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UNITARY PATENT

In 2012 Member States and the European Parliament agreed on the "patent package" - a legislative initiative consisting of two...

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Interpreting Bad Faith - A Pan European Concept?

What should a trade mark owner do if he believes a third party knowingly has applied for an identical trade mark to his own mark in an EU member state where he does not have any earlier rights? Should the trade mark owner assert that the application filed by the third party was made in ‘bad faith' and thereby apply to cancel the mark? As set out in Malaysia Dairy Industries Pte Ltd v Ankenævent for Patenter og Varemærker (Case 320/12), it is not necessarily that simple.

Background

Yakult is a probiotic dairy product made by fermenting skimmed milk with a strain of Lactobacillus casei. The product was developed by a Japanese scientist Minoru Shirota in the 1930s. The name is said to be derived from an old Turkish word for yoghurt.

After initially selling the Yakult product in Japan and Taiwan, the Japanese producer began retailing the drink more widely in the 1960s. During that expansion, the packaging for the product was changed from a glass bottle to a distinctively shaped plastic bottle. This novel packaging was protected by design rights in Japan in 1965 and was subsequently registered as a trade mark in a number of other countries, including some member states of the EU.

In 1977, a Malaysian company, Malaysian Dairy Industries, began selling a competing fermented milk drink under the trade mark Vitagen. This competing product was sold in a plastic bottle that was strangely reminiscent of the Yakult bottle.

In 1993, Yakult and Malaysia Dairy entered into an agreement which purported to set out their rights and obligations in relation to the registration and use of their respective bottles. If they thought that this was the end of the matter, it wasn't. In 1995, Malaysia Dairy applied to protect its bottle shape as a 3D mark in Denmark. This application proceeded to registration in 2000. However, under Danish trade mark practice, opposition takes place after registration and Yakult duly opposed. The opposition was based on Section 15(3) (iii) of the Danish Trade Marks Act which states,

"A trade mark is also excluded from registration
if:
...it is identical to or differs only insubstantially from a trade mark which at the time of the application, or as the case may be the time of priority claimed in support of the application, has been brought into use abroad and is still used there for goods or services of the same or similar kind as those for which the later mark is sought to be registered, and at the time of the application the applicant knew or should have known of the foreign mark".

This provision was derived from an optional part (Article 4(4)(g)) of the EU Trade Mark Harmonisation Directive (now 2008/95/EC).

In 2005, the Danish Patent and Trade Mark Office rejected the opposition, finding that, since Malaysia Dairy owned an earlier (1980 dated) Malaysian trade mark registration for the same bottle shape, they had not acted in bad faith when filing their Danish trade mark application, even though they (Malaysia Dairy) knew about Yakult's foreign use of their (Yakult's) bottle shape.

Yakult appealed to the Danish Appeal Board who annulled the original decision and cancelled Malaysia Dairy's trade mark registration. In the Board's view, Malaysia Dairy's knowledge of Yakult's foreign use was sufficient to establish their (Malaysia Dairy's) bad faith. This decision was confirmed by the Maritime and Commercial Court.

This led Malaysia Dairy to appeal still further in 2009, this time to the Danish Supreme Court. The Supreme Court sought guidance from the European Court of Justice. Essentially they asked the (European) Court to decide whether the Danish Patent and Trade Mark Office or the Danish Appeal Board had taken the correct position on Section 15(3) (iii) and Article 4(4)(g). They also asked for guidance on the concept of bad faith under the Harmonisation Directive; should the concept be interpreted at a national level or was it an EU concept that must be interpreted uniformly throughout the EU?

The Decision

The Court began by confirming that a provision of EU trade mark law, such as Article 4(4)(g) of the Directive, should be interpreted uniformly throughout the EU, and not separately (and differently) at national level.

The Court then ruled that the mere fact that Malaysia Dairy knew of Yakult's use of a similar 3D mark outside Denmark, when they filed their Danish trade mark application for their bottle shape, did not, in itself, show that the (Danish) application was made in bad faith. When considering the issue, it was necessary to take into account all of the relevant factors specific to the case, presumably including, although not stated by the European Court, the fact that Malaysia Dairy had registered their bottle shape (in Malaysia) in 1980 and had been using it since 1977.

The case now goes back to the Danish Supreme Court for a decision. The outcome is important to the parties not only at a national (Danish) level but also at an EU level. This is because Yakult owns a CTM application for their bottle shape (CTM 111138 in classes 29, 30 & 32) which was filed on the day OHIM opened (1 April 1996) and is still the subject of opposition proceedings brought by Malaysia Dairy. Since this opposition now relies exclusively on the opponent's Danish trade mark registration for their (Malaysia Dairy's) bottle shape, the importance of the Danish Supreme Court's decision can be seen.

Comment

This case not only confirms that the level of evidence required in order to substantiate a ‘bad faith' claim is higher than most brand owners might often expect, but also highlights the importance of being the ‘first to file'. In a case like this, where two entities have similar trade mark interests and multiple rights in the same jurisdiction as each other, it is prudent for brand owners to be the ‘first to file' in those jurisdictions of particular importance, in order to be able to ensure the protection of their brands. It is important that brand owners secure registered protection, as soon as possible, in markets of actual or likely commercial interest.

Where a competitor obtains rights in an identical or confusingly similar mark then, if there is no genuine interest in that jurisdiction, brand owners should seriously consider whether or not it is worth bringing a ‘bad faith' claim, as this case illustrates that it will take more than just the mere knowledge of an earlier right abroad in order to be able to cancel a mark on the ground of ‘bad faith'. The burden is on the trade mark owner to prove ‘bad faith', not the other way around.

In a ‘bad faith' claim, the Court will need to carry out an overall assessment, taking into account all the factors relevant to the case which existed at the time of filing the application. For instance, the Court will consider whether the applicant knew, or should have known, that a third party was using an identical or similar sign for an identical or similar product. More importantly, however, regard will be given to the applicant's intention at the time of filing his application. For instance, does the applicant have a history of applying for third parties' marks, was the applicant a former employee of the rights' holder, was there a breakdown in a business relationship, has the applicant offered to sell back the mark for a substantial amount of money?

This case also highlights the importance of future-proofing settlement agreements. In order to have commercial certainty that a competitor is unable to file an application in a jurisdiction of potential interest to your business, it is prudent to identify those jurisdictions from the beginning. Otherwise, it's a race around the world to be the ‘first to file', which can have disappointing consequences, as in this case.

Lastly, it may be helpful to note that there has been a European Commission proposal to include a limited bad faith ground of opposition based on the ownership of a relevant foreign registration abroad in CTM proceedings.

Hope remains that perhaps this case is the first step towards the CJEU harmonising other trade mark concepts, such as the likelihood of confusion. Watch this space!

For the benefit of trade mark anoraks, you know who you are, Yakult's CTM application is one of only five CTMs that were amongst the nearly 22000 applications filed on 1 April 1996 and that remain pending at the time of writing.