ECJ: appeal courts must state reasons too

The toy manufacturer MEGA Brands International (maker of Mega Bloks and long-time rival to Lego) is back in the courts again – this time taking on the EU General Court. In MEGA Brands International v Office for Harmonisation in the Internal Market (OHIM) (Case C-182/14 P), the toy company appealed a General Court decision to the Court of Justice of the European Union (ECJ) relating to its Community trademark (CTM) application for MAGNEXT, another construction-based toy.

In January 2008 MEGA Brands applied to register the figurative sign below as a CTM:

The goods covered "toys and playthings, in particular multi-part construction toys, its parts, its accessories and its fittings". In March 2010 a second application was filed by this company with OHIM for registration of the word mark MAGNEXT, covering the same goods in Class 28 of the Nice Classification.

Both applications were opposed by Spanish company Diset based on its earlier Spanish word mark MAGNET 4, covering "games, toys, gymnastic and sports articles not included in other classes; decorations for Christmas trees" in Class 28.

The Opposition Division of OHIM upheld the oppositions brought by Diset. The Board of Appeal agreed with the Opposition Division. Finding no joy before OHIM, MEGA Brands applied to the General Court to annul OHIM’s adverse findings.

The General Court disagreed with OHIM’s finding in respect of the figurative mark but upheld OHIM’s decision against the word mark. Curiously, the General Court took the liberty of assessing the issues afresh (see the court’s jurisdiction under Article 65(2) of the Community Trademark Regulation (207/2009)), and clearly arrived at a different conclusion to OHIM in one instance.

When comparing the figurative MAGNEXT mark and the earlier MAGNET 4 word mark, the General Court held that, both from a visual and phonetic point of view, they were weakly similar. Conceptually, the marks were found to be different, although the court conceded that the marks could be understood as referring to magnetic articles by the relevant public, given that in Spanish the word 'magnético' means 'having magnetic properties'.

However, different conclusions were drawn by the General Court regarding the respective word marks. Here the only difference was in respect of the letter 'X' and, consequently, there was a medium degree of similarity between the signs. On this basis, given the identity of the goods and the weak distinctive character of MAGNET 4, the court found similarity between the word marks and upheld OHIM’s decision.

MEGA Brands, unhappy with the General Court’s decision in respect of the word mark, appealed to the ECJ, arguing that the General Court had erred on two grounds:

1. that the court had categorised the term 'magnet' as the dominant element of Diset’s mark; and

2. that the court had failed to take proper account of the figure '4 'in Diset’s mark (particularly the phonetic element 'cuatro', as pronounced by the average Spanish consumer).

In allowing parts of the appeal, the ECJ held as follows:

1. The General Court had erred in law in not carrying out the comparison of the marks at issue by considering each of them in its entirety. In its decision, the ECJ stated that any assessment of confusion between marks must take into consideration their distinctive and dominant components. In this instance, the General Court had given no analysis of the significance of the presence of the figure '4' and had merely confirmed that the element 'magnet' was dominant, without providing any proper reasoning.

2. The General Court, while not under a duty to exhaustively account for all of the arguments put forward in the case, was obliged to provide sufficient reasoning - to enable the parties to know the reasons why their arguments had not been upheld and to enable the ECJ to properly review the case.

Interestingly, the ECJ rejected the first part of the appeal, stating that although the earlier mark's 'magnet' component had a descriptive character, it could still be accorded a dominant character within the comparison of the signs. Another plea was also rejected due to MEGA Brands failing to provide legal arguments supporting its claim of alleged distortion of facts on the part of the General Court.

The ECJ held that the operative parts of the General Court’s judgment were to be set aside due to a lack of substantiation of its reasoning and remitted the action for further consideration. We now have to await the General Court’s final assessment of the likelihood of confusion between the signs, given the ECJ’s comments and findings.

This case serves as a timely reminder to all parties that appellate courts are also obliged to provide their analysis in a cohesive manner and that any reasoning by such courts must be sufficiently substantiated, failing which its decision is liable to be set aside. Of greater interest to trademark practitioners in this case will be how the different tribunals have assessed the same set of facts pertaining to likelihood of confusion (and applied the 'global appreciation' test) – and the differing conclusions reached.

Sumi Nadarajah, FRKelly, Dublin & Belfast