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Implications of a Repeal of the Safeguard Clause for the Madrid System Procedure20 At its first session, the Working Group undertook a first analysis of the implications of a repeal of the safeguard clause on the following six features of the international procedure, in respect of which the application of the safeguard clause is of direct relevance:
21 The Working Group concluded that, at least with regard to the first four features mentioned above, the safeguard clause should no longer be maintained. With respect to the other two features, namely the refusal period and the fee system, the Working Group did not reach a consensus as to whether the safeguard clause should be maintained or not. 22 Additionally, as mentioned earlier, the Working Group examined the implications of a repeal of the safeguard clause on the use of languages under the Madrid system, a feature which is indirectly concerned by the application of the safeguard clause, and recommended that the Common Regulations be amended so as to provide for the application of all three languages (English, French and Spanish) in the mutual relationship between States bound by both treaties. 23 At its second session, the Working Group may wish to further examine the implications of a repeal of the safeguard clause on certain features of the Madrid system procedure. To assist the Working Group in this task, the International Bureau has compiled additional information and more recent statistical data, which is presented in this Chapter. In addition, other issues relating to the implementation of a repeal of the safeguard clause, including operational consequences and the need for transitional provisions are addressed in Chapters IV and V, below. (a) Required Basis for Filing an International Application 24 Under the Agreement, an international application must be based on a prior registration of the mark concerned with the Office of origin (“basic registration”). Under the Protocol, an international application may be based on either a basic registration or on an application for registration filed with the Office of origin (“basic application”). 25 It follows that international applications governed exclusively by the Protocol may be based either on a basic registration or basic application, while international applications governed exclusively by the Agreement, or by both the Agreement and the Protocol, must necessarily be based on a basic registration. 26 If the safeguard clause were to be repealed, the consequence would be that a number of international applications which, by virtue of the safeguard clause, are currently governed exclusively by the Agreement, or by both the Agreement and the Protocol, would become governed exclusively by the Protocol and could therefore be based either on a basic registration or on a basic application. 27 As already noted, of the 33,169 international registrations recorded by the International Bureau in 2005, 6,655 resulted from applications governed by the Agreement, 11,691 resulted from applications governed by the Protocol, and 14,823 resulted from applications governed by both treaties. 28 If the safeguard clause had not been in place in 2005, of those 33,169 international registrations recorded, only 175 would have resulted from applications governed exclusively by the Agreement (instead of 6,655)6, 26,470 would have resulted from applications governed exclusively by the Protocol (instead of 11,691), and 6,524 would have resulted from applications governed by both treaties (instead of 14,823). 29 This would have meant that an additional 14,779 international registrations would have resulted from applications governed exclusively by the Protocol and thus could have been based either on a basic application or a basic registration filed with the Office of origin. 30 In conclusion, repeal of the safeguard clause would, insofar as the required basis for applying for an international application is concerned, allow users of the Madrid system greater flexibility when deciding whether to base an international application on a basic registration or a basic application. At the same time, it is not anticipated that such a change would be detrimental to Offices and it would not have any direct implications for the International Bureau. (b) The Cascade 31 Under the Agreement, the country of origin is determined according to a hierarchy among the possible entitlements of the applicant (on the basis of the applicant’s establishment, domicile and nationality). The applicant must follow this so-called “cascade” and therefore does not have a free choice of country of origin. 32 Under the Protocol, in contrast, no such cascade applies. The country of origin may be freely chosen by the applicant from among those in respect of which the applicant is entitled on the basis of establishment, domicile or nationality (it being understood that there can be only one country of origin in respect of a given international application). 33 It follows, therefore, that in respect of international applications governed exclusively by the Protocol, the cascade does not apply, while in respect of international applications governed exclusively by the Agreement, or by both the Agreement and the Protocol, the cascade must be followed. 34 If the safeguard clause were to be repealed, the consequence would be that a number of international applications which, by virtue of the safeguard clause, are currently governed exclusively by the Agreement, or by both the Agreement and the Protocol, would become governed exclusively by the Protocol and, as a result, the country of origin could be freely chosen by the applicant from among those in respect of which the applicant is entitled. 35 As already noted, of the 33,169 international registrations recorded by the International Bureau in 2005, 6,655 resulted from applications governed by the Agreement, 11,691 resulted from applications governed by the Protocol, and 14,823 resulted from applications governed by both treaties. 