GCC Trademarks Act resolves uncertainty over use of marks by licensees

United Arab Emirates
The Gulf Cooperation Council Trademarks Act (Federal Decree 52/2007) will put an end to the uncertainty as to whether use of a mark by a licensee constitutes genuine use of the mark.

The act formalizes the mutual efforts of Gulf Cooperation Council member states to apply a unified law in the region. When it comes into effect, the act will clarify the status of unrecorded licence agreements and provide an adequate solution to one of the most controversial issues that has arisen under the trademark regime of the United Arab Emirates (UAE).

There is ambiguity under the UAE Federal Trademarks Law (37/1992) concerning trademarks that are the subject of a licence. If the licence is not recorded, it is uncertain whether the licensee's use of the mark will be adequate to keep the trademark registration alive and to constitute evidence of genuine use. The law (even as amended) does not present clear guidance on this issue. Rather, it substantially requires fulfilling the recording formalities and prohibits a party from using unrecorded licences against third-party claims. Article 31 provides as follows:

"The licence agreement for the use of the trademark shall be recorded in the register; the licence shall have no effect against third parties unless it has been recorded in the register and published as prescribed in the regulation."
The language of Article 31 is very broad; its abstract wording could imply that granting the exclusive use of a trademark to a licensee results in an abandonment of the rights associated with keeping the mark alive. Therefore, it is recommended that trademark licences be recorded so that licensee use can be a basis to counter a cancellation action for non-use.
Pursuant to Article 22 of the law, the competent civil court may order the cancellation of a trademark registration at the request of any interested party if it is proven that the mark has not been used for a continuous period of five years. In cancellation actions based on non-use, the burden is on the owner of the mark to prove actual use in order to dismiss the claim. Due to the broad language of Article 31, it is unclear whether licensors could prove use through licence arrangements unless such arrangements were officially recorded with the UAE Trademarks Office.
In practice, most trademark owners in the UAE neglect the recording formalities for licensed rights, partly to avoid several consequences related to the post-termination process, but also due to the lengthy and frustrating formalities, which may take up to a year to complete.
The act resolves the ambiguity around this particular issue. It clearly provides licensors with the right to rely on unrecorded licence use to prove use of the marks. The act requires only a written licensing agreement, rather than absolute recording formality. Article 32 of the act stipulates that a "trademark licence is required to be in writing in order to be valid and recording the licence of trademark usage is not mandatory to validate the licence".
Article 32 gives a clear solution to one of the most controversial issues that has affected trademark users using their brands though local entities in the UAE. In addition, it will be considered a promising milestone in improving trademark exploitation practice in the UAE while safeguarding the rights of trademark owners. Trademark owners have thus acquired a clear mechanism for maintaining the validity of trademark registrations against cancellation claims for non-use.

Munir Suboh, Al Tamimi & Company - Advocates and Legal Consultants, Dubai

Unlock unlimited access to all WTR content