On February 17 2012 the Alicante Court of Appeal (acting as a Community trademark court) nullified Leku-Ona's DUNFLEX trademark, declaring that it had been applied for in bad faith. It further held that the defendant's use of the DUNFLEX mark prior to the declaration of nullity constituted infringement of the DUNLOP trademark.
Dunlop Hiflex UK Limited is a company belonging to the Dunlop Group, which manufactures hydraulic pipes and hoses sold under the trademarks DUNLOP and HIFLEX.
Between 1979 and 2006 Leku-Ona distributed Dunlop products in Spain; it held this status exclusively until 2002.
In January 2005 Dunlop discovered that Leku-Ona was using the DUNFLEX mark to market similar products (of inferior quality) to Dunlop's range.
Dunlop requested that Leku-Ona cease using the DUNFLEX sign, arguing that such use:
- consisted of a contraction of its DUNLOP and HIFLEX trademarks;
- was incompatible with those trademarks; and
- constituted an infringement of the obligations assumed by Leku-Ona in the distribution agreement.
Leku-Ona not only did not cease use of that sign, but hastily applied for its registration as a national Spanish trademark (first as a word mark and later as a mixed mark) so that, once registration had been obtained, it could attempt to negotiate a return to its advantageous position as the exclusive Spanish distributor of Dunlop products.
Once the commercial relationship between the parties ended, and in view of Leku-Ona's continued use of the DUNFLEX sign, Dunlop filed suit against Leku-Ona, requesting that:
- the DUNFLEX trademark be nullified as it had been registered in bad faith;
- the court find that its Community trademarks DUNLOP and HIFLEX were infringed by Leku-Ona's use of the DUNFLEX mark; and
- compensation be awarded for damages caused to Dunlop as a result of such use.
Dunlop's claims were rejected by the Alicante Commercial Court on May 20 2011. On appeal, the Community trademark court reversed this decision based on the following arguments:
- From a trademark perspective, the trademarks DUNFLEX and DUNLOP were incompatible due to confusion, given the similarities between the signs and their identical application.
- From a competition perspective, the DUNFLEX trademark was incompatible with the trademarks DUNLOP and HIFLEX insofar as it was an abbreviation of them, which implied the existence of a likelihood of confusion and exploitation of Dunlop's reputation.
- As a distributor of Dunlop's products in Spain since 1979, Leku-Ona was aware of the trademarks that identified Dunlop's products and services, and therefore knew of their incompatibility.
- Leku-Ona was contractually restricted in its use of Dunlop's trademarks and trade name in any form.
- Leku-Ona used its trademark registration as leverage or as a bargaining tool in order to regain its status as the exclusive distributor of Dunlop's products.
In view of these facts, the judgment concluded that the DUNFLEX trademark had been registered in bad faith and declared it null.
This judgment is interesting insofar as it qualifies the view adopted by courts in previous judgments that the use of a sign by the registered trademark owner is covered by the registration and therefore cannot constitute infringement of an earlier mark.
After a period of technical reflection and legal analysis of the issue, the court noted that this conclusion cannot be maintained in cases where, as in the case at hand, the trademark registration had been obtained in bad faith.
The court held that in this case, the title generated was fictitious because its applicant knew from the beginning that the sign was incompatible with a third-party trademark and the application for registration was made with the intent of legally protecting that incompatibility.
Hence, the court concluded that in such cases, infringement must be found to exist.
The court based its decision on the European Court of Justice's February 16 2012 ruling in Case C-488/10, in which it provided a preliminary ruling at the request of the Alicante Commercial Court in relation to this issue.
For further information on this topic please contact Antonia Torrente at Grau & Angulo by telephone (+34 93 202 34 56), fax (+34 93 240 53 83) or email ([email protected]).