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Magnusson has announced the arrival of Daniel Klementewicz, who moves from Wolf Theiss to join the firm as Partner and Head of the Dispute Resolution practice in Poland.

Klementewicz is an attorney-at-law admitted to the Warsaw Bar. His main practice areas include litigation and arbitration, as well as corporate/M&A transactions. He advises both international and domestic clients on various litigation, arbitration, and insolvency matters. According to Magnusson, “he has been particularly active in representing institutional and private investors in court and arbitration matters related to their Polish and regional investments, including post-mergers and acquisitions disputes, as well as shareholder disputes.” His practice also includes representation of international commercial real estate banks in matters related to the enforcement of non-performing loans. Additionally, he has been active in sports arbitration and, on numerous occasions, has been appointed arbitrator. 

Prior to Wolf Theiss, Klementewicz worked with Beiten Burkhardt and several other law firms in Warsaw. Among the recent matters he’s worked on are advising PORR Bau GmbH on its purchase of Bilfinger Infrastructure S.A. from Bilfinger SE (as reported by CEE Legal Matters on June 18, 2015), and a significant bankruptcy case before the Polish Supreme Court (as reported by CEE Legal Matters on May 16, 2014).

Noerr has advised Japan’s Nidec Corporation on its acquisition of approximately 94.8% of the shares of Romania’s ANA IMEP S.A. (“IMEP”), a company that develops, manufactures, and sells washing machine and drying machine motors. Tuca Zbarcea & Asociatii advised the seller on the deal.

Noerr advised Nidec — which it describes as “the world’s No. 1 manufacturer of small precision motors” — on its entrance into a share purchase and transfer agreement with the major shareholder of IMEP. Through the transaction, Noerr reports, “the Japanese company expects to enhance the competitiveness of its appliance motor business in the European market and obtain IMEP’s major customers.”

“It has been both an honour and a professional pleasure to assist such a prestigious corporation in expanding its footprint on the Romanian market,” said Noerr Associated Partner Mihai Macelaru, who coordinated the firm’s team on the deal, about working with Nidec. Macelaru was supported by Noerr Senior Associate Cristina Stamboli, Associated Partner Roxana Dudau, and Senior Associate Luiza Bedros. Noerr worked with Italy’s La Torre Morgese Cesaro Rio firm on the deal. 

The Tuca Zbarcea & Asociatii team was led by Partner Dan Borbely, supported by Managing Associate Razvan Mircea.

Dentons and ODI have advised Central Europe private equity fund Innova Capital on EUR 27 million financing of Slovenia’s Trimo Group provided by Nova Ljubljanska Banka, d. d., Ljubljana. Odvetniki Vidmar Zemljaric advised Nova Ljubljanska Banka.

Innova has through its SPV – European Architectural Systems SARL – recently become the controlling shareholder of Trimo Group, a European provider of original and complete solutions in steel buildings, roofs, facades, steel constructions, containers and sound and insulation systems (as reported by CEE Legal Matters on December 17,2015).

According to an ODI press release, “the financing transaction marks one of the steps by Trimo’s new owner in reinforcing Trimo’s position as a leading company in the sector of panels and high value added facade solutions.”

Dentons, acting as lead counsel in the transaction, provided general coordination, negotiated the facilities agreement and the other finance documents.

ODI, acting on behalf of Innova Capital, reviewed the Facilities Agreement from the Slovenian law perspective, negotiated the Slovenian law governed security documents requested by Nova Ljubljanska banka, d. d., Ljubljana, as lender, and provided closing assistance.

Dentons’ team was supervised by Partner Mateusz Toczyski, Head of the Banking and Finance practice in Poland and Europe, and led by Senior Associate Jakub Wieczorek. 

The ODI team was led by Managing Partner Uros Ilic and Senior Associate Lea Pecek, assisted by Senior Associate Katarina Skrbec.

Odvetniki Vidmar Zemljaric did not reply to our inquiries on the matter.

Taylor Wessing Warsaw supported GEA Process Engineering sp. z o.o. on the sale of a process line for drying dairy products to Grajewo-based Spoldzielnia Mleczarska Mlekpol.

