Facts
Metropolitan Tribunal decision
Supreme Court decision
Comment


Facts

In 1995, various members of a limited liability company created the "Aloha production" device, and the company started to use the sign soon after.

Two years later, in 1997, a controversy emerged between the members of the company. One member filed the coloured ALOHA FILM device (Figure 1) as a trademark application with the Hungarian Intellectual Property Office (HIPO) in his own name. The HIPO registered the device mark in favour of this member.

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Figure 1: ALOHA FILM device

The company requested a review of the HIPO's decision. In the request, the review applicant pointed out that the sign had been used exclusively by the limited liability company. While it had not been registered as a trademark, it had been used in correspondence and contracts. In contrast, the owner of the mark had not used the sign in his own name. As a result, the review applicant argued that the trademark application had been made in bad faith.

The owner of the mark requested that the Metropolitan Tribunal reject the review filed by the company, stating that he had used the sign with the consent of the company. He referred to an agreement between the members of the company concerning the use of the sign (this alleged licence had been withdrawn by the parties in 1997). As a result, he alleged that he had not made the trademark application in bad faith.

Metropolitan Tribunal decision

The Tribunal reversed the decision of the HIPO and cancelled the trademark, establishing that the application had been filed in bad faith and had to be rejected in line with section 3 of the Trademark Act. The distinctive element of the mark in question was the term "aloha", which is easy to pronounce and recall, and creates an unusual aural impression. The additional words in the mark, which were presented in smaller letters, concerned films and were not distinctive. The Tribunal found that the device portion of the mark was not sufficiently distinctive either.

Further, the Tribunal found that the owner of the mark had not opposed the use of the mark in trade by the applicant of the cancellation action, as he was also a member of the company. It was proved during the proceeding that the mark had been developed and made known by the parties in suit together. It was obvious that the owner of the mark had been aware of such use. Despite this, he had filed the trademark application alone. The existence and withdrawal of a licence was not proven.

Supreme Court decision

The owner of the mark filed an appeal with the Supreme Court,(1) but the appeal was also rejected.(2) The Supreme Court said that the Tribunal had been right in establishing that the mark under question had become known as a result of the joint activity of the two parties in suit. Section 22(2) of the Company Act (1988) provides that only the company can make use of a sign that has become known as a symbol thereof. Therefore, no member of the company alone can appropriate such sign in their own name. As a result, the Tribunal had been right in holding that when the member of the company had filed the mark, he had done so in bad faith.

Comment

The prohibition of bad faith actions is at least 2,000 years old; in Roman case law, it was referred to as "mala fide" (ie, as opposed to "bona fide"). It was adopted by the European and Hungarian statute law, and is commonly seen in case law.

The case discussed in this article was rendered on the basis of both the Trademark Law and the Company Law. The situation was not exceptional; it happens from time to time that a dispute arises among the members of a company concerning the company's logo. The decision rendered in this case is convincing.

For further information on this topic please contact Alexander Vida at Danubia Patent & Law Office LLC by telephone (+36 1 411 8700) or email ([email protected]). The Danubia Patent & Law Office LLC website can be accessed at www.danubia.hu.

Endnotes

(1) The case discussed in this article proceeded in conformity with the Trademark Act that was effective at the time (1997). The jurisdiction system was reformed in 2003; today, an appeal in similar cases would be judged by the Metropolitan Court of Appeal and not by the Supreme Court.

(2) Pkf IV 24.838/2000.