The appeal in Koton v EUIPO, C-104/18 has presented the Court of Justice for the European Union (CJEU) with an opportunity to refine its case law on a couple of questions which have yet to be clarified: what constitutes bad faith and how it can be established?

 

The case background

Mr Nadal Esteban filed an application with the EUIPO for the registration of the figurative trade mark shown below in Classes 25, 35 and 39:

 

 

 

The Turkish clothing manufacturer Koton Mağazacılık Tekstil Ticaret ve Sanayi A.Ş. (“Koton”) filed a notice of opposition on the basis of its own earlier figurative marks registered for Classes 25 and 35 (but not Class 39), which both took the following form:

 

 

The opposition was successful for Classes 25 and 35, and Mr Esteban’s mark was registered for the services in Class 39.

 

In 2014, Koton applied to cancel Mr Esteban’s EUTM registration on the ground that it had been applied for in bad faith (Article 52(1)(b) EUTMR). The EUIPO’s Cancellation Division rejected the application and both the Board and General Court upheld that decision, based on the fact that Koton’s earlier marks did not extend to the services in Class 39 for which Mr Esteban’s EUTM had been registered.

 

Koton appealed again, this time to the CJEU. The CJEU decided to set aside the General Court’s judgment, annulled the Board of Appeal’s decision and rejected the claim that the contested mark should be declared invalid.

 

The problem was that the General Court had said that (within the meaning of Article 59(1)(b) of EUTMR) “bad faith on the part of the applicant for registration 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 the registration is sought”. This led the General Court to rule that the Board had been fully entitled to conclude that Mr Esteban had not acted in bad faith when the contested mark was registered because it was registered for services dissimilar to those designated by Koton’s earlier marks. However, the CJEU considered that to be a serious error in law.

 

Determination of bad faith

In order to determine whether the applicant for registration was acting in bad faith, the correct approach involved taking into account all the relevant factors specific to the particular case which pertained at the time of filing the application for registration. There could not be any objection to this case-law of the CJEU on the basis of five arguments, which were as follows:

 

1. Anyone can apply for a bad faith invalidation because the ground for invalidity in Article 52(1)(b) does not require that the applicant is the proprietor of a trade mark for identical or similar goods or services.
2. The need to take into account all the relevant factors is an inevitable consequence of the subjective nature of bad faith and the object of the bad faith.
3. Case-law on finding abusive conduct can offer guidance in examining bad faith.
4. Overlap with an already existing application is not required, e.g. bad faith can cover an application for registration of a trade mark filed by a person who applies for a trade mark with the sole aim of preventing an imminent trade mark application by others (so-called “trade mark squatting”).
5. The Court had already recognised the possibility of an application made in bad faith by an applicant who wished to establish a basis for acquiring a descriptive domain name in Internetportal und Marketing (C‑569/08). The extent to which applications had already been filed for identical or similar goods or services was irrelevant in this regard.

 

If, as AG General Sharpston had suggested in Chocoladefabriken Lindt & Sprüngli (Goldhase; C‑529/07), bad faith “constitutes a departure from accepted principles of ethical behaviour or honest commercial and business practices”, then all the relevant factors would have to be taken into account. The CJEU said it did not follow from the judgment in Chocoladefabriken Lindt & Sprüngli that the existence of bad faith, within the meaning of Article 52(1)(b) EUTMR, could only be established in the situation where there was use on the internal market of an identical or similar sign for identical or similar goods capable of being confused with the sign for which registration was sought.

 

Divisibility of bad faith

The CJEU also confirmed that Article 52(3) suggested the divisibility of a trade mark application filed partly in bad faith. Unlike the other grounds for invalidity, however, bad faith was not an inherent defect in the trade mark itself, but instead stemmed from the circumstances in which it was applied for. As the CJEU noted, Koton had applied for the contested mark to be declared invalid in its entirety, meaning the application for a declaration of invalidity should therefore be examined by assessing the intervener’s intention at the time that he sought, for various goods and services, including textile products, registration of an EU trade mark containing the word and figurative element already used by Koton for textile products. However, as Advocate General Kokott observed in her Opinion, dividing an application for registration into a part filed in bad faith and a part filed in good faith would be tantamount to offering an incentive for applicants to apply to register trade marks for a larger set of goods and services than justified by actual intended uses.

 

This issue is extremely interesting as it is currently also being considered in the referral for a preliminary ruling made by the High Court in Sky v Skykick (C-371/18), which concerns whether the entire application was made in bad faith if and to the extent that the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use it in relation to other specified goods or services.

 

In the present case, there was ultimately no need to make definitive findings on whether an application for registration could or even must be split into a part filed in bad faith and a part filed in good faith, but it was of crucial importance that the applicant allayed doubts as to whether the application had been filed in good faith by showing that, by filing the application, he pursued a comprehensible and — at least to his knowledge — legitimate economic purpose or an ‘economic logic’. Although “the commercial logic underlying the filing of the application for registration” and “the chronology of event leading to that filing” had been mentioned in the judgment under appeal as factors which might be relevant, the CJEU found that the General Court had failed to fully examine those factors.

 

Unfortunately for Mr Esteban, the AG found his commercial logic unconvincing. According to Mr Esteban, he intended to offer certain services and, in this connection, use bags on which the trade mark at issue already appeared, because he had received those cotton bags as packing material for specific goods. The AG concluded that “Mr Esteban’s motivation is thus limited to pure convenience” and there was no indication of a legitimate interest in accepting the risks of his services being associated with Koton, or of Koton being impaired in future activities.

 

To conclude

In view of the foregoing, the question of the overlap of the original application with the goods and services protected for the earlier trade marks did not need to be further analysed. This was somewhat disappointing because, as AG Kokott had observed, “in view of the earlier practice of filing applications for trade marks for entire classes of goods and services (see C-307/10 IP TRANSLATOR) which the applicant was not even able to, let alone wished to cover comprehensively, this is a highly explosive issue”.