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The many facets of bad faith in trademark law




Sarah Turner, Darren Meale and Adrian Smith of Simmons & Simmons consider what brand owners can do when faced with a bad faith trademark application and how to prepare for a potentially important CJEU decision

1 minute read
Bad faith in trademark law can take many different forms. Here we look at how to tackle an allegation of bad faith and the factors that case law suggests are more (and less) likely to lead to a bad faith finding. One issue which is under scrutiny in the SkyKick CJEU referral is whether an applicant’s lack of intention (at the date of the application) to use the mark for the entire range of goods or services claimed in the specification should invalidate the whole registration if there was a bona fide intention to use the mark for some of the claimed goods or services. We consider what brand owners can do now when faced with a bad faith application and how to prepare their portfolios for a possible CJEU decision that a partial finding of bad faith taints the whole registration.

An interesting body of case law has developed in the UK and the EU around the concept of bad faith trademarks. Of course, bad faith is not a concept peculiar to trademarks. Wherever monopoly rights are concerned, some bad faith applications will inevitably appear. Patent lawyers, for example, are familiar with the fight against patent trolls or non-practising entities who file or buy patents simply to enforce them (for the damages awards made by the courts or to reap the financial benefits of settlement). Such a business model is becoming more common in the trademark field with the additional commercial benefit of using the hijacked trademarks to trade in related domain names. This is one of many different forms of bad faith objections being considered by the courts and trademark registries, and we await with interest the Court of Justice of the European Union's (CJEU) latest guidance in SkyKick (referred to the court just over a year ago by Mr Justice Arnold). Pending the SkyKick decision, we look at how the law on bad faith has developed and what brand owners can do when faced with a bad faith challenge.

When bad faith can be raised in trademark law

There is no definition of bad faith in the UK or EU trademark legislation, so it has been for the courts to provide us with some guidance on how to interpret the term. As a result, there are many different behaviours which may form the basis of a bad faith challenge, as we see below.

The UK and EU regimes are slightly different. A UK trademark application will be rejected if it can be proved to have been made in bad faith (under section 3(6) Trade Marks Act 1994 and Article 3(2)(d) of the 2008 Directive), meaning an opposition can be founded on the basis of bad faith. When applying for a UK trademark the applicant must sign a statement that either the trademark is being used in relation to specified goods or services or there is a bona fide intention that it will be so used.

While there is no equivalent provision for EU trademark (EUTM) applications (so it is not possible to oppose an application on this basis), a registered EUTM can be revoked for bad faith (either at the EUIPO or as a counterclaim in infringement proceedings) under Article 59(1)(b) of the EUTM Regulation.

Article 4(2) of the 2015 Trademark Directive (2015/2436), which had to be implemented by member states by January 15 2019, makes the bad faith ground of invalidity mandatory for registrations. Article 4(2) provides that "A trademark shall be liable to be declared invalid where the application for registration of the trademark was made in bad faith by the applicant". However, member states will still have some discretion in relation to trademark applications. Article 4(2) continues "Any member state may also provide that such a trademark is not to be registered".

Different forms of bad faith and the UK test

Bad faith commonly arises where a trademark (often a well-known mark) is used (and registered) in some jurisdictions but not in others, and someone other than the original registered owner applies for an identical or confusingly similar mark in the jurisdictions where the mark is not registered. This might be done with the intention of selling the registration to the owner at inflated cost (so-called troll behaviour) or simply to profit from their reputation. Such dishonest behaviour clearly falls within the realms of bad faith, however defined. But, while it may appear odd to a layman, dishonesty is not always a pre-requisite for a finding of bad faith. The UK Court of Appeal formulated a two-part test for bad faith in Harrison v Teton Valley [2004] EWCA Civ 2018:

  • Would the applicant's conduct be objectively judged as being in bad faith?
  • Was the applicant aware that its conduct fell below the proper standards of commercial behaviour? ("Proper" being assessed as acceptable to reasonable and experienced people in that field.)