The process line purchased by Mlekpol, according to Taylor Wessing, “will be one of the largest and most sophisticated lines of its kind not just in Poland but also in Central and Eastern Europe. The project is expected to be complete by 2019.”

The Taylor Wessing team was led by Partner Przemyslaw Walasek, and included Senior Associates Paulina Cieslak and Marcin Przybysz and Associates Katarzyna Kochanowska and Wiktor Los.

Sorainen Lithuania has advised Kuusakoski, Northern Europe’s leading industrial recycling company, on the sale of its Lithuanian subsidiary to Dorvina. The transaction is expected to close later this year.

The Sorainen transaction team was led by Specialist Counsel Mantas Petkevicius.

Sorainen did not reply to our inquiry about counsel for Dorvina on the matter.

The importance of the automotive sector for Europe’s emerging markets can hardly be overstated. The automotive sector is the largest contributor to GDP in Hungary, Akos Eros, Partner at Squire Patton Boggs (SPB) in Budapest, points out, and Uros Ilic, the Managing Partner of the ODI Law Firm, describes a similar prominence in Slovenia: “The automotive sector represents as much as 20% of Slovenian exports, making it a particularly important component of the country’s economy.”

Across the region, “every country is doing all it can to draw in these production plants, a competition in which every country is trying to put forward better infrastructure and supporting through different facilities,” according to Martin Wodraschke, Partner and Head of CEE German Desk and CEE Automotive team at CMS.

We reached out to leading lawyers in this sector across Central and Eastern Europe to learn more about the amount and kinds of work being generated and the particular challenges the sector imposes on those lawyers working within it.

A Look at the Market

Slovakia, the Czech Republic, Hungary, and Poland are among the CEE countries most commonly identified as heavy manufacturers. 

“…every country is doing all it can to draw in these production plants, a competition in which every country is trying to put forward better infrastructure and supporting through different facilities…”

In Hungary, CMS’s Wodraschke reports that the manufacturing side of the industry is still growing, encouraged by large suppliers such as Bosch and Continental. According to Lukasz Berak, Partner at Soltysinski Kawecki & Szlezak (SK&S), although Poland claims fewer production facilities for passenger cars than Slovakia, sales and distribution remain strong. 

While “there is no real automotive production industry in [Slovenia],” according to Matija Testen, Partner at Rojs, Peljhan, Prelesnik & Partners (RPPP), “there are some strong producers on the supplier side, such as Johnson Controls and CIMOS.” Ilic at ODI Law explains that, in Slovenia, “there are over 16,000 people employed in automotive in the country between some 250 companies that create a regular stream of legal work on daily commercial, labor, and regulatory matters. This cluster ranges in products from decorative components to engines and engine parts, to gearing equipment, to electronic components. Many leading automotive players have Slovenian firms as partners: Audi, BMW, Daimler, VW, as well as MAN and Ford in Germany account for some 40% of car component exports from Slovenia followed by buyers in France, Italy, Austria, the UK, and the USA. The vehicles that roll off the assembly lines of Renault, PS, Skoda, and Fiat also incorporate components from Slovenia that comply with all EU green and safety requirements. In figures, it means that Slovenia’s automotive industry generates roughly one tenth of the country’s GPD and accounts for 14% of its exports of goods.” 

Daniel Anghel, Partner at PwC in Romania, explains that Romania hosts “a lot of spare parts suppliers, most of them held by foreign groups but some locally-owned as well, located especially in the west of the country but increasingly towards the center as well.” And in Macedonia Gjorgji Georgievski, Partner and Regional Head of TMT Group at the ODI Law Firm, refers to the recent establishment of a large Johnson Controls plant in Macedonia (see Buzz on page 28).

 

Most CEE countries reported steady automotive sales in 2015, with SK&S’s Berak pointing to Poland’s constant sales growth as an exception, “which makes both networks and manufacturers quite happy.” Of course, buying a new car is not the only option on the table for consumers, and manufacturing of new cars is impacted by an apparent increase in used car sales, mentioned as a factor both by Berak in Poland and Anghel in Romania. Anghel reports that, “starting with 2007/2008 especially, Romania developed into a second-hand market, unfortunately,” and points to a recent PwC study showing that second-hand cars were outselling new cars 4-1 in the country (see Graphs for more details).