36 If the safeguard clause had not been in place in 2005, as already mentioned, of those 33,169 international registrations, only 175 would have resulted from applications governed exclusively by the Agreement (instead of 6,655), 26,470 would have resulted from applications governed exclusively by the Protocol (instead of 11,691), and 6,524 would have resulted from applications governed by both treaties (instead of 14,823). 37 In practical terms, this would have meant that an additional 14,779 international registrations would have resulted from applications governed exclusively by the Protocol and in respect of which the Office of origin could have been freely chosen by the applicant (from among domicile, nationality and establishment). 38 Thus, repeal of the safeguard clause would, insofar as the cascade is concerned, result in a significantly increased number of users having greater ease and flexibility in choosing their country of origin from among those in respect of which they are entitled. Such a change would also be advantageous to Offices, insofar as they would be relieved of the necessity to ensure always that an international application is being filed through the appropriate Office. 39 It is not envisaged that such a change would have any consequences for the International Bureau. (c) Presentation to the International Bureau of Certain Requests 40 Where all the Contracting Parties which are the subject of a subsequent designation are designated under the Protocol, or where a request for the recording of a renunciation or a cancellation affects a Contracting Party whose designation is governed by the Protocol, such subsequent designation, or request for the recording of renunciation or cancellation, may be presented to the International Bureau either directly by the holder, or through the intermediary of the Office of the Contracting Party of the holder (at the holder’s option). 41 In contrast, where any of the Contracting Parties which are the subject of a subsequent designation is designated under the Agreement, or where a request for the recording of a renunciation or a cancellation affects a Contracting Party whose designation is governed by the Agreement, that subsequent designation, or request for the recording of renunciation or cancellation, must be presented to the International Bureau through the Office of the Contracting Party of the holder. 42 If the safeguard clause were to be repealed, the consequence would be that an increased number of subsequent designations and requests for the recording of renunciations and cancellations7 would become governed by the Protocol and, as a result, could be presented to the International Bureau either directly by the holder, or through the intermediary of the Office of the Contracting Party of the holder. 43 According to the statistics for 2005, the number of subsequent designations recorded in that year which included the designation of a Contracting Party governed by the Agreement (and therefore required to be presented through the Office of the Contracting Party of the holder) was 6,832 (67 percent of the total). 44 With regard to renunciations and cancellations recorded by the International Bureau in the same year, the number of those which affected a Contracting Party whose designation was governed by the Agreement was 366 (46 percent of the total) and 150 (65 percent of the total), respectively. 45 If the safeguard clause had not been in place, the number of subsequent designations recorded in 2005 which would have been required to be presented through the Office of the Contracting Party of the holder (because they included the designation of a Contracting Party governed by the Agreement), would have been 1,833 (18 percent of the total) – that is to say, 4,999 less. 46 As far renunciations and cancellations recorded in 2005 are concerned, if the safeguard clause had not been in place, the number of those for which a request would have been required to be presented through the Office of the Contracting Party of the holder (because it affected a Contracting Party whose designation was governed by the Agreement) would have been 43 (some 5 percent of the total) and 7 (3 percent of the total), respectively. 47 Thus, repeal of the safeguard clause would, insofar as the presentation of subsequent designations and requests for the recording of cancellations and renunciations are concerned, be of clear benefit to users of the Madrid system, in that it would grant users more freedom in the management of their portfolios, while at the same time it would be advantageous to Offices, which would be relieved of the need to always act as intermediary between users and the International Bureau. 48 It is not envisaged that such a change would have any significant consequences for the International Bureau. (d) Transformation 49 Article 9quinquies of the Protocol provides that, in the event that an international registration is cancelled at the request of the Office of origin under Article 6(4) (i.e., where the basic mark has ceased to have effect within the five-year period of dependency, as a result of a so-called “central attack”), the holder of the international registration may request the transformation of his international registration into national or regional applications, while keeping the original date of the international registration. 50 To the extent that the transformation mechanism is provided for only in the Protocol, its benefit can be claimed only in respect of a Contracting Party whose designation is governed by the Protocol. It follows that holders whose country of origin is bound by both the Agreement and the Protocol are not entitled to request such transformation in respect of a designated Contracting Party also bound by both treaties (such designation being, by application of the safeguard clause, governed by the Agreement). 51 If the safeguard clause were to be repealed, the consequence would be that in those situations outlined in the second part of the preceding paragraph, it is the Protocol that would govern the designations in question and therefore transformation would become possible in respect of such designated Contracting Parties. 