Regulatory impact statement
Singapore Treaty
Statement of the nature and magnitude of the problem and the need for government action
A trade mark is a unique identifier (word, brand, logo, colour, slogan, three-dimensional shape, and sometimes even a sound) that enables a business to easily distinguish its goods and services from those supplied by other traders. It is used as a marketing tool so that consumers can recognise the product of a particular trader, thereby providing low cost information to consumers and creating incentives for business to invest in quality products and services. During the financial year ending 30 June 2005, the Intellectual Property Office of New Zealand (IPONZ) received 27 937 applications to register trade marks, registered 21 089 trade marks and received renewal notices for 10 014 trade mark registrations.
In March 2006, member states, which include New Zealand and Australia, of the World Intellectual Property Organization (WIPO) adopted at the conclusion of a Diplomatic Conference the Singapore Treaty on the Law of Trademarks (the Singapore Treaty). The Singapore Treaty aims to make national trade mark registration systems more user-friendly and to reduce business compliance costs, both for applicants for the registration of a trade mark and for trade mark registrants. This is achieved through the simplification and international harmonisation of trade mark registration procedures.
The majority of the provisions in the Singapore Treaty relate to the procedures of trade mark offices and, in particular, they are constructed to make it clear what a trade mark office can and cannot require from an applicant for registration of a trade mark or a trade mark registrant. While the Trade Marks Act 2002 (the Trade Marks Act) incorporates many of the standards prescribed by the Singapore Treaty, there are a number of provisions that either do not currently meet those standards or are inconsistent with international best practice. Therefore unless New Zealand amends the Trade Marks Act it is unable to join the Singapore Treaty.
Trade marks legislation that is inconsistent with the Singapore Treaty or international best practice can:
There are 3 areas of the Trade Marks Act inconsistent with the provisions of the Singapore Treaty. These are:
Division of trade mark registrations into several registrations:
Currently the regulation making powers only enable procedures, requirements and other matters to be prescribed for the division of an application for registration of a trade mark into several applications. No provision is made for the owner of a trade mark registration to be able to divide his or her registration into 2 or more registrations. The Singapore Treaty requires that such a provision be available to registrants.
Assignment and transmission of title to a trade mark:
The Trade Marks Act only permits the new owner of a trade mark to whom title to the trade mark has been assigned or transmitted may apply to the Commissioner of Trade Marks (the Commissioner) for registration of the person’s title. There is no fee payable to register an assignment or transmission of title. No provision is made for a person assigning or transmitting title to a trade mark (the previous owner) to another person to apply to register the change in ownership of a trade mark. The Singapore Treaty requires a trade mark office to accept an application to register a change of ownership from either the previous owner or the new owner.
Registration of a person as a licensee:
The Singapore Treaty does not require that provision be made for licensees to be registered, but if registration is provided then contracting parties must adhere to certain standards and rules, such as the maximum information a request to register a licensee may contain.
While the Trade Marks Act provides that licensees may be voluntarily registered (there is no fee payable for doing this), the information that must be provided and the evidence requirements are different to those permitted by the Singapore Treaty. Furthermore, under the Trade Marks Act if the licensee is not registered, the licensee is barred from taking action against infringement of the registered trade mark and from lodging a border protection notice to prevent the importation of counterfeit goods. Furthermore, there is no requirement for licensees or trade mark owners to keep the information on registered licensees up to date, and there are business compliance costs associated with doing so. There are no statistics available on the number of licensees not registered in New Zealand or on the number of registered licensees where the information is not current.
In Australia, the registration of a licensee is not a prerequisite for a licensee to have the ability to take action against infringement of the trade mark or to lodge a border protection notice with Customs. The matter of whether a licensee can take action against infringement or lodge a border protection notice is determined first by the licence agreement between the trade mark owner and the licensee. Unregistered licensees in New Zealand are therefore at a disadvantage when compared to their equivalents in Australia.
Statement of the public policy objectives
The primary public policy objective is to provide a more efficient and cost effective trade mark registration regime under the Trade Marks Act that:
The secondary public policy objective is to ratify the Singapore Treaty.
Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objectives
Status quo
New Zealand is not party to the Singapore Treaty.
The key features of the status quo sections are discussed in the problem section. The status quo is not preferred because the Trade Marks Act does not meet the public policy objectives.
Preferred Option – amend the Trade Marks Act to be consistent with the Singapore Treaty
Division of trade mark registrations into several registrations
Amend section 199(b) relating to regulation making powers concerning procedures, requirements, and other matters for the division of an application for the registration of a trade mark into several applications, so that regulations can also be made in respect of procedures, requirements, and other matters for the division of a trade mark registration into several registrations. It is anticipated that the procedures to be prescribed for dividing a trade mark registration in the Trade Mark Regulations 2003 (the Regulations) will mirror those currently provided for dividing applications for registering a trade mark, that is the trade mark registrant would need to make an application to the Commissioner to divide the registration.
Assignment and transmission of title to a trade mark
Amend section 82 to permit the previous owner of a trade mark who is assigning or transmitting title to the trade mark to another person to also apply to the Commissioner. Whether the previous owner or the new owner applied to register the assignment or transmission of title to the trade mark would be a matter for the 2 parties to determine.
Registration of a person as a licensee
Repeal sections 83 to 86, 182(d) and 199(c) to remove the provisions governing the registration of a person as a licensee (ie, amend the Trade Marks Act so that a person cannot be registered as a licensee). The definition of licensee under section 5(1) would also be amended to mean a person other than the owner of the trade mark, who is authorised to use the trade mark by, and subject to the control of the owner. In addition, all existing registrations of licensees would be cancelled and removed from the trade marks register. The provisions in the Trade Marks Act governing the actions of licensees in respect of infringement and border protection measures be aligned with the Australian Trade Marks Act 1995 so that the matter of whether a licensee can take action against infringement or lodge a border protection notice is determined by the licence agreement between the trade mark owner and the licensee.
Statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options
Government
Amending the Trade Marks Act would allow New Zealand to become party to the Singapore Treaty and, therefore, would contribute to the realisation of the aims of the Singapore Treaty to make national trade mark registration systems more user-friendly and to reduce business compliance costs, both for applicants for the registration of a trade mark and for trade mark registrants. It would also assist to align trade mark registration procedures with our major trading partners, in particular Australia, and send a clear signal to the international community of New Zealand’s commitment to provide an efficient and effective trade mark registration regime that is consistent with international best practise.
Amendment would also contribute to the development of a seamless trans-Tasman business environment, or “single economic market”
, and towards fulfilling the mandate in the 2000 Closer Economic Relations Memorandum of Understanding on the Co-ordination of Business Law that the 2 countries explore “the potential for more closely co-ordinating the granting and recognition of registered intellectual property rights”.
Since the Singapore Treaty does not seek to harmonise substantive trade mark law, becoming party to that treaty would not impact on the Government’s ability to achieve specific policy objectives in the trade marks area, such as, for example, responding to Treaty of Waitangi claims.
IPONZ is fully third-party funded and, therefore, there would be no financial implications for the government arising from amendments to the Trade Marks Act. It is anticipated that the proposed changes to the Trade Marks Act and its regulations to enable New Zealand to become party to the Singapore Treaty would result in a minor reduction to IPONZ’s administrative costs associated with maintaining the trade marks register. It is not possible to quantify this reduction in administrative costs.
Trade mark owners and users of trade marks
The likely business compliance costs are discussed in more detail in the business compliance cost statement below.
Division of trade mark registrations into several registrations
The decision to divide a registration would be a voluntary and initiated by the registrant. There would be business compliance costs associated with making an application to divide a trade mark registration for the trade mark owner. The process for doing so has not yet been developed, but it will be prescribed in the Regulations. It is anticipated that no fee would be payable by the registrant to make such an application.
Assignment and transmission of title to a trade mark
There would be business compliance costs associated with a previous owner applying to assign or transmit a trade mark application or registration. These costs are expected to be similar to the costs currently faced when a new owner applies to register change in title to the trade mark and they are discussed in more detail in the business compliance cost statement below.
Registration of trade mark licensees
Removal of the provisions relating to the voluntary registration of a person as a licensee under the preferred option will reduce business compliance costs. These costs are discussed further in the business compliance cost statement.
Removal of these provisions would also decrease the publicly available information on the register about who is licensed to use a registered trade mark. The impact of this cannot be measured as many licensees are not registered, and for those that are the information on the licensee available from the trade marks register is likely to be out of date.
Society
Because of the narrow scope of the proposed amendments to the Trade Marks Act under the preferred option, they are not expected to have any noticeable impact for consumers or on the range or costs of goods and services available in New Zealand.
Statement of consultation undertaken
Stakeholder consultation
The Ministry of Economic Development (MED) released a discussion paper entitled International Trade Mark Treaties in March 2006, which considered, amongst other things, New Zealand becoming party to the Singapore Treaty and key amendments that would be required to the Trade Marks Act and its associated regulations. Six submissions from patent attorneys and law practitioners were received on the matter of accession and amendments to the Trade Marks Act and its associated regulations. Submissions favoured joining the Singapore Treaty, as this would assist to align New Zealand’s trade mark registration regime with our leading trade partners.
A J Park were concerned amendment to section 82 to allow the original owner of title to a trade mark to register a change of ownership did not make practical sense and had the potential to cause difficulties for the new owner. It was suggested, for example, that there is potential for confusion if the new owner is not aware that an assignment has been recorded and the records of the entities involved are likely to be inconsistent and in some cases wrong. Officials note that the provisions in the Singapore Treaty regarding changes to ownership require a trade marks office to accept an application for change of ownership from either the original owner or the new owner.
A J Park were also concerned that the original proposal in the discussion paper to align the provisions concerning the registration of a person as a licensee with the Australian Trade Marks Act 1995 would not result in any benefits and the registration of licensees often causes costs and confusion. Furthermore, they considered that the Commissioner should not play any role in between the trade mark owner and a licensee, and nor should there be any practical or legal effects from the registration of a licensee. It was their view that there were not any practical or legal effects at present. Officials agree with the A J Park's submission on the registration of licensees and the preferred option now proposes to remove the provisions relating to the voluntary registration of licenses and to cancel all existing licensee registrations.
Government department/agency consultation
The following departments and ministries have been consulted on the proposal: the Ministry of Consumer Affairs, the Ministry of Culture and Heritage, the New Zealand Customs Service, the Ministry of Foreign Affairs and Trade, the Ministry of Justice, Te Puni Kokiri, and Treasury. No concerns were raised.
Business compliance cost statement
The source of new compliance costs would include learning of the amendments to the Trade Marks Act, specifically:
The current sources of compliance costs that would be eliminated by the proposed changes include:
Parties likely to be affected will be trade mark owners, trade mark agents (such as law firms and patent attorney firms), who act on behalf of trade owners, and other interested parties including businesses who use trade marks under licence agreements. It is not possible to identify the numbers of such parties or their size, but they range from small businesses to large multinational businesses.
The new sources of compliance costs cannot be quantified until provisions are developed for the Regulations for the procedures relating to the division of a trade mark registration and registration of a change of ownership by the original trade mark owner. They are expected to be very small as these new provisions are expected to mirror existing provisions in the Regulations, ie, mirror the existing provisions for a new owner registering title to a trade mark and for a trade mark applicant to apply to divide his or her application into 2 or more applications for registration of a trade mark. In relation to registering a change of title to a trade mark, currently the new owner of the trade mark must bear the business compliance costs associated with registering a change of ownership. Under the preferred option, either the original owner or the new owner would bear these costs or the costs would be shared between the 2 parties, as determined in any assignment or transmission agreement.
Steps that will be taken to minimise compliance costs include: IPONZ would publish information on the various changes outlined in the preferred option, as well as publishing a set of sample application forms setting out the mandatory information required for any application to divide a trade mark registration into several registrations, and for an application to register a change of ownership by the original trade mark owner assigning or transmitting title of a trade mark to another person.
