Advocate general gives opinion on bad-faith CTM registrations

European Union
Advocate General Sharpston has handed down her opinion on the concept of bad faith in registering a Community trademark (CTM) in Chocoladefabriken Lindt & Sprungli AG v Franz Hauswirth GmbH (Case C-529/07, March 12 2009).

The case concerned a claim for trademark infringement made by Swiss chocolatier Chocoladefabriken Lindt & Sprungli AG against an Austrian company, Franz Hauswirth GmbH. Lindt has manufactured and sold chocolate rabbits for the Easter chocolate trade since the mid-1950s, first marketing them in Austria in 1994. Hauswirth has also produced and sold chocolate rabbits since 1962. In July 2000 Lindt registered a three-dimensional CTM for its chocolate bunny wrapped in gold-coloured foil.  

Lindt sued Hauswirth for trademark infringement, alleging a likelihood of confusion. Hauswirth counterclaimed, alleging that Lindt’s registration should be invalidated as being registered in bad faith under Article 51(1)(b) of the Community Trademark Regulation (40/94). The case was appealed to the Austrian Supreme Court, which then referred a question to the European Court of Justice (ECJ) for a preliminary ruling. The question was whether an applicant for a CTM acts in bad faith if:

  • at the time of the application, it knew that one of its competitors was already using that sign or one confusingly similar to it; and
  • the application was made to stop that competitor from continuing to use the sign. 
The court also asked whether bad faith would not arise in these circumstances if the applicant’s sign had already obtained a reputation with the public and was thus protected under competition law.

In her advice to the ECJ, the advocate general concluded that “there is no simple, decisive test for establishing whether a trademark application was submitted in bad faith”.

The advocate general commented that the concept of bad faith implies a subjective mental state, but difficulties would arise if only proof of subjective intention could suffice. Therefore, she noted that the presence or absence of bad faith must normally be inferred from all the relevant objective circumstances. The advocate general thought it impossible to confine bad faith to a limited category of specific circumstances, stating that bad faith must be assessed on a case-by-case basis. She opined that relevant circumstances may include:

  • the existence of a particular kind of prior right;
  • a lack of intention to use the mark; and
  • actual constructive knowledge of the existing use of a similar mark.
The advocate general believed that a relevant factor in this case was that wrapping technology introduced in the 1990s had caused chocolate bunnies to be manufactured in increasingly similar shapes. She commented that an application to register a mark can much more easily be judged as being in bad faith if the freedom of choice of shape is limited, so that the trademark proprietor will in effect be able to prevent competitors not merely from using a similar mark, but from marketing a comparable product. 

The advocate general summarized her opinion by proposing that to determine whether an applicant was acting in bad faith, national courts must take account of all the available evidence from which it is possible to conclude that the applicant was or was not acting knowingly in a manner incompatible with accepted standards of honest or ethical conduct. In particular, an intention to prevent others from using similar signs in respect of similar products may be incompatible with such standards if the applicant was - or must have been - aware that others were already legitimately using similar signs, particularly if:
  • that use was substantial and longstanding and enjoyed a degree of legal protection; and
  • the nature of the sign was dictated to some extent by technical or commercial constraints.
However, such an intention would not necessarily be incompatible with those standards if:
  • the applicant itself had enjoyed similar or greater legal protection in respect of the mark applied for and had used it in such a way, to such an extent and over such a time that use by others of similar signs could be considered to derive unjustified benefit from the applicant’s sign; and
  • those others were not constrained in their ability to choose dissimilar signs.   
This case is the first reference to the ECJ concerning the meaning of bad faith under the regulation and guidance on this issue is long overdue. The key message to emerge from the advocate general’s opinion is that existence of bad faith is to be measured on a case-by-case basis after careful consideration of all of the facts. There are no hard and fast rules on the issue.

The ECJ is expected to make a decision in the coming months. It will be interesting to see whether the ECJ follows this opinion and, if it does, whether it confines its judgment to bad faith in relation to shape marks. However, practitioners and trademark proprietors may be waiting in vain for the ECJ to set out a decisive test for establishing whether a trademark application was submitted in bad faith.
Michael Sweeney, Field Fisher Waterhouse LLP, London

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