Bad Faith Registration of Trademarks and Repetitive Filings

Bad Faith Registration of Trademarks and Repetitive Filings[1]

Preamble:

TMs registered in ''bad faith'' are deemed to be valid, until cancelled.

In major part of EU Member States, issues of bad faith registration are not addressed at the stage of the examination of an application, so that the acquisition of a TM applied in bad faith is automatic, even in logically obvious cases of bad faith applications.

Obtaining a TM with bad faith is too much easy.

Bad faith registered TMs confer to the proprietor a strong exclusive right, used to distort competition by creating barriers to entry on a market, or to create a deliberate confusion/association with distinctive signs prior used on a given market, in order to mislead consumers over the origin of goods or services.

The registration of a TM in bad faith on the territory of a EU Member State may allow counterfeiting activities on the EU territory. Such counterfeited goods bearing a registered TM, may not be stopped from entering the European market, because they are put in commerce under the registered trademark of the owner of such goods.

Comparing to the easy steps for registering a TM in bad faith, and in view of the often huge economic damages caused by the exercise of the exclusive rights granted by such TMs, the process of cancelling a TM registered in bad faith is extremely difficult.

The present Study seeks to reveal the main difficulties faced in cancellation actions in various scenarios indicating a possible bad faith registration and to make proposals for improving and balancing the current TM system with regard to absolute/relative grounds for refusal, the relevant indicia of bad faith, the standard of proof and the onus of proof of bad faith.

I Different case scenarios

1. Registration as a TM of a well-known or reputed TMs

In the majority of Member States registration is mandatory for protection under TM law. In such countries, protection under TM law by action for cancellation for bad faith registration is restricted to well-known or reputed TMs.

Proof of a high degree of knowledge or of reputation of a distinctive sign used as a TM satisfies the relevant factors related to prior knowledge of the use of the sign for certain goods/services and related to the high degree of legal protection enjoyed by the third party’s sign in comparison with­ the sign for which registration is sought.

However, this approach is inconsistent with the existing law provisions and disregards that bad faith is a different, absolute ground of cancellation, which should not be equivalent with the relative ground for cancellation based on conflicts with prior rights in well-known or reputed TMs.

2. Prior business relationships
3. a) unauthorized registration by an agent or representative

This case amounts to bad faith in most EU Member States.

In major part of EU Member States, only in this case the assignment of the registered TM is possible.

1. b) other prior business relationship between the parties: former associates, former employees, former distributor

In major part of Member States, it would not constitute a bad faith TM registration if two associates of a company split, the company ceases to exist, but both former associates continue to carry the same business separately and, without the consent of the former associate, one of them registers as a trademark, in his own name, the former's company distinctive signs (such as trade name, domain name, emblems etc.).

It is questionable if this approach is consistent with the ECJ jurisprudence in cases C-371/18, SkyKick (par. 75) and C- 104/18, Koton (par. 45, 46, 63) regarding the registration of the TM with the aim of engaging fairly in competition and of allowing consumers to distinguish the commercial origin of goods/services without facing a risk of confusion.

3. Re-filing an unused mark in order to obtain a new “grace period”

This case amounts to bad faith in most EU Member States.

4. Registration of a sign similar to a TM registered abroad

4.1. Registration of a sign similar/identical to a TM registered abroad for similar/identical goods/services, folowed by no use of the TM after registration and notifications and legal actions to stop third parties from using the sign on the market

4.2. Registration of a sign similar/identical to a TM registered abroad for similar/identical goods/services, followed by use of the TM that creates a risk of confusion on the market as to the commercial origin of goods/services

In the majority of Member States, that would not amount to bad faith registration. The principle of territoriality and the principle of priority apply.

Further relevant factors indicating bad faith vary between Member States and may be, in most cases: proof of prior use of the TM registered abroad in national jurisdiction; proof of a certain degree of knowledge by the general public in national jurisdiction; proof of a dishonest intention at the date of application.

In most Member States, effective use of the TM after registration does not indicate that the application was made in good faith.

There are jurisdictions where Courts decide differently (DK, GE, PL, RO, SK).

4.3. Registration of a sign with a low degree of similarity with a TM registered abroad (word mark) for non-similar goods/services, followed by use of a similar/identical sign for identical goods and notifications and legal actions to stop third parties from using the sign on the market

In the majority of Member States, Courts consider the TM as registered, in view of the fact that bad faith should exist at the date of the application, so confusion on the market as to the commercial origin of goods is excluded.

Issuing notifications and starting legal actions for counterfeiting is considered an exercise of exclusive rights in the registered TM.

This approach allows registration of TMs in a way that deliberately circumvents the double similarity between signs and goods/services in order to create a risk of confusion on the market by the effective use of the sign.

The two choices made at the stage of registration and at the stage of effective use are motivated by bad faith and are able to show an abusive filing strategy.

In other jurisdictions, Courts always take into account the actual use of the TM on the market, after registration (BNLX; BG, EE, DK, FR, LV, LT, SI, SK).

The second approach is consistent with the ECJ jurisprudence in cases C-371/18, SkyKick (par. 74) and C- 104/18, Koton (par. 45).