52 As already noted, in 2005 the International Bureau recorded 356,487 designations made in international registrations or in subsequent territorial extensions. These consisted of 198,894 designations governed by the Agreement and 157,593 designations governed by the Protocol. 53 If the safeguard clause had not been in place that year, of those 356,487 designations, 25,601 designations would instead have been governed by the Agreement and the remaining 330,886 would have been governed by the Protocol. In other words, 173,293 additional designations would have been made under Protocol instead of under the Agreement and would therefore be eligible for transformation, had the circumstances so warranted. 54 In that context, it should be noted that, in 2005, the International Bureau recorded 851 cancellations of international registrations due to ceasing of effect of the basic registration (Rule 21) of which 543 corresponded to international registrations governed partially or exclusively by the Agreement by virtue of the safeguard clause and which, in the absence of such clause, would have fully benefited from the possibility of transformation. 55 Thus, repeal of the safeguard clause would, insofar as transformation is concerned, be clearly beneficial to users of the Madrid system. With respect to Offices, while it is certainly possible that a widening of the scope of the transformation procedure as a result of the repeal of the safeguard clause may, in the longer term, result in some additional work, it is not considered that this would have a significant impact, in general, on the workload of those Offices, and should not necessitate any additional procedural or infrastructural measures. 56 It is not envisaged that such a change would have any consequences for the International Bureau. (e) Refusal Period 57 The time limit to notify a provisional refusal of protection is one year under the Agreement, while such time limit may, under the Protocol, be extended to 18 months, or longer in the case of a refusal based on an opposition (provided that the Contracting Party concerned has made the declarations referred to in Article 5(2)(b) and (c) of the Protocol). 58 By virtue of the safeguard clause, where a Contracting Party bound by both the Agreement and the Protocol is designated by an applicant or holder whose country of origin is also bound by both treaties, such designation is governed by the Agreement. It follows that the Office of such designated Contracting Party must necessarily notify a provisional refusal of protection within a one year time limit, notwithstanding the fact that that Contracting Party may have requested an extension of the refusal period to 18 months, or longer, under the Protocol. 59 If the safeguard clause were to be repealed, the consequence would be that, in the circumstances outlined above, the Office of a designated Contracting Party which has made the appropriate declarations would be entitled to notify a provisional refusal of protection within the extended period of 18 months, (or longer, in the case of a provisional refusal based on opposition), instead of within a one year time limit, as at present. 60 As of the date of issuing of the present document, such change would be of direct significance for the Offices of 12 States. These are the Offices of States bound by both treaties, and which have requested the extension of the refusal period to 18 months8. (Of those 12 States, a further 6 have also made the declaration under Article 5(2)(c) of the Madrid Protocol, permitting the period of 18 months to be extended in the case of the notification of a provisional refusal based on an opposition)9. 61 Repeal of the safeguard clause would mean that those Contracting Parties would then, in principle, obtain additional time for the purpose of notifying a provisional refusal, when designated by an applicant or holder whose country of origin is a country also bound by both treaties. 62 According to the International Bureau’s statistics, in 2005 there were 54,079 designations of those 12 Contracting Parties originating from States bound by both treaties, and thus made under the Agreement, by virtue of the safeguard clause. If the safeguard clause had not been in place in that period, then all those designations would instead have been made under the Protocol. 63 Thus, in practical terms, as far as users are concerned, the applicants and holders in question, i.e., whose country of origin is a State bound by both treaties, and who designated any of those 12 Contracting Parties, (i.e., also bound by both treaties and which have requested an extension of the refusal period), would in such case, in theory, have been obliged to wait for a period of 18 months (or more), instead of one year, as at present, in order to know whether they enjoyed protection in the territory of the Contracting Party concerned. 64 In that context, it is instructive to consider the factual timing of notifications of provisional refusal issued during 2005 by the Offices of those 12 States against designations made under the Protocol (and thus, where the extended period was in fact available). 65 In 2005 the International Bureau recorded 1,476 notifications of provisional refusal issued by the 12 Offices in question, against designations made under the Protocol10. Of those notifications, a total of 1,453 were issued within the period of one year, only 20, i.e., about 1.4 percent, were issued between 12 and 15 months, none was issued between 16 and 18 months, and just 3 were issued after 18 months (i.e., concerning provisional refusals based on opposition). 66 Thus, in terms of the actual notification of provisional refusals, repeal of the safeguard clause, insofar as the refusal period is concerned, would, in practice, be unlikely to have a significant impact on users of the Madrid system. In those cases where notifications of refusal are issued, it would seem that, by and large, the vast majority of such notifications would, in any event, issue within the period of one year, regardless of whether a designation has been made under the Agreement or under the Protocol. 