effectively. When the courts of merit begin to apply the new rules, we will understand how and to what extent trade mark owners and consumers will feel the benefits. But should Italian courts apply the new regulations in a faithful and coherent way, the benefits for consumers and trade mark owners alike will surely be significant.