Keeping Lawyers Busy

With all this activity, there is plenty of work for lawyers specializing in the automotive sector across the region. CMS’s Wodraschke explains: “The huge original equipment manufacturers present in the country generate work for lawyers in pretty much all areas, with a lot of work coming from commercial and employment areas in particular, complemented with some M&A activity as well, since some clients are also looking at smaller targets they’d like to acquire.” 

In Russia, Daria Shagabutdinova, Head of the Legal and Corporate Affairs Department of Cordiant, has noticed quite a bit of M&A activity as well, with “boards aiming to incorporate start-ups when possible or selling off less-performing assets.” Veronika Odrobinova, Partner at Dvorak Hager & Partners (DH&P), also reports a lot of M&A activity in the Czech Republic, and she says that she has noticed a “push from the larger producers who are seeking to get more efficient and relocate their businesses or are getting rid of different parts that are not efficient.” She adds that this is complemented by investors coming from outside the country and consolidation in the sector within the country, with a number of new plants also being developed. 

While these types of projects tend to be one-offs, there appears to be a significant amount of recurring work as well, with real estate and employment matters being most common, according to Odrobinova, though she reports that the considerable amount of financing work that existed two or three years ago seems to have dried up. 

Eros at SPB identifies labor law matters as a common form of ongoing work after the initial set-up stage is completed – inevitable, he says, in a “sector that is very employee-intensive.” His team makes “some additional regular check-ins … on the contracts in place to make sure that the templates are still compliant in case a regulator update happens, but nothing as intensive as the original set-up stage.”

Of course, the very nature of the sector limits the amount of ongoing assistance clients require after set-up. Eros notes that although the set-up stage is work-intensive for lawyers, once manufacturing facilities are up and running there’s less to do. “The beginning … involves a lot of work to set up the greenfield investments, secure the real estate purchases, assist in the subsidies negotiations, set up the employee base, set up financing, and so on.” Even real estate matters are challenging, as “it’s not a simple matter of purchasing a plot of land. It involves considerable negotiations with municipalities, infrastructure work, and so on.” By contrast, “after the plant is set up there are not so many legal projects, at least hopefully.”

Indeed, contract work is fairly limited in the region, according to Prague-based DH&P Partner Odrobinova, “since, most of the time, cars are produced for a mother company abroad.” CMS’s Wodraschke elaborates: “on paper, these companies don’t really sell anything to end users, meaning that consumer rights are not really within the scope of concerns of the local manufacturing plants. Even in terms of suppliers, Audi Hungary for example does not really purchase spare parts from Delfi Hungary, Look Hungary, or Hilite Hungary – rather, a global or European deal is in place. There are exceptions, of course, [and] one of our clients, for example, has its European HQ in Hungary, but such instances are very rare.”

Of course, some lawyers in the automotive sector – particularly, perhaps, those working in-house – deal more with contractual matters than others. For example, Nikolay Khaybulaev, Director for Legal Affairs and Government Relations at Mazda Motor Russia, explained that his team’s activities revolve primarily around contract law, “as part of your team’s role in supporting the business side is retaining contractual relationships primarily.” According to Khaybulaev, this is complemented by regulatory work and “some work on trademark-related issues and some litigation” (though he notes that his company “really tries to solve most issues in an amicable way”). 

 

On the Horizon

Several lawyers in the automotive sector in CEE note the affect of significant anti-monopoly developments in their jurisdictions. In Russia, Khaybulaev says, a new Code of Conduct for Members of Automobile Manufacturers, developed in cooperation with the country’s Federal Antimonopoly Service, has been put in place to ensure that the industry follows certain rules regarding dealerships. Dealers who believe those rules are being violated, Khaybulaev explains, “can apply to the anti-monopoly service, a development which has seen many companies in the sector invest a lot of effort to review existing systems/contracts and make sure they are compliant to the full letter of the law.”

