Appendix A: National Interest Analysis: The Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Date of Proposed Binding Treaty Action
1. The Madrid Agreement Concerning the International Registration of Marks ("the Madrid Agreement") was concluded in 1891 and amended multiple times, most recently in 1979. The Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ("the Madrid Protocol") was concluded in 1989 and entered into force on 1 December 1995.
2. It is proposed that New Zealand accede to the Madrid Protocol by December 2008. Accession to the Madrid Protocol is possible without becoming party to the Madrid Agreement and officials to not propose that New Zealand become party to the Agreement.
Reasons for New Zealand to become Party to the Protocol
3. The Madrid Agreement and the Madrid Protocol together form what is known as the "Madrid system". The Madrid system provides an international registration system for trade marks through the World Intellectual Property Organization ("WIPO"). There are 68 countries party to the Madrid Protocol, including New Zealand's major trading partners such as Australia, China, Japan, the United States and the United Kingdom. Recently, the European Community joined the Madrid Protocol, which enables access to the European Community's trade mark system, and provides protection in all countries of the European Union. New Zealand remains one of the last developed countries yet to become party to the Madrid Protocol.
4. At present, a New Zealand business seeking to register its trade marks overseas must make separate applications in each country where protection is sought, in the language of each country. It must pay the fee required in the currency of each country, and will usually need to employ a trade mark agent resident in each country to lodge its application.
5. The Madrid system simplifies this process by registering and protecting trade marks in other countries through a single international application or request made through WIPO. The Madrid system, therefore, has the potential to reduce both the direct application costs and indirect compliance costs for businesses seeking and maintaining trade mark protection in other member countries. New Zealand's accession to the Madrid Protocol would mean that New Zealand businesses would have the option of using the Madrid system and benefiting from the reduction in costs associated with protecting their trade marks overseas.
6. Furthermore, around half of all trade mark applications lodged in New Zealand (approximately 8,000 applications per year covering about 14,000 classes) are from overseas businesses domiciled in member countries of the Madrid Protocol. New Zealand's accession to the Madrid Protocol would allow overseas businesses to apply for or register their trade marks in their home countries, and have that application or registration be effective in New Zealand, thereby reducing their costs associated with trading in New Zealand.
Advantages and Disadvantages to New Zealand of the Protocol Entering into Force
New Zealand and Overseas Businesses
7. The main advantage to New Zealand from accession to the Madrid Protocol is that businesses would have the option to use the Madrid system when obtaining and maintaining the protection of trade marks abroad and, therefore, benefit from the financial savings available through using the Madrid system.
8. Under the Madrid system, after a business has either registered a trade mark or filed an application for registration in its home country (including paying the requisite domestic fees), it files only one additional application in one language (English, French or Spanish) and pays a fee in the local currency, instead of filing multiple applications separately in the trade mark offices of various member countries. In New Zealand, Madrid applications would be filed in English and paid for in New Zealand dollars.
9. Businesses can also use the Madrid system to effect changes in details such as ownership, name and address in some or all of the countries in which protection has been designated, and pay only one fee to do so. Thus, using the Madrid system, a business is able to reduce, and in some cases eliminate, the costs associated with employing a trade mark agent in each country.
10. One potential disadvantage for businesses relates to the fee structure of the Madrid system. Initial analysis indicates that the cost benefits of using the Madrid system would only be realised when a business was to seek protection in at least three or more Member countries simultaneously. It is, however, not compulsory to use the Madrid system and it is still possible to apply directly for protection in particular countries where this would be more cost-effective.
11. Another potential disadvantage for businesses relates to what is known as "central attack". To be able to access the Madrid system, a business must have applied for trade mark protection in its own country (the "home country"). For the first five years after this application, any registration granted through the use of the Madrid system is dependent upon the home country registration being granted and remaining valid. Should the home country application be refused, or the registration subsequently revoked or declared invalid, all registrations obtained through the Madrid system are automatically revoked. In the event of this happening, the Madrid Protocol provides a grace period to allow trade mark owners to convert their Madrid system registrations into ordinary trade mark registrations in each country were protection is sought. The benefits of using the Madrid system would, therefore, be automatically lost.
