Court of Appeal prohibits use of trademark as company name

The Court of Appeal of Nancy has issued its decision in the dispute over whether Céline SA, the owner of the trademark CÉLINE, is entitled to prevent the use of the name Céline by Céline SARL for the provision of goods that are identical to those for which the mark is registered. The decision follows up the 2007 ruling of the European Court of Justice (ECJ) in Céline (Case C-17/06) (for further details please see "ECJ rules on use of trademarks as company and shop names").

In Céline, the ECJ issued a preliminary ruling on a reference from the Nancy Court of Appeal concerning Article 5(1) of the First Trademarks Directive (89/104/EEC) - and, more specifically, the relationship between a company name, trade name or shop name on the one hand, and an earlier mark used for identical goods on the other. The ECJ held that use of a company name, trade name or shop name that is similar to an earlier registered mark may be prohibited at the request of the trademark owner, but added that:
"Article 6(1)(a) of [the directive] can operate as a bar to such use being prevented only if the use by the third party of his company name or trade name is in accordance with honest practices in industrial or commercial matters."
Following the ECJ's ruling, the case was remanded to the Court of Appeal of Nancy, which, based on new evidence filed by the parties, held that the facts which had led to the reference for a preliminary ruling were partially wrong.
The court indeed discovered that Céline SA was created in 1948 not under the company name Céline, as previously thought, but under the name Cambon SA (Cambon being the name of the street where Céline SA's headquarters were located). Cambon started to use the company name Céline only in February 1972. However, in 1971 Cambon had acquired the trademark CÉLINE, which had been registered for shoes in 1948 and for clothes in 1963. As a consequence, Céline SA's rights in the mark had been created before Céline SARL started to use the name Céline as a trade name in 1950.
The court recalled that, according to established EU case law, shoes are part of the larger 'clothing' category and, consequently, the registration of the mark for shoes in 1948 included protection for clothes. This finding was crucial, since the mark was registered for clothes only in 1963 - namely, after the creation of Céline SARL.
The court considered that, even if the facts on which the questions referred to the ECJ were based were wrong, the ECJ’s ruling was still useful and the Court of Appeal was bound by it under Article 234 of the EC Treaty (now Article 267 of the Treaty on the Functioning of the European Union). Moreover, the following facts were not disputed by the parties: 
  • Céline SARL used the name Céline as a company name or trade name to sell clothes; and
  • the owner of the CÉLINE mark, which was registered for clothes, had not consented to such use and had complained about it as early as 1974.
Therefore, the issue before the court was whether Céline SARL used the name Céline to distinguish its goods and, consequently, whether such use affected the function of the trademark. Based on the evidence before it, the court found that:
  • Céline SARL used the name Céline to distinguish the goods sold in its store; and
  • therefore, the essential function of the trademark was affected, even if the parties were not active in the same market.
The fact that the goods were identical and that the CÉLINE mark was well known was sufficient to conclude that the average consumer could be misled as to the origin of the goods. Therefore, the court held that infringement had occurred within the meaning of Article 5(1) of the directive. The court applied the provision directly and did not mention the text of the French Intellectual Property Code at this point.
The final issue was whether use of the name Céline by Céline SARL as part of its company name, trade name or shop name could be permitted under Article L713-6 of the French Intellectual Property Code. Article L713-6 provides as follows:
"Registration of a mark shall not prevent use of the same sign or a similar sign as:

a) a company name, trade name or signboard, where such use is either earlier than the registration or made by another person using his own surname in good faith;
b) the necessary reference to state the intended purpose of the product or service, in particular as an accessory or spare part, provided that no confusion exists as to their origin."
The Court of Appeal held that, in its original decision, it had stated that this exception did not apply in this case. However, this part of the decision was not binding and Céline SARL could seek to rely on Article L713-6. The Court of Appeal recalled that, according to the ECJ's decision, this exception was not limited to the name of natural persons. The issue was thus whether use of the name Céline by Céline SARL was fair.

The Court of Appeal pointed out that Céline SARL had started to use Céline as a trade name and shop name in 1950 - two years after the registration of the CÉLINE mark, which was used for children's shoes in Paris only. Therefore, Céline SARL's use of the name represented honest use, even if Céline SARL had failed to conduct a priority search.
However, the court's conclusion was different with regard to the adoption by Céline SARL of the name Céline as a company name in 1992 (ie, after Céline SA complained about Céline SARL's use of the name in 1974). At that time, Céline SA was well known, both nationally and internationally, for clothes and fashion accessories.
As a consequence, the court found that Céline SARL had initially chosen the name Céline as a trade name and shop name in good faith. However, it had adopted Céline as a company name in contradiction with the legitimate interests of the owner of the CÉLINE mark. Therefore, the exception could not apply and Céline SARL's company name should be amended.
The ruling seems somewhat self-contradictory: Céline SARL will have to stop using its name, even if the court found that its use of Céline as a trade name and shop name was in good faith. Whether the case will be referred to the Supreme Court remains to be seen.
Richard Milchior, Granrut Avocats, Paris

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