67 However, it could be said that a repeal of the safeguard clause, insofar as the refusal period is concerned, might otherwise be prejudicial to users, to the extent that in the situations where a notification of provisional refusal has not been issued by the Office of one of the 12 States in question, applicants and holders would be obliged to wait for an extended period before knowing definitively whether their mark is protected in the territory of such State11. 68 It should be further added that none of the States in question issues statements of grant of protection, as provided for by Rule 17(6) of the Common Regulations. With the safeguard clause in place today, applicants and holders would are nevertheless able have been able to rely upon the expiry of the period of one year in order to know the status of protection of their mark. Repeal of the safeguard clause would result in an extension of this period, without the mitigation of possibly receiving a statement of grant of protection before the period has expired12. 69 As far as Offices are concerned, repeal of the safeguard clause with respect to the refusal period would be of direct significance only for the Offices of those 12 States concerned. The Offices of those States would need to modify their information systems in order to reflect the new situation, but given the fact that in the appropriate circumstances such Offices already apply the provisions of Article 5(2)(b) and (c) of the Protocol, it is anticipated that the implementation of such modification would not be difficult. 70 Such a change would also require to be incorporated into the administrative and procedural systems of the International Bureau, but it is not anticipated that a repeal of the safeguard clause would have any significant implications for the International Bureau in this respect. (f) Fee System 71 Under the Agreement, the designation of each Contracting Party gives rise to the payment by the applicant or holder of “standard” fees (the amounts of which are 73 Swiss francs, plus 73 Swiss francs for each class of goods and services beyond the third). Under the Protocol, instead of the standard fees, the designation of a Contracting Party (and the renewal of that designation) may give rise to the payment of an “individual fee”, if such Contracting Party has made the corresponding declaration under Article 8(7) of the Protocol. (The amounts of the individual fee are determined by each Contracting Party concerned, but may not be higher than the fee which the Office of that Contracting Party would be entitled to receive in the case of a direct filing.) 72 Where a Contracting Party bound by both treaties is designated by an applicant or holder whose country of origin is also bound by both treaties, such designation is, by virtue of the safeguard clause, governed by the Agreement. It follows, therefore, that only the standard fees are payable in respect of the designation of that Contracting Party, even if the latter has opted for an individual fee under the Protocol. 73 It also follows that if the safeguard clause were to be repealed, the consequence would be that applicants or holders (whose country of origin is a State bound by both treaties) would be required to pay an individual fee, instead of standard fees, as at present, when designating a Contracting Party also bound by both treaties that has made the individual fees declaration, as well as for the renewal of such a designation. 74 As of the date of issuing of the present document, such change would be of direct significance for 11 Offices of Contracting Parties, namely the Offices of Contracting Parties bound by both treaties, and which have requested the payment of an individual fee13. 75 For the purpose of assessing the potential impact of the repeal of the safeguard clause, insofar as the payment of fees is concerned, the International Bureau has carried out a simulation of the repeal with respect to international registrations recorded in 2005, stemming from applications filed through the Offices of Contracting Parties bound by both the Agreement and the Protocol. That exercise shows that, on average, the amount of registration fees would have risen from 3,041 to 3,773 Swiss francs – i.e., a difference of 732 Swiss francs, or 24 percent. 76 On an annualized basis, for each year of the period of 10 years of protection, this works out as an increase of 73 Swiss francs. 77 Furthermore, for a clearer perspective, it is of significance that the statistics of the International Bureau also reveal that, in 2005, the average amount of fees paid in respect of a single international registration was of 3,253 Swiss francs. In 59 percent of cases, the actual fee paid per international registration was less than 3,000 Swiss francs. A further 23 percent of international registrations incurred fees between 3,000 and 4,999 Swiss francs. Thus, in 2005, a total of 82 percent of all international registrations incurred fees of less than 5,000 Swiss francs. The following chart illustrates more comprehensively the breakdown of all fees paid in respect of international registrations in 2005. 
78 A similar simulation carried out with respect to subsequent designations recorded in 2005 and which were filed through the Offices of Contracting Parties bound by both the Agreement and the Protocol shows that the amount of fees would have risen, on average, by 276 Swiss francs, from 1,171 to 1,447 Swiss francs, or 23 percent. 79 As a repeal of the safeguard clause would also apply to designations made before the entry into force of the amendment of Article 9sexies, this would entail that for the renewal of those registrations which include designations of Contracting Parties that have made the declaration under Article 8(7)(a) of the Protocol, individual fees would also be payable instead of the standard fees. 80 For international registrations expiring in 2007, statistics reveal that of the designations contained therein, 98 percent are in respect of Contracting Parties bound by both the Agreement and the Protocol. A simulation based on the renewal of those international registrations originating from Contracting Parties bound also by both treaties shows that if the safeguard clause were to be repealed, the average fee for the renewal of such international registrations would increase from 1,757 to 2,840 Swiss francs – a difference of 1,083 Swiss francs, or 62 percent. 