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EU and US: Opposing Views of Geographic Indications of Origin

March 5, 2010

Newsletters

EU and US: Opposing Views of Geographic Indications of Origin

March 5, 2010

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Trademark Thoughts Fall 2008

For centuries, rural enclaves of Europe have produced some of the world’s best known and most celebrated meats, cheeses, and other specialty foods. Many of Europe’s rural economies have prospered by selling these unique products. Steeped in cultural significance, regional “foodstuffs” have also become a source of national pride.

European Union Regulation 2081/92 currently represents the culmination of these efforts.1 It expressly states the European Council’s desire to offer strong protection to the regional producers of specialty agricultural products and foodstuffs through a centralized system of European registration and protection:2 “The promotion of products that have certain characteristics could be of considerable benefit to the rural economy, in particular to less-favored or remote areas, by improving the incomes of farmers and thereby preserving the rural population in these areas.” The regulation also notes that in recent years, “consumers are tending to attach greater importance to the quality of foodstuffs rather than to quantity.” The intent is to aid consumers in finding products of a specific quality amidst the “wide variety of products marketed” and “the abundance of information concerning them.”

Registration and protection of geographical indications and identifications of origin is available when “the quality or characteristics of [the product] are essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and the production, processing and preparation of which take place in the defined geographical area.” By defining the designation in this manner, the Council limits registration to goods that owe their unique characteristics to the region where they are produced. If a product of equal quality and characteristics could be made elsewhere in the world, these features would by definition not be the result of a “particular geographic region.” Accordingly, an application to protect the product in more than one region would, in theory, be denied.

European courts have supported the principles underlying article 2. In Commission v. Germany,3 German law permitted use of the word “Sekt” only for German sparkling wine and “Weinbrand” only for German brandy; imported sparkling wine and brandy had to be referred to by different names.4 The court notes that “appellations of origin” (the old term for geographical indications of origin) “only fulfill their specific purpose if the product which they describe does in fact possess qualities and characteristics which are due to the fact that it originated in a specific geographical area.” The court found that the wines and spirits protected by the appellation of origin did not possess any unique qualities or characteristics related to the geographical region of Germany. Consequently, the court struck down the German law as an improper use of an appellation of origin, in violation of the Common Market’s principle of free circulation of goods.

The strict interpretation of the requirement of a clear linkage between a product’s qualities and its protected geographical designation of origin serves to allay fears that 2081/92 will create unfair monopolies. The Council does not feel that by allowing the registration of a regional name, it is acting to deny producers from other regions the right to make the product and compete in the marketplace. Under the logic of the regulation, the very location of production is what gives the product its character; if it were made somewhere else, it would necessarily be a different product. In theory, geography is what is keeping outside producers from competing in the market. Regulation 2081/92 can thus be viewed as protecting both consumers and legitimate producers from the possibility of outsiders selling knock-off products under misleading names.

Applications for registration must include a detailed specification of the product in order to allow the Commission to make an informed decision as to the product’s conformity to the requirements of article 2.5 This specification must include the name of the product or foodstuff and a description of it, including the raw materials used in its production and “the principle physical, chemical, microbiological, and/or organoleptic characteristics of the product or foodstuff.” The specification also must detail, among other things, the methods of production, a definition of the geographical area, details “bearing out the link with the geographical environment,” and details of the inspection structures.

