Charitable and Promotional Use Confound ECJ

When a registered trade mark is not being used for profit, thorny issues abound on the defensibility of the rights. Yet charities and even businesses widely use branding in respect of products and services for which they do not charge, such as charitable fund-raising and distribution or promotional give-aways. The same entities regularly protect these brands as registered marks. Are they vulnerable to revocation solely because they are not used for profit?

This was the issue before the ECJ recently in Silberquelle GmbH v Maselli-Strickmode GmbH (C-495/07) and Verein Radetzky-Orden v Bundesvereinigung Kameradschaft ‘Feldmarschall Radetzky’ (C-442/07). The answers in these two cases are hard to reconcile, though, and leave businesses who apply marks to promotional give-aways in troubled waters.

Free Drink, But No Free Lunch

Silberquelle arose from a dispute in Austria, in which the claimant applied to revoke Maselli’s registered mark WELLNESS in respect of non-alcoholic drinks in Class 32.

Maselli had been using WELLNESS-DRINK in connection with such drinks, but they were given away free with purchases of clothing, Maselli’s main line of business. The Austrian IPO ordered the cancellation, but on appeal the Austrian court referred to the ECJ the question of whether promotional give-aways of branded goods could constitute genuine use of a registered mark.

In its judgment in January the ECJ essentially agreed with the Austrian IPO. In the Court’s view, genuine use denoted use that was intended to create or maintain market share in the goods for which use is claimed.

Promotional goods were normally distributed with the intention not of creating market share for those goods, but rather to create or increase market share for the goods actually being sold. Consequently, the Court considered that the brand owner could not have aimed to penetrate the market in the promotional goods, and without such an intent and aim, there could be no genuine use in respect of the promotional goods.

A More Charitable Outcome

While in Silberquelle the ECJ rejected Maselli’s promotional ventures, in Verein Radetzky-Orden it adopted a more generous line to another non-profit trade mark use.

In this second case, the claimant had applied to revoke the defendant charity’s (“BKFR”) registered Austrian trade marks for non-use. The charity, whose objects were to preserve military traditions and distribute aid to needy veterans and their families, had used the marks on its business papers including materials sent to members and others to solicit donations, and also used them on badges worn by members when soliciting donations in public places.

The claimant argued that use of a mark for purely charitable purposes was not use in the course of trade and could not therefore constitute genuine use, since its purpose was not to create or maintain market share in goods or services sold or provided for a profit.

In a judgment released shortly before Christmas 2008, however, the ECJ rejected the claimant’s contentions and held that charitable use could indeed constitute genuine use. It noted that charities, like businesses, often employ full-time staff and need to compete with other charities for donations and public support. Their use of marks to distinguish their own activities from those of competitor charities was use with the objective of creating or maintaining market share in the charitable field. Indeed, as previously noted by the Advocate General in the same case, some charitable activities were expressly mentioned in the International Classification, such as “charitable fund-raising” in Class 36.

The Court noted that not all uses by a charity would automatically constitute genuine use sufficient to maintain a registration. As with other businesses, purely internal use would not count. Hence, use directed only at charity members, such as fund-raising drives targeting members only or members-only events, for example, were regarded as insufficiently outward-facing to be regarded as creating or maintaining market share.

Comment

The outcome in Radetzky was a welcome Christmas present for the defendant charity, as well as charities throughout Europe. For them, it is now clear that the cost and effort invested in protecting their names and logos is indeed worthwhile, good news at a time when charities are finding it harder than ever to fill their coffers, and when competition for donations is high.

One may question whether the ECJ was right to regard members-only events and fund-raising drives as purely internal uses of a mark, though. Members of a charity are not really on a par with employees of a business, and while use confined to employees or staff may clearly be internal, the position is not really so clear for charity members, who may in fact be quite detached from the actual running of the charity. Moreover, it can hardly be said that members-only fund-raising drives or events are not designed to maintain market share—that is precisely what they are intended to do. The ECJ is perhaps unlikely to revisit this issue too soon, though, since most charities also target non-members in their activities.

The outcome for the different non-profit use in Silberquelle, however, is more concerning. Maselli was distributing its drinks for free to customers who bought Maselli clothing, but Maselli also advertised the give-aways in advance. Even if Maselli’s give-away was not especially enticing, it is entirely plausible that some customers who would not normally buy a certain product might be persuaded to do so if they know that they will get another item free with it. Promotional cereal boxes and McDonalds Happy Meals with toys are two obvious examples, and in such cases the promotional give-away often drives the purchase.

Where a give-away is advertised, can it not be argued that the seller is in fact intending to create, and is in fact creating, market share (albeit perhaps small) in the give-away products as well? Moreover, can it not be argued that the purchaser is actually paying part of the purchase price for the “give-away” item, since the latter may well motivate the purchase?

There are also lingering questions about the status of true give-aways, such as where a new product is distributed on the streets as a promotional gimmick to stir up public interest and awareness prior to a product launch. In a case like that, there is a clear intent to create market share in the actual product given away, although the major activity designed to garner that share may not yet have begun, and the mere fact that the give-away involves no profit makes it no less genuine a use.

The Silberquelle judgment casts doubt on the value of trade mark protection for give-away promotional goods, an unfortunate outcome since so many businesses rely on such branded promotional items as part of their marketing strategy. Businesses who want to secure and maintain brand protection for such goods should not give up hope, however, but rather adapt to the ECJ’s reasoning. Educating marketing teams to promote give-aways rather than simply give unannounced “free gifts on purchase” may help. Where a brand owner has evidence that some customers sought out the product because of the “gift,” it could help in showing that there was an intent to create at least some market share in those goods.

Non-profit use need not be non-use, where brand owners plan ahead