CTM held to be invalid due to proprietor's bad faith when filing application

European Union

In Silicium España Labaratorios SL v Office for Harmonisation in the Internal Market  (OHIM) (Case T-306/13, June 16 2015), the General Court has upheld a decision of the First Board of Appeal of OHIM declaring that the Community trademark (CTM) LLRD5 was invalid. The General Court concluded that the Board of Appeal had not erred in law in finding that the mark was registered in bad faith.

The intervener, LLR-G5 Ltd, is a company whose business is the production and sale of organic silicon under the name ‘G5’. Upon its creation, Mr R and Mr V each held 50% of the shares and were the two directors of the company.

On September 2 2003 Mr I filed an application for registration as a CTM of the word sign LLRG5 in Classes 5, 32 and 44 of the Nice Classification. On April 7 2004 Mr I requested that OHIM register the assignment of the application of the CTM to Mr R. The change of proprietor was registered on May 10 2004 and the publication of the application for the CTM followed on October 4 2004. 

On December 21 2004 Mr R and the intervener concluded an agreement ('the memorandum'), which granted the intervener an exclusive licence to manufacture and distribute the product known as G5 and any other health products of the same range.

Since there was no opposition to the application, the CTM was registered on April 27 2005.

Mr R died on June 7 2007 and, on March 11 2008, the intervener requested the transfer of Mr R’s CTM into its name, on the basis of the memorandum. OHIM refused. Consequently, the intervener filed an application for a declaration of invalidity of the CMT, claiming that the proprietor of the CTM had acted in bad faith when filing the application.

On July 2 2010 Mr C provided OHIM with a document issued by the executor of Mr R’s will, which stated that the registration of the CTM had been transferred to Mr C, who had later transferred the registration to the applicant, Silicium España Labaratorios SL.

Although the Cancellation Division of OHIM rejected the intervener's request for a declaration of invalidity, the Board of Appeal later declared the mark to be invalid. The applicant appealed, raising a single plea in law alleging infringement of Article 52(1)(b) of the Community Trademark Regulation (207/2009). According to the applicant, the Board of Appeal had committed an error of law in finding that Mr R had acted in bad faith when filing, through another person, an application before OHIM seeking the registration of the sign LLRG5 as a CTM.

The applicant claimed that the application for a declaration of invalidity based on bad faith had not been substantiated by clear and convincing evidence, and disputed the probative value of matters that were taken into consideration by the Board of Appeal in its determination of bad faith. In addition, the applicant considered that the Board of Appeal had not drawn the conclusions that it should have drawn having regard to the evidence produced.

The intervener claimed that the court should confirm the decision of the Cancellation Division. Since this was a request for a declaratory judgment, which an action before the court may not seek, this part of the claim was found to be inadmissible.  

With regard to the registration of the CTM in bad faith, the General Court stated as follows.

Due to Mr R’s role within the intervener until his resignation in 2003, he was closely and continuously involved in the activities leading to the use of the LLRG5 sign, which led to the conclusion that he clearly accepted that the sign had become the company name of the intervener and was being used in the trading of the goods. Nothing indicated that Mr R stated or made it known that he reserved to himself rights in respect of that sign or that he demonstrated the belief that such rights belonged to him. Even the existence of the memorandum could not change that conclusion.

The circumstances in which the memorandum came into being and the chronology of events between the filing date of the application for registration and the date of conclusion of the memorandum was subject to much speculation due to the lack of information shedding light on the circumstances at the time and the fact that the two protagonists, who have both since died, were no longer able to provide any explanations with regard to them.

The text of the memorandum did not make explicit reference either to a CTM or to an application for such a mark, or to the transfer of the registered mark. Therefore, the Board of Appeal was entitled to conclude that the memorandum was nothing more than an agreement between two associates in the course of separation, including a non-competition clause, and that the memorandum did not prove the existence of a common understanding between the signatories that the rights in respect to the sign LLRG5 belonged to Mr R.

In his capacity as co-director of the intervener, Mr R was obliged to act in the intervener’s best interests. As co-director and co-founder, Mr R clearly accepted that the sign LLRG5 should become the intervener’s company name and also be used when trading goods.

It followed from all the foregoing that the intervener had adduced evidence that demonstrated, or at least from which it might objectively be inferred, that Mr R’s conduct amounted to an act of bad faith. Therefore, the Board of Appeal had not erred in concluding that Mr R had acted in bad faith when filing, through an intermediary, an application with OHIM seeking to register as a CTM the company name of the intervener at a time when he was one of the intervener’s co-directors and without informing the intervener of his action.

The action was dismissed as unfounded.

Marga Verwoert, Hoogenraad & Haak, Amsterdam

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