New rules on geographically deceptive trademarks spark debate

Italy has twice changed its rules on the use of trademarks which convey a false impression that the goods were manufactured in Italy. In both cases, the changes seem to be inconsistent with EU Law and the Italian Constitution.

First, Article 17(4) of Law 99 of July 23 2009, which was published in the Official Gazette on July 31 2009 and entered into force on August 15 2009, prohibits the use of "Italian trademarks" for goods manufactured abroad, unless the geographical origin of the goods is "evident" or there is "another indication which is sufficient to avoid any confusion as to the origin of the goods". The law states that any infringement will be subject to a criminal sanction.

Arguably, this provision unjustifiably hinders the practices of decentralization and production integration, which promote competition, reduce costs and, consequently, benefit consumers. Moreover, it introduces an absurd disparity in the treatment of goods manufactured abroad by Italian firms and those manufactured by foreign firms, which do not fall within the scope of the provision. This seems to be unconstitutional and incompatible with EU law. The risk is that to circumvent this rule, companies will transfer their trademarks to foreign companies within the same group. However, this would be impracticable for smaller companies. The new director general of the Italian Patent and Trademark Office tried to mitigate the effects of this new rule by issuing an interpretative circular clarifying that the provision was not retroactive.

The concerns raised by various entrepreneurial associations and experts led to a hurried revision. The provision was abrogated in part by Article 16 of Decree Law 135 of September 25 2009, which introduced a new rule due to enter into force on November 9 2009. The criminal sanctions were removed and were replaced by very high administrative fines (between €10,000 to €250,000).

Although the new provision no longer mentions "Italian trademarks", it prohibits the "use of a trademark by its owner or licensee in such a way as to mislead consumers into believing that the goods are of Italian origin". Therefore, the rule does not apply to any trademarks containing an indication of geographical origin, but only to those conveying the false impression that the goods are of Italian origin. For example, use of a trademark which leads consumers to believe that goods come from France when they were produced elsewhere will not be considered to be unlawful under the provision. Arguably, such disparity in treatment violates:

Moreover, it remains unclear whether the mere fact of using an 'Italian-sounding' trademark will be sufficient to trigger the provision - or whether the trademark owner or licensee must actually mislead consumers into believing that the goods come from Italy. The latter interpretation would be in line with established case law, according to which a trademark by itself does not inform the public as to the geographical provenance of the goods. In addition, the phrase "use of a trademark by its owner or licensee" raises some questions: for example, it remains unclear whether the mere fact of using 'Italian-sounding' trademarks on goods which are not intended for the Italian market would fall with the scope of the provision. It is crucial that these questions be answered to ensure that the provision is enforced adequately.

Second, Decree Law 135/2009 introduced a new rule which prohibits the use of signs or indications, in any languages, conveying the impression that the goods have been "entirely produced in Italy" (eg, '100% made in Italy', '100% Italia' or  'tutto italiano') if part of the production took place elsewhere. Under the new rule, goods that have been "entirely produced in Italy" are those whose "design, planning, production and packaging were exclusively carried out in Italy".

This rule is extremely vague and, therefore, difficult to apply. Under the EU Customs Code, indications such as 'made in Italy' may be used for goods which have "undergone a last, substantial transformation" in the country. A logical interpretation of the rule would be that the use of an Italian flag or an image of Italy, without additional elements such as '100% made in Italy', would not fall within the scope of the rule. However, the provision also lends itself to a different interpretation. Moreover, it is unclear how the authorities will ascertain whether the design of the goods actually took place in Italy.

Because the rule is subject to parliamentary review within 60 days, it is hoped that it will be adjusted before it comes into force.