5. Registration of a sign similar/identical with a non-registered sign used for identical/similar goods/services

The kind of signs that would be protected by prior rights (in trade names, emblems) or other legal or commercial interests in distinctive signs, as well as the requirements for their protection (use as a trade mark; use in national jurisdiction; degree of market recognition; right to prohibit the use of the subsequent TM) vary widely between Member States.

In the majority of EU Member States registration is mandatory for protection under TM law. In such countries, protection under TM law by action for cancellation for bad faith registration is restricted to well-known or reputed TMs.

The approach is inconsistent with the existing law provisions and the ECJ jurisprudence and disregards that bad faith is a different, absolute ground of cancellation, which should not be equivalent with the relative ground for cancellation based on conflicts with prior rights in well-known or reputed TMs.

In GE, SE, FI, protection for trade names is granted on the basis of prior use, according to art. 8 of the Paris Convention.

According to Benelux practice, the non-registered sign can be any sign (including a trade name) being used as a trademark.

The Swedish trademark law provides protection for signs that have been put into use before the mark applied for and which have in principle continued to be used, in Sweden or abroad, even if the mark has not been registered.

6. Registration of signs in breach of a public interest may be prohibited on absolute grounds of refusal.

Trademarks with extensive lists of goods or general terms can generally neither be cancelled for bad faith nor for being contrary to public interest (ECJ, C-371/18, SkyKick).

II Procedural aspects

Bad faith may be invoked in cancellation proceedings in major part of the EU Member States.

In some Member States, bad faith may be raised in opposition proceedings (BG, CY, EE, DK, GR, LV, LT, PL, PT, RO, SE, SK, TR, UK), in case the the trade mark is ''liable to be confused with an earlier trade mark protected abroad, provided that, at the date of the application, the applicant was acting in bad faith'' [Art. 5 (4) c) TMD].

In a few numer of EU Member States, bad faith may be brought up in observation proceedings (CZ, EE, DK, GE, PL, UK).

III Problems

1. Registration of TMs in bad faith is automatic in case the applicant deliberately circumvents the double similarity between signs and goods/services at the date of the application, so that relative grounds may not be raised in opposition proceedings, but, in reality, after registration uses a highly similar/identical sign for identical goods/services.
2. The onus of proof of bad faith is too high and lies entirely on the claimant.

In case the defendant effectively uses the TM after registration, cancellation for bad faith is almost impossible, because of the strong principle of territoriality and priority of registration.

The defendant has no obligation to justify any legal interests in the registered sign, acquired prior registration, neither at the stage of registration, nor in cancellation proceedings.

3. There is no comprehensive list of relevant criteria for assessing bad faith, so the jurisprudence and practice in different jurisdictions vary to a large extent.
4. Relevant factors for finding bad faith application of a TM are not taken into consideration by Courts, such as:

- if the registered TM is able to fulfil its essential function of indicating origin or if, on the contrary, the TM was registered in order to create a risk of confusion/association with goods/services already put on the market by another undertaking;

- if the defendant is able to justify any legal interests in the sign, acquired through use of the sign for certain goods/services prior registration as a TM;

- assessing bad faith based on the commercial realities of the use made of the TM after registration, not of the TM as registered.

IV Proposals

1. 1. Bad faith registration of TMs should be prevented; bad faith should be addressed before a trademark is registered, in observation and opposition proceedings.
2. In obvious cases, in which the applicant cannot argue lack of knowledge of prior acquired rights or prior legal interests in signs used for certain goods/services and it is impossible to show a legal interest in acquiring TM rights in the sign (such as the case or registering the name of a public body or of a professional association performing activities in the public interest), bad faith should be regulated as an absolute ground for refusal and the national offices should be able to examine facts ex officio.
3. In other cases, bad faith should be regulated as a relative ground for refusal, which may be raised in opposition proceedings, based on a prior right aquired in the national jurisdiction or abroad.
4. Relevant factors for finding bad faith should be globally assessed and not examined one by one, as cumulative requirements.
5. Similarity between the TM and a sign prior used in commerce and similarity between goods/services should be assessed by taking into consideration the effective use of the TM after registration, not just the TM, as registered, in order not to allow eluding relative grounds for refusal/invalidity, by a deliberate choice.
6. The fact that there is a degree of similarity/identity between a prior used sign and a TM - as used in commerce after registration, and between goods/services - as used in commerce after registration, should allow the presumption of knowledge of the prior use by third parties of a distinctive sign in relation to certain goods/services.
7. Proof of knowledge of the prior use of a distinctive sign in relation to certain goods/services by third parties, on the national territory or on the territory of a EU Member State, should allow the presumption of a dishonest intention to undermine legal interests in that sign:

- if the TM is not used after registration in commercial activities, but legal actions are taken to prevent third parties from entering the market or from continuing to use the sign on the market;

- if the TM, as used in commerce after registration, does not fulfil its essential function to indicate the origin of goods/services, without confusion.

8. In case there are prima facie indicia of bad faith registration, the onus of proof should switch on the defendant, who should give a reasonable and objective justification, amounting to a legal interest, for choosing to register and to use as a TM a particular sign (which can be also a TM registered abroad, or a non-registered sign prior used in commerce), in a way that creates a risk of confusion, or of association for the consumers with a distinctive sign prior used on the market by an undertaking for similar/identical goods.

[1] Studiul a fost prezentat în cadrul proiectului desfășurat de European Community Trademark Association (ECTA), Comisia de armonizare a dreptului european.