In Slovenia, Testen at RPPP refers to a recent decision against the Hyundai group – a general importer – related to warranty clauses linked to authorized repair shops deemed to be in breach of competition regulations. SK&S’s Berak described antimonopoly issues connected with dealership networks as “a recurring theme” – particularly related to pricing, with producers only allowed to recommend rather than specify the prices offered by the dealer. According to Berak, this is a matter that is “stringently controlled by the Polish anti-monopoly watchdog.”

At the same time, both Poland and Romania are taking active steps to address an aging car fleet. In Poland, Berak points to a new consumer protection law that entered into force at the end of 2014, as well as legislation addressing end-of-life vehicles, increasing various requirements on distributors and dealers as creating new work for lawyers in that country. For its part, Romania is pursuing initiatives related to environmental stamps and other pieces of legislation meant to address the aging car pool in the country, according to PwC’s Anghel – “initiatives that despite being changed around several times proved to have a positive impact in the past.”

the decision by many manufacturers to locate their plants in the region is driven by “some opportunities generally valid for CEE as a whole – cheap labor costs and good infrastructure and access within CEE.”

Relevant labor law is being updated as well, according to CMS’s Wodraschke, who says that the 2012 labor code in Hungary has already been changed several times in the last few years to “give more flexibility and implement many [changes] relevant to the industry, which overall made the life of companies much easier in the country.” Less positive news on the subject comes from Romania, where Anghel points to “recent heated talks” related to a raise of the minimum wage in the country, which would, “of course, make the manufacturing industry in the country less competitive on the cost side.” A more positive development, he says, is the initiative to remove the so-called “pole tax” – a tax on special equipment that was hurting the industry: “We ran a study and noticed that companies would have to repay up to 60% of the value of special constructions, which represented a block [against] purchasing new technologies. We expect the development will have a positive effect towards this end as the pole tax would be eliminated next year.”

 

An update in Russia last year required that companies holding individuals’ personal data collect, store, modify, and host this data within Russia. Khaybulaev describes this, however, as more of a financial and infrastructure burden than one requiring significant legal advice. The ongoing Western sanctions on Russia, Khaybulaev explains, have a relatively insignificant impact on his legal team (as distinct from their effect on the country as a whole, of course), and he claims they have had only a minor impact on the company itself.

Finally, SK&S’s Berak reports that while consumer protection legislation in Poland in the main mirrors European standards and requirements, the overlap between the product warranties extended by car makers when selling to customers and the Polish statutory warranty (governed by civil law provisions) creates a problematic “dual system of protection.” According to Berek, “in practical terms, [this] means that Polish consumers are able to choose between the two, which poses some complications when in need of solving disputes with consumers.”

Chasing the Plants

CEE does have an advantage in enticing many automotive manufacturers. As SPB’s Eros explains, the decision by many manufacturers to locate their plants in the region is driven by “some opportunities generally valid for CEE as a whole – cheap labor costs and good infrastructure and access within CEE.” 

This is not to say that all CEE markets are identical. Speaking about Romania, Anghel comments, “The potential is great. I see a lot of room for growth, both in terms of suppliers of components but also in the producers’ space especially, [although] that seems to be impeded by people’s concern over underdeveloped infrastructure.” He points to Daimler Chrysler which, considered the
Romanian market, then – because of this concern – decided ultimately to invest in Hungary and simply hire from Romania. Anghel notes, however, that “we are seeing a few good things in the area of infrastructure but, unfortunately, progress on this front is slow.” 

And it is not just infrastructure that affects this competition. According to ODI’s Uros Ilic, “Slovenia cannot really compete on the lower value-added production side in terms of cost of labor, with the country being very well positioned comparatively when it comes to skilled or highly-skilled workforce.” Not everyone is so lucky. CMS’s Wodraschke says that, “it is difficult to get good skilled workforce in the big industrial zones of Hungary and in the region as a whole. In the north of the country, there are some production plants that are trying to get employees from Slovakia, but even there they have the same challenge.”

