Bad Faith Filing? No Bunny Knows After Lindt

In branding, beating your competitors to a trademark registration is often the name of the game. In a crowded marketplace, being the first to secure registered rights can help you weed out confusingly similar competitor brands already on the market, as well as act against new ones. Not everything is fair in branding wars, though, as the ECJ recently confirmed in Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH (Case C-529/07).

Hopping for clarity

In Lindt, the well-known chocolatier secured a CTM in 2000 for the shape of its gold-wrapped and belled chocolate bunny. Lindt's bunnies had been marketed since the early 1950s and in Austria since 1994. Austrian competitor Hauswirth had sold its own, closely similar gold bunny in Austria since 1962. Notwithstanding this, upon grant of its CTM registration, Lindt sued for trademark infringement.

Hauswirth countered that Lindt's CTM was invalid because it had been filed in bad faith, since Lindt had known about Hauswirth's long-standing use when it filed its CTM. Whether such knowledge allowed the Austrian Court to infer bad faith was referred to the ECJ, which handed down judgment in June.

The Court ruled that an applicant can be presumed to know about competitor use based on general knowledge in the relevant economic sector, particularly where a competitor's use has been long-standing. Mere knowledge on its own, however, does not denote bad faith. Here, the applicant's subjective intention is key.

Intent to enforce a CTM against others may suggest bad faith, but equally it may not. For example, the Court observed that filing a CTM with the sole intention of blocking others from entering the market, without any intention by the proprietor to do so itself, would point to bad faith. Likewise, bad faith may exist where an applicant opportunistically applies for a new mark with a view to competing unfairly against a competitor he knows has already acquired long-standing rights through use.

On the other hand, where an applicant is already using a mark, and particularly where he has acquired a reputation in it, he may be justified in filing for protection despite knowing of similar competitor marks, since he is entitled to protect his mark against newcomers seeking to take advantage.

There was therefore no definite test for bad faith, but rather the need for a general assessment of whether, on an overall view, an applicant's behaviour fell short of acceptable standards of commercial behaviour in the sector concerned. Knowledge of competitor activities was relevant, but the intention behind the filing was determinative.

Comment

On first blush it may appear that the ECJ dodged the main question. The impact of knowledge of competitor activities on a possible finding of bad faith is not much clearer now than before the case was brought.

Yet, on the other hand, the concept of bad faith is inherently resistant to efforts to straight-jacket it. The concept requires exploration of an applicant's subjective intent, held up to the light of the objective circumstances at the time of filing. As such, it is problematic to argue that every time an applicant is aware of certain facts, a filing would be made in bad faith. Mere awareness on its own, without an objectionable subjective intent, can never really constitute bad faith on its own, and the Court was astute to recognise this.

The judgment is also helpful in affirming that knowledge of competitor activities is a relevant factor, and that it can be presumed from general knowledge in the trade.

It does, however, leave open many questions as to when a filing made in such knowledge will have been made in bad faith. Competitors sometimes do use similar marks, avoiding conflict over the years by staying out of each other's markets. If one eventually seizes the advantage and secures EU-wide protection through a CTM, without any intent to enforce it against the other, would the filing nonetheless be in bad faith simply because it could be so enforced later, either by the CTM owner or an unrelated assignee down the line?

The subjective intent would seem above board in such a case, but does an applicant's awareness of the broad rights the CTM confers against all parties, including the long-standing competitor, matter?

Notwithstanding this, wouldn't either party have been entitled to seek Community-wide protection against possible newcomers, regardless of their intentions vis a vis each other? And what of the case where intent is mixed, and an applicant intends to rely on the CTM not only to bar the door against newcomers, but to flush out competitors, even long-standing ones, from the market?

It is hard to predict how the Austrian Court will apply the ruling in Lindt, since the ECJ decision contains little on the critical factor, namely Lindt's actual intent in filing its CTM. How exactly to establish this may also be a challenge for Hauswirth. Brand owners will no doubt be watching with interest.

Meanwhile, it is worth bearing in mind that when filing a CTM, weeding out the marketplace is a legitimate goal-but pulling up those hardy perennials may or may not be.