Blind faith not enough when proving bad faith: a case of Colourblindness

If the COLOURBLIND case (Pangyrus Ltd v OHIM, RSVP Design Ltd, Case T-257/11) had been a movie, it would have secured a nomination for its intricate screenplay, in the spirit of the recent Academy Awards. At the root of this Community trade mark (CTM) dispute -- a complex plot of corporate issues, incorporations, mergers and dissolutions -- were questions relating to subjective intention and the objective utilization of the Pangyrus's UK unregistered trade mark COLOURBLIND, invoked in invalidity proceedings against the CTM for the same word.

This dispute hinged on the difficulties in determining (i) who owned the unregistered Colourblind mark, created and used since 1991 to identify learning toolbox software created by RSVP's design director Geoff Cox, and, consequently, (ii) whether the COLOURBLIND CTM was legitimately filed, as Pangyrus claimed to own the rights in the unregistered trade mark in the view of its relationship with Mr Cox.

Three companies asserted rights over the disputed sign: Pangyrus (the applicant for invalidity and the appellant before the General Court, which was in principle Cox's company, through which he marketed the Colourblind product [apparently in Cox’s own name before founding Pangyrus] since 1993; Future Factory, one of the companies in which Cox was a shareholder together with a Mr Peacock: in 1998 Future Factory merged with Pangyrus, giving birth to the Cordyn Group, in which both Cox and Peacock had shares; and RSVP, a company founded by Cox, after resigning from Future Factory and Pangyrus in 2003.

Following Cox's resignations, he formally assigned all rights in the unregistered Colourblind mark to RSVP, which successfully applied to register COLOURBLIND as a CTM the same year. Six years later Pangyrus, believing that it owned the Colourblind unregistered mark, filed an invalidity action based both on relative grounds under Article 8(4) of Regulation 207/2009 (use of an earlier unregistered mark of more than local significance) and bad faith under Article 52(1)(b) of the same Regulation. The Cancellation Division upheld the action, but the Board of Appeal reversed that decision in a decision that the General Court has now upheld.

The Board of Appeal had determine whether the unregistered mark was (i) used in the course of trade, (ii) of more than mere local significance, (iii) before the CTM application was filed and (iv) capable of preventing use of the CTM in the UK under the law of passing off. 

As regards the first ground, Pangyrus relied on the common-law tort of passing off, in that, together with Future Factory, Pangyrus created the goodwill in COLOURBLIND and that RSVP had misrepresented its product by selling it under the same mark, threatening to cause real damage.  Regarding the passing-off point, a good place to start is the dictum of Mr Justice Arnold in Och-Ziff Management Europe Ltd & Another v Och Capital LLP & Another [2010] EWHC 2599 (Ch), that 

“the basis of passing-off is a misrepresentation causing damage to the claimant’s goodwill and there are few a priori limits on what the misrepresentation may be or how the damage may arise: the case in which the defendant’s goods are sold as and for the goods of the claimant is now recognised as no more than a special instance of a more general rule”.

Pangyrus however failed to establish its entitlement to the unregistered mark through its use before the CTM was filed. On the facts, Future Factory was the sole supplier of Colourblind products and Pangyrus could not show a significant use of the unregistered mark. Nor was Pangyrus able to demonstrate that it granted Future Factory either an express or an implicit licence to use Colourblind: it was thus the latter which built up the goodwill in relation to the Colourblind sign. The General Court upheld this conclusion.

According to the Court, Mr Cox was indisputably the creator of the COLOURBLIND product and the sole user in his own name of the unregistered mark prior to Pangyrus' incorporation. In evidential terms, invoices relating to the sale of the product only referred to trade mark use by Future Factory. The argument that the corporate structure allowed Pangyrus to retrieve an implied licence from Future Factory was rejected; the invalidity action only could have been brought by the unregistered mark's proprietor, this being the natural or legal person using the mark.

The Board of Appeal also dismissed the argument that RSVP acted in bad faith at the filing of the application, according to Article 52(1)(b), in that no formal agreement between Cox and Pangyrus on the unregistered Colourblind mark existed at the time of their partnership and that there was no proof of that the mark had been transferred from Pangyrus to Cox. Said the Board, bad faith must be assessed in the light of dishonest conduct and be measured under objective standards, since subjective intentions could not on their own have any bearing in such determination. It followed that the alleged 'common understanding' or Pangyrus's 'belief' that it could rely on its ownership of the unregistered mark following the end of Pangyrus's collaboration with Cox could not stand. In any event, such evidence as Pangyrus did submit -- the merger agreement of 1998, a letter addressed to the national tax authority and the Future Facory's business plan at the time of the partnership -- did not support a finding of bad faith, either because it did not concern the ownership of the unregistered mark or because it referred to corporate structural issues and said nothing about the transfer or the licence of the unregistered mark to Pangyrus.

On the subject of bad faith, the General Court had quite a bit to say. It referred to the Court of Justice of the European Union (CJEU) in Chocoladefabriken Lindt & Sprüngli (Case C-529/07), pointing out that instances in which bad faith is found are only examples of circumstances from which a finding of bad faith can be reached following an examination of the facts and circumstances of each case, taking account of matters such as the origin of the contested sign, the nature of its use since its creation, the commercial logic behind its filing and all events that led to the application being filed. 

In this case, said the Court, when applying for the mark Cox was a well-informed person; he knew of the use of the sign first by Pangyrus and, after the merger, by Future Factory, as he had been involved in both companies' activities from 1993 to 2003. However, such awareness could not count as bad faith. As for Cox's own intentions, according to the Court, he did not want to stop Pangyrus using the Colourblind sign, but nor was there any common understanding that the mark belonged to Pangyrus.

So where does this decision leave us? We know that bad faith is easier to allege than it is to prove, and the fact that one party feels personally aggrieved by his perception of the conduct of the other party often provides the motivation to challenge a trade mark application or registration even when evidence is scant or of little persuasive value. Anyone raising bad faith as a ground must be warned, though, that it is ultimately a court that must be persuaded; it is not enough to persuade oneself.

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