Generally an application will be filed by a group of producers, although individual persons may apply as well.6 The application is filed with the applicant’s Member State, which then examines it and, if it feels the application satisfies the requirements of 2081/92, forwards it to the Commission. The Commission then makes its own determination on the application; if the application is approved, a summary of it is published and, unless objections are filed by other Member States within six Trademark and Copy right Group After finding that outside bottling could alter the quality and characteristics of the protected Rioja region’s wines, thereby defrauding consumers and hurting the reputation of all the producers in the region, the court upheld the regional bottling requirement as necessary to attain the legitimate goal of the regulation. The court determined that there was no other way to ensure maintenance of quality and thus deemed the regulation to be the least restrictive means available to accomplish the legitimate goal of the regional bottling requirement. This case illustrates the divide between US and EU law in the area of free movement of goods. Pike v. Bruce Church 9 involved an Arizona state law that required all Arizona-grown cantaloupes to be packaged in Arizona in order to be labeled as originating in the state. The State legislature’s declared goal for enacting this regulation was to “promote and preserve the reputation of Arizona growers by prohibiting deceptive packaging.” The Supreme Court begrudgingly noted that “the asserted state interest [was] a legitimate one,” but went on to declare the statute a violation of the Commerce Clause: “The State’s tenuous interest in having the company’s cantaloupes identified as originating in Arizona cannot constitutionally justify the requirement that the company build and operate an unneeded $200,000 packing plant in the State. The nature of that burden is, constitutionally, more significant than its extent. For the Court has viewed with particular suspicion state statutes requiring business operations to be performed in the home State that could more efficiently be performed elsewhere.” The key word in this decision is “efficiently.” The Supreme Court is hesitant to allow legislation that discriminates against another state in an effort to ensure high quality or protect consumers from deception. Economic efficiency is the primary goal to be protected, and the Court apparently is unwilling to sacrifice it in order to defend the good name of regional growers or to protect consumers from deception. As evidenced by the Belgium opinion, the European courts are willing to exchange some margin of economic efficiency in an effort to protect consumers and regional producers operating under protected designations of origin. One possible explanation for the holding is that there was no evidence that whatever uniqueness Arizona canteloupes offer is lost when the melons are shipped elsewhere to be crated. Still, there is the priority of economic efficiency in the United States, while in the European Union, such efficiency may be sacrificed to protect consumer expectation. On another principal, there is greater, but less than total, agreement between the two regimes. Regulation 2081/92 prohibits registration of generic names. 2 Fish & Richardson Trademar kT houghts months of the publication, the designation is certified and placed on the register.7

The inspection structures referred to in 2081/92 are a vital part of the regulation’s efforts to protect consumers and producers. Products produced under the protected designation of origin must always conform to the specification filed with the application for protection. If they do not, the inspection body is required to deny the producers of such products use of the protected designation. The individual Member States are in charge of ensuring that inspection regimes are set up and that producers have access to them, though the costs of inspection are borne by the producers themselves. Any Member State may “submit that a condition laid down in the product specificati…has not been met.” If repeated violations of the specification by users of the designation are found by the Commission, it may cancel the registration altogether. The threat of cancellation may compel producers to better police each other in an effort to ensure that the reputation and status of the protected designation remain intact.

The courts have allowed strict enforcement of specification conformity requirements, even when those requirements operate to restrain the free movement of goods within the European Union. In Belgium v. Spain,8 a Spanish wine regulation required wines produced in a region under a protected appellation of origin to be bottled in the protected region. Belgium brought a proceeding, claiming that the regional bottling requirement violated the free movement of goods principle of the European Union because it prevented wine from being shipped from Spain in bulk and then bottled in Belgium. After finding that the regulation did, in fact, restrict the free movement of goods, the court reasoned that to be justified, a regulation restraining the free movement of goods must be necessary to attain a legitimate state objective, and it must also be the least-restrictive means available. The objective of the Spanish regulation was to promote the reputation of products by ensuring quality through conformity with the specifications contained in the registration of the protected “Rioja” designation. The court deemed this goal legitimate, stating that
“The reputation of designations of origin depends on their image in the minds of consumers.That image in turn depends essentially on particular characteristics and more generally on the quality of the product…The rules governing the Rioja [controlled designation of origin] are designed to uphold these qualities and characteristics. By ensuring that operators in the wine-growing sector of the Rioja region control bottling as well, they pursue the aim of better safeguarding the quality of the product and, consequently, the reputation of the designation.”

After finding that outside bottling could alter the quality and characteristics of the protected Rioja region’s wines, thereby defrauding consumers and hurting the reputation of all the producers in the region, the court upheld the regional bottling requirement as necessary to attain the legitimate goal of the regulation. The court determined that there was no other way to ensure maintenance of quality and thus deemed the regulation to be the least restrictive means available to accomplish the legitimate goal of the regional bottling requirement.

