Bad faith in case of a new application for a trademark that has already expired?

Can an old trademark – that is no longer protected – be registered by a new owner and can that owner then be accused of bad faith?

The GC answered this question on July 6, 2022 in Case T-250/21 Ladislav Zdút v. EUIPO/Nehera.

Facts of the case

In 2013, Mr. Zdút applied to the EUIPO for the EU trademark for the following sign: Nehera

In 2014, the trademark was registered for goods in classes 18, 24 and 25 (leather goods, clothing, blankets).

In 2019, the heirs of Mr. Nehera, filed an application for a declaration of invalidity of this mark for all goods covered by it, pursuant to Article 59(1)(b) of Regulation No. 2017/1001.

They argued that the applicant had acted in bad faith when it applied for the contested mark because their grandfather, Mr Nehera, had set up a company in Czechoslovakia in the 1930s for the distribution of clothing and accessories and had applied for and used a national mark identical to the contested mark.

The EUIPO Cancellation Division rejected the application for a declaration of invalidity on the grounds that the applicant’s bad faith in filing the contested mark had not been established.

The applicants filed an appeal with the EUIPO against the decision of the Cancellation Division.

By the contested decision, the Second Board of Appeal of EUIPO allowed the interveners’ appeal, annulled the decision of the Cancellation Division and declared the contested mark invalid.

This decision was appealed before the GC and annulment of the decision was sought.

Decision of the General Court

Pursuant to Article 52(1)(b) of Regulation No 207/2009 now Article 59(1)(b) of Regulation No 2017/1001, an EU trade mark shall be declared invalid on application to the EUIPO or on counterclaim in infringement proceedings if the applicant was acting in bad faith when filing the application for that trade mark.

The concept of bad faith in the present case, which is to be understood in terms of trademark law, is not defined, delimited or even described in any way in the legislation (see judgment of 29 June 2017, Cipriani v EUIPO – Hotel Cipriani, T-343/14),

However, the Court of Justice and the General Court have provided some guidance on how to interpret the concept of bad faith for the purposes of trademark law and how to assess its existence. Accordingly, bad faith is committed when it is clear from conclusive and consistent indications that the proprietor of a trademark filed the application not with the aim of participating in competition in a fair manner, but with the intention of harming third party interests in a manner contrary to honest practices, or with the intention of obtaining an exclusive right for purposes other than those inherent in the function of a trademark, without reference to a specific third party (judgments of 12. September 2019, Koton Mağazacilik Tekstil Sanayi ve Ticaret v EUIPO, C-104/18).

Indicators for this are:

• If the applicant knows or must know at the time of filing that a third party is using in at least one Member State an identical or similar sign for an identical or confusingly similar product or service to the sign for which registration is sought
• If there is an intention on the part of the applicant to prevent that third party from further use of such sign.
• The degree of legal protection enjoyed by the third party’s sign and the sign applied for (judgment of 11 June 2009, Chocoladefabriken Lindt & Sprüngli, C-529/07).
• Origin and use of the earlier sign
• Entrepreneurial logic, sequence of events in the application for registration
• Intention to take unfair advantage of the reputation of an earlier sign or name.

It is for the party filing the application for a declaration of invalidity to establish the circumstances giving rise to a presumption of filing in bad faith, in which case – unless the contrary is proved – good faith is assumed (judgment of 13 December 2012, pelicantravel.com v OHIM – Pelikan (Pelican), T-136/11).

In the present case, according to the case-law, the impression created in the mind of the relevant public of a link between a younger sign and an earlier sign is not in itself sufficient to support a finding that the reputation of the sign or the earlier name has been unfairly exploited.

Furthermore, it should be noted that the concept of taking unfair advantage of the reputation of a sign or a name covers a situation in which a third party seeks to profit, almost as a free rider, from the attraction, reputation and prestige and to exploit, without financial consideration and without having to make any effort of its own to do so, the efforts made by the owner of that sign to create a corresponding image.

In the present case, however, the applicant submits that the former Czechoslovak trade mark and the name of Mr Jan Nehera were completely forgotten by the relevant public in 2013 and that he himself expended considerable commercial effort, time and money in order to revive the Nehera trade mark, thus not behaving in a parasitic manner. Under these circumstances, the mere reference to the historical image of Mr. Jan Nehera and the former Czechoslovak trademark for the purpose of advertising the contested mark does not violate honest practices in trade and commerce.

Second, the former Czechoslovak trademark and the name of Mr. Jan Nehera in any case no longer enjoyed legal protection in favor of third parties at the time of the application for the contested mark. It follows that the descendants and heirs of Mr. Nehera did not possess any rights which could be abused or usurped by the applicant. It is therefore not apparent that, by filing the contested mark, the applicant intended to defraud the descendants of Mr Jan Nehera or to usurp their alleged rights.

In the light of the foregoing, the Board of Appeal erred in finding that the applicant intended to take unfair advantage of the reputation of Mr Jan Nehera and of the former Czechoslovak trade mark and that it acted in bad faith in filing the application for the contested mark.

Under these circumstances, in the absence of residual awareness of the earlier mark and current fame of the Nehera name at the time of the application for the contested mark, the subsequent use of that mark by the plaintiff was not, in principle, capable of constituting parasitic conduct revealing bad faith on the part of the plaintiff.

That conclusion is not called into question by the fact that the applicant had knowledge of the existence and prior reputation of Mr Jan Nehera and the earlier Czechoslovak mark. Indeed, the mere fact that the trademark applicant knows or must know that a third party has used in the past a mark identical or similar to the mark applied for is not sufficient for the affirmation of bad faith on the part of that applicant.

But, the court also clarifies: it should be noted that it cannot be ruled out that, under certain special circumstances, the reuse by a third party of an earlier, formerly well-known mark or the name of a formerly famous person may give a false impression of continuity or inheritance with respect to that earlier mark or that person. This could be the case, in particular, if the trademark applicant holds himself out to the relevant public as the legal or economic successor of the owner of the earlier trademark, although there is no continuity or inheritance relationship between the owner of the earlier trademark and the trademark applicant. Such a circumstance could be taken into account in order to affirm, if necessary, the bad faith of the trademark applicant and, consequently, to declare the invalidity of the new trademark on the basis of Article 52(1)(b) of Regulation No 207/2009 now Article 59(1)(b) of Regulation 2017/1001.

Tenor of the judgment

The term bad faith presupposes a dishonest attitude or intention in the trademark context or in business life. The decisive factor here is the intention to take unfair advantage of the esteem of an older sign or name and to profit parasitically from the attraction, reputation and prestige of the older sign without making any effort of one’s own to do so.

Key Takeaways

The ruling solidifies the handling of the allegation of bad faith. The legislation on the EU trademark does not in principle prohibit a repeated application for a trademark, nor does such an application per se constitute bad faith. However, in the case of a repeated application for an earlier trademark which has already lapsed, it is important to avoid that the applicant can be accused of bad faith. It is forbidden both to tie in with and to take unfair advantage of a certain residual awareness of this sign. Own efforts must be made to withstand the accusation of parasitic behavior and to prevent the invalidity of the trademark.

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Text source: Judgment of the GC of 6.07.2022, T-250/21

Image source: nehera