ECJ rules on revocation of trademark due to inactivity of proprietor

It is a well-established rule that a trademark shall be liable to revocation if, after the date on which it was registered, it has become the common name in the trade for a product in respect of which is was registered, in consequence of acts or inactivity of the proprietor (Article 12, Paragraph 2(a) of the Trademarks Directive (2008/95/EC)). However, this rule may be problematic where particular business models are involved and only part of the trade is aware that a trademark is a distinctive sign for products originating from a certain undertaking, while another group of consumers considers the sign as a common name for the products.

This issue has recently been dealt with by the Court of Justice of the European Union (ECJ) in Backaldrin Österreich The Kornspitz Company GmbH v Pfahnl Backmittel GmbH (Case C-406/12, March 6 2014), following a request for a preliminary ruling by the Oberster Patent- und Markensenat (the Supreme Patent and Trademark Court of Austria). This decision will have an important bearing on the drafting of licence agreements in the future.

Backaldrin Österreich The Kornspitz Company GmbH coined the sign KORNSPITZ to designate a bread roll, which is oblong in shape and has a point at both ends. Backaldrin only produces a baking mix, which it supplies primarily to bakers, who in turn produce the bread rolls. Consequently, the trademark KORNSPITZ has been registered for a whole variety of flour and bakery products in Class 30 of the Nice Classification.

The Oberster Patent- und Markensenat took it for granted that all competitors of Backaldrin and the majority of bakers were aware of the fact that the sign KORNSPITZ is a registered trademark of Backaldrin. On the other hand, it also considered that end consumers buying the bread rolls consider the sign KORNSPITZ not as a trademark, but as the name of the product. This can probably be explained by the fact that the bakers selling the end product do not inform their customers that the sign KORNSPITZ is a registered trademark.

The Oberster Patent- und Markensenat thus concluded that the trademark KORNSPITZ should be considered as distinctive for the raw materials and intermediate products only - namely, for flour and preparations made from cereals, baking agents, pastry confectionary prepared for baking and preformed dough for the manufacture of pastry confectionary. On the other hand, KORNSPITZ should be considered as a common name for bakery goods and pastry confectionary.

This led the court to ask the ECJ whether a trademark can be revoked if it constitutes an indication of origin among traders (here, bakers), but is not understood as an indication of origin by end consumers of the final product. It also asked whether the conduct of the trademark proprietor can be interpreted as inactivity if the proprietor does not require its traders to tell customers that a sign is a trademark. Finally, the court asked whether it was relevant that there existed equivalent alternatives to designate the end product.

The ECJ held that, on the facts submitted by the Oberster Patent- und Markensenat, the sign KORNSPITZ does not fulfil its essential function as an indication of origin for bread rolls, which are known under that name. Consequently, it was liable to revocation. The fact that it was considered as a common name for bread rolls solely from the point of view of end users would be sufficient to revoke the trademark.

The most interesting aspect of the court's findings is the alleged inactivity of the trademark proprietor - it means that Backaldrin, in order to preserve its trademark, would have had to make sure that its traders conveyed to their customers that KORNSPITZ is a trademark and distinctive sign of Backaldrin. The judgment does not specify whether Backaldrin had contracts with its bakers covering in any form trademark rights, but the decision may lead to the conclusion that a trademark owner must make sure that its intermediaries not only recognise the trademark themselves, but also make it clear to their consumers that the sign is protected as a trademark. The conclusion of contracts alone would probably not suffice, unless they are actually enforced.

The ECJ, answering the second question, held that the conduct of a trademark owner may be classified as ‘inactivity’ within the meaning of Article 12(2)(a) of Directive 2008/95 “if a proprietor of a trademark does not encourage sellers to make more use of that mark in marketing a product in respect of which the mark is registered” (Paragraph 36).

Regarding the third question, the ECJ stated that it was irrelevant whether equivalent alternative names for the product existed.

It will be interesting to see how the proceedings will be continued by the Oberster Patent- und Markensenat, because the ECJ did not really answer the first question. The main issue for the Austrian court was whether a sign which has become the common name for an end product among end consumers can still be a trademark for raw materials and intermediate products. In its answer, the ECJ referred to the possibility of revocation in respect of a product for which the mark has become a common name. This could mean either that the trademark can be revoked only for that product, and not for the raw materials and intermediate products, or that, if a sign has become the common name of an end product, it cannot remain a distinctive sign for raw materials and intermediate products of that same product.

The conclusion to be drawn from the judgment is that a trademark owner must always make sure that its signs are presented as trademarks not only to its own customers, but also at all levels of trade, up to the end consumers. It is unlikely that it would be sufficient to encourage sellers to make more use of the mark in marketing the products; rather, it is probable that it will be necessary to prove that sellers are under such an obligation by contract and to demonstrate that such requirement is enforced.