Bad faith and trade mark use for export – some Great Blue Sky thinking from The Hague Court of Appeal

Is it bad faith to apply for a trade mark you know your business associate is already using in the EU, albeit that he is only exporting goods under that mark? No, says the Dutch Court of Appeal in The Hague, although its reasoning is a little creative when it comes to its application of EU trade mark law.

The decision is Zhu v Great Blue Sky International and dates back to December 2013. Realising in February that I cannot speak Dutch, I’ve called upon the help of my Amsterdam-based colleague Laurens Kamp and together we present the following summary.

Roken is Dodelijk!

Zhu instructed Promodyne to manufacture MABA branded cigarettes in the Netherlands for export to South East Asia. They were not placed on the market in the EU. In August 2008, Great Blue Sky International (GBS), with the encouragement of Promodyne, filed for a Community trade mark (CTM) for MABA. Just months later, Zhu filed his own Benelux MABA trade mark application. Evidently Promodyne and GBS thought they could gain some clever advantage over their business associate by making their application. They subsequently attacked Zhu’s Benelux mark. Zhu responded by applying to cancel their CTM on the ground that it was filed in bad faith.

Could Zhu establish bad faith in these circumstances?

The leading authority on bad faith is Case C-529/07 Chocoladefabriken Lindt & Sprungli AG v Franz Hauswirth GmbH, in which the Court of Justice of the European Union (CJEU) held that (emphasis added):

“in order to determine whether the applicant is acting in bad faith within the meaning of art.51(1)(b) of Regulation No.40/94 [now Article 52(1)(b) of Regulation 207/2009], 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, 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 CJEU held that the part underlined is not enough to show bad faith by itself, but it is clearly an important element. Drawing on this authority, the Court of Appeal in The Hague decided that to succeed on bad faith, Zhu would have to show that he had used his mark in at least one country in the EU before GBS’s application. This would mean that Zhu would have to show he had some prior (and necessarily unregistered) rights in the EU.

More cats... this one's for Jordana

Sure, replies Zhu, I have used for export purposes, which Article 15(1)(b) of Regulation 207/2009 expressly provides constitutes use in the EU (“The following shall also constitute use… affixing of the Community trade mark to goods or to the packaging thereof in the Community solely for export purposes”). This might be seen as an anomaly – how can you use a mark in the EU if you are putting it on goods which are immediately thereafter going to be sent outside the EU and will never see the EU market? Nevertheless, that is what the law appears to say, although it is worth noting that in the important CJEU case on genuine use in Case C-40/01 Ansul, the Advocate General thought that use for export purposes should only count "in exceptional circumstances".

The Court of Appeal in The Hague was not put off by the above position. It decided (without reliance on any particular authority) that use of a trade mark for exporting goods outside the EU only qualifies as trade mark use if the use is contrary to one of the functions of the trade mark. That may well be arguable, but it took things further: use is contrary to the functions of the trade mark, it said, if there is a risk that the goods will be put on the market in the EU even though they are officially destined for export, either because the trade mark owner has changed its plans, or because third parties get hold of the goods. This conclusion – which looks to us to make new law – draws on comments made by the Advocate General in Case C‑119/10 Frisdranken Industrie Winters BV v Red Bull GmbH (see para 56) and perhaps on the principles enunciated in transit cases (such as Joined Cases C‑446/09 and C‑495/09), even though this case had nothing to with goods in transit through the EU.

Not if there is a risk that the cigerettz will
be put on the market in the EU even though
they are officially destined for export, pooch!

This was an unfortunate conclusion for Zhu. There was no risk of the goods he had exported being put on the market in the EU, they had all been sent to South East Asia. So he could not establish a sufficient prior use, and could not succeed on bad faith. Despite it being abundantly clear (to us at least) that Promodyne and GBS were up to no good, that meant that they got away with it.

Upset by Zhu’s fate, this English-speaking Kat and his guesting Dutch-speaking Katfriend are minded to stop there. For those keen to see Zhu suffer further, the Court of Appeal in The Hague then went on to consider, obiter, what the position would have been had Zhu’s use for export in fact constituted sufficient use to support a bad faith claim. That didn’t end well for Zhu either.

There’s definitely one – if not several – points for the CJEU to look at here, if Zhu can muster up the resources to pursue a further appeal and referral. The Court of Appeal in The Hague has made a number of rather bold leaps in trade mark law to get from A to B to C, which are all the braver based as they are on remarks in opinions of Advocates General. Those are opinions which can be just as easily ignored as followed when the CJEU comes to look at them.