The “Swissness” trademark legislative amendment came into force on 1 January 2017. It strengthens the “Swiss Made” designation and the Swiss stamp of quality. It aims to reinforce the value of Swiss products used for marketing products, and in turn contributes to preventing any wrongful use of the Swiss indication of source.
This article aims to give an overview of the revision of the Federal Act on the Protection of Trade Marks and Indications of Source of 28 August 1992 (“TMPA”; RS 232.11) and to analyse the criteria for determining the origin of goods, especially industrial goods and services.
An adequate protection of the “Swiss” brand
Indications of source are direct or indirect references to the geographical origin of goods or services, including references to their characteristics or the quality associated with their origin (art. 47 para. 1 TMPA).
The designation “Switzerland” is an indication of source according to the TMPA. Swiss goods and services have the reputation of being of higher quality and are thus valued by consumers both domestically and abroad. Swiss indications are thus an undeniable added value for the Swiss industrial sector, particularly when it comes to watchmaking, machinery and cosmetics[1].
As a result, “Swiss” labelled products can be charged at a higher price than products not from Switzerland or whose origin is unknown[2]. This does not only apply to economic sectors considered typically Swiss, such as watches, jewellery, cheese and chocolate[3]. Indeed, studies show that body care and cosmetics products with a Swiss indication would be preferred in 83% of cases to products without indication of source at the same price and in 57% of cases even if they were more expensive than equivalent products without indication of source[4]. For watches costing around CHF 2’000, Swiss products would be preferred in 89% of cases at the same price and their reputation would even allow their price to be doubled[5]
For this reason, companies tend to use the Swiss “brand” on their products and services, by using the Swiss cross or another reference to Switzerland, such as “Swiss”, “Switzerland”, “Made in Switzerland” or figurative images such as the Matterhorn or William Tell[6].
Such added value (usually referred to as the “Swiss premium”) led many companies to use the “Switzerland” brand for products that barely have any connection with the country. This phenomenon led to the adoption of the “Swissness” legislative amendment to the TMPA by the Swiss Parliament. This amendment aims to reinforce the trust consumers have in the guaranteed origin and quality of a product or service, and more broadly to better protect the “Swiss” brand from free riders and to secure an important long-term competitive advantage for companies that manufacture in Switzerland[7]. Since the entry into force of the “Swissness” legislation on 1 January 2017, companies that want to use the Swiss indication of source must comply with the legally defined criteria and be able to prove such compliance in the event of a legal dispute[8].
According to art. 64 para.1 TMPA, any person who wilfully:
- uses an incorrect indication of source;
- uses a designation that can be confused with an incorrect indication of source; or
- creates a risk of deception by using a name, a company name, an address or a trade mark associated with goods or services of a different origin,
risks up to one year imprisonment or a fine. If the offender acts for commercial gain, the custodial sentence can be up to five years and can be combined with the monetary penalty (art. 64 para 2 TMPA).
Criteria for determining Swiss origin of the product or service
The indication “Switzerland” as the source of the product or service may be used as long as the statutory criteria set in the TMPA are met. The use of the indication does not require approval and is free of charge. No official verification is carried out. Only the legal regulations must be complied with and, if required, be able to be proven if the “Swissness” brand is used[9]. Thus, it is the sole responsibility of the relevant company to comply with the criteria set in the law.
The legally defined criteria for determining origin take the specific type of goods into account and divide goods into three categories: natural products (art. 48a TMPA), foodstuffs (art.48b TMPA) and industrial products (art. 48c TMPA)[10].There is an additional category for services (art. 49 TMPA). We will hereunder focus on the conditions set by the law for industrial products and for services.
To comply with these criteria guarantees that when “Switzerland” is marked on the outside, “Switzerland” is also contained on the inside[11].
Highlight on industrial products
Art. 52b lit. a of the Ordinance on the Protection of Trade Marks and Indications of Source of 23 December 1992 (“OMPA”; RS 232.111), defines industrial products as all products that do not belong to the category of natural products or foodstuffs.
In order to legally use the Swiss indication of source, industrial products must meet two conditions. First, the TMPA requires that at least 60% of the manufacturing costs were incurred in Switzerland (art. 48c para 1 TMPA and art. 52e ff OMPA). The items set in the table below are taken into account or excluded for the calculation of the 60% threshold. All these costs will have to be evidenced on the basis of accounting information (salary slips, invoices, balance sheets, etc.)[12].
Second, the indication of source must correspond to the place where the activity, which gave the products its essential characteristics, took place. In all cases, an essential manufacturing step must have been carried out at this place (art. 48c para 4 TMPA). This essential manufacturing step is not defined in the law but it is, for instance, the assembly of a watch or the manufacture of a fabric from fibres[16]. Specific ordinances of the Federal Council set detailed criteria for certain categories of products[17].
