In a recent decision of the General Court between two former business partners, the “bad faith” absolute ground for invalidity was put to the test – that is, the provision that an EU trade mark shall be declared invalid where the applicant is deemed to have been acting in “bad faith” when he filed the application. However, the concept of “bad faith” is not defined or described in legislation, making this a difficult ground for invalidity to establish. It is hardly surprising then that the Court made a ruling of “no bad faith”.

On 25 April 2011, the intervener Joaquín Nadal Esteban (“Esteban”) lodged an application for registration of an EU trade mark with the EUIPO in respect of classes 35 and 39, as shown above left (the “Contested Mark”):

On 26 August 2011, Koton Mağazacilik Tekstil Sanayi ve Ticaret AŞ (“Koton”) filed a notice of opposition to the mark applied for in respect of all the services. The opposition was based on the following earlier rights, although, importantly, these earlier marks covered dissimilar goods / services to those covered by the Contested Mark:

  • the earlier Maltese figurative marks registered under numbers 46666 and 46667, above right top).
  • international registration No 777048, designating Benelux, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Greece, Ireland, Spain, France, Italy, Cyprus, Latvia, Lithuania, Hungary, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom, of the earlier figurative mark above right bottom.

On 31 October 2013, the Opposition Division found that there was a likelihood of confusion between the marks at issue in so far as they designated services in Class 35.

The following year, the Fourth Board of Appeal of EUIPO dismissed the appeal and upheld the Opposition Division’s decision and on 5 November 2014, the Contested Mark was registered for services in Class 39 comprising “transport; packaging and storage of goods; travel arrangement”.

On 5 December 2014, Koton filed an application for a declaration that the Contested Mark was invalid on the ground of “bad faith” which was rejected by the Cancellation Division. It found that, in the absence in particular of any indication as to the Esteban’s dishonest intention, Koton had failed to prove that Esteban had acted in bad faith when filing the trade mark application.

On 4 September 2015, Koton filed a notice of appeal with EUIPO against the decision of the Cancellation Division but on 14 June 2016 the Second Board of Appeal of EUIPO dismissed the appeal (the “Contested Decision”).

Arguments raised by Koton

On appeal to the General Court Koton raised a number of pleas in support of its appeal, including that the Board of Appeal was wrong to find that the marks at issue are protected only for dissimilar goods and services. Koton argued that the Board of Appeal should have taken into account all the marks referred to in the application for a declaration of invalidity, including Koton’s earlier Turkish, Ukrainian and Moroccan figurative marks, which allegedly cover the services of the Contested Mark.

In Koton’s submission, “bad faith” depends on whether or not the applicant for the EU trade mark has violated his duty of fairness in relation to the legitimate interests and expectations of the applicant, with whom he had business relations. In the applicant’s submission, the presence of the figurative element ‘“KOTON” in the contested mark cannot be accepted as a mere coincidence, and therefore reflects a dishonest intention on the part of its former business partner.

To that end, Koton relied on three additional factors aimed at establishing Esteban’s dishonest intention and therefore his bad faith when filing his trade mark application, namely:

  • the fact that he was aware that Koton used an identical or similar mark covering identical or similar goods and services;
  • the fact that Esteban intended to prevent Koton from using the earlier mark KOTON in Spain by filing an opposition with the Spanish Patent and Trade Mark Office against the international registration No 1171878 regarding that mark, and
  • the fact that the ‘“KOTON” element had been created and used for the first time by Koton and that Esteban could not have used that element if he had not been aware of the earlier mark KOTON.

The Decision of the General Court

The Contested Decision was correct and upheld because there was no bad faith. The General Court dismissed the appeal and agreed with the Board of Appeal of the EUIPO, finding that:

  • even if it were established that the contested signs display an undeniable degree of similarity and that Esteban had knowledge of Koton’s earlier marks (especially since there was a business relationship between the parties), Esteban had clearly not displayed bad faith when filing the application for registration of the contested mark with respect to marks which cover dissimilar goods and services.
  • This is because, under the Bad Faith case-law, bad faith within the meaning of Article 52(1)(b) of Regulation No 207/2009 must be assessed, among other things, in light of the likelihood of confusion between a sign used by a third party and the sign for which registration is sought, which presupposes identity or similarity not only between the signs, but also between the goods or services in question.

The Board of Appeal applied the case-law, according to which bad faith presupposes that a third party is using an identical or similar sign for an identical or similar product or service capable of being confused with the sign for which registration is sought, which was not the case for these parties.

Therefore, the Board of Appeal’s application of the law was correct, the decision should be upheld, and the action dismissed.

Case Ref: Case T-687/16