When should you use the Madrid system?

For businesses looking to expand their markets overseas, the Madrid system can be a "one-stop shopping" for an international filing and maintenance program. The advantages of filing through the Madrid system are many, including:

- Wide coverage. At present, there are over 80 member countries in the Madrid Protocol.

- Single filing procedure with one fee payment in one currency, in one language.

- No translation or legalisation / notarisation of document is required.

- There is no requirement to engage foreign lawyers or agents except where an objection is raised.

- There is only one renewal deadline which can be handled with one renewal application.

- Recordal of assignments and name changes are centrally administered.

However, there are risks in filing through the Madrid system. Under the "Dependency Rule", an lnternational Registration (lR) is dependent upon the basic application / registration for 5 years. Any invalidation / revocation, cancellation or limitation of the basic application / registration during this critical period will directly affect the IR extending to the designating countries.

As a result of the "Dependency Rule", lR is vulnerable to "central attack". This is a strategy normally employed by adverse third parties to invalidate an lR when it remains dependent.

The harshness of the "Dependency Rule" is somewhat mitigated by a transformation procedure. The trademark owner has a grace period of 3 months to transform the lR into national registration without the loss of priority date of the lR. However, the cost of transformation is very high as it requires payment of national filing fees in each designated country.

In addition, businesses that have obtained registrations of trademarks under the Madrid system may only transfer those lnternational Registrations to other businesses who are also domiciled in a member country. This may cause difficulties for traders whose businesses span beyond the member countries.

Despite the administrative benefit and the reduction in transaction costs, the Madrid system has technical features (outlined above) that could disadvantage international businesses. Therefore, in addition to cost considerations, there are many strategic considerations for a trademark owner considering using the Madrid system, for example:

- The strength of the basic application / registration prior to using it as a basis for designating other countries under the Madrid system, in view of the "Dependency Rule".

- Alternative international filing strategy. For instance, a trademark owner only interested in the European market may find that a single European Community Trademark application better suits his needs.

- The likelihood that the trademark will be transferred to a third party which is not domiciled in a member country.

In a nutshell, the Madrid system can be used as a cost-efficient means of securing an international portfolio for smaller companies or for less important trademarks. Further, using the Madrid system may be suited for less crucial markets. However, for principle trademarks in principal markets, national application may be a better choice.

Trademark owners should seek professional advice from experienced professionals in these strategic considerations in order to avoid potential pitfalls along the way.