Bad faith too complex for simple trade mark rule, says ECJ

An Austrian legal spat over the design of chocolate Easter bunnies was referred to the ECJ to see whether or not chocolate maker Lindt's behaviour in registering a whole bunny as a trade mark counted as acting 'in bad faith' or not.

Under the EU's Community Trade Mark Regulation community trade marks (CTMs) can be declared invalid if they were registered in 'bad faith'.

Austrian chocolate maker Franz Hauswirth has been making and selling chocolate bunnies since the 1960s, while Lindt has been doing so since the 1950s. In 1994 it began selling its bunnies in Austria and in 2000 became the proprietor of a three dimensional trade mark representing a gold foil-covered bunny sitting down and wearing a red ribbon.

That trade marked shape closely resembles Hauswirth's bunny, and Lindt took legal action to try to stop Hauswirth from producing its bunny in the EU. Hauswirth fought back, claiming that by entering its market and trade marking a shape that Hauswirth already sold, Lindt had acted in bad faith and should have its trade mark declared invalid.

The Austrian court asked the ECJ if Lindt had automatically to be seen to have acted in bad faith just because it knew when it registered the mark that Hauswirth already sold a product which closely resembled it.

It also asked the ECJ if bad faith was automatically at work if Lindt applied for the trade mark in order to stop a competitor from trading even if that competitor has built up rights in the shape.

The ECJ said that there could not be clear rules about exactly what constituted bad faith. It said that national courts must look at the whole of a case and make their decision on the particular facts.

"The fact that the applicant knows or must know that a third party has long been using, in at least one Member State, an identical or similar sign for an identical or similar product capable of being confused with the sign for which registration is sought is not sufficient, in itself, to permit the conclusion that the applicant was acting in bad faith," said the ruling.

The Court said that it must be borne in mind that there could well be legitimate reasons for the registration of a trade mark.

"In order to determine whether there was bad faith, consideration must also be given to the applicant’s intention at the time when he files the application for registration," the ruling said. "When several producers were using, on the market, identical or similar signs for identical or similar products capable of being confused with the sign for which registration is sought, the applicant’s registration of the sign may be in pursuit of a legitimate objective."

The ECJ ruling said that it was important to get the judgment right when the trade mark in question represented the whole shape of the product. Companies acting in bad faith might be able to quash all competition, it said.

"In a case where the sign for which registration is sought consists of the entire shape and presentation of a product, the fact that the applicant is acting in bad faith might more readily be established where the competitors’ freedom to choose the shape of a product and its presentation is restricted by technical or commercial factors, so that the trade mark proprietor is able to prevent his competitors not merely from using an identical or similar sign, but also from marketing comparable products," it said.

"In order to determine whether the applicant is acting in bad faith … the national court must take into consideration all the relevant factors specific to the particular case which pertained at the time of filing the application for registration of the sign as a Community trade mark," said the ruling.

"In particular: the fact that the applicant knows or must know that a third party is using, in at least one Member State, an identical or 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; and the degree of legal protection enjoyed by the third party’s sign and by the sign for which registration is sought."

The Court largely followed the advice of its advisor, Attorney General Eleanor Sharpston. She said in her opinion earlier this year that the concept of bad faith was likely to be impossible to pin down.

"Like a banker, bad faith is no doubt easier to recognise than to define," she said. "It is a concept with which not merely lawyers but philosophers and theologians have grappled without quite achieving mastery. It is likely, indeed, that bad faith cannot be defined at all in the sense of determining its precise limits."