Trade Name Act
2015 Supreme Court ruling
Tests for assessing trade name infringement
On September 19 2017 The Hague Court of Appeal rendered its judgment in a case in which the claimant was seeking protection for its trade name, Parfumswinkel ('Perfumes shop' in English).(1)
The claimant uses the trade name for its online shop, which offers a variety of perfumes. Several consumers approached the trader with questions regarding the delivery of products that were not Parfumswinkel transactions. It transpired that the consumers had confused Parfumswinkel with another online store that also sold perfumes. This competitor was acting under the trade name Parfumswebwinkel ('Perfumes webshop' in English).
The claimant initiated proceedings against the competitor on the basis that its rights to the trade name had been infringed as a result of the defendant's use of a confusingly similar trade name. The claim was based on Article 5 of the Trade Name Act 1921, which protects trade names in the Netherlands against the use of confusingly similar trade names.
The Hague District Court found in the claimant's favour and granted an injunction against the defendant on June 15 2016.(2) The defendant appealed the decision.
The main issue in the proceedings was whether trade name protection should be granted to trade names that are purely descriptive and lack inherent distinctive character. The answer to this question is not clear from the legislation or the preparatory documents that were published when the legislation was introduced, and literature and case law from the past century have shown that no unequivocal answer exists. While there is an abundance of lower case law on this issue, only a few cases have made it to the Supreme Court.
In general, it is accepted that (contrary to trademark law) the Trade Name Act does not require a trade name to be distinctive in order to be valid. Rather, any name under which a company runs qualifies as a trade name under Dutch law. However, it is less clear whether descriptive trade names are granted the same protection against confusion as distinctive names.
In 2015 the Supreme Court ruled on a matter concerning a descriptive trade and domain name versus a similar descriptive domain name.(3) It held that such purely descriptive denominations cannot be monopolised by law because this would be contrary to the general right of the public to use descriptive words freely to describe certain goods and services. As a result, use of a sign that is similar to one already used by another party does not qualify as an unlawful act under Dutch law – even if such use is for the same activities and may result in a risk of confusion. Rather, use of a confusingly similar sign may constitute an unlawful act only where additional circumstances are present, although the Supreme Court did not explain which additional circumstances must exist.
Notably, the parties in the Supreme Court case agreed that the defendant's domain name did not qualify as a trade name. Therefore, the claimant did not seek protection under the Trade Name Act – which only provides for an action in a conflict between two trade names – but merely on the basis of general torts law, as set out in Article 6:162 of the Civil Code. Nonetheless, the Supreme Court, in its grounds for the decision, referred to the Trade Name Act, which – according to the Supreme Court – had already settled the fact that it is in the public interest to require purely descriptive signs to remain free for all to use. In this regard, the Supreme Court referred to a 1987 Supreme Court decision.(4) It is questionable whether the rule of law that the Supreme Court deduced from this prior decision is correct. In any case, the essential remark made in the 2015 judgment (ie, that confusion is insufficient and additional circumstances are required) is not found in the prior ruling.
Tests for assessing trade name infringement
Notably, the meaning of the 2015 decision did not remain linked to general tort matters. Due to the Supreme Court's reference to trade name law, the lower case law on this matter applied the Supreme Court's 2015 decision to both general tort matters and trade name cases. The legal rule that descriptive signs can be protected only where certain circumstances exist – in addition to a likelihood of confusion – was implemented in trade name law. As a result, as of 2015, two different infringement tests exist in trade name case law:
- the original confusion test for regular trade names; and
- the confusion and additional circumstances test for descriptive trade names.
