A company operating in the energy sector that used a distinctive sign “tenergo” in its company name sued a competitor in the Czech Republic for alleged unfair competition conduct. In particular, the claimant was not pleased with the fact that the defendant – operating within the same business sector – was carrying out certain deceptive activities that could create a likelihood of confusion between these two undertakings. According to the claimant, the defendant was intentionally using its company name in order to acquire the claimant’s customers.

The court of first instance held that the defendant should stop the use of the distinctive sign “tenergo” in its company name and to desist from using this sign in its corporate documents, marketing or promotion materials, etc. The Court of Appeal upheld this decision.

Up to this point, it had been more or less a standard unfair competition case. During the appellate stage of the proceedings, however, the defendant registered a trade mark containing the disputed sign “tenergo”. Boosted by this new development, the defendant argued before the Czech Supreme Court that the Court of Appeal had not properly assessed the relevance of its newly registered trade mark containing the sign “tenergo”, meaning that the Court of Appeal did not resolve the existing conflict between the absolute right of the claimant to a company name and the absolute right of the defendant to a trade mark. The Supreme Court dealt with the highly interesting question whether a judicial decision can prohibit a trade mark proprietor from using its registered trade mark or the distinctive element of its trade mark.

The reasoning used by the Supreme Court in its decision may be very instructive for further cases in Slovakia. Although the final decision in this case comes from the Supreme Court of the Czech Republic, due to the history of sharing one legal order in Czechoslovakia even nowadays Slovakian judges often cite and refer to the judgments of the Czech Supreme Court. Hence, the decision in the “tenergo” case carries strong authority even in Slovakia.

The Supreme Court Decision

The previous case law concerning the court’s authority to prohibit the use of a trade mark by the proprietor was not consistent.

The first group of decisions held that a court may not prohibit the trade mark proprietor from using its trade mark even in cases where the trade mark owner was liable for unfair competition conduct. The courts argued that the use of a trade mark is a right of the trade mark owner. Therefore, the trade mark owner should not be required to stop using the trade mark, unless there are further grounds for the revocation of a trade mark by the national Intellectual Property Authority (the national authority may decide on revocation of a trade mark on the basis of a final court ruling according to which the use of the mark is considered unfair competition conduct).

However, the Supreme Court ruled differently in the later set of cases. These judgments argued that the prohibition of the use of a trade mark is acceptable and legitimate. The trade mark registration does not mean that the trade mark owner cannot violate rules against unfair competition by using his trade mark.

In the light of these decisions, the Grand Chamber of the Supreme Court eventually concluded that if the trade mark owner uses the trade mark in a manner that falls within the scope of under competition practices, a person harmed by such conduct (usually a competitor) needs to have a right effectively and timely to defend against such illegal conduct of the trade mark owner, including a right to seek a court order that would prohibit the defendant from using the registered trade mark.

Practical consequences

The recent decision of the Grand Chamber of the Supreme Court is a welcome development that limits the options of using a registered trade mark in speculative ways. In our practice, we have seen a number of cases where a registered trade mark was not used in a trade mark sense, but rather as a tool for creating confusion on the market or as a means to request license fees in cases where no trade mark infringement could take place. If the court finds that all elements of unfair competition conduct has been established by the applicant, it should have the power to order the defendant to stop using the trade mark in question.