Efforts are being made to meet this demand, and Wodraschke reports that many supplies manufacturers are setting up strategic collaborations with technical schools in Hungary. Establishing such projects can provide interesting work for lawyers, both on the level of obtaining available European aid and in structuring the actual agreements between the companies and the educational institutions. Similar efforts are reported in Romania by Anghel, who says that there is a drive towards switching from a simple assembly and low value-added production to a more complex approach. He gives as an example the so-called “Centrul Tehnic de la Titu” from Dacia, which hosts 2,000 engineers focused on R&D, as a positive sign towards this goal. Anghel sees progress being made, “not only in the automotive sector, but [in] manufacturing in general, with such co-operations between manufacturers and technical universities being set up in the cities of Timisoara, Cluj, and Oradea.”

Attracting Investors and Manufacturers

Ultimately, the incentives to develop the necessary infrastructure, provide enticing tax breaks, and create workforce development programs all make sense, as Wodraschke’s observation about Hungary seems to apply to most of the CEE markets as well: “Hungary is a manufacturing place. Therefore, it is not surprising that state bodies are in regular contact with the large manufacturers and have a very proactive economic policy towards them and are eager to establish favorable circumstances for investors and manufacturers.”

We thank the following for sharing their opinions and analysis for this report:

• Daniel Anghel, Partner, PwC
• Martin Wodraschke, Partner, CMS, 
• Matija Testen, Partner, RPPR 
• Veronika Odrobinova, Partner, Dvorak Hager & Partners
• Lukasz Berak, Partner, Soltysinski Kawecki & Szlezak
• Uros Ilic, Managing Partner, ODI Law Firm
• Akos Eros, Partner, Squire Patton Boggs

This article was originally published in Issue 3.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

At the beginning of this year, Debevoise & Plimpton announced the promotion of two new International Counsels in its Moscow office – Maxim Kuleshov, in the firm’s corporate practice, and Dmitry Karamyslov, in its finance and aviation practices. With many international firms in Russia in retrenchment mode due to the geopolitical landscape (and at least one which shut its doors entirely (see page 18)), CEE Legal Matters took the opportunity to sit down with the two new International Counsels and discuss their appointments, what they meant for the firm, and the status of the market as a whole

An Opportunity to Develop Towards Becoming a Partner

We were curious to learn what the title of International Counsel signifies within Debevoise. Karamyslov explained, first, that there is no real difference between the title of International Counsel and that of Counsel – rather that the former simply relates to those outside of the US – and that it is the only position in the firm between Associate and Partner. Karamyslov explained that he and Kuleshov will be charged with an increased set of managerial responsibilities, and, while not the heads of their respective practices, Kuleshov explained that they are still “responsible for the development of their practices.” 

Kuleshov also pointed out that two Debevoise Partners in Moscow moved to that position from the International Counsel step, but he said that he does not believe there is any special training on how to become a partner, which is based on various targets rather than skills that can be taught. Nonetheless, Kuleshov claimed, both he and Karamyslov have received significant trainings throughout their time with the firm, relating to both hard and soft skills, such as how to give feedback to junior lawyers and “how to actually be a member of the firm – which promotes a collegial culture.” The firm’s emphasis on the latter is greatly responsible for the firm’s retention rates, Kuleshov reported, pointing to numerous lawyers, including himself, who have been with the firm for more than ten years.

Nonetheless, while agreeing that a formal training on how to become a partner is difficult to envision, Karamyslov explained that the firm has always invested a great deal of time and effort into helping its young lawyers develop in that direction. He said the firm encourages younger lawyers to develop relationships with clients and engage in their own BD efforts, and while there is definitely increased pressure to gain client exposure at a senior level, it’s facilitated at mid-level as well. He cited as an example the six months he spent last year in the firm’s London office, where he worked closely with both New York and London partners, and he will return to London for a short period to be closer to the international clients driving the firm’s aviation projects.

