CJEU: Counterclaim for invalidity/revocation has the same scope as an application with EUIPO

In its latest judgment, LM (Demande reconventionnelle en nullité) (case C-654/21), the CJEU had the opportunity to further develop its case law on counterclaims for invalidity and revocation in response to an infringement action of an EU trade mark (see Art. 124(d) EUTMR and Art. 128 EUTMR).

Background

The claimant owns EU trade mark Multiselect, registered in 2018 for goods and services in classes 9, 41, and 42, including ‘vocational guidance (education or training advice), education information, installation of computer software, maintenance of computer software, publication of texts and providing online electronic publications’.

Since 2009, the defendant has offered and promoted a guide for prospective police officers, which aims to prepare them for psychological tests that are covered by the Multiselect mark. The defendant used the sign ‘Multiselect’ for this guide.

In 2020, the claimant brought an action against the defendant in the Regional Court of Warsaw, alleging infringement of its Multiselect mark. The defendant filed a counterclaim, seeking a declaration of invalidity of the Multiselect mark in respect of goods and services on which the infringement action was based, as well as other goods and services covered by the registration. The defendant argued that the claimant’s trade mark lacked distinctiveness (Art. 7(1)(b) EUTMR) and is a customary term for the goods and services (Art. 7(1)(d) EUTMR).

By judgment of 7 October 2021, the Regional Court of Warsaw dismissed the action for infringement. Regarding the counterclaim, the Court queried whether a ‘counterclaim for […] a declaration of invalidity’ within the meaning of Art. 124(d) EUTMR and Art. 128(1) EUTMR must have a connection with the infringement action, or if the Court can also decide on goods and services on which the infringement claim is not based, i.e. where the counterclaim is more than a ‘defence’ to the infringement action.

The CJEU’s decision

The CJEU held that the counterclaim is not limited to the goods and services on which the infringement action is based. As the CJEU wrote:--

[Art. 124(d) EUTMR and Art. 128(1) EUTMR] must be interpreted as meaning that a counterclaim for a declaration of invalidity of an EU trade mark may relate to all the rights which the proprietor of that mark derives from its registration and that the subject matter of that counterclaim is not restricted by the scope of the dispute as defined by the action for infringement.

The Court drew on its recent judgment Gemeinde Bodman-Ludwigshafen (discussed here), where it held that a national court must decide on a counterclaim for invalidity or revocation, even if the infringement action has been withdrawn. The Justices found that a counterclaim is not a mere defence. It is a separate and self-standing claim and, accordingly, it must be dealt with irrespective of the fate of the infringement action.

Although the counterclaim under Art. 124(d) EUTMR and Art. 128(1) EUTMR is conditional on the bringing of an action for infringement, the counterclaim is intended to extend the subject matter of the dispute. Once filed, the counterclaim becomes independent of the outcome of the infringement action. Therefore, the subject matter of the counterclaim cannot be restricted by that of the infringement action.

The CJEU supported this conclusion by the following reasoning:

First, a counterclaim may be based on any of the grounds of invalidity or for revocation set out in the EUTMR. These grounds have the same scope, whether relied upon in an invalidity/revocation application before EUIPO, or in a counterclaim before a national court. Further, absolute grounds for refusal protect general interests and not just the economic interests of the defendant in defending against an infringement action.

Additionally, the Court observed that some of the absolute grounds in Art. 7(1) EUTMR, by their nature, relate to all goods and services of a trade mark.The CJEU mentioned in this regard trade marks contrary to public policy or accepted principles of morality (Art. 7(1)(f) EUTMR, deceptive marks (Art. 7(1)(g) EUTMR), and marks violating protected designations of origin and geographical indications, traditional terms for wine, traditional specialities guaranteed, and plant variety rights (Art. 7(1)(j) to (m) EUTMR). Likewise, bad faith is also considered to potentially relate to the entire mark (Art. 59(1)(b) EUTMR).

The CJEU found that it would run counter to the principle of procedural economy to limit the counterclaim to the goods and services on which the claimant based its infringement action.

Furthermore, Art. 59(3) EUTMR, providing that an EU trade mark may be declared invalid only for the goods or services for which the ground for invalidity exists, constitutes the only restriction in the EUTMR concerning the scope and outcome of an application for a declaration of invalidity and, accordingly, of a counterclaim for a declaration of invalidity.

The CJEU opined further on the erga omnes effect of a decision of invalidity (mentioned in Recital 32 EUTMR and confirmed, as per the Court, in Art. 128(6) EUTMR), which speaks in favour of the notion that a counterclaim may cover all goods and services of the claimant’s trade mark.

The Court concluded by elaborating on the relationship between EUIPO and national courts under the EUTMR. EUIPO has exclusive jurisdiction over the registration of EU trade marks and oppositions. Applications for declarations of invalidity and revocation are, as a rule, also centralised at EUIPO. Still, jurisdiction to invalidate or revoke an EU trade mark is ultimately shared, pursuant to Art. 63 EUTMR and Art. 124(d) EUTMR, between the EU trade mark courts and EUIPO. Furthermore, the jurisdictions of EUIPO and the national courts are exercised in accordance with the principle of the priority of the body seized, i.e. if a counterclaim for invalidity or revocation is brought before a national court first, EUIPO must, absent special circumstances, stay identical proceedings initiated thereafter, and vice versa (cf. Art. 132 EUTMR). The CJEU concludes that this interrelationship between these jurisdictions shows that both EUIPO and national courts have jurisdiction to review the validity of EU trade marks.

Comment

Defendants have the choice between filing an invalidity or revocation application with EUIPO, or bringing a counterclaim in the infringement proceedings. The CJEU clarified that both have the same scope and are equally suitable to attack the EUTM on which the infringement action is based. Therefore, tactical considerations play an important role in deciding whether to file a counterclaim or an application with EUIPO. Inter alia, the following aspects can be considered:

• Which body is more likely to declare the EUTM invalid or revoke it? Although the law is the same, national courts may apply it differently.
• What are the cost implications of an application with EUIPO vs. a counterclaim under national law? E.g., the fee for an application with EUIPO is ‘only’ EUR 630 but recovery of attorney fees for the prevailing party is, in principle, limited to EUR 450 before EUIPO and EUR 550 before the Board of Appeal.
• Which body is quicker to decide the counterclaim? The EU system has four instances and going through them can take several years. It might be speedier to seek a decision from a national court.

If a counterclaim is filed, the plaintiff can consider the same questions before asking the national court to request the defendant to bring invalidity or revocation proceedings before EUIPO (Art. 128(7) EUTMR).

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