Tackling bad faith

In the past there has been some variation in the way that bad faith has been interpreted in the UK and in the EU, with the UK finding bad faith in situations which would not cause a problem elsewhere. This may be as a result of the "bona fide intention to use" declaration required when filing a UK trademark application, or simply because more evidence (tested by cross examination) is put before the UK courts.

In both the UK and the EU good faith is presumed until bad faith is proved by the contesting party. So, how should a party go about proving bad faith? It is important to remember that an allegation of bad faith is a serious allegation which should not be made unless it can be properly pleaded and proved (on the balance of probabilities).

Factors likely to indicate bad faith

Case law has suggested that the following factors are likely to indicate bad faith:

  • Identical or confusingly similar signs – although this is not enough in itself to support a finding of bad faith, marks which do not fulfil these criteria will not support a finding of bad faith. On the other hand, registrations which bear a striking similarity to marks which have been long used by the other party will need to be explained.
  • Knowledge of the other party's use of an identical or confusingly similar sign – again not enough in itself, but proof of the applicant's actual or deemed knowledge of its competitor's activities for identical or similar goods or services will be a relevant factor (if, say, it deliberately turned a blind eye or it would be clear to a reasonable person from the surrounding circumstances). Even use in relation to dissimilar goods or services might suffice if they are in a neighbouring field into which expansion by the competitor might be reasonably expected or the existing mark has a significant reputation and there is evidence that the applicant intended to benefit from that reputation.
  • Well-known marks – where an application is made for a well-known mark with which the applicant has no apparent connection the applicant must submit evidence to explain and justify the application. Failure to submit such evidence is likely to lead to a finding of bad faith. (See the recent Trump International Limited v DTTM Operations [2019] EWHC 769 decision, for example, where Mr Justice Carr set out guidance on how the UKIPO should deal with such applications.)
  • Dishonest intention – for example, if there is evidence that the applicant's primary intention in applying for the mark was to stop others from entering the market. In practice, proving a purely dishonest motive may be difficult as an applicant's motives are often mixed. Proving motive may be difficult in any event even where there is disclosure, as documents evidencing motive may be privileged.
  • Circumstances surrounding the mark's creation and use/commercial logic – obviously where a mark is not used for some time, there is a better argument that it was applied for in bad faith. However, in highly regulated industries it may not be possible to launch a product for a considerable time, leading to registrations which may appear at first glance to be in bad faith but which are genuine, as the applicant is simply waiting for product approval. The commercial logic behind the application may be relevant to rebut an argument of bad faith. Conversely, a lack of commercial logic may suggest bad faith.
  • Nature of the mark – this can be relevant for marks consisting of the shape of the product (such as the 3D chocolate bunny decision, C-529/07 Lindt) where the applicant is not just stopping its competitors from using a particular sign, but it is effectively stopping its competitors from trading in particular goods.
  • Degree of distinctiveness – of the marks in dispute. The extent of the reputation enjoyed by a mark may be relevant, as it may justify ensuring broader protection.
  • Timing of the application – if, for example, there is a relationship between the parties which is in difficulties and one of the parties then files an application for a mark used by the other party, this may suggest bad faith.
  • Existence of a relationship – if there have been formal or informal dealings between the parties previously, this may be relevant.
  • Policy of re-filing trademark applications at five-yearly intervals – repeated filings of earlier trademarks to avoid the consequences of the genuine use requirements may be considered in order to assess whether the applicant acted in bad faith.
  • A previous bad faith application – evidence of similar applications is also relevant as shown in the recent Trump International decision.

