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Cancellation for non-use of registered trademarks

The regional trademark offices in the Middle East, including the local UAE trademark office, receive thousands of trademark applications annually. The number of approved and registered trademarks has increased significantly over the last few years due to a less conservative approach being taken towards examination. Effectively, this increase in the number of registered trademarks has resulted in more newly registered controversial trademarks in the market.

Hence, it is essential to conduct clearance searches prior to trademark registration, as this will help the owner to identify any obstacles that may arise in the early stages and assist trademark owners in selecting and registering more distinctive trademarks. Nonetheless, the chances of facing opposition from third parties’ objections and cancellation actions still remains a serious risk for newly registered marks.

In the UAE, non-use cancellation is relatively rare and not commonly raised in trademark disputes due to the flexibility for trademark owners to produce evidence demonstrating such use. Historically, there was no system permitting tax control on sales of products or services and parties could produce evidence to demonstrate internal sales within the UAE.

Trademark Federal law number 37 enacted in 1992 and its amendments by Federal law number 8 of 2002 of “Trademark Law”, establishes statutory ground via Article 22 for disputing parties to order the cancellation of a trademark, if it is proven that a trademark has not been in use for five consecutive years. This is not applicable if the trademark owner establishes that the non-use is due to reasons beyond his control, such as import restrictions and imposed governmental conditions.

A cancellation request against a registered trademark will shift the burden of proof of usage to the trademark owner. With an increasing number of unused registered trademarks in the UAE, trademark attorneys find themselves obliged to come up with innovative and creative steps to overcome such threats to their registered trademarks. It is imperative to find suitable and legally sound mechanisms for producing adequate evidence to prove active trademark use.

In this context the analysis is kept to a minimum, by simply highlighting the impact of non-use under these two conditions i) objection by third parties to newly applied marks by legitimate trademark owners; and ii) impact of tax regulations in the UAE on evidence proving trademark use.

Objections by third parties are expected during the opposition period. Trademark applicants may face opposition within a thirty day period from the date of publishing their approved marks in the local official gazette. Whilst trademark applicants usually focus on traditional defenses, including lack of similarity between marks, prior ownership and/or use of an applied mark, to overcome such opposition, it will soon become very important to test whether the owners of preregistered trademarks have met the usage requirement and can produce evidence of such use according to Article 22 of the Trademark Law.

It is not unusual for parties’ to pirate trademarks with the purpose of blackmailing the legitimate right holder, it seems that many owners of preregistered trademarks may have no intention of using such marks, and therefore, contribute to the increasing number of non-use registered trademarks, which makes it unlawful. Hence, it is recommended for trademark applicants who face opposition or objection by holders of preexisting registered marks to consider whether such trademarks are vulnerable for cancellation on a non-use basis. Evidence of use can be produced in the form of marketing expenditures, actual direct sales, signed agreements to appoint third parties for a jurisdiction, advertisement expenses, logistic movement by way of imports and exports for goods and so forth. This has provided some flexibility in overcoming the traditional proof of actual usage, yet actual effort and evidence must be prepared and produced by trademark owners. Legitimate trademark owners will most likely be willing to invest in and build such evidence in order to maintain their registered rights.

As the UAE, and other neighbouring countries, are introducing and implementing tax systems, such as Value Added Tax (VAT) and Tax Procedures laws, the proof of use needs to be aligned with the declared sales and alleged revenues from such use. Therefore, trademark owners will have to pay attention to the evidence submitted in any proceedings, whether in the UAE or elsewhere, to prove the actual use, fame of their trademarks and ensure their submissions tally with their declarations made to the relevant tax authorities in the UAE. In addition, the VAT and UAE tax system will assist parties in cross-examining any submission or allegation of use submitted by the trademark owner to prove the authenticity of such use.

The expense of facing cancellation for non-use proceedings five years after the date of registration can be avoided if trademark registrants are prepared for such claims. To be in a solid position to defend a claim based on Article 22, there are five conditions that should be met: (1) The trademark in use is the subject matter of the registration(2) The trademark is in-use within the normal course of the trade license (3) It is used within the UAE including UAE free zones or onshore territory (4) The trademark is used in relation to the goods or services identified by registration.; and (5) The trademark is used by the trademark owner or a properly appointed entity or person as determined by the Trademark Law.

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