Madrid Protocol
Statement of the nature and magnitude of the problem and the need for government action
A trade mark is a unique identifier (word, brand, logo, colour, slogan, three-dimensional shape, and sometimes even a sound or smell) that enables a business easily to distinguish its goods and services from those supplied by other traders. It is used as a marketing tool so that consumers can recognise the product of a particular trader, thereby providing low-cost information to consumers and creating incentives for business to invest in quality products and services. Trade mark law in New Zealand is governed by the Trade Marks Act and the Regulations.
Seeking trade mark protection overseas can be a time-consuming and expensive exercise for businesses. This can create a barrier to businesses, particularly small businesses, looking to expand into overseas markets.
Currently, if a New Zealand business wants to protect its trade marks overseas, it must apply separately in each country and comply with each country’s information, language, currency, and procedural requirements. The subsequent management of any trade marks registered overseas, such as renewing a registration or recording a change of address or ownership, similarly involves a process of applying separately in each country, complying with each country’s requirements and paying multiple fees. Often businesses must also employ trade mark agents to act on their behalf to register a trade mark and to subsequently maintain that trade mark registration. The number of New Zealand businesses who seek trade mark protection overseas per annum is not known.
If an overseas business wants to protect its trade marks in New Zealand, it must apply directly to IPONZ and provide all information in English, pay prescribed fees in New Zealand dollars and comply with our unique procedural requirements. During the financial year ending 30 June 2005 IPONZ received 27 937 applications to register trade marks, registered 21 089 trade marks, and received renewal notices for 10 014 trade mark registrations. Approximately half of the applications to register trade marks originated from overseas businesses either trading in New Zealand, or looking to sell their goods and/or services in New Zealand.
The WIPO administers the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (the Madrid Protocol) that provides access to the “Madrid system”
for the international registration of trade marks. There are 68 countries party to the Madrid Protocol, including New Zealand’s leading trade partners. The Madrid system enables a trade mark owner to have a trade mark protected in one or more countries by filing one application (an international application) directly with his or her local trade mark office in English, French, or Spanish, paying 1 fee and designating 1 or more overseas countries where the Madrid system is available and where protection is sought.
The Madrid system also provides for a business to manage its trade marks by filing a single application in 1 language and paying 1 fee to, for example, renew a trade mark registration or to record a change in address or ownership. Only those businesses resident in a country party to the Madrid Protocol are able to take advantage of the Madrid system to protect their trade marks in countries that are party to the Madrid Protocol.
Statement of the public policy objectives
The public policy objectives are:
Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objectives
Status quo
New Zealand businesses seeking trade mark protection overseas must apply for protection individually in each country where that protection is desired and comply with each country’s unique registration requirements. Overseas businesses seeking trade mark protection in New Zealand must apply directly to IPONZ and comply with all New Zealand’s requirements. The status quo is not preferred because it does not meet the public policy objectives.
Preferred Option – amend the Trade Marks Act to implement the Madrid system in New Zealand as provided for under the Madrid Protocol Relating to the Madrid Agreement
To implement the Madrid system in New Zealand, the Trade Marks Act would be amended to provide for:
the maintenance of international registrations in New Zealand, such as renewal of international registrations every 10 years, recording changes in the address of the international registrant and changes in ownership of the international registration:
Statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options
Government
Amending the Trade Marks Act and the Regulations would allow New Zealand to accede to the Madrid Protocol and make the Madrid system available to both New Zealand and overseas business. It would also assist to: align New Zealand’s trade marks regime with our major trading partners, such as Australia; add credibility to New Zealand’s trade mark regime; and send a clear signal to the international community of New Zealand’s commitment to provide an efficient and effective trade mark registration regime.
Since Australia is party to the Madrid Protocol, accession would contribute to the development of a more seamless trans-Tasman business environment, or “single economic market”
. It would also contribute towards fulfilling the mandate in the 2000 Closer Economic Relations Memorandum of Understanding on the Co-ordination of Business Law that the 2 countries explore “the potential for more closely co-ordinating the granting and recognition of registered intellectual property rights”
.
The Madrid Protocol does not seek to harmonise substantive trade mark law. Becoming party to the Madrid Protocol would not, therefore, impact on the Government’s ability to achieve specific policy objectives in the trade marks area, such as responding to Treaty of Waitangi claims.
IPONZ is fully third-party funded and there would be no financial implications for the government arising from the proposed amendments to the Trade Marks Act. There would be some one-off administrative costs for IPONZ to develop and implement procedures for administering the Madrid system and to update the trade marks register to accommodate the Madrid system. For example, 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 in developing client information about the use of the Madrid system and educating trade mark agents and New Zealand businesses on the use of the Madrid system. These costs have not yet been quantified.
There would be on-going costs for IPONZ related to its on-going administration of the Madrid system in New Zealand, such as acting as a Receiving Office for the IB for international applications. These costs would be recovered through fees payable by the users of the Madrid system, such as IPONZ handling fees and Madrid system fees payable by users in relation to applications and registrations applying to New Zealand.
Businesses
The main advantages for businesses in using the Madrid system arise from the simplicity of the international registration system and the financial savings made when maintaining the protection of their trade marks abroad. The Madrid system also reduces, and in some cases may eliminate, the need for a trade mark owner to employ the services of a trade mark agent in each country where protection is sought.
The aim of the Madrid system is to reduce business compliance costs associated with the simultaneous protection of a trade mark in multiple countries. The costs are discussed in more detail below in the business compliance cost statement.
New Zealand resident businesses would have the option of using the Madrid system to simplify the process of obtaining trade mark protection overseas in countries party to the Madrid Protocol and thereby potentially to reduce business compliance costs associated with protecting trade marks overseas. The extent of any reduction in the business compliance costs achievable under the Madrid system cannot be quantified. Any cost deduction would be variable and depend on a variety of factors including the number of countries where protection was being sought and, particularly, whether registration of the trade mark would require the assistance of a trade mark agent.