Factors less likely to indicate bad faith

On their own the following factors are less likely to support a successful claim (although they may be relevant in combination with other factors):

  • Identical signs – where there are no other relevant factors.
  • Low degree of similarity – between the marks or between the goods or services, especially if the marks are not distinctive.
  • Honest intention – if there is evidence of an honest (albeit misguided) belief that the applicant was entitled to apply for registration.
  • The number of goods and services for which protection is sought – simply because an applicant files for protection for a wide range of goods and services is not in itself sufficient to find bad faith. Although a lengthy list may arouse suspicion, the party claiming bad faith on this ground must be able to plead the respects in which the specification is too wide and demonstrate that in applying for a wider specification the claimant fell short of the standards of acceptable behaviour observed by reasonable and experienced people in the particular trade.
  • Lack of a positive intention at the application date to use across the entire scope of goods and services listed – while there is no requirement under the directive or the UK Trade Marks Act that the applicant should have a positive intention to use the mark across the entire scope of the specification, lack of a positive intention to use may constitute bad faith. This is an area of the law which is being reviewed by the CJEU in the SkyKick case (see below).
  • Repeat filings per se – it depends on the intention behind the repeat filing; for example, it should not be bad faith to develop a brand by filing (a) an updated version of the mark; or (b) a new mark covering different goods or services.

Consequences of a bad faith finding

When bad faith relating to a mark is established, the whole application/registration is invalid for all goods and services covered by the mark unless the bad faith attack is directed against only some of the claimed goods and services. This 'all or nothing' approach is one of the big issues under consideration by the CJEU in SkyKick.

SkyKick

Sky alleged infringement of its UK and EUTMs by SkyKick. SkyKick counterclaimed that Sky's registrations were wholly or partly invalid for, among other things, bad faith, on the basis that there was no intention to use the marks for the entire range of the specified goods and services. Below is a paraphrasing of Arnold's two questions referred to the CJEU on bad faith:

  • Can it be bad faith to apply to register a trademark without any intention to use it in relation to the specified goods and services?
  • If it is, is it possible to conclude that the application was made partly in good faith (in relation to the goods and services the applicant intended to use) and partly in bad faith (in relation to the specified goods and services it had no intention to use)?

While we wait for the CJEU to give its decision, some brand owners are considering their portfolios carefully, fearing that in the future certain valuable trademarks could be revoked if the CJEU concludes that the whole mark is tainted by a partial finding of bad faith.

Conclusion

Assessment of bad faith will always take the specific circumstances of the case into account. Depending on what they are, one or more factors may be sufficient to demonstrate bad faith. The SkyKick decision may alter the way bad faith is assessed, particularly where a broad range of goods and services is claimed. While the CJEU decision is likely to come out in 2020, which may well be after the UK leaves the EU, we expect that the English courts will still follow it, although they may not be bound by it (in the absence of a Brexit deal). While waiting for the decision, brand owners might review their portfolios to identify any registrations which could be vulnerable to a finding of bad faith on the grounds that there was no intention to use the mark across the entire range of goods or services claimed. For vulnerable marks it might be worth preparing to re-file for a narrower range of goods and services to ensure there is no loss of protection if the CJEU eventually finds that marks tainted by a partial finding of bad faith are invalid in their entirety (an outcome not generally considered highly likely, but this certainly cannot be ruled out).

For brand owners faced with a bad faith application, it is important to remember the different channels available to remove a troublesome application. While proceedings in the UKIPO or EUIPO are one option, it might be quicker to bring court proceedings, particularly if the applicant is looking to hijack a well-known mark. The court also has a wider choice of remedies open to it. Unlike the registries, the court can grant a preliminary (or interim) injunction for trademark infringement or passing off. Such a remedy can be obtained in a matter of days for a clear cut, urgent case. The court can also make a costs order (against parties and non-parties) which reflects the costs actually incurred and, for serial wrongdoers, a publicity order which might help deter future bad faith applications from the same or other applicants.

(L-R) Sarah Turner; Darren Meale; Adrian Smith

Sarah Turner is a professional support lawyer, and Darren Meale and Adrian Smith are partners, at the London office of Simmons & Simmons.


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