New CJEU referral on interplay between bad faith and trade mark functionality

Last month, the French Supreme Court (Cour de Cassation) submitted a request for a preliminary ruling to the Court of Justice of the European Union (CJEU). The text of the request (C-17/24) is not yet available on the CJEU’s website, but may be accessed through the national proceedings (No 21-23.458). The case concerns issues of bad faith and functionality in trade mark law.

National proceedings

CeramTec is a developer and manufacturer of ceramic products. Among other products, CeramTec markets a pink-coloured hip-replacement implant. In 1991, CeramTec obtained a European Patent to a ceramic matrix composite, used in the production of this hip-replacement implant. The patent, which included France among the designated states, expired on 5 August 2011.

On 23 August 2011, CeramTec applied for registration of three European Union trade marks (EUTMs): the three-dimensional mark No 10 214 179 in the colour ‘pink, Pantone 677 C’ (to the upper right), the figurative mark No 10 214 112 in the colour ‘pink, Pantone 677 C’, and the mark No 10 214 195 consisting in the colour pink, Pantone 677 C.

In 2013, the three EUTMs were registered in Class 10 on the basis of acquired distinctiveness. CeramTec then initiated infringement proceedings in front of the France’s EUTM court (Paris First Instance Court) against its competitor Coorstek.

In response, Coorstek filed an invalidity request to the European Union Intellectual Property Office (EUIPO), asking the EUIPO to invalidate the three EUTMs owned by CeramTec. Considering that the EUTMs were applied for immediately after the patent expiration, Coorstek argued that the applications had been done in bad faith, to prolong the IP monopoly. It also argued that the pink colour was not part of a marketing strategy, but rather the result of the chromium oxide, present in the implants and covered by the now-expired patent.

This request was later withdrawn by Coorstek as it decided, instead, to file a counterclaim for a declaration of invalidity to the EUTM court, already seized by CeramTec. Coorstek’s counterclaim was essentially based on Art. 7(1)(e)(ii) Regulation No 207/2009 (signs which consist exclusively of the shape, which is necessary to obtain a technical result) in conjunction with Art. 52(1)(b) of the same Regulation (application filed in bad faith). In 2016, the EUTM court sided with Coorstek and invalidated the three EUTMs.

Since then, the ruling was appealed to the Paris Appeal Court, which upheld the judgment. It subsequently reached the Cour de Cassation, which returned the case to the Paris Appeal Court. CeramTec and Coorstek have also been litigating in the US, Switzerland and Germany. In the meantime, it was discovered that the chromium oxide (to which the pink colour is due) was not essential in the ceramic matrix composite that was patented by CeramTec.

In its second ruling, the Paris Appeal Court confirmed the invalidation of the three EUTMs. The court ruled that the three EUTMs had been filed in bad faith: when the EUTMs applications were filed, CeramTec and its competitors believed that the chromium oxide had a technical effect on the composite’s resistance. Thus, the pink colour caused by the chromium oxide was not an arbitrary choice, but rather an intentional decision by CeramTec to prolong the monopoly on its invention. It is irrelevant that the chromium oxide was later discovered not to have the technical effect it was thought it had. At the same time, added the Paris Appeal Court, CeramTec had no obligation to inform the EUIPO about its earlier patents rights and failure to do so does not constitute bad faith.

Referral

CeramTec appealed this decision to the Cour de Cassation. Essentially, it argued that Art. 7(1)(e)(ii) and Art. 52(1)(b) are two separate grounds for invalidation that cannot be applied in conjunction. For Art. 7(1)(e)(ii) to be applicable, the sign shall consist exclusively of the shape, which is necessary to obtain a technical result: this is not the case, as it was discovered after the application was filed that chromium oxide brought no technical result. Art. 52(1)(b) cannot be used as a backdoor to apply Art. 7(1)(e)(ii). Thus, CeramTec asked the Cour de Cassation to clarify these issues with the CJEU.

The Cour de Cassation noted that, in parallel proceedings, German courts opined that the pink colour may only be examined under Art. 7(1)(e)(ii), and that Coorstek may not invoke bad faith. Thus, Member States seem to have a different interpretation of EU law and a preliminary ruling is needed.

The Cour de Cassation decided to stay the proceedings and refer the following questions to the CJEU [unofficial translation from French by this Kat]:

1. Are the invalidity grounds of (a) registration of a trade mark contrary to the provisions of Art. 7 [Absolute grounds] Regulation (EC) No 207/2009 and (b) the bad faith of the applicant on the day of filing, which are respectively the subject of Art. 52(1)(a) and (b) of the same Regulation, autonomous and exclusive?
2. If the answer to the first question is negative, can the bad faith of the applicant be assessed with regard to the sole absolute ground for refusal of registration referred to in Art. 7(1)(e)(ii) Regulation (EC) No 207/2009 without it being examined whether the sign registered as a trademark is indeed constituted exclusively by the shape of the product necessary to obtaining a technical result?
3. Must Art. 52(1)(b) of Regulation (EC) No 207/2009 be interpreted as meaning that it excludes bad faith of an applicant who has submitted an application for trade mark registration with the intention of protecting a technical solution when it was discovered, subsequent to this application, that there was no link between the technical solution in question and the signs constituting the registered trademark?

Comment

The concept of bad faith is not defined in EU trade mark law. According to C-320/12, bad faith is an autonomous concept of EU law, which must be given a uniform interpretation in the EU. An overall assessment must be made in which all the relevant factors of the individual case must be taken into account.

While the CJEU has issued several rulings interpreting this concept, so far there has been no guidance as to whether bad faith may be applied in conjunction with other absolute grounds for invalidity, such as those concerning functionality.

To this Kat, it seems that the answer to Question 3 will be rather straightforward: according to Art. 52(1)(b), bad faith shall be examined at the application date. EUIPO Guidelines do suggest that posterior events may be taken into account, but only to interpret the owner’s intention at the time of filing the EUTM.

However, nothing in EU trade mark law indicates that the assessment of bad faith may take place on the basis of other invalidity grounds. If the CJEU’s ruling aligns with Coorstek’s reasoning on functionality as an indicator of bad faith, it may also bring into focus other trade marks, such as the Lego minifigures.

One additional detail to bear in mind is the possible reason for attacking CeramTec’s EUTMs on the basis of bad faith. While Coorstek’s arguments focus on the pink colour being functional, the three EUTMs were registered under Regulation (EC) No 207/2009, when only functional shapes were excluded. If the Regulation (EU) 2017/1001 would have been applicable to the three EUTMs, Coorstek could have more easily relied on Art. 7(1)(e)(ii) in its current wording, where “shapes or other characteristics” are prohibited (though it remains an open question whether the scope of Art. 7(1)(e)(ii) actually changed with the reform).