Finance: Calculated Optimism

Speaking both about their respective practices and their outlook within the Russian market, both Karamyslov and Kuleshov displayed an obvious optimism. Karamyslov explained that the finance market work has been picking up since the second quarter of last year. Even though the overall market still is rather slow, he was pleased that Debevoise had secured a considerable share of that work and was proud to report very high utilization rates within the practice. “For example,” he said, “in 2015 we closed 2 big ticket pre-export finance facilities which were among only a few international financings on the Russian market in 2015: up to USD 800 million for Uralkali and USD 400 million for NLMK. We also assisted Norilsk Nickel in its USD 1 billion Eurobond issue which was more thanfour times oversubscribed and is again among only a handful of capital markets deals in 2014-2015.”

“At the end of the day, Karamyslov said, “all are tired of the sanctions and everyone is eager to start working on financings again. My prediction is that, unless something extraordinary happens, we’ll see more and more financing work and, if we are lucky enough to see the sanctions lifted, really, everyone will be overworked, since the demand is enormous at this point.” 

And, Karamyslov explained “the US market, the EU one, are both extremely active – in fact, last year was one of the largest in the EU for IPOs. Unfortunately, Russia could not keep up with the rest of the world because of the context but, if things change … I really don’t want to be overly optimistic, but because demand is so high, I can’t help it.”

Corporate: Betting On the Right Clients

Kuleshov reported that Debevoise is quite busy because its Moscow office is focused on representing Russian clients. “Despite the turmoil, our Russian clients are alive and considering new deals and we are constantly helping them on acquisitions or divestitures,” he said, while also pointing to what he described as “other corporate opportunities” such as a number of clients considering going private or deciding to delist from the London Stock Exchange. 

“People have gotten used to the new normal,” Kuleshov said, “and we’re seeing a good deal of work coming from divestment of non-core assets as well as some potential acquisitions on the horizon as well.” Another potential source of business that he mentioned was privatizations, with the Russian government planning to sell a number of state-owned companies to private investors. “With Mr. Putin mentioning that the priority would be to sell to Russian private clients, I can only hope that will include some of our clients.”

“I can’t say that all these transactions are signs of good economic conditions, but they still represent economic activity and work for lawyers as a result – I’m quite optimistic because of our investment in our Russian clients,” Kuleshov concluded.

Dmitry Karamyslov, Counsel, and Maxim Kuleshov, Counsel, Debevoise & Plimpton

This article was originally published in Issue 3.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Glimstedt’s Tallinn office has advised the Estonian Defense Forces on its March 31, 2016 framework agreement with the Israeli defence industry company Elbit Systems Ltd., under which Elbit Systems will supply ammunition for 120-millimeter mortars of the Estonian Defense Forces in coming years.

According to a Glimstedt press release, the number of mortar rounds to be delivered is big enough to maintain the ammunition stocks of the defense forces and conduct training. The first delivery is to be made this year and the price of the first batch is slightly over EUR 2 million.  

“The ammunition to be obtained is brand new and corresponds to NATO standards,” said Commander Roman Lukas, Deputy Commander of the Logistics Command, who signed the agreement on Estonia’s behalf, “which means a longer lifespan and higher quality.” 

The Glimstedt team advising Estonian Defense Forces included Partner Priit Latt and Associate Mari-Liis Orav, as well as Ave-Liis Saluveer and Erki Fels.

I. Introduction

Could design and layout of a retail store be registered as a three-dimensional trademark? Apparently yes.Apple Inc. triggered an examination on that front before the Court of Justice of the European Union (“the CJEU”) when the German Patent and Trademark Office (“the DPMA”) rejected the company’s trademark application of “distinctive design and layout of a retail store” and the company appealed this rejection decision before German Federal Patent Court (Bundespatentgericht, “the Court”), which ultimately led the Court to ask for a preliminary ruling from CJEU on the matter. 

The Court laid out theoretical questions that does not bear the specific merits of the case but would help resolve the dispute (whether design and layout of a retail store be registered as a three-dimensional trademark and if so, what requirements are sought for such registration) and the CJEU gave its preliminary ruling¹ further to these questions. The gist of ruling, to wit of the CJEU’s assessments on this issue, is provided hereunder. 

