Facts First-instance decision Appeal Comment

In an October 17 2016 judgment, the Madrid Court of Appeal recognised Modelo Continente Hipermercados SA's absolute right to use its registered CONTINENTE trademark after confirming the cancellation of CONTINENTE trademarks that had previously been registered by another company in the same sector.

Facts

In July 2008 Modelo, the applicant for Spanish mixed mark 2.831.997 (CONTINENTE), filed a claim against Sidamsa-Continente Hipermercados SA, Centros Comerciales Carrefour SA and Carrefour Société Anonyme requesting the cancellation of their various trademark registrations, trade names and signs, all of which bore the name Continente, on the basis of non-use.

In response to the claim, Carrefour admitted that it had stopped using its CONTINENTE sign in 2000. However, it attempted to undermine the invalidity of its registrations on the basis of an alleged beneficiary condition regarding the trademarks' reputation and consumers' association of the marks with Carrefour. Further, Carrefour brought counterclaims against Modelo for alleged infringement of its unused CONTINENTE trademarks and unfair competition. Subsequently, by way of a claim added to the proceedings, Carrefour also requested the nullity of Spanish mark 2.831.997.

First-instance decision

In a December 20 2012 judgment, the Madrid Commercial Court Number 2 cancelled the Carrefour registrations on the basis of non-use of the registrations. It also declared:

  • the validity of Modelo's mark; and
  • the lack of infringement of Carrefour's marks.

However, the court prohibited Modelo from using its CONTINENTE trademark in Spain, as it considered that this would constitute unfair competition.

Appeal

Both parties appealed the decision. In an October 17 2016 judgment, the Madrid Court of Appeal dismissed Carrefour's appeal, but upheld Modelo's based on the following considerations.

Cancellation action for non-use With regard to Carrefour's CONTINENTE registrations, the court confirmed Modelo's legitimate interest in exercising the cancellation action and acknowledged that the sign had not been used since 2000, which was the basis for their cancellation. The court also noted that Carrefour's allegation that the recognition previously acquired by the CONTINENTE mark was linked to Carrefour was not a barrier to cancellation.

Infringement action The court confirmed its dismissal of the infringement action brought by Carrefour regarding its registered CONTINENTE trademarks and an alleged well-known unregistered mark of the same name, on the basis of:

  • the cancellation of the registrations on which the action was based; and
  • the lack of an existing unregistered well-known CONTINENTE trademark (due to lack of use).

In this respect, the court noted that neither the "remembered" trademark nor the well-known unused mark existed as a tertium genus (ie, a third possibility).

Absolute nullity action Carrefour's absolute nullity action regarding Spanish mixed mark 2.831.997 was based on the alleged existence of Modelo's bad faith when making its application. However, the court held that bad faith could not be assumed, as Carrefour had stopped using the CONTINENTE trademarks in 2000 and Modelo had made the application for its CONTINENTE mark in 2008. Further, the court considered that, as Modelo was using the CONTINENTE mark in Portugal, it was perfectly reasonable for it to attempt to expand into Spain with the same marks.

Relative nullity action On the matter of the relative nullity action regarding Spanish mixed mark 2.831.997, which was based on the previous CONTINENTE registrations of Carrefour, the court reiterated its considerations regarding the inefficacy of such registrations once their cancellation has been declared. It also denied the existence of the allegedly well-known CONTINENTE trademark and the Continente trading name, which was unregistered by Carrefour, as:

  • they were not being used; and
  • it was clear that the name Continente had not identified any party other than the applicant when Modelo had requested the trademark.

Unfair competition action With regard to Carrefour's unfair competition action, the court – by upholding Modelo's appeal – revoked the commercial court's ruling against Modelo that prohibited its use of the mark. The court pointed out that the unfair competition argument cannot be used by a party which has let its trademark be cancelled due to lack of use, as opposed to a party that legitimately registers and obtains a trademark precisely because of its non-use. It also noted that allowing this argument in cases such as the present one would restrict rights holders' legally recognised rights, thus changing the trademark system to generate a new ius prohibendi (ie, a right to prohibit others from using intellectual property) in favour of those that allow their trademarks to be cancelled, which is inadmissible.

Comment

Registered trademarks that are cancelled due to non-use in the market should not prevent rights holders of a subsequently registered mark from using it in the same market, as this is not considered to be an infringement of IP rights or an act of unfair competition.

Carrefour has appealed the judgment.

For further information on this topic please contact Antonia Torrente at Grau & Angulo by telephone (+34 93 202 34 56) or email (a.torrente@gba-ip.com). The Grau & Angulo website can be accessed at www.gba-ip.com.

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