Overseas businesses resident in a country party to the Madrid Protocol would have the option of using the Madrid system to protect their trade marks and to maintain their protection in New Zealand and, therefore, benefit from a reduction in business compliance costs associated with protecting a trade mark in New Zealand. Those that choose to use the Madrid system may be able to avoid some or all of the costs associated with obtaining and maintaining trade mark protection in New Zealand.
Trade mark agents
Anecdotal evidence from Australia following its accession to the Madrid Protocol suggests that New Zealand trade mark agents would face a short-term (around 1 to 2 years) reduction in revenue from overseas clients as those clients switch to using the Madrid system in New Zealand. The impact of any reduced revenue cannot be quantified, but is likely to be felt the most by smaller firms who may rely heavily on overseas trade mark work for a substantial portion of their income. Overseas experience suggests that this impact is likely to be mitigated over the longer 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 the greater utilisation of the Madrid system. Trade mark agents would also incur some business compliance costs, which are discussed further in the business compliance cost statement below.
In addition, WIPO makes available detailed information on the Madrid system covering all aspects of how it works and this information is readily available both in paper and electronic form (via its website dedicated to the Madrid system).
Society
No costs to consumers would result from accession to the Madrid Protocol. Making the Madrid system available to overseas businesses to protect their trade marks in New Zealand may encourage them to consider New Zealand as a possible market for their goods and services, where they might not have ordinarily done do. This in turn may lead to a gradual increase in the range of goods and services marketed in New Zealand.
Statement of consultation undertaken
Stakeholder consultation
MED released a discussion paper entitled International Trade Mark Treaties in March 2006, which considered, amongst other things, New Zealand’s accession to the Madrid Protocol. Seven out of the eight submissions received on the Madrid Protocol supported accession. Submitters generally acknowledged that overseas businesses, rather than local businesses, would be more likely to use the Madrid system and benefit from New Zealand’s accession. They did, however, broadly support accession.
Submissions from New Zealand patent attorneys considered that New Zealand businesses and, in particular, their clients would not use the Madrid system to protect trade marks overseas, particularly because of their small size. They were concerned that few benefits would accrue for New Zealand businesses from accession. Officials note that the Madrid system is principally designed to assist exporting businesses and, in particular, the businesses exporting to several countries at a time. The greater the number of overseas markets being exported to, the greater the potential financial savings that can be achieved through using the Madrid system. While local businesses may not choose to use the Madrid system, officials believe that this does not justify preventing overseas businesses from taking advantage of the Madrid system to protect their trade marks in New Zealand.
Patent attorneys were also concerned that accession would result in a substantial reduction in revenue from overseas clients. For example, A J Park considered that accession to the Madrid Protocol would cost trade mark firms around $5 million annually, with flow-on effects such as loss of jobs. Officials note that this loss of revenue equates to the financial savings that would accrue to overseas businesses annually from New Zealand’s accession. A J Park conceded that protecting the income of New Zealand trade mark firms should not be a priority in determining whether New Zealand joined the Madrid Protocol. As noted above, overseas experience suggests that this loss in income would be mitigated over time.
Other concerns raised by patent attorneys were: that accession to the Madrid Protocol would result in more trade marks being registered in New Zealand, and thereby reduce the “pool”
of available trade marks available to New Zealand businesses to use; that it would increase the number of trade marks registered in New Zealand that are not actually used; make it more difficult for trade mark firms to “clear”
trade marks for use by New Zealand businesses; and increase the number of trade mark conflicts between businesses. Officials note that such issues are common to all businesses operating in larger markets than New Zealand and they are an unavoidable consequence of economic growth and increased global trade. Officials also note that trade mark firms are most likely to benefit from increased numbers of trade marks registered in New Zealand and any increase in trade mark conflicts between businesses.
Government department/agency consultation
The following departments and ministries have been consulted on the proposal: 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 Treasury. No concerns were raised.
Business compliance cost statement
It would be for a business to choose on a case-by-case basis whether to file direct national applications for the registration of its trade marks overseas, or to take advantage of the filing mode provided by the Madrid system.
A business seeking trade mark protection overseas would face the following sources of compliance costs in each country:
If a business chooses to use the Madrid system, it would be able to reduce and in some cases eliminate the sources of compliance costs outlined above. New Zealand businesses using the Madrid system for the first time would, however, incur the business compliance cost of learning how the Madrid system operates and its requirements.
Becoming party to the Madrid Protocol would require all New Zealand trade mark agents to incur the costs associated with learning and understanding the requirements of the Madrid system, so as to be able to advise their clients on when it would be appropriate to take advantage of the Madrid system to protect trade marks overseas.
Parties likely to be affected will be trade mark owners, trade mark agents (such as law firms and patent attorney firms), who act on behalf of trade owners, and other interested parties. It is not possible to identify the numbers of such parties, but they range from individuals and small firms to large multinational businesses and firms.
Steps that will be taken to minimise compliance costs include:
Nice Agreement
Statement of the nature and magnitude of the problem and the need for government action
The Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks (the Nice Agreement) provides a classification system for goods and services for the purposes of registering trade marks (the Nice Classification). Countries that are party to the Nice Agreement must apply the Nice Classification to registered trade marks. Other countries are free to adopt and use the Nice Classification. Whilst New Zealand is not party to the Nice Agreement, the use of the Nice Classification has been mandated for many years under the Trade Marks Act 1953 (now repealed) and more recently under the Trade Marks Act.
Some 1 600 Third Schedule trade marks registrations are not classified under the Nice Classification. They were registered before 1953 and some date back to the beginning of the 20th century. These registrations prevent New Zealand from becoming party to the Nice Agreement. They also result in added administrative costs for the IPONZ, as it must maintain 2, rather than 1, searchable trade mark registers. The existence of 2 trade mark registers imposes time and search costs upon IPONZ (during the examination of applications to register trade marks) and the public, from having to understand and access 2 different classifications systems and from having to search 2 separate registers to find if a particular trade mark has been registered in New Zealand.