II. CJEU’s Ruling on the Matter

In a nutshell, Apple Inc. requests registration of a sign that is the depiction of its flagship store, which can be identified as “presentation of the establishment in which a service is provided”. So basically the matter at hand pertains to whether how one presents its place of business/establishment/store, in which a service is rendered, can be registered as trademark and actually, in a way, be considered as “packaging” of a product. 

The first issue that needs to be handled is to establish whether the layout of a store is eligible for being a trademark, and there are three conditions that are in play here: 

1. The subject matter of the trademark application must be a sign. 
2. That sign must be such that it can be presented graphically. 
3. That sign must be such that by virtue of it, the goods and services of one undertaking can be distinguished from those of other undertakings. 

Design and layout of a retail store is basically a representation, bearing integral collection of lines, curves and shapes. Such design and layout therefore satisfies the first and second conditions cited above. There is no need for this design, or layout, to contain any indication as to the size and proportions of the store it depicts. This means that the layout does not have to be a perfectly measured depiction, a representation of what stands where and how those stands suffices.  

Whether the design and layout of a store is distinguishable, to wit distinctive, depends on whether the layout has noteworthy features that are quite different and stands out as far as the norms and customs of the relevant economic sector is concerned. So basically, the layout must have such innovative and novice elements that put the design of the store in a completely different place from the stores in which similar services are provided. This is judged by the goods and services in question and the perception or the relevant public. So the conclusion is that design and layout of a store has the potential to distinguish the undertaking/company that provides services in that store.   

Consequently, as long as the design and layout of a store meet all the foregoing criteria, registration thereof is possible;

(i) for the goods that are presented under that design/layout and grants the same trademark protection as the “packaging” of the goods enjoy, 

(ii) for the services relating to the goods that are presented under that design/layout as long as such service is not an integral part of offering the goods for sale. 

The above conclusions of the CJEU show that there is a minor distinction when it comes to registration of design and layout of a store for services. The design and layout need to be such that those do not belong to an integral part of the way that the goods in questions are sold. 

III. Assessment of CJEU’s Ruling in Light of the DPMA’s Reasoning

The reasoning behind the DPMA’s rejection on Apple Inc.’s trademark application of “distinctive design and layout of a retail store” relies on the ground that depiction of a store in which products are offered for sale is merely a representation of an integral part of business. The DPMA also concludes that, regardless the possibility that one may have an idea about the price range and quality of the products that are put in display by simply looking at the design and layout, one cannot perceive commercial origin of the products in question. 

The DPMA has a point in its reasoning since the primary function of a trademark is introduced as “showing commercial origin” in various decisions of the CJEU and that is actually why the DPMA rejects the trademark application, as it concludes that the design and layout do not look distinctive enough to make one have a perception, or assumption, about the commercial origin. 

The ruling of the CJEU shows that design and layout of a retail store can be registered as trademark as long as this design/layout is so unique that it actually screams the commercial origin of the products. An assessment on that front requires an examination on merits of each specific case, therefore the CJEU’s theoretical conclusions work only to a certain extent for Apple Inc.’s case. The remaining, and actually the main issue in that case revolves around whether the design and layout of Apple Inc.’s flagship store is so distinctive and unique that when one sees it one immediately associates it with Apple products.  

To sum up, although it is theoretically possible, as the CJEU establishes, for design and layout of a retail store to be registered as trademark, the level of distinctiveness that design and layout of a retail store must have is subject to quite a high threshold in order for that design/layout to be registered as trademark. In connection to that, even if there is such distinctiveness, the commercial origin of that design/layout must be well-known before relevant consumers as this is the main point for the design/layout in question to create a perception on commercial origin. 

(First published in Mondaq on April 25, 2016)

1. CJEU (Third Chamber) Case: C-421/13

By Gonenc Gurkaynak, Managing Partner, Ilay Yilmaz, Partner, and Tolga Uluay, Associate, ELIG, Attorneys-at-Law

Alexander Litvinov was, at the time we spoke to him, Head of Legal at the Kira Plastinina Group in Moscow. Since then he has started transitioning towards a new role with an international retail chain. Prior to joining Kira Plastinina, he worked for the Clarins Group, Inditex (CJSC ZARA CIS), and Solvay.