In Parfumswinkel, The Hague Court of Appeal also applied the Supreme Court's 2015 decision. Its judgment thoroughly analysed the Trade Name Act's legal framework, including its historical background, in order to establish whether the legislature's aim in 1921 was to protect purely descriptive trade names under the same conditions as other trade names. This could help to solve the puzzle as to whether the additional circumstances criterion from the 2015 decision should be applied equally in trade name cases. The Hague Court of Appeal concluded that there are sufficient grounds to treat descriptive trade names differently from other trade names. This implies that, according to The Hague Court of Appeal, a 'need to leave free' criterion exists for descriptive trade names – like in trademark law, but to a lesser extent and with the difference that it does not affect the validity of the trade name, but rather only its scope of protection. When applying this test in Parfumswinkel, The Hague Court of Appeal held that the claimant had shown insufficient additional circumstances to grant the claim.(5)
The Hague Court of Appeal accepted that its argument is not necessarily correct. For this reason, the court also applied the traditional confusion test, probably to avoid its judgment being overturned by the Supreme Court at a later stage. However, the end result was no different, as the claimant was also unsuccessful when the traditional confusion test was applied.
This is notable, as there was not much dispute in the case at hand about whether confusion had, at least to some extent, occurred. However, the appeals court concluded that the limited examples of actual confusion were negligible and did not qualify as the type of confusion that can be prohibited under Article 5 of the Trade Name Act.
The Hague Court of Appeal appears to have held that various degrees of confusion can exist and that while a high level of confusion is generally sufficient for granting a court injunction, a low level of confusion does not necessarily justify such an injunction. However, it is essential to understand this in light of the specific circumstances of the matter at hand. The aforementioned distinction is the result of the fact that the matter deals with trade names of a non-distinctive nature. Even though the appeal court did not explicitly weigh the mutual interests of the parties involved in the judgment, it is likely that:
- the court was of the opinion that the legitimate interests of the prior user of the trade name did not outweigh those of the competitor (and the general public) to use descriptive and non-distinctive signs freely (even as part of a trade name); and
- it was for this reason that the court concluded that no confusion existed by more or less 'stretching' the definition of confusion.
Even though the distinction between the signs Parfumswinkel and Parfumswebwinkel is minimal, The Hague Court of Appeal held it to be sufficient to reject the injunction sought by the claimant. To support this outcome further, the court referred to the fact that the figurative elements of the signs used by the respective parties were dissimilar, as well as the layout, look and feel of the websites and other communications. Notably, the outcome could have been different if the defendant had chosen the exact same trade name as the claimant. Even though the descriptive trade name's scope of protection is limited, it is unlikely to be nil.
Although the outcome of this case is acceptable, the reasoning behind it is not necessarily correct. Arguably, it is better not to introduce a new infringement test to trade name law which requires other circumstances in addition to confusion to exist before a descriptive trade name can be successfully invoked against a similar trade name. Such test would be an unwritten rule which would, to a certain extent, contradict the Trade Name Act. Conversely, the idea that not all trade names should be treated equally is commendable, as is the idea that it should not always be possible to invoke a non-distinctive and descriptive trade name against a third party that uses the same descriptive terms. Arguably, this situation can be solved by existing legislation – in particular, the confusion test included in Article 5 of the Trade Name Act. The Hague Court of Appeal has shown – albeit in its superfluous reasoning – that the confusion test leaves open the possibility to:
- balance the interests of the parties involved (ie, the general interest of the public to use descriptive signs freely against the right of the first user of a trade name not to be confronted with confusingly similar trade names); and
- consider the distinctive character as a relevant factor in determining the scope of protection of the trade name at issue.
The more descriptive and less distinctive a trade name is, the more limited the scope of protection should be.
For further information on this topic please contact Roderick Chalmers Hoynck van Papendrecht at AKD by telephone (+31 88 253 50 00) or email ([email protected]). The AKD website can be accessed at www.akd.nl.
(1) The Hague Court of Appeal, September 19 2017, ECLI:NL:GHDHA:2017:2622.
(2) The Hague District Court, June 15 2016, ECLI:NL:RBDHA:2016:6475.
(3) Supreme Court, December 11 2015, ECLI:NL:HR:2015:3554 (Artiestenverloningen).
(4) Supreme Court, May 8 1987, ECLI:NL:HR:1987:AG5592 (Bouwcentrum).
(5) The Hague Court of Appeal's arguments justifying the distinction between the protection of distinctive and non-distinctive trade names with reference to historical considerations are not entirely solid. This opinion is largely based on the fact that none of the preparatory documents to the Trade Name Act contain a clear indication from the legislature that a different infringement test had to be applied depending on the type of trade name.