12. A further disadvantage for businesses may result should they wish to sell or transfer their Madrid system trade marks to businesses from non-member countries. The Madrid system requires that trade mark owners who have registered their trade marks through the Madrid system may only sell or transfer such registrations to another person who is also domiciled in a country party to the Madrid Protocol. Transfer outside of the Madrid Union would require the trade mark owner to convert their Madrid registrations into national trade mark registrations.
Government
13. One advantage to government from the Madrid Protocol entering into force is that under the Madrid system WIPO has responsibility for ensuring that applications for registration of a trade mark made through the Madrid system are correctly completed. The Intellectual Property Office of New Zealand ("IPONZ"), therefore, would only need to examine international applications for the substantive registrability requirements under the Trade Marks Act. This is likely to result in increased productivity for IPONZ as they would no longer have to examine for formality requirements under the Trade Marks Act.
14. A disadvantage to government of acceding to the Madrid Protocol is that there is a presumption of registrability concerned with every Madrid application. Unless an application for registration of a trade mark is formally refused by the domestic registering body within 12 months (extendable to 18 months), an application under the Protocol is deemed registered. It would, therefore, be crucial for IPONZ to ensure that no significant backlogs in unexamined applications develop after accession. However, IPONZ does not currently have any backlog on trade mark applications and this only likely become a problem if, for some reason, IPONZ suffered a significant loss of resources.
15. Additionally, as a consequence of New Zealand being party to the Patent Co-operation Treaty, which establishes a comparable process for patent applications, IPONZ already has experience as a Receiving Office, including handling and processing procedures for international applications. This experience can be applied in the development of its role as a Receiving Office under the Madrid Protocol.
Obligations
16. New Zealand's obligations under the Madrid Protocol would be principally managed by IPONZ through its administration of the Madrid system procedures.
17. As the national Receiving Office, IPONZ would be required to receive applications (and applicable fees in New Zealand dollars) from New Zealand businesses on behalf of WIPO. IPONZ would then be required to forward the applications and relevant fees (after conversion to Swiss francs) to WIPO.
18. As the National Trade Marks Office, IPONZ would be obliged to examine Madrid system applications designating New Zealand for compliance with our own Trade Marks Act. A trade mark under the Madrid system would be deemed to be registered in New Zealand, unless IPONZ notified WIPO that it had refused registration within 12 months (extendable to 18 months).
19. Where an original trade mark application is made through IPONZ and within the first five years of international registration it ceases to have effect, IPONZ would be required to notify WIPO of this as well as the facts and decision affecting the cessation of the trade mark registration.
Economic, Social, Cultural and Environmental Effects
20. If New Zealand acceded to the Madrid Protocol, businesses would have the option of filing for trade mark protection overseas using the Madrid system. Compliance costs for businesses using this system could, therefore, be reduced. The cost saving would be proportional to the number of overseas countries (three or more) where protection was sought.
21. Anecdotal evidence from Australia following its accession to the Madrid Protocol suggests that New Zealand trade mark agents could face a short-term (around one to two years) reduction in revenue as overseas businesses switch to using the Madrid system to protect their trade marks in New Zealand, rather than applying directly through local agents. The impact of any reduced revenue is likely to be greatest on small firms who rely on overseas trade mark work for a substantial portion of their income. This impact is expected to be mitigated over the medium to long term as some of the lost revenue can be expected to be recouped by additional work from both New Zealand and overseas businesses related to utilisation of the Madrid system.
22. Since the Madrid Protocol does not attempt to harmonise substantive trade mark law, accession would not limit the government's ability to achieve specific policy objectives in the area of trade marks, such as responding to Treaty of Waitangi claims. Furthermore, accession would not have any adverse effects on Māori interests or be inconsistent with our human rights obligations. There are, therefore, no perceived social, cultural or environmental effects arising from accession.
