[Guest post] Bad faith or business-savvy? Lessons from recent EU General Court’s ruling

The IPKat has received and is pleased to host the following guest contribution by Katfriend Patricia Trofin (Hogan Lovells), commenting on a recent decision of the EU General Court on the elusive concept of bad faith in trade mark law. Here’s what Patricia writes:

Bad faith or business-savvy? Lessons from recent EU General Court’s ruling

by Patricia Trofin

Bad faith claims are notoriously difficult to prove, often hinging on the