Better late than never? Not if you want to avoid acquiescence!

There can be many reasons for not taking action against a trade mark infringement, such as budget limitations or an unattractive risk-reward ratio. But not taking action may have serious consequences.

Consider a trade mark owner who has acquiesced, for a period of five successive years, to third party's use of a later registered trade mark, while being aware of such use. In such a situation, the owner may not invalidate the later mark or take action against its use in respect of the goods or services for which the later trade mark has been used, unless registration of the later mark was applied for in bad faith (Art. 9(1),(3) of Directive (EU) 2015/2436 (‘EUTMD’)).

Against this background, the German Supreme Court dealt with, in this Kat's view, an astonishing case of acquiescence in its recent judgment in HEITEC III.

Background

The plaintiff, HEITEC GmbH, was founded in 1984. It owned EU trade mark 'HEITEC', which was filed in 1998 and registered in 2005. The defendant, HEITECH Promotion GmbH, was founded in 2003. It owned a figurative EU trade mark containing the word 'HEITECH', registered in 2008 and used since 6 May 2009 at the latest.

The defendant was aware of the plaintiff’s mark and asked the plaintiff in November 2004 if he would consider concluding a coexistence agreement. The plaintiff did not respond. In July 2008, the EU trade mark office informed the plaintiff about the defendant’s application for the EU trade mark containing the word 'HEITECH'.

It was only in April 2009 that the plaintiff sent a warning letter to the defendant, requesting that it cease and desist from using 'HEITECH' as a trade mark and company name. The defendant responded in May 2009, described its use of 'HEITECH', and proposed a coexistence agreement again. The plaintiff did not respond.

In December 2012, the plaintiff filed by fax an infringement action with the District Court of Nuremberg-Fürth. In accordance with the national laws of civil procedure, in January 2013, the court requested the plaintiff to pay the court fees in advance. The court repeated this request and asked the plaintiff to submit the originals of the complaint in March 2013. By now, you can guess what happened: The plaintiff did not respond.

In September 2013, the plaintiff finally responded, not to the court’s requests but to the defendant’s proposal for a coexistence agreement. He refused the offer, proposing a license agreement instead.

In December 2013, the plaintiff filed an amended complaint with the District Court of Nuremberg-Fürth and enclosed a cheque for the court fees. The complaint had some formal errors, which the plaintiff rectified on 21 May 2014. The complaint was served on the defendant on 23 May 2014.

The District Court and the Higher Regional Court rejected the infringement claims. The latter court considered the plaintiff to have acquiesced to the defendant’s use for more than five years, in accordance with Art. 9(1),(3) EUTMD. The plaintiff filed an appeal to the Supreme Court.
 

The German Supreme Court’s decision

After a reference for a preliminary ruling to the CJEU (case C-466/20), the Supreme Court dismissed the appeal. It agreed with the lower court: the plaintiff had acquiesced to the contested use for a period of five years. Neither the warning letter nor the complaints filed in December 2012 and December 2013 were sufficient to interrupt the five-year period of acquiescence.

In accordance with the CJEU’s preliminary ruling, the Supreme Court held that a warning letter can, in principle, interrupt the five-year period of acquiescence. However, this requires the plaintiff taking further action and enforcing its claims within a reasonable period of time, should the demands in the warning letter be rejected.

The Supreme Court did not take a stance on whether the period between the rejection of the warning letter by the defendant in May 2009 and the filing of the first complaint in December 2012 was (arguably) too long for the warning letter to interrupt the five-year period of acquiescence. Instead, it held that the filing of the first complaint did not show the plaintiff’s serious intent to oppose the defendant’s use.

The filing of an infringement action can be sufficient to stop the clock of the five-year acquiescence period. This does not apply, however, if the complaint is served on the defendant after the end of the five-year period because it did not comply with procedural requirements due to a lack of diligence by the plaintiff. In this case, the date of the rectification of the formal errors was considered decisive. It happened on 21 May 2014, more than five years after the plaintiff had obtained knowledge of the defendant’s trade mark and its use.

As a consequence of acquiescence, the defendant is entitled not only to continue all uses of the trade mark and company name that it has made during the five-year period of acquiescence, but to make comparable uses as well. As such, the defendant is not liable for injunctive relief, damages or other remedies for trade mark or company name infringement.

Comment

If the owner of an earlier trade mark decides not to take action against the use by a third party of a registered mark, it is advisable to docket a deadline of three to four years after obtaining knowledge of the later mark and its use, and reassess whether to take action.

Even if a defendant can successfully rely on acquiescence, he faces constraints and uncertainties with respect to the goods and services, the sign, the territory and perhaps the type of use of the later mark, as follows:

Goods/services:

An expansion of the product portfolio may not be possible, unless the owner of the earlier rights becomes aware of this expansion and takes no action for five years.

Furthermore, does acquiescence only cover the specific type of goods or services offered by the defendant in the five-year period, or does it cover a broader category? Could the case law on the principle of partial genuine use be applied? E.g., where a later trade mark is registered for ‘motor cars’ but is only used for sports cars, could the owner of the later mark also expand to SUVs?

Signs:

Are variations of the mark allowed, e.g. such variations that do not alter the distinctive character of the mark, as in the case of genuine use (see Art. 16(5)(a) EUTMD)?

Territory:

If the use has been limited to a certain territory (e.g., a Member State in the case of an EU trade mark), can the owner of the later mark expand its territorial scope of use?

Type of use:

Can the owner of the later mark expand the type of use? E.g., if he commissioned a third party to manufacture the goods with the infringing trade mark, could he start manufacturing them?


Picture is by Gundula Vogel and is used under licensing terms of Pixabay.