This week we reported on concerns over the transparency of selection processes for senior leadership roles at the EUIPO. As the debate continues, and the office embarks on a busy year, it is critical that users remain central to all its endeavours, argues our Saturday opinion.

On Tuesday WTR reported on a complaint lodged at the European Anti-fraud Office criticising the election process for senior leadership appointments at the EUIPO. The complaint, and the perception that it creates, adds some important context to what will be a pivotal year for the Alicante-based office.

The complaint claims that the appointment process for management positions at the EUIPO is highly politicised and vulnerable to conflicts of interest. The fact that the race to lead a financially independent EU agency is political, with lobbying up to national government level, will surprise few in the industry. But the nature of some allegations may be cause for disquiet. It has long been “common practice to offer top management posts in exchange for votes”, the complaint claims.

The EUIPO strongly refutes these allegations. Claims of jobs being offered for votes are “not supported by any concrete verified example in the office’s history”, it states, and the selection process for positions at the office is “open, fair and transparent and subject to judicial control”.

But behind all of this is an issue worth reflecting on. At the heart of the perceived conflict of interest is the fact that the management board and the budget committee – while having appointees from the European Commission and Parliament – predominately comprise EU member state representatives, usually from – or reporting to the head of – the country’s national IP office. These groups input into leadership selection, budget decision-making and the ongoing mandate of the executive director.

So where is the perceived conflict? In short, those who can directly benefit from EUIPO funds, focuses and activities are able to exert influence on them. This can then manifest in decision-making.

For instance, member state offices currently benefit from an offsetting mechanism that sees the EUIPO compensate member states for costs incurred by them for participating in the trademark system, when the EUIPO incurs no budgetary deficit in a particular year.

One issue purported to be a factor in the management board’s November 2022 decision not to renew executive director Christian Archambeau’s contract was the (then) latest EUIPO budget, which signposted no such funds going to national offices in 2024 due to economic turbulence and volatile filing levels. As Tove Graulund, principal of Graulund Consulting, told WTR: “Today it is in the best interest of the management of the office to be friendly with EU IP offices. We saw that when Archambeau['s contract] was not renewed.”

Speaking to WTR in October, current EUIPO executive director João Negrão noted that the mechanism is a positive feature, allowing the EUIPO to support member states. He also observed that offsetting was less of an issue on the campaign trail than reported.

It is hard to argue against EUIPO support for national offices being a positive thing. The Co-operation Fund that Negrão played such a pivotal role in developing – and which has supported a swathe of projects at national level – has greatly benefitted users across the continent, and beyond.

Conflict of interest concerns surface when it is perceived that decisions on the office’s leadership and budget are made by members with financial skin in the game. Even if offsetting is not a factor in the decision, perception is everything. And the perception for some is that Archambeau was removed in part because national offices were due to receive less financial support and were far from happy about it. The decision was made – through the management board – in part by those whose own organisations would have received such support.

Similarly, a number of previous management board and budget committee chairs have subsequently taken on jobs at the office. That may be because they were the best candidates – people who understood the landscape at EU and national level, and who brought important expertise and skillsets. The office itself states that “all candidates are treated on equal footing, independently of their origin”, noting: “It is quite natural for members of the office’s management board to match with the profiles sought by vacancy notices published and thus to apply for senior positions.”

The office should, of course, hire the best qualified candidate for any role. But the optics are also important. And for those who see a relatively ‘closed shop’ in EU IP agencies, frequent movement from European IP offices to the better-funded EUIPO can reinforce negative perceptions.

Then there is the EUIPO budget. The European Court of Auditors’ annual report on EU agencies for the 2022 financial year observed that budgetary and discharge arrangements were similar for all EU agencies except the EUIPO, the Community Plant Variety Office and the Single Resolution Board. The first two are the only fully self-financed decentralised agencies “subject to budgetary and discharge procedures administered respectively by their Administrative Council or Budget Committee, but not by the European Parliament or the Council”, the report noted.

In the EUIPO’s case, the budget committee has representatives from – or close to – member state IP offices. Again, this causes perception issues. As one source told WTR anonymously: “They are the people who are approving everything, including the granting of funds to themselves.” Another European IP professional characterised it as “the fox guarding the hen house”.

This leaves the EUIPO in a difficult position. The spotlight is firmly on governance and finances, and every move is scrutinised.

The European Commission is among those watching. One source tells WTR that it has its eye on EUIPO fees and budgets.

Finances are clearly on Negrão's mind. Speaking to WTR in November, he emphasised a focus on ensuring that the office retains its financial independence, as this is a motivation to achieve high performance levels.

“For me, it will always be important to ensure the financial autonomy of the EUIPO,” he explained. “We don't receive anything from the EU budget. We need to ensure that this will continue to be the case. We [also] need to ensure that anything we do is not going to generate deficit. If we are not autonomous, I will have to ask for EU budget and that is something that I never want to do – [as] that might have a strong impact in terms of the level of the services that we provide. The moment we are not autonomous and receive our budget from the EU budget, we no longer have extra motivation to become better [in a bid to raise more revenue] because whatever you do, you will always have the same amount, more or less, as now.”

The EUIPO has a busy 2024 in store. The groundwork for the Strategic Plan 2030 is being laid. And there is also the no small matter of a proposed foray into the world of patents.

Last year the European Commission announced plans for a regulation on standard essential patents (SEPs), with the EUIPO to be entrusted with running a system for administering essentiality checks and processes for aggregate royalty determinations and FRAND determinations, as well as administering an SEP register.

These plans, which have proved controversial in patent and political circles, would require resourcing from the outset. To date, the EUIPO has kept its counsel. It is “a technical organisation… not a political organisation”, Negrão noted; therefore, it is unable to comment on discussions around the proposals. Instead, it will “implement whatever the legislators decide that [it] should implement”.

It is unknown whether Negrão was supportive of a missive from his compatriot António Campinos, president of the European Patent Office (EPO) and former EUIPO head, which questioned why his organisation’s potential contribution to the mooted system had been overlooked. The missive observed that the European legislator had entrusted the EPO to administer the unitary patent, rather than “an existing EU agency with no experience in the field of patents”.

Entrusting the EUIPO with SEPs would add a complex task to an already lengthy 2024 ‘to do’ list. This includes maintaining current operations, taking on new responsibilities, preparing for the next strategic plan, ensuring political scrutiny, responding to questions over governance structure and managing the office’s brand.

Key to the latter will be to ensure that the EUIPO's work grabs positive headlines and that the office is perceived by media outlets (and, by extension, the public) as a leading IP agency – not one that is known as much for the “sweeping sea views, deluxe sports grounds and… ritzy restaurant” of its headquarters.

As it does this, it is critical to ensure that users remain front of mind, in both Alicante and Brussels – not least because, amid the politicking, EUIPO customers are both the financial lifeblood and the reason for the agency’s very existence.

In terms of office operations and governance, Graulund – who represented MARQUES as an observer at the EUIPO (then OHIM) Administrative Board and Budget Committee from 2009 to 2013 – reflects: “There is no vote for users or customers. They don’t have a vote and this all happens behind closed doors.” But their needs must be front and centre when decisions about funding, budget allocation, resourcing and office priorities are made.