ECJ rules on bad-faith CTM applications in chocolate bunny case

European Union
In Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH (Case C-529/07, June 11 2009), the European Court of Justice (ECJ) has ruled for the first time on what it means to file a Community trademark (CTM) application in bad faith.   

Since the 1930s, chocolatiers in Austria and Germany have produced chocolate rabbits as a celebration of Easter. Chocoladefabriken Lindt & Sprüngli AG has produced chocolate rabbits since the early 1950s, while Franz Hauswirth GmbH has sold chocolate rabbits since 1962. Nowadays, the shape and get-up of these rabbits is constrained by the use of industrial production and automatic wrapping techniques.

In 2000 Lindt registered as a CTM the shape and styling of a chocolate rabbit wrapped in gold foil with a red ribbon and bell at its throat. After registration of the mark, Lindt began infringement proceedings against Franz Hauswirth in Austria to restrain its sale of chocolate rabbits of a similar shape and get-up. The Austrian court was of the view that Franz Hauswirth's chocolate rabbits were confusingly similar to Lindt’s mark. 

Franz Hauswirth counterclaimed that Lindt’s CTM registration was invalid on the grounds that it had been filed in bad faith. Franz Hauswirth argued that Lindt:
  • had filed the CTM application knowing that established competitors used similar get-up; and
  • intended to use the CTM registration to interfere with the freedom of these competitors to continue using get-up in which they had valuable rights.
The Austrian court decided to stay the proceedings and refer questions to the ECJ for a preliminary ruling. Unfortunately, the ECJ did not set out a comprehensive test for bad faith. However, it did provide the following guidance:
  • Bad faith must be assessed globally in light of all relevant factors which pertained at the time of filing of the contested application.
  • An applicant can be presumed to have knowledge of a third party’s use of its mark where such knowledge can be inferred from general knowledge of the economic sector concerned and, particularly, the duration of the third party’s use. 
  • In addition to actual or presumed knowledge, the applicant’s intention must be taken into account. While this is a subjective factor, it is to be assessed by reference to the objective circumstances of the case.
  • In this regard, where it becomes apparent that an applicant applied for a mark with no intention to use it but simply to contest another party’s use, this conduct may in itself constitute bad faith and is not consistent with the essential function of a trademark.
  • Even where the above circumstances apply, an applicant can rebut a claim of bad faith by showing that it had a legitimate objective in applying for the registration of the mark. This may include circumstances where an applicant has a pre-existing reputation in a mark.
  • The nature of the mark applied for may be relevant. In particular, where there is a limited variety of get-up available to competitors due to the nature of the product, an application intended to prevent competitors from using this get-up may be in bad faith where it prevents the competitors from marketing comparable products.
The ECJ did not provide exhaustive guidance on how bad faith can be proved. However, the guidance available clarifies some aspects of the test and will assist brand owners in contesting ‘register squatters’ and others who seek to misuse the trademark system. It is hoped that in future decisions, the ECJ will clarify where the burden of proof will lie once knowledge is presumed and how an applicant’s intention is to be assessed.  

Hastings Guise and Mark Holah, Field Fisher Waterhouse LLP, London

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