A.L.: While still at university, I started my career as a paralegal and interpreter at Solvay, a well-known Belgian chemistry, plastics, and then medicine producer. Thanks to amicable management I managed to combine my studies and working at Solvay. This gave a massive boost to my professional knowledge and understanding of the vast abyss between legal education and legal practice in Russia (which I keep in mind when hiring fresh graduates). Having emerged from this process a corporate lawyer in Solvay, I decided to shift to a different sector, so I joined a Spanish-born retail giant. This was a pivotal point for my career. For me and for many of my colleagues in different fields Inditex was a cradle of retail, where we all learned much and where lots of high-skilled specialists were born. This was for sure the most instructive part of my professional path. However, Inditex didn’t provide much freedom of choice or opportunities for growth due to its enormous vertical structure and well-developed system of obligatory guidelines from the headquarters, and somewhere in 2014 I realized that I’d learned as much as I could from Inditex and opted for Clarins, a French luxury cosmetics and perfumery brand. I was appointed General Counsel and had one paralegal as my subordinate. This position provided much more freedom in making legal decisions, which I had craved. However, this was a dramatic deviation from my previous retail experience, because Clarins in Russia was practically 100% wholesale. Finally, in mid-2015 I was lured to Kira Plastinina Group, which was a return-to-the-roots and very ambitious project. At the moment I’m gently switching to another project which is a Russian start-up for a famous international retailer.

A.L.: For sure, the most unusual part of my experience at Kira Plastinina Group was that, since the Group originated in Russia, we were the headquarters – the ones who made decisions and communicated them to Belarus, Kazakhstan, Ukraine, and China, whereas throughout my previous experience I was employed by local branches of international companies which, in their turn, had been the following instructions of their mother companies and had been backed by them. This time it was me and my team who had to double-check all the legal decisions before communicating them to our branches and seeing to how our guidelines were implemented. This status leads to greater responsibility and wider legal overview.  

PA.L.: For me, the retail sector provides a unique opportunity to witness an immediate response to my decisions, instead of a protracted one. Retail is a very fast-moving industry where there is only a split second between the birth of a project and its implementation. Retail managers are like The Flash – better think twice before voicing your thoughts because they won’t ask you to repeat or give you a chance to correct your memoranda.

A.L.: For sure, it would be legal consulting. I was always fascinated by the opportunity to focus on pure, concentrated law. Another goal which I would pursue with great pleasure is legal education. As a matter of fact, I’m still nurturing a dream to contribute to the beginning of a new system of Russian legal education – based on modern and practical skills and competence-based, directly connected to and permanently communicating with the end beneficiaries of legal education: companies and law firms.

A.L.: Personally, I’m an advocate of dedicated local legal support because I’ve witnessed many times the errors of centralized support, often made only because of the headquarters’ exclusion from Russian legal reality and the relevant markets. However, in Kira we had everything centralized in Moscow, except for one lawyer in Kazakhstan. Due to financial difficulties and the order of priorities, I was not able to rebuild this structure and had to cope with what I had.

P.P.: No, definitely not. It’d simply be way too expensive to have one specialist on call for each of the immensely diverse jurisdictions we deal with on a regular basis.

A.L.: My dream would be to build a local in-house team in every jurisdiction instead of managing everything centrally from Moscow, because even with the best efforts made sitting here in Moscow you’re not always able to communicate duly with external counsel in some jurisdictions – for instance China and Hong Kong – without being fooled in regards of quality of local services or having important communications lost in translation.  

A.L.: For Inditex stores in Crimea, the issue was a great diplomatic and political difficulty as I remember, while for Kira Plastinina it was not, because the Group didn’t have to fear for its international business outside of CIS. I expect that some problems for textile retailers are still to come in connection with the Turkey issue, as we already witnessed the unwillingness of Russian customs authorities to import goods from Turkey at the end of last year.

A.L.: For me it was always the assumption by external consultants that in-house lawyers would not double-check their memoranda due to inexperience or unwillingness and would not find their mistakes. Personally, I’m always biased regarding such legal papers and examine them with much scrutiny.

This Article was originally published in Issue 3.1. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.