Costs
Government
23. There would be one-off costs for IPONZ to develop and implement procedures for administering the Madrid system and to update its electronic database to accommodate the Madrid system. IPONZ staff would need to be trained on the changes to the Trade Marks Act and in the implementation of procedures for administering the Madrid system. Costs would also be incurred by IPONZ to develop client information about the use of the Madrid system and to educate trade mark agents and New Zealand businesses on the use of the Madrid system.
24. While there would be on-going costs for IPONZ acting as a Receiving Office for WIPO, these costs would be recovered through a handling fee charged to users of the Madrid system.
25. As a party to the Madrid Protocol, New Zealand would be signalling its intention to participate in the Madrid Union including attendance at meetings of the Madrid Assembly (although attendance at such meetings is not compulsory).
26. The Madrid Assembly meets annually in Switzerland at the same time as the WIPO General Assemblies, which WIPO funds New Zealand to attend. Attendance at any additional meetings to deal with issues of significance affecting the operation of the Madrid Protocol would be recovered from revenue derived from Madrid system applications.
New Zealand and Overseas Businesses
27. There may be one-off costs associated with New Zealand businesses developing their in-house procedures to manage international applications and registrations. This should, however, be viewed in light of the potential cost reductions associated with using the Madrid system.
28. There are unlikely to be any additional costs for overseas businesses in New Zealand acceding to the Madrid Protocol, especially for those domiciled in Member countries, whose compliance costs would be reduced.
Trade Mark Agents
29. Trade mark agents would be expected to face one off costs, such as staff training, setting up new processes and procedures and software modifications, in relation to using the Madrid system.
Consumers/Society
30. No costs to the consumer or economy are anticipated.
Future Protocols
31. The Protocol provides that amendments may be adopted by a majority of the contracting parties voting as members of the WIPO Assembly. Adopted amendments would enter into force one month after written notifications of acceptance have been received from three-quarters of the contracting parties who were members of the Assembly at the time of the adoption of the text of the proposed amendments. Accepted amendments are binding on all parties to the Protocol.
Implementation
32. The Madrid Protocol would be implemented under the Trade Marks Act and its associated regulations. Prior to acceding to the Madrid Protocol this legislation would require amendment to implement the Protocol. The proposed Trade Marks (International Treaties) Amendment Bill has been categorised as priority level 5 (drafting instructions to be given to Parliamentary Counsel Office by the end of 2006) on the Government's 2006 legislative programme.
33. IPONZ would also need to develop and implement new processes for trade mark applications filed through Madrid (both from New Zealand applicants and international applications received through WIPO), including modifications to its database.
Consultation
34. A discussion paper entitled International Trade Mark Treaties was published on 8 March 2006. Submissions were sought from businesses, trade mark agents, patent attorneys, law practitioners and interested parties on whether New Zealand should accede to the Madrid Protocol. Seven submissions commented specifically on the Madrid Protocol and all, to varying degrees, supported New Zealand becoming party. Submitters generally acknowledged that overseas businesses, rather than local businesses, would be more likely to use the Madrid system and, therefore, benefit most from New Zealand's accession. Submitters commented that they considered New Zealand's accession was, however, inevitable; would assist to align New Zealand's trade mark regime with Australia and other leading trading partners; and would also add credibility to New Zealand's trade mark regime.
35. The following departments and ministries have been consulted on this paper: the Ministry of Consumer Affairs, the Ministry for Culture and Heritage, the New Zealand Customs Service, the Ministry of Foreign Affairs and Trade, the Ministry of Justice, Te Puni Kōkiri, and the Treasury. In addition, the Department of the Prime Minister and Cabinet has been informed.
Withdrawal or Denunciation
36. Any party to the Madrid Protocol may, at the expiry of five years from the date of accession to the Protocol, denounce the Protocol by written notification to the Director General of WIPO. Denunciation takes effect one year after the day on which notice is received.
37. Owners of international registrations in a denouncing state may file an application within two years from the date of the denunciation for registration of their mark with the Office of the denouncing state. This is also available if the owner is no longer entitled to file international applications in other countries because of the denunciation. In these cases, the mark is to be treated as though it had been filed on the date of its international registration.
Lead agency: the Ministry of Economic Development
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