81 However, if one were instead to take those international registrations recorded in 2005, the renewal in 2015 of those international registrations (originating from Contracting Parties bound by both treaties) would incur, on average, an increase of 1,019 Swiss francs, from 2,544 to 3,563 Swiss francs, or 40 percent, as a result of the repeal of the safeguard clause14. 82 On an annualized basis, this would mean an increase of approximately 100 Swiss francs for each year of the renewed 10 years of protection. 83 Obviously, the repeal of the safeguard clause insofar as the fee system is concerned will have a more or less significant impact, or no impact at all, on those users (holders and applicants) whose country of origin is a State bound by both the Agreement and the Protocol, depending on the Contracting Parties that have been designated in each particular case. 84 As far as Offices are concerned, repeal of the safeguard clause with respect to the fee system would be of direct significance only for the 11 Offices in question. Such a change would require to be incorporated into the administrative and procedural systems of those Offices. However, given the fact that in the appropriate circumstances such Offices already operate the individual fee system, it is anticipated that the implementation of such a change would not be difficult. 85 For the International Bureau, it is not anticipated that the repeal of the safeguard clause in the context of the fee system would have any significant implications. Consequences of the Repeal of the Safeguard Clause on the Use of Languages 86 It should be noted that the issue of the language regime under the Madrid system is the subject of a separate specific and detailed paper for submission to the second session of the Working Group (document MM/LD/WG/2/4). It is proposed, therefore, merely to briefly restate here the salient comments contained in that document. 87 It is recalled that the rules governing the languages which may or must be used for the filing of international applications and all subsequent operations under the Agreement and the Protocol are not laid down in the treaties themselves, but in the Common Regulations (Rule 6). 88 In its first session, the Working Group recommended, in the context of the review of the safeguard clause, the amendment of the Common Regulations so as to provide for the use of all three languages (“the trilingual regime”) in the mutual relationships between States bound by both treaties (document MM/A/36/1, paragraph 98 of the Annex). 89 In the event that the safeguard clause is repealed, an amendment of Rule 1 of the Common Regulations would be necessary in order to redefine what is meant respectively by an international application governed exclusively by the Agreement, exclusively by the Protocol, or by both the Agreement and the Protocol. 90 Such an amendment of Rule 1 of the Common Regulations would automatically entail, as a natural consequence (without the need for any specific modification of Rule 6 of the Common Regulations and without changing the language regime, as such), an extension of the trilingual regime. Thus, an international application whose Office of origin is the Office of a Contracting Party bound by both the Agreement and the Protocol and which designates Contracting Parties all bound by the Agreement, would become governed (at least in part) by the Protocol, where at least one of the designated Contracting Parties is also bound by the Protocol – in which case the trilingual regime would apply. 91 As far as users are concerned, the extension of the language regime as a consequence of the repeal of the safeguard clause would be clearly beneficial and would result in a partial simplification of the overall language system in the international procedure. In effect, the situations where the Agreement alone would apply, and thus the monolingual regime, would become comparatively rare. 92 Additionally, such a change would be of benefit to Offices of Contracting Parties bound by both treaties, as it would, in almost all cases, afford them additional possibilities for the choice between all three languages for communications with the International Bureau in respect of international registrations that, under the Common Regulations as they currently stand, would have been governed exclusively by the Agreement. Having said that, extension of the trilingual regime would not affect the right of Offices to restrict the choice of the filing language to any one, or two, of the three languages, nor their right to decide on the language in which they wished to receive communications from the International Bureau. 93 An extension of the language regime as a consequence of the repeal of the safeguard clause would also be of benefit to third parties by improving access to the International Register, since considerably more new entries in the Register would be published and made available in all three languages. 94 As far as the International Bureau is concerned, the implications of the extension of the language regime are set out in detail in Chapter V, below. IV. IMPLEMENTATION OF A REPEAL OF THE SAFEGUARD CLAUSE Amendment of the Protocol and of the Common Regulations 95 If the Assembly of the Madrid Union were to agree to repeal the safeguard clause, this decision could be implemented either:
96 In addition to the abrogation or amendment of Article 9sexies itself, the a repeal of the safeguard clause would require consequential amendments to the Common Regulations, in particular an amendment to Rule 1 to redefine what is meant respectively by an international application governed exclusively by the Agreement, exclusively by the Protocol, or by both the Agreement and the Protocol. |