Highlight on services
The conditions to use the Swiss indication of source for services are defined at art. 49 TMPA and art. 52o OMPA. The indication of source of a service is considered to be correct if a) it corresponds to the registered office of the person providing the service and b) a place of effective administration of this person is located in the same country (art. 49 para. 1 TMPA). The effective administration is a notion of tax law and corresponds to the place where the company’s affairs are conducted and where important decisions regarding the company are taken[18].
Enforcement
The legislator intentionally did not set up a state control system of the use of the Swiss indication of source. Professional and economic associations are called upon to play a key role in the effective implementation of the “Swiss brand” since it is they, or rather their members who benefit from such label[19]. According to art. 64 para. 3 TMPA, the Swiss Federal Institute of Intellectual Property (“IPI”) can file criminal charges in the name of the Swiss Confederation or bring a civil action. Trade and consumer protection associations, as well as individuals, can report a case of wrongful use to the competent authority or bring civil proceedings against the alleged infringer.
Swiss law is not applicable abroad. Thus, it is particularly difficult to enforce the protection granted with the “Swissness” legislative amendment overseas. The IPI can learn of potential unlawful use from the Swiss embassies abroad, from the Directorate General of Customs and from private persons[20]. The offending company can be notified of its wrongful conduct and the involved trade associations can be informed via the embassy, but proceedings cannot be brought against such offender for breaches occurring outside Switzerland (i.e. when products are sold outside Switzerland)[21]. The trade association however will have the option to file an opposition if the offending company tries to register a trademark[22].
Conclusion
The Swissness criteria set in the TMPA and OMPA aim at regulating the use of Swiss indications of source and they motivate companies to invest more in Switzerland in order to produce Swiss products[23]. In parallel, the use of Swiss indications of source can be a commercial advantage in many sectors. Such use is totally optional and self-regulated unlike in other jurisdictions (where the party wishing to use such indication of origin must first prove the relevant criteria), but comes with heavy responsibilities, as the burden of proof relies on the company (art. 51a TMPA)[24].
In any case, the use of the Swiss indication of source in a specific case requires technical, legal and economic skills, as well as a deep analysis of the requirements applicable to specific economic branches.
Our Experience
lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.
This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact us on info@lecocqassocate.com for any questions.
Footnote
[1] Vieira Philippe, Les règles du « Swissness », un nouveau défi pour les entreprises, in Expert Focus (2019) p. 302.
[2] Swiss Federal Institute of Intellectual Property
[3] Addor Felix/Guyot Nicolas, La réglementation “Swissness”: objectifs et principes, in Indications géographiques: Perspectives globales et locales, De Werra Jacques (édit.) (2016) p. 4.
[4] Swissness Worldwide 2016, Image und internationaler Mehrwert der Marke Schweiz, S. Feige, R. Annen, D. von Matt, S. Reinecke und F. Addor, Universität St. Gallen (2016) p. 48.
[5] Swissness Worldwide 2016, p. 54.
[6] Swiss Federal Institute of Intellectual Property (https://www.ige.ch/en/law-and-policy/national-ip-law/indications-of-source/swiss-indications-of-source/background-and-goals.html).
[7] Swiss Federal Council, Media Release Evaluation of the “Swissness” legislation (18.12.2020).
[8] Swiss Federal Institute of Intellectual Property.
[9] Swiss Federal Institute of Intellectual Property (https://www.ige.ch/en/law-and-policy/national-ip-law/indications-of-source/swiss-indications-of-source/background-and-goals.html).
[10] Swiss Federal Institute of Intellectual Property (https://www.ige.ch/en/protecting-your-ip/indications-of-source/indications-of-source-basics/criteria-for-determining-origin.html).
[11] Swiss Federal Institute of Intellectual Property (https://www.ige.ch/en/protecting-your-ip/indications-of-source/indications-of-source-basics/swissness.html).
[12] Vieira, p. 305.
[13] Rapport explicatif relatif au droit d’exécution « Swissness » (2015) p. 16.
[14] Rapport explicatif relatif au droit d’exécution « Swissness », p. 17.
[15] Rapport explicatif relatif au droit d’exécution « Swissness », p. 20.
[16] Vieira, p. 304.
[17] See for instance the Ordinance on the Use of “Switzerland” or “Swiss” for Watches of 23 December 1971 (RS 232.119).
[18] Message sur l’harmonisation fiscale, FF 1983 III 114.
[19] Rapport explicatif relatif au droit d’exécution “Swissness”, p. 11.
[20] Swiss Federal Institute of Intellectual Property.
[21] Swiss Federal Institute of Intellectual Property (https://www.ige.ch/en/protecting-your-ip/indications-of-source/indications-of-source-basics/fighting-misuse/the-role-of-the-ipi?L=1).
[22] Swiss Federal Institute of Intellectual Property (https://www.ige.ch/en/protecting-your-ip/indications-of-source/indications-of-source-basics/fighting-misuse/the-role-of-the-ipi?L=1).
[23] Addor/Guyot, p. 14.
[24] Vieira, p. 307.
