CTM Court relies on ECJ's design decision in Celaya

Spain

By judgment of February 17 2012, the Alicante Court of Appeal, acting as a Community Trademark Court, held that the defendant's DUNFLEX marks were null and void on the grounds that they had been applied for in bad faith.

Dunlop Hiflex UK Limited, which belongs to the Dunlop Group, is engaged in the manufacture of hydraulic pipes and hoses under the trademarks DUNLOP and HIFLEX. Between 1979 and 2006, Leku-Ona distributed Dunlop products in Spain, holding the status of exclusive distributor until 2002. In January 2005 Dunlop became aware of Leku-Ona’s use of the mark DUNFLEX to market the same products (of inferior quality) as Dunlop.

Dunlop objected to the use of that sign, arguing that:

  • the word ‘Dunflex’ was a portmanteau of the trademarks DUNLOP and HIFLEX;
  • use of the DUNFLEX mark was incompatible with Dunlop’s rights in its trademarks; and
  • use of DUNFLEX was in breach of Leku-Ona’s obligations under the distribution agreement.

Dunlop thus requested that Leku-Ona cease using the DUNFLEX mark.

Not only did Leku-Ona not cease to use the sign, it also applied for its registration as a Spanish trademark (first as a word mark, and then as a word-and-device mark) so that, once registration was obtained, it could negotiate a return to its position as exclusive distributor of DUNLOP-branded products.

When the commercial relationship between the parties was terminated, and in view of Leku-Ona’s continued use of DUNFLEX, Dunlop filed suit against Leku-Ona, seeking:

  • a declaration that the DUNFLEX marks were null and void because they had been applied for in bad faith;
  • a declaration of infringement of the Community trademarks DUNLOP and HIFLEX; and
  • compensation for the damages caused to Dunlop trough use of DUNFLEX.

Dunlop's claims were rejected by the Commercial Court of Alicante on May 20 2011. Dunlop filed an appeal, which was upheld by the Alicante Court of Appeal.

With regard to the issue of the nullity of the DUNFLEX marks, the court held as follows:

  • From the point of view of trademark law, use of DUNFLEX was incompatible with Dunlop’s rights in its DUNLOP mark due to a likelihood of confusion among the public, taking into account the similarity of the marks and the identity of the goods.
  • From the point of view of fair competition, use of DUNFLEX was incompatible with Dunlop’s rights in the trademarks DUNLOP and HIFLEX insofar as ‘Dunflex’ is a portmanteau of the words ‘Dunlop’ and ‘Hiflex’; this implied that there was a likelihood of confusion and exploitation of Dunlop’s reputation.  
  • In its capacity as distributor of the Dunlop Group's products in Spain since 1979, Leku-Ona knew that the trademarks DUNLOP and HIFLEX identified the products and services of Dunlop Group.
  • Leku-Ona was contractually restricted in its use of the trademarks and trade name of the Dunlop Group.
  • Leku-Ona used its registration for DUNFLEX as a bargaining tool to regain its status as exclusive distributor of the Dunlop Group’s products.

In view of the foregoing, the court concluded that Leku-Ona had applied for the registration of DUNFLEX in bad faith, and declared that the marks were null and void.

The court then turned to the claim of infringement. The judgment is interesting in this respect in that it qualifies the court’s previous view that use of a sign by a trademark owner is covered by the Trademark Register and, therefore, cannot constitute infringement of an earlier mark.

After analysing the issue, the court noted that this conclusion could not be maintained in cases where - as in the case at hand - the trademark registration had been obtained in bad faith. The court held that, in such cases, the title given to the trademark owner is fictitious because its applicant knew ab initio that use of the sign was incompatible with third-party trademark rights, and the application for registration was made with the intent to legally protect that incompatibility.

The court concluded that, in such cases, there was trademark infringement. In support of its conclusion, the court relied on the judgment of the Court of Justice of the European Union (ECJ) in Celaya Emparanza y Galdos Internacional SA v Proyectos Integrales de Balizamientos SL (C-488/10), issued the day before, in which the ECJ gave a preliminary ruling, at the request of the Alicante Commercial Court, on a similar issue with regard to registered Community designs.

Antonia Torrente, Grau & Angulo, Barcelona

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