This case illustrates the divide between US and EU law in the area of free movement of goods. Pike v. Bruce Church 9 involved an Arizona state law that required all Arizona-grown cantaloupes to be packaged in Arizona in order to be labeled as originating in the state. The State legislature’s declared goal for enacting this regulation was to “promote and preserve the reputation of Arizona growers by prohibiting deceptive packaging.” The Supreme Court begrudgingly noted that “the asserted state interest [was] a legitimate one,” but went on to declare the statute a violation of the Commerce Clause: “The State’s tenuous interest in having the company’s cantaloupes identified as originating in Arizona cannot constitutionally justify the requirement that the company build and operate an unneeded $200,000 packing plant in the State. The nature of that burden is, constitutionally, more significant than its extent. For the Court has viewed with particular suspicion state statutes requiring business operations to be performed in the home State that could more efficiently be performed elsewhere.”

The key word in this decision is “efficiently.” The Supreme Court is hesitant to allow legislation that discriminates against another state in an effort to ensure high quality or protect consumers from deception. Economic efficiency is the primary goal to be protected, and the Court apparently is unwilling to sacrifice it in order to defend the good name of regional growers or to protect consumers from deception. As evidenced by the Belgium opinion, the European courts are willing to exchange some margin of economic efficiency in an effort to protect consumers and regional producers operating under protected designations of origin. One possible explanation for the holding is that there was no evidence that whatever uniqueness Arizona canteloupes offer is lost when the melons are shipped elsewhere to be crated. Still, there is the priority of economic efficiency in the United States, while in the European Union, such efficiency may be sacrificed to protect consumer expectation. On another principal, there is greater, but less than total, agreement between the two regimes. Regulation 2081/92 prohibits registration of generic names.

“The name of an agricultural product or a foodstuff which, although it relates to the place or the region where this product or foodstuff was originally produced or marketed, has become the common name of an agricultural product or foodstuff,” may not be registered.10

Determining whether a name has become generic and is thus unregistrable is largely a fact-based inquiry carried out by the Commission when it reviews an application. However, the Commission’s decision can be appealed to the European Court of Justice, and these appeals have produced some guidance as to what constitutes a generic name in the European Union. In Denmark v. Commission,11 Denmark sued the Commission over its approval of FETA as a protected designation of origin for a type of cheese. There were persuasive arguments both for, and against, registration. The court pointed out that Feta was “traditionally” produced in Greece,12 while producers in Denmark did not begin production until 1963. This fact argues in favor of registration. However, as evidenced by the Eurobarometer public opinion poll results, Danish producers had made quite an impact on the market in the 40 years since beginning production. Of Europeans surveyed, 50 percent believed the cheese was of a particular origin, while 47 percent believed it to be the common name of a type of cheese. Even in Greece itself, only 52 percent of respondents who had seen the name thought it was a product from a particular region. These inconclusive results were enough to convince the ECJ to remand the decision to the Commission for reconsideration. On remand, the court instructed the Commission to consider, “traditional fair practice and…the actual likelihood of confusion.”13 The EU prohibition on the registration of generic names only applies to the initial registration process, however. Once protected, “Names may not become generic.”14 This is a significant rule. Never again shall a geographical indication like “Pilsner” become a widely used common name for a product. Even if 99 percent of European consumers come to believe that Feta is a common name, the Greek producers who registered the designation of origin will retain their rights under 2081/92. This is a striking departure from US law, where changed consumer perception can remove the rights of any mark holder.15

Conclusions:
There are significant positive aspects to the European approach of guaranteed protection, despite the law’s refusal to recognize changes in consumer perception. In the US, a trademark holder must constantly defend its mark from infringement via lawsuit, and must advertise its product in such a way as to remind consumers that, for instance, Thermos is a brand of vacuum-sealed insulating bottle, or Kleenex is a brand of facial tissue, or Xerox is a brand of document copiers. This imposes significant costs on mark holders. Under 2081/92 the holders of a protected designation or identification do not have to worry about protecting their marks from becoming generic. This greatly reduces the costs imposed on the producers. This reduction is important given the fact that producers are already made to bear the costs of the required inspection regimes. It is also vital to the overall goals of 2081/92, namely the protection of rural economies and small regional producers through statutory defense of their products from unfair competition. These small companies and associations are precisely the type of “little guys” that the European Union seeks to benefit and protect.