Furthermore, New Zealand has been unable to participate in the five-yearly cycle of reviews of the Nice Classification conducted by countries that are party to the Nice Agreement. Therefore, it has been unable to influence whether the development of the Nice Classification best meets the needs of New Zealand businesses and IPONZ.
Statement of the public policy objectives
The public policy objective is to provide for efficient and effective searching of the trade marks register.
Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objectives
Non-regulatory options
Option 1 – Status quo
There are 2 trade mark registers, 1 containing around 1 600 Third Schedule registrations registered before 1953 and 1 containing over 200 000 trade mark registrations classified under the Nice Classification.
Under the Regulations, the owners of the Third Schedule registered trade marks may voluntarily request (free of charge) that their registrations be converted into the Nice Classification. Few Third Schedule registrants have made such requests.
This option is not preferred because it will not lead to the timely conversion of Third Schedule registrations into the Nice classification.
Option 2 – Commissioner of Trade Marks invites registrant to convert
The Commissioner would write to each Third Schedule registrant and invite them to apply voluntarily to convert their registration into the Nice Classification. This option is also not preferred. While it is anticipated that some registrants would take up the Commissioner’s invitation, it is likely that some would not. Reasons for not taking up the invitation could include the cost of expert advice to determine the most appropriate Nice class(es) for the registration and/or that conversion may result in the registration being divided into several Nice classes, which would increase the renewal fees payable by the registrant.
Regulatory options
Option 3 (preferred) – amend the Regulations
Amend the Regulations to provide a procedure for the Commissioner to initiate the re-classification of Third Schedule registrations to the Nice Classification. The Commissioner would write to the registrant proposing a suitable Nice Classification and providing for the registrant to either accept the Nice class(es) as proposed or provide an alternative classification to the satisfaction of the Commissioner within a specified period. The normal appeal procedures specified in the Regulations would apply in situations where the registrant disagrees with the Commissioner’s decisions regarding conversion. Where a conversion results in a registration being converted into 2 or more classes of the Nice Classification system, additional renewal fees related to the number of classes would be payable upon the expiry of the registration.
Statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options
Government
The Commissioner would have a mechanism with which to convert all Third Schedule registrations into the Nice Classification in a timely manner. Having a single register of trade marks would reduce IPONZ administration costs and simplify searches of the trade marks register.
IPONZ is fully third-party funded and there would be no financial implications for the government arising from amendments to the Trade Marks Act. There will be a minor cost to IPONZ associated with initiating the conversion of those trade mark registrations currently not classified in the Nice Classification. This cost would be met from within existing MED baselines.
Following conversion of Third Schedule registrations, New Zealand would be able to become party to the Nice Agreement and, therefore, be able to contribute to the future development of the Nice Classification. As the Nice Agreement does not seek to harmonise substantive trade mark law, joining would not impact on the Government’s ability to achieve specific policy objectives in the trade marks area, such as responding to Treaty of Waitangi claims.
Businesses
For the large majority of businesses who have registered trade marks or who use registered trade marks, there will be no costs arising from the conversion of the Third Schedule registrations into the Nice Classification. For the large majority of businesses, searching the trade mark register would become more efficient and effective as a result of needing to only search 1 register of trade marks under 1 classification system.
Following conversion and accession to the Nice Agreement, New Zealand businesses who own trade marks may benefit from New Zealand’s participation in the development of the Nice Classification, especially where classification issues arise from New Zealand vernacular not used elsewhere, or where businesses provide unique products or services not encompassed by the Nice Classification.
There will be some minor unquantified costs for the owners of the 1 600 registered trade marks not classified under the Nice Classification, associated with identifying the most suitable classes of Nice Classifications into which their registration should be converted. Where conversion results in a registration being converted into several classes of the Nice Classification, the owner would need to pay additional fees to renew the registration. The fee for renewing a trade mark registration is $250 (exclusive of GST) per class (a trade mark may be registered for 1 or more classes of goods and/or services).
Statement of consultation undertaken
Stakeholder consultation
MED released a discussion paper entitled International Trade Mark Treaties in March 2006, which considered, amongst other things, New Zealand’s accession to the Nice Agreement and key amendments that would be required to the Trade Marks Act and the Regulations to facilitate accession. Six submissions were received on the Nice Agreement. Submissions were generally in favour of conversion of the Third Schedule registrations into the Nice Classification and of New Zealand acceding to the Nice Classification.
Several submissions raised concerns at the possible costs to the 1 600 Third Schedule registrants arising from conversion. Some submissions suggested that additional renewal fees should be waived either at the first subsequent expiry of the registration or in perpetuity. Officials agree that some registrants would face additional renewal costs, but disagree that such registrants should be compensated. Where registrants of Third Schedule registrations have previously voluntarily converted their registrations into the Nice Classification, no compensation for additional renewal fees has been available.
Further, the registrants of Third Schedule registrations will have had the benefit of lower renewal fees than other owners for more than 50 years and should for the future be in the same position as other registrants with regards to renewal fees (ie, other registrants should not be required to subsidise Third Schedule registrants).
Business compliance cost statement
Overall there will be a reduction in compliance costs associated with searching a single trade marks register under 1 classification system. For the owners of the 1 600 trade marks not classified under the Nice Classification, there would be, in some cases, compliance costs associated with the process of conversion and, in particular, seeking expert advice from a trade mark agent to identify the most appropriate Nice class(es), because of the broad nature of specification of goods for which the trade mark is registered. The likely cost of seeking expert advice from a trade mark agent has not been quantified and is expected to vary depending of the complexity of classification issues that arise during the conversion processes.
It is estimated that the owners of around 200 Third Schedule registrations may need to seek expert advice from a trade mark agent related to the conversion of their registrations. The size of the businesses affected is not known and the conversion process is likely to affect both New Zealand and overseas businesses. It is also likely that a small number of businesses will own 2 or more Third Schedule registrations.
Steps that will be taken to minimise compliance costs include: IPONZ providing information to affected Third Schedule registrants on the conversion process. In order to assist to reduce conversion costs for affected registrants, the Commissioner would initiate the conversion processes by suggesting an appropriate conversion to the registrant.
