In a reference from the Austrian Supreme Court, the European Court of Justice (ECJ) has ruled on the meaning of bad faith in Article 51(1)(b) of the Community Trade Mark Regulation (40/94/EEC). This Article provides that a Community trade mark (CTM) shall be declared invalid where the applicant was acting in bad faith when he filed the application for the trade mark.
This reference to the ECJ by the Austrian Supreme Court emanated from the case of Chocoladefabriken Lindt & Sprungli AG v Franz Hauswirth GmbH. The facts of this case have already been examined in the article entitled “Watership down? Lindt defends chocolate bunny trade mark” in our December E-Bulletin available here. In brief, this case concerned a dispute over Lindt's Community Trade Mark (CTM) for a three dimensional chocolate bunny wrapped in gold-coloured foil with a bell and a red ribbon around its neck. Austrian chocolate maker Hauswirth has been making and selling chocolate bunnies since the 1960s. Lindt has been making and selling chocolate bunnies since the1950s and started marketing them in Austria in 1994. In 2001 Lindt acquired a CTM for the three dimensional chocolate bunny. Lindt subsequently took legal action against Hauswirth for trade mark infringement for making "confusingly similar" products to Lindt's chocolate bunny and tried to stop Hauswirth producing its chocolate bunnies. However, Hauswirth fought back claiming that, by entering the market and registering as a trade mark the shape that Hauswirth already sold, Lindt had acted in bad faith by registering the trade mark for the sole reason of blocking competitors’ products and therefore the trade mark should be declared invalid.
The Austrian court referred questions to the ECJ to see if Lindt’s behaviour in registering the trade mark constituted bad faith.
The Austrian court asked the ECJ if Lindt was automatically to be regarded as acting in bad faith just because it knew when it applied to register the trade mark that Hauswirth already used a shape for its product which was so similar as to be capable of being confused with Lindt’s product and Lindt applied for the trade mark to be able to prevent Hauswirth from selling that product?
The court also asked if Lindt was automatically acting in bad faith if Lindt applied to register the trade mark with the intention of preventing a competitor from trading even if that competitor had acquired “valuable property rights” in the shape?
The ECJ said that the fact that the applicant knew or must have known that a third party had been using an identical or confusingly similar sign for an identical or similar product was not sufficient in itself to conclude that the applicant was acting in bad faith. To determine whether the applicant was acting in bad faith, consideration must be given to the applicant’s intention at the time he filed the trade mark application. The ECJ said that there could be legitimate reasons for registration of the trade mark. However, an intention to prevent a third party from marketing a product could be regarded as bad faith in certain circumstances, for example, where the applicant applied for the trade mark with no intention to use it but only to prevent a third party from entering the market. Equally, where a third party has used a confusingly similar mark for a long time, which had acquired some degree of legal protection, that could be a factor in determining whether the applicant was acting in bad faith.
However, the ECJ considered that where the trade mark was for a three-dimensional mark consisting of the shape of a product, it might be easier to establish bad faith where a competitor’s freedom to choose the shape of a product and its presentation was restricted by technical or commercial factors, so that the trade mark owner was able to prevent his competitors from not merely using an identical or similar sign, but also from marketing comparable products.
In order to determine whether an applicant was acting in bad faith within the meaning of Article 51(1)(b) of the CTM Regulation, the ECJ held that a national court must look at the whole of a case and take account of all of the relevant factors specific to that particular case which pertained at the time of filing of the trade mark application, in particular:
- The fact that an applicant knows or must know that a third party is using, in at least one Member State, an identical or confusingly similar sign for an identical or similar product capable of being confused with the sign for which registration is sought.
- The applicant’s intention to prevent that third party from continuing to use such a sign.
- The degree of legal protection enjoyed by the third party’s sign and the sign for which registration is sought.
This case is the first reference to the ECJ concerning the meaning of bad faith in the CTM Regulation or the EC Trade Marks Directive. The ECJ has largely followed the approach of Advocate General Sharpston, who said that the concept of bad faith is likely to be impossible to pin down. The test put forward by the ECJ is a broad and flexible test with emphasis on national courts considering each case on its own facts. However, it is clear from this ruling that the concept of bad faith is not limited to situations in which the applicant had no intention of using the trade mark.