Supreme Court clarifies bad-faith test

The German Federal Supreme Court has ruled in three cancellation actions involving trademark applications filed by the same company (Cases I ZB 8/06, I ZB 5/08 and I ZB 9/06, April 2 2009, only recently released). The court clarified the circumstances in which a trademark application will be found to have been filed in bad faith under Section 8(2)(10) of the Trademark Act. In all three cases the court found that the applicant had filed the application in bad faith and remitted the cases to the Federal Patent Court for reconsideration.

The applicant, a company specializing in trademark licensing, filed various trademark applications covering “pharmaceutical products, in particular medicines for human purposes”. The applications concerned designations that were used by pharmaceutical companies to sell their products outside Germany. The pharmaceutical companies distributed these products under different names in Germany and, therefore, had not registered the foreign names as trademarks. Nevertheless, other German distributors of these products sold them under the names used by the pharmaceutical companies outside of Germany.

 

The Supreme Court held that a trademark application may have been filed in bad faith if it is likely that the trademark owner will use unlawful means to persuade third parties to obtain a licence from it. This is especially the case where only a small group of companies is likely to be interested in obtaining a licence - rather than a large group of companies - and this small group of companies would be prevented from using a trademark that it had been able to use freely before the trademark application was filed.

 

Under the law, the relevant date for determining bad faith is the date of the trademark application. The court held that the date of the trademark application is the date on which the decision regarding the registrability of the trademark is issued. Further, the court stated that in cancellation proceedings based on absolute grounds for refusal (Section 50 of the act), bad faith need not be obvious and all relevant circumstances must be examined.

 

The decision will be welcomed by companies that have not registered their international and/or foreign trademarks in Germany, while third parties have registered identical designations for identical goods and/or services. The decision demonstrates that the Supreme Court will take into account trademark rights acquired outside Germany.

 

Furthermore, the court’s finding that the relevant date for determining bad faith is the date of the actual decision on the registrability of the mark (ie, a decision by the German Patent and Trademark Office, the Federal Patent Court or the Supreme Court) is likely to help plaintiffs establish bad faith because a longer period of time will be taken into consideration.