Court of Appeal considers concepts of 'use' and 'bad faith'

The Court of Appeal of The Hague has dismissed the claims of Chinese cigarette trader Zhu against Dutch company Promodyne and its Chinese business partner Great Blue Sky International Limited Company. At the centre of the dispute was Zhu’s claim that Great Blue Sky had registered a word-and-device Community trademark (CTM) in bad faith. The Court of Appeal dismissed this claim and ordered the cancellation of Zhu’s subsequent registration for a similar word-and-device mark in the Benelux. 

Zhu had been in business with Promodyne since 2005. In 2005 Promodyne had cigarettes and their cartons produced in the Netherlands. The word 'Maba' and a logo consisting of two tobacco leaves were affixed to the goods. After production, the goods were shipped to South East Asia, where they were marketed by Zhu under the Maba signs.

On August 11 2008 Great Blue Sky (with the consent of Promodyne) filed an application for the CTM depicted below:

This CTM was registered on May 17 2009. On November 21 2008 Zhu filed a Benelux trademark application for the following mark for the same goods and services:

Great Blue Sky and Promodyne requested that the District Court of The Hague cancel the Benelux registration. In its counterclaim, Zhu requested the cancellation of Great Blue Sky’s CTM, claiming that it had been registered in bad faith. The district court:

• dismissed Zhu’s claim;
• cancelled Zhu’s trademark; and
• ordered Zhu to cease and desist from any infringement of Great Blue Sky’s trademark rights in the Netherlands.

The Court of Appeal upheld this decision on December 10 2013. 

Referring to the recent decision of the Court of Justice of the European Union (ECJ) in Lindt v Frans Hauswirth GmbH (Case C-529/07), the Court of Appeal held that bad faith requires that an applicant, at the time of filing of the application, knew or should have known that a third party had used an identical or similar sign for the same or similar goods or services in at least one member state of the European Union. The Court of Appeal, however, held that the use made of the Maba signs (by or for Zhu) in the Netherlands did not qualify as such. The fact that the affixing of a sign to goods intended for export under that sign is explicitly considered as infringing use under the Community Trademark Regulation (207/2009) (Article 9(2)(a) and (c)) did not change this finding.

Further, referring to the conclusion of Advocate General Kokott in the recent case of Winters v Red Bull (Case C-119/10), the Court of Appeal held that such activities for the purposes of export outside the European Union are considered as 'use' under the regulation only due to (and in order to prevent) the risk of goods intended for export and bearing infringing signs making their way into the European market. If, however, this risk is concretely excluded, then, according to the Court of Appeal, the affixing of a sign to goods in an EU member state, followed by the export of these goods outside of the European Union, does not constitute use of the sign in the European Union.

Since, in the underlying matter, none of the cigarettes and cartons to which the Maba signs were affixed had in fact made their way onto the European market, the Court of Appeal found that the use made of these signs could not have constituted (anticipatory) use of these signs in the European Union. Therefore, the Court of Appeal concluded that Great Blue Sky could not, and had not, filed the application for its CTM in bad faith.

In an (extensive) obiter dictum, the Court of Appeal also held that, even if the use made of the Maba signs prior to Great Blue Sky’s registration were to qualify as use in the European Union, bad faith would still not be demonstrated. Referring to Lindt, the Court of Appeal considered that bad faith should be assessed in view of all the relevant circumstances, and the circumstances here favoured Great Blue Sky. This part of the decision offers a helpful overview of the practical outcome of the doctrine of bad faith.

The decision further confirmed that there is more to the Community Trademark Regulation than meets the eye, as the Court of Appeal applied a teleological interpretation of the concept of use under trademark law - despite explicit considerations in the regulation to the contrary. It is now clear that use of a trademark for export purposes outside of the European Union does not, in principle, amount to relevant use within the European Union, unless there is a realistic chance that the public will be exposed to the trademark within the European Union.

Sebastiaan Brommersma, Klos Morel Vos & Schaap, Amsterdam