It’s a hard rock life for UNIVERS as the EU General Court upholds a finding of bad faith

Judgments from the EU on bad faith in trademarks keep on coming. Kat friend Becky Knott reports on one of the latest, which is of particular interest.

Bad faith is the ground du jour in the EU due to the SkyKick saga, which recently held that Sky did not act in bad faith when filing broadly. But what happens when the proprietor of a Chinese registration is ‘beaten to the punch’ in the EU? Is it bad faith? A recent decision of the General Court (GC) answered "yes". The GC affirmed a decision of the Board of Appeal (BoA), holding that a registration for AGATE was invalid, having been made in bad faith [BoA decision here, GC decision here, case no T-592/20].

A precarious position for would-be trade mark squatters in the EU?

Background

On 7th March 2017, UNIVERS AGRO LTD applied to register AGATE as an EU trade mark for “Automobile tires [tyres]” in Class 12. It registered on 21st June 2017. Shandong Hengfeng Rubber & Plastic Co. Ltd owns a Chinese registration for the mark below (“the AGATE Logo”), covering goods in Class 12 including tyres. Shandong filed an invalidity action against UNIVERS’ registration, stating that (1) it was made in bad faith and (2) asserting earlier unregistered rights in Bulgaria.

The EUIPO’s Cancellation Division upheld the request on the grounds of bad faith (here). It did not examine the second ground for invalidity. The Division found that UNIVERS had filed the application to exploit the lack of formal protection of Shandong’s mark in Bulgaria, and to take over Shandong's clients and the market share created by Shandong’s distributor, Omnifak Ltd.

UNIVERS filed an appeal, which was dismissed by the BoA (here). The BoA held that the two marks were identical and the goods at least highly similar. In light of the evidence filed and the chronology, it thought it practically impossible that (1) UNIVERS had no knowledge of Shandong/Omnifak’s use of the AGATE Logo in Bulgaria, and (2) that it intended to honestly use the contested mark, not to block Shandong from the Bulgarian market. UNIVERS then appealed to the GC.

The GC’s decision

UNIVERS requested that the GC both annul the contested decision and declare its mark to be valid. The GC first noted that it had jurisdiction only to annul/alter decisions of the BoA, not to grant a declaratory judgment or to substitute its own assessment/carry out an assessment on which the BoA had not yet adopted a position. As such, the GC held it unnecessary to consider UNIVERS’ arguments concerning the alleged unregistered rights and treated UNIVERS as having put forward only a single plea in law, for infringement under Article 59(1)(b).

In support of its claim of infringement, UNIVERS said that the BoA had erred in its assessment of (1) UNIVERS' presumed knowledge of the existence and use of the AGATE Logo in Bulgaria, and (2) its intentions at the time of filing the application.

UNIVERS claimed that, before the date of publication of its application, it had no knowledge of the existence of tyres imported under AGATE, or of Shadong/Omnifak. It argued that the number of tyres sold in Bulgaria amounted to “basically nothing” (paragraph 37), and alleged that Shadong “consciously manipulated customs declarations, forwarding false documents to EUIPO” (paragraph 39). UNIVERS also argued that, as it had carried out a global pre-filing search and located no conflicting right in Europe, this meant that it could not have been aware of the AGATE Logo and that the use in Bulgaria must have merely local significance (paragraph 40).

The GC was unimpressed. It found that the BoA was entitled to presume knowledge on UNIVERS’ part at the time of filing. Although Shadong’s evidence only showed use of AGATE between 2014 and 2017, the GC emphasised that duration of use is only one factor (paragraph 46). Moreover, it found that the quantity of tyres imported could not be considered to be insignificant. Regarding the alleged falsification of evidence, the GC noted that UNIVERS had not put forward any argument or evidence “capable of…raising doubts as to the authenticity of the documents” (paragraph 52).

The GC also dismissed UNIVERS’ reliance on its trade mark search. It stated that the report “does not categorically rule out the existence of marks similar or identical to the contested mark” and that “the applicant’s alleged diligence cannot be proven” (paragraph 60). It emphasised that the report did not make the geographical scope or the extent of the search clear.

The GC gave particular weight to the quick enforcement by UNIVERS of the AGATE mark following registration. Commenting on the BoA’s finding that “it was well prepared to target [Shadong and Omnifak] and that it already knew about the use of the [Chinese] mark Agate” (paragraph 61), the GC noted that UNIVERS did not explain how it became aware of the use of the AGATE Logo in Bulgaria only after publication of its application. The GC therefore dismissed UNIVERS’ first complaint.

In its second complaint, UNIVERS argued that the BoA did not take into account the fact that it had not used AGATE before its application registered. It submitted that this was normal commercial practice and could not be regarded as evidence of bad faith.

The GC replied that it was not a question of examining the use made of the mark but of assessing whether an intention to use was present when filing. It commented that “the absence of such an intention may be inferred from the circumstances of the case and…the complete absence of evidence relating to the commercial activities of the proprietor of the contested mark” (paragraphs 68 to 69).

It endorsed the BoA’s conclusion that there was no commercial logic underlying the application, noting that UNIVERS had not provided “any reasonable explanation concerning the extension of its commercial activities in the agricultural field to the tyre sector”. From the evidence provided by UNIVERS, it was apparent that companies that produce truck tyres do not produce agricultural tyres (paragraph 71).

It therefore rejected UNIVERS’ second complaint, upholding the BoA’s findings that UNIVERS’ intentions were not to prevent infringement, “but a planned endeavour with the goal of taking advantage of the [intervener’s] failure to … protect its [Chinese] mark “Agate” in Bulgaria’”. Such purposes were dishonest (paragraphs 73 to 74).

Answering UNIVERS’ claim that Shadong had no interest in the European market and was just trying to exclude it, the GC held that the BoA was not required to examine Shadong’s commercial strategy and specific intentions in detail (paragraph 97). Moreover, UNIVERS had provided no evidence for its assertion.

As a result, the GC upheld the BoA’s decision, dismissing UNIVERS’ action in its entirety.

Comment

This decision embellishes the ever-growing doctrine of bad faith, diving into further detail about presumed knowledge and intention. The GC’s comments that an absence of intention to use can be inferred from the circumstances and a ‘lack of commercial logic’ for the application may give some comfort to proprietors fearing trade mark squatters. Its dismissal of UNIVERS’ trade mark search is also interesting and indicates that courts are not prepared to take evidence of this kind into account when assessing bad faith.

Picture on upper middle is by the author.

Picture on lower middle is in the public domain.