On the other hand, US law squares more precisely with consumer understanding and expectation. The beneficiary of US law is the consuming public as a whole; that of the EU model, the (normally rural) producers. EU law regarding the protection of geographical indications of origin attempts to defend consumers and regional producers from deceptively labeled products through a system of rigid marketing restrictions. Producers bear the financial burden of establishing and operating inspection regimes to ensure conformity with a detailed specification, but they are spared the costs of advertising and vigilant legal enforcement imposed on trademark holders by US law. The EU system has economic costs associated with it. It restricts access to markets and allows restraints on the free movement of goods. However, these costs have been deemed acceptable by the ECJ, because they afford gains in consumer protection and enhanced competitiveness of rural economies. The US Supreme Court has shown that it is unwilling to let regional economic interests burden interstate trade.

These competing philosophies have clashed at the WTO. A Europe-led contingent of countries is seeking to amend Trips Article 23 to include foodstuffs (it currently provides worldwide protection to wines and spirits similar to that provided in the European Union by Regulation 2081/92). A United States-led group of countries opposes this effort.16 Thus far, neither side has been able to compel the other to bend to its philosophy on the protection of geographical indications of origin. This dispute is likely to continue for some time.

Notes

1 See, Council regulation 2081/92, O.J. L. 208, at 2 (1992).

2 It should be stressed that 2081/92 covers agricultural products and food stuffs only. Wine and spirits are covered under a separate regulation detailing a more elaborate system of distinction, registration, and protection.

3 Case 12/74, [1975] E.C.R. 181. This case was decided on in 1975, long before 2081/92 was passed. At this time, the Member States still had their own individual protection regimes. These regimes were approximated and harmonized by regulation 2081/92.

4 Obviously, this case concerns wines and spirits that do not fall under 2081/92. However, the principles outlined in this opinion are easily applied to the less-protective 2081/92.

5 Council regulation 2081/92, O.J. L. 208, at article 4(1) (1992).

6 Id. at art. 5. It should be noted that the group of producers who originally filed the application may not act to prohibit new producers from beginning production in the region, so long as their products meet the specification contained in the application. European Commission, Protection of Geographical Indications, Designations of Origin, and Certificates of Special Character for Agricultural Products and Foodstuffs p. 11, http://europa.eu.int/comm/ agriculture/publi/gi/broch_en.pdf (accessed May 8, 2008).

7 The publication of a summary serves to protect the trade secrets of producers filing for protection. Id.

8 Case 388/95, [2000] E.C.R. 23

9 397 U.S. 137, 90 S.Ct. 844 (1970)

10 Council regulation 2081/92, O.J. L. 208, at art. 3(1) (1992). One well known example of such a geographical name is “Pilsner.” Now simply a “style” of beer produced throughout the world, the name originally referred to the Plzen region of Czechoslovakia where the style was first produced. The name “Pilsner” became generic long before 2081/92 came about and is thus un-registrable.

11 Case 289/96, [1999] E.C.R. I-1541.

12 The Feta style of cheese is mentioned numerous times in Homer’s Odyssey, however the name “Feta” was not used until the 17th century.

13Feta remains a registered protected designation of origin despite the significant evidence of a generic meaning. European Commission, Protected Designation of Origin/Protected Geographical Indication, http://www.europa.eu.int/comm/agriculture/qual/en/el_en. htm (accessed May 8, 2008).

14 Council regulation 2081/92, O.J. L. 208, at art. 13(3).

15See, King-Seeley Thermos Company v. Aladdin Industries, 321 F.2d 577 (2nd Cir. 1963)(where the Second Circuit Court of Appeals found that consumers had come to understand the word “thermos” as being a common name of for a vacuumsealed insulated container. Despite 60 years of continuous use of the mark “Thermos” by appellant, the changed perception in consumers’ minds was enough to destroy most of the property rights appellant had in the mark).

16 World Trade Organization, TRIPs Geographical Indications: Background and the Current Situation, http://www.wto.org/english/tratop_e/trips_e/gi_background _e.htm#protection (accessed May 8, 2008).

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