Dalia Ferrando August 13 2012 Supreme Court grants full effect to relative invalidity of GRUPO KNY trademark Grau & Angulo | Intellectual Property - Spain Dalia Ferrando Intellectual Property BackgroundFactsDecisionCommentBackgroundOn April 4 2012 the Supreme Court issued a judgment that invalidated Spanish trademark GRUPO KNY due to likelihood of confusion with existing Community trademark DKNY.The effects of the judgment include a declaration of infringement an award of damages to the owner of the DKNY mark, due to the defendants' use of the GRUPO KNY trademark prior to the declaration of invalidity.The judgment is significant as the Supreme Court has established the scope of the right to use a registered trademark, taking into account the consequences of the invalidity of a registered trademark.In this regard, the Trademark Act provides as follows:Article 34.1 sets out that the registration of a trademark shall confer on its owner the exclusive right of use in economic transactions.Article 34.2 allows the owner of a registered trademark to prohibit third parties from using signs which could cause confusion among the public.Article 54.1 sets out, as a general rule, that a declaration of invalidity shall imply that the registration of a trademark was never valid.Article 54.2 regulates some specific consequences of the invalidity of a trademark due to the bad faith of the trademark owner.Spanish courts, including Community trademark courts, had previously held that there was a right to compensation when a mark was invalidated due to bad faith. However, if a defendant's mark had been not filed in bad faith, the infringement use was considered to be 'covered' by the defendant's title; thus, the infringer was not liable for damages. This doctrine was applied according to the principle of 'qui suo iure utitur neminem laedit' – 'he who exercises a legal right harms no one'.The latest judgment goes a step further and gives the same effect to the declaration of invalidity due to incompatibility with another earlier mark, without it being necessary to demonstrate bad faith.FactsGabrielle Studio Inc and the Donna Karan Company LLC (the plaintiffs) own the trademark DKNY and sell clothing and accessories under this mark. The sign DKNY (an acronym combining designer Donna Karan's initials with those of New York City) has been a Community trademark since 1996.Spanish company Grupo KNY Exchange SL and others (the defendants) also operate in the fashion industry and present their products under the signs KNY and GRUPO KNY. The sign GRUPO KNY was registered as a Spanish trademark in 2002.The Spanish trademark GRUPO KNY was registered with the opposition of Community trademark DKNY.On several occasions in 2006, the US companies warned the Spanish companies to cease using the signs KNY and GRUPO KNY.Gabrielle Studio and the Donna Karan Company subsequently brought proceedings before the Alicante Commercial Court (acting as a Spanish Community trademark court) to defend the exclusivity granted by the ownership of its Community trademark.Specifically, the plaintiffs requested the following:a declaration of the invalidity of the GRUPO KNY trademark due to conflict with the earlier DKNY trademark and for having been registered in bad faith;a declaration of the infringement of Community trademark DKNY through the use made of the signs KNY and GRUPO KNY; andcompensation for damages caused by the use of the signs KNY and GRUPO KNY.The defendants answered, briefly, as follows:The validty of their trademark was not questionable because it had been registered after the relevant Spanish Patent and Trademark Office examination and in spite of the plaintiffs' opposition to it;The trademarks DKNY and GRUPO KNY could coexist; andThe infringement action was impossible without prior cancellation of the registration, because the defendants had acted under the protection of the registered trademark (founded in Article 34.1 of the Trademark Act, which grants the right of use to the registered trademark owner).DecisionThe court allowed the claim and declared the invalidity of the defendants' trademarks for two reasons:conflict with the prior trademark DKNY (relative invalidity); andapplication in bad faith (absolute invalidity).Based on this declaration of invalidity, the use of the signs KNY and GRUPO KNY was held to constitute infringement and the defendants were ordered to compensate the plaintiffs.The defendants appealed before the Alicante Court of Appeal.The court of appeal allowed the appeal in part to introduce a major change which had significant consequences regarding the invalidity of the GRUPO KNY trademark.The court maintained the declaration of invalidity of the defendants' trademark due to a conflict with DKNY, but rejected the cause of absolute invalidity considering that bad faith had not been proved.Due to this change of approach, the court of appeal dismissed the declaration of infringement and the award of damages, considering that the defendants' use had been protected by a registered trademark, pursuant to Article 34.1 of the Trademark Act.Gabrielle Studio and the Donna Karan Company appealed to the Supreme Court, which issued a judgment on April 4 2012 concluding as follows:Infringement - the fact that a declaration of invalidity has retroactive effect (Article 54.1), the simultaneous exercise of both actions (invalidity of the cover registration and infringement of an earlier trademark) and the success of the invalidity action led to infringement, because the use had been unjustified, even during the period of the mark's validity.Compensation for damages -Given that the defendants had infringed the plaintiffs' Community trademark by using a trademark that was later invalidated, they must compensate the holder under Article 42 of the Trademark Act, which states the grounds for compensation for damages.The judgment rejected the application of Article 54.2 (regarding specific consequences of the invalidity of the trademark due to the bad faith of the trademark owner) and declared that this article does not supplant the general provisions of Article 42 regarding trademark infringement.CommentThis judgment signifies an important change in the effects of a relative declaration of invalidity and is a decisive step towards the protection of Community trademarks in Spain.For further information on this topic please contact Dalia Ferrando at Grau & Angulo by telephone (+34 93 202 34 56), fax (+34 93 240 53 83) oremail ([email protected]).