MED Enforcement
Statement of the nature and magnitude of the problem and the need for government action
There is a growing problem around the world related to the manufacture, distribution, and sale of counterfeited goods and pirated works (counterfeits). For example, the World Customs Organization estimates counterfeiting and piracy accounts for 5 to 7% of global merchandise trade, estimated to be equivalent to lost sales of as much as US$512 billion. The World Health Organization estimates that up to 10% of medicines sold worldwide are counterfeit.
Goods typically targeted by counterfeiters are those items sold at “premium” prices and well in excess of the cost to manufacture. Counterfeits can provide a ready source of income for terrorist organisations and organised crime. Typically fashion clothing, footwear, fashion accessories (like perfume, sun glasses, hand bags, caps, watches, and jewellery), movies, music, and software are usually counterfeited. Many other types of goods, however, are also being counterfeited such as auto parts, motorcycles, cigarettes, cosmetics, medicines, sports equipment such as golf clubs, toys, and foodstuffs. Many of these items can pose serious health risks.
New Zealand is not immune to the problem of counterfeits, although New Zealand does not yet appear to face problems associated with counterfeits that pose a risk to public safety such as medicines, foodstuffs, and auto and machinery parts. The New Zealand Customs Service (Customs) has reported that the volumes of counterfeited goods they have detained have risen by over 400% since July 2000 with over 260 000 items detained by them last year as suspected of being counterfeits. Since Customs works on an intelligence and risk assessment basis, and cannot inspect every shipment of goods entering New Zealand, the true volume of counterfeits will be substantially higher than detention statistics suggest.
The Trade Marks Act and the Copyright Act 1994 (the Copyright Act) provide criminal offences against the manufacture, importation and sale of counterfeits to deter the trade in counterfeits. MED has determined that the infrequent and ad hoc prosecutions by government agencies of these criminal offences is contributing to the growth of counterfeits being offered for sale in New Zealand. Greater volumes of counterfeits being offered for sale can lead to reduced profits by trade mark owners and copyright holders (right holders) and entrenchment in society of the acceptance and consumption of counterfeits, whilst ignoring the law, the potential health risks and the wider impacts on the economy as a whole.
Statement of the public policy objectives
The public policy objective is to reduce the trade in New Zealand of counterfeits and to deter people becoming involved in that trade through increased prosecution of the criminal offences provided under the Trade Marks Act and the Copyright Act by a government agency.
Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objectives
Status quo
Under the Trade Marks Act it is a criminal offence for a person who with the intention of obtaining a gain for himself or herself or any other person or of causing loss to any person to counterfeit a registered trade mark; to falsely apply a registered trade mark to goods or services; to make or oppose an object for making copies of a registered trade mark; or to import or sell goods with a falsely applied registered trade mark.
The Copyright Act provides that it is a criminal offence, other than under a copyright licence, to—
in the course of business sell or let for hire, offer or expose for sale or hire, exhibit in public, or distribute otherwise than in the course of business to such an extent as to affect prejudicially the copyright owner:
an object that is, and the person knows is, an infringing copy of a copyright work.
It is also an offence to make an object specifically designed or adapted for making copies or a particular copyright work or to have such an object in that person’s possession, knowing that the object is to be used to make infringing copies for sale or hire or for use in the course of business.
Both Acts provide that every person who commits such an offence is liable on summary conviction to a fine of up to $150 000 or imprisonment for a term of up 5 years. Neither Act, however, provides any government agency with any investigative and prosecution powers to facilitate enforcement of these criminal offences. The police are considered to be the only government agency with the necessary investigative and prosecutorial powers to undertake enforcement action under the Trade Marks Act and the Copyright Act.
Lack of resources and expertise within the police prevents them prioritising the enforcement of the criminal offences. The level of enforcement activity is not sufficient to achieve the policy objective.
Non-Regulatory Options
Option 1 – Provide police with additional resources.
Under this option police would be allocated an additional $664 050 of government funding to prioritise enforcement of the criminal offences under the Trade Marks Act and the Copyright Act.
This option was rejected because there was no guarantee that the additional resources provided would be used by police to prioritise enforcement of the criminal offences under the Trade Marks Act and the Copyright Act over all other forms of criminal offending.
Option 2 – Make another government agency with funding responsible for enforcement
Under this option another government agency with an existing enforcement role and experience, such as the Commerce Commission, Department of Internal Affairs, Customs or the NEU of MED would be made responsible for enforcement action under the Trade Marks Act and the Copyright Act and provided an additional $664 050 of government funding for such enforcement activity.
This option was rejected because none of these other government agencies have available to them any investigative and prosecutorial powers to undertake any enforcement of the criminal offences under the Trade Marks Act and the Copyright Act. Enforcement action would still be dependent on the availability of Police resources to, for example, obtain and execute search warrants to obtain evidence for a prosecution.
Regulatory Options
Option 3 – Provide another government agency with investigative and prosecutorial powers under the Trade Marks Act and the Copyright Act
Under this option the Trade Marks Act and the Copyright Act would be amended to give either the Commerce Commission, New Zealand Customs Service, or Department of Internal Affairs with suitable investigative and prosecutorial powers to take enforcement action.
This option is not preferred. While these agencies have an indirect interest in preventing the trade in counterfeits under other legislation, making any one of them responsible under the Trade Marks Act and the Copyright Act would not be a good fit to their existing activities and legislative responsibilities. For example, making Customs responsible for prosecutions would require expanding their role to post-border activities.
Option 4 (preferred option) – Provide the National Enforcement Unit of MED with additional resources and investigative and prosecution powers under the Trade Marks Act and the Copyright Act to enable the National Enforcement Unit to play a role enforcing the criminal offences
Under this option the NEU would be provided with an additional $664 050 in government funding and the Trade Marks Act and the Copyright Act would be amended to provide the NEU with the powers to:
use information from other government agencies, such as New Zealand Customs and New Zealand Police, to determine whether a person is complying, or has complied, with either Act and for detecting contraventions of either Act:
Any person from whom any property has been seized without a search warrant would be able to apply to the District Court for an order directing that the property be returned to that person. The person applying for such an order would need to satisfy the court that there are no grounds for the property to be continued to be held, such as that the seized goods where not counterfeits.
This option would not alter the responsibilities of other government agencies, such as Customs' administration of the border protection measures under the Trade Marks Act and the Copyright Act or the Commerce Commission's responsibilities under the Fair Trading Act 1986, nor would it substitute or otherwise negate the responsibilities right holders have to take civil action to enforce their trade mark or copyright rights.
Statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options
Government
There are several reasons why the NEU is the preferred choice for making responsible enforcement. The Trade Marks Act and the Copyright Act are the primary responsibility of MED and the NEU is an established enforcement unit with the Ministry with a wide range of experience investigating and prosecuting various forms of regulatory crime. Furthermore, the NEU also has established links with other government agencies that have existing roles enforcing legislation against various forms of regulatory crime.
Having the NEU play a role in enforcing the criminal offences would be expected to result in an increase in the number of prosecutions by the Crown of the criminal offences under the Trade Marks Act and the Copyright Act, particularly against repeat and serious offenders. This in turn is expected to lead to a reduction in the trade of counterfeits in New Zealand. Other benefits likely are:
send a clear signal to the international community that New Zealand does not tolerate trade in counterfeits and, therefore, reduction in the risk that New Zealand would be targeted by terrorist groups and crime gangs as a market for counterfeits and a ready source of income for them:
The proposed powers outlined in the preferred option are very similar to the powers to be prescribed to the NEU under the draft Major Events Management Bill. Since major sports events are a popular target for the sale of counterfeits, consistency in the investigative powers between the proposed Major Events Management Bill and the amendments proposed to the Trade Marks Act and the Copyright Act would ensure that the NEU would be able to simultaneously discharge its responsibilities under the three separate Acts in an efficient and effective manner.
There would be a cost to government of $664 050 dollars to fund the NEU’s proposed enforcement role during the first year of enforcement activity rising to $964 465 for the third and outlying years.
Industry
Right holders are likely to benefit in a number of ways from enforcement action by NEU. While these benefits cannot be quantified, enforcement action by the NEU is expected to lead to a reduction in manufacture, importation, and sale of counterfeits in New Zealand through a deterrent effect. A reduction in the sale of counterfeits is likely to result in increased sales for right holders and increase their profits from the New Zealand market. A reduction in sales of counterfeits is also likely to increase the reputation of the quality of right holders’ goods, since right holders would not have to complete against poor quality “knock off” items being offered for sale. This in turn may also assist to increase sales for right holders.
This in turn is likely to reduce right holders’ costs of doing business in New Zealand.
There will still be some unquantified costs to right holders arising from the need to support the NEU’s enforcement activity arising from for example collecting and sharing intelligence with the NEU to identify offenders and providing expert evidence to support prosecutions. No business compliance costs, however, are anticipated to arise from this proposal.
Society
The proposal is likely to increase consumer confidence in the quality and source of goods they purchase. In addition, there is likely to be a reduction in the risk that consumers would be affected by counterfeits that pose a health and safety risk.
Statement of consultation undertaken
The proposal to create a role for the NEU to provide enforcement for the criminal offences and to amend the Trade Marks Act and the Copyright Act to facilitate investigations has been discussed with a range of right holders, their legal representatives and retailing bodies such as the New Zealand Retailers Association Inc. and the New Zealand Sports Industry Association Inc. who have expressed a particular interest in combating the sale of counterfeits. Stakeholders are broadly supportive of the proposal for NEU to play a role in the enforcement of the criminal offences under the Trade Marks Act and the Copyright Act and the proposed investigative and prosecutorial powers.
In developing this proposal, the Ministry of Economic Development has consulted with the following government departments and agencies: the Treasury; the New Zealand Customs Service; the Ministry of Justice; the Department of Internal Affairs; the New Zealand Police; the Ministry of Consumer Affairs; the Commerce Commission; the Ministry for Culture and Heritage; Te Puni Kōkiri; and the Ministry of Foreign Affairs and Trade. The Department of the Prime Minister and Cabinet has been informed.
Customs Enforcement
Executive summary
Border interceptions of counterfeit and pirated goods by Customs contribute to a global partnership aimed at reducing this trade. A worldwide increase in the amount of counterfeit and pirated goods being traded, and the weak level of deterrence against such imports, has contributed to a backlog in Customs' workload. Allowing Customs to take some prosecutions related to imported counterfeit and pirated goods would be an effective way of helping to manage this problem. It is proposed that Customs is empowered to take such prosecutions. In many cases this would be more efficient than the police or the NEU of MED taking the prosecutions.
To enable Customs to undertake this role it will require explicit supporting powers under the Trade Marks Act and the Copyright Act. The proposed supporting powers would enable Customs to undertake warranted searches, retain certain goods, require information to be supplied and to copy information.
Adequacy statement
Customs has reviewed this Regulatory Impact Statement (RIS), and has determined it is adequate according to the criteria agreed by Cabinet. The Regulatory Impact Analysis Unit decided not to review this RIS because it considered the Cabinet paper's proposal would not significantly impact on economic growth.
Status quo and problem
Internationally, trade in counterfeit and pirated goods has been increasing, with New Zealand subject to the same trend. In New Zealand volumes of trade mark and copyright infringing goods intercepted by Customs have continued to increase each year. In 2004/05 185 000 infringing items were detained by Customs. This increased to 260 000 items in 2005/06. The issue of trade in counterfeit and pirated goods is receiving increasing attention internationally, with governments around the world considering new measures to tackle the issue, including giving customs agencies the powers to take prosecutions and ex officio powers to act on their own behalf against trade mark and copyright importing infringements.
In August 2006 Cabinet agreed that the NEU of MED should be responsible for enforcing trade mark and copyright offences defined in the Trade Marks Act and the Copyright Act [CAB Min (06) 32/12]. This includes offences related to the importation of counterfeit and pirated goods. No additional funding has, however, been given to the NEU to undertake such enforcement action. The police is also able to use its general powers to enforce trade mark and copyright criminal offences, but resource constraints mean that investigations of this type are low priority.
Customs activities
Border interceptions of counterfeit and pirated goods by Customs contribute to a global partnership aimed at reducing trade in these goods.
Customs' current activities are based on the border protection measures set out in the Trade Marks Act and the Copyright Act. This legislation is consistent with measures described in the internationally recognised Agreement on Trade-related Aspects of Intellectual Property Rights, Including Trade in Counterfeit Goods. Customs' activities are predicated on rights owners lodging a notice requesting the detention of goods that appear to infringe their rights.
Problem definition
The global increase in trade of counterfeit and pirated goods, and the low level of deterrence against importing such goods into New Zealand, have contributed to some operational pressure within Customs. For example, there is a backlog of about 6 months in Customs' investigations of possible trade mark and copyright infringements. The backlog impacts on the availability of Customs' resources to undertake other types of work, such as drug and objectionable material investigations. It has also precipitated a shortage of secure storage facilities for detained goods.
A few importers repeatedly import counterfeit and pirated goods. Although enforcement could be better managed by taking some prosecutions against such importations, and in most cases Customs is better placed than other agencies to do this, Customs is not currently able to take this action.
Objectives
The main objective of the change being sought is to help to reduce the importation of counterfeit or pirated goods (as compared with the status quo). A secondary objective is to reduce the backlog in Customs' investigations of possible trade mark and copyright infringements.
Alternative options
Alternative Option 1 – Increase Resources Allocated to Customs IPR Investigations
Option 1 would not require legislative change. However it would not increase the deterrence against recidivist importers of counterfeit and pirated goods. Although an increase in resources might reduce the backlog of Customs investigations in the short term, any reduction is unlikely to be sustained over the medium and longer terms.
Alternative option 2 – Provide additional funding to the NEU, tagged for prosecuting importers of counterfeit or pirated goods
Option 2 would not require legislative change. Although it would increase the level of enforcement against importers of counterfeit or pirated goods, it would not deliver the outcomes sought in the most efficient way. This is because in most cases Customs will already be in possession of the necessary information and evidence to prosecute importers of counterfeit and pirated goods.
Preferred option
Description of the preferred option
Under this option Customs would be able to take prosecutions against a person importing or possessing any imported goods which would constitute a breach of the criminal offence provisions of sections 120 to 124 of the Trade Marks Act and sections 131, 198, and 226 of the Copyright Act. To enable this to occur certain investigation powers would be made available:
Investigative powers related to goods under Customs’ control
(a) without a warrant, seize any goods subject to the control of Customs that a Customs officer has reasonable grounds to believe is evidence of, or has significant relevance to, an investigation of certain offences under the Trade Marks Act or the Copyright Act:
(b) require, by notice in writing, any person (other than an officer of a central government department) believed to have imported goods or to have been involved in their import as an agent to supply (within a reasonable time) documents and other recorded information related to goods that are still under Customs’ control for the purpose of determining whether the goods should be retained or released:
(c) require any person (other than an officer of a central government department) believed to have imported goods or to have been involved in the import as an agent to appear at a reasonable time and place, specified in writing, and to answer questions relevant to an investigation of goods that are still under Customs’ control for the purpose of determining whether the goods should be retained or released:
Other investigative powers
(e) apply for a judicial order authorising the production of documents and other recorded information believed to be evidence of, or to be material of significant relevance to, the investigation of an offence in respect of imported goods:
(f) apply for a search warrant to search any place or thing, believed to contain evidence or material of significant relevance to an investigation of an offence in respect of imported goods, under the statutory provisions referred to in recommendation 5, at any reasonable time of the day or night and in doing so use any assistance and any force that is reasonable in the circumstances:
(j) take photographs or sound or video recordings of the place or thing searched, and of any thing found in that place, if the person executing the warrant has reasonable grounds to believe that the photographs or sound or video recordings may be relevant in any proceedings arising from the execution of the warrant:
It addition, it would be an offence to deliberately withhold information requested under the provisions of (b) or (e) above, or to refuse to be interviewed under the provisions of recommendation (c) above.
Following legislation enabling Customs to take such prosecutions, Customs and NEU would clarify more precisely their respective roles in relation to trade mark and copyright enforcement.
Impacts of the preferred option
Although trade mark and copyright prosecution may impact on Customs' resources available to take other types of prosecution, discretionary decisions about when to allocate these resources are already made on a regular basis.
Enabling Customs to take prosecutions would help to reduce the overall amount of counterfeit and pirated goods being imported, as compared to the status quo. It could result in a net reduction of Customs' work related to counterfeit and pirated goods by reducing subsequent offending. Compared to the status quo, it would also tend to reduce the backlog in Customs' investigations.
This proposal is not expected to place any compliance costs on businesses.
Implementation and review
If Government wishes to enable Customs to take such prosecutions, the Trade Marks (International Treaties and Enforcement) Amendment Bill provides a convenient vehicle for the necessary legislative amendments. Customs will be able to undertake these prosecutions as soon as the Bill has received Royal assent.
The effectiveness of Customs' trade mark and copyright prosecutions would be evaluated through any changes in the:
Consultation
The Treasury; the Ministry of Economic Development; the Ministry of Justice; the Department of Internal Affairs, the New Zealand Police, the Ministry of Consumer Affairs; the Commerce Commission; the Ministry for Culture and Heritage; and the Ministry of Foreign Affairs and Trade have been consulted in the development of this paper. The Department of the Prime Minister and Cabinet and Te Puni Kōkiri have been informed.
Owners of intellectual property rights are expected to approve any increase in deterrence to the importation of counterfeit and pirated goods. Consultation with them over the proposed powers was not therefore undertaken.
MED and the Law Commission were concerned that the powers sought by Customs did not go beyond what was appropriate to prosecute importers of counterfeit and pirated goods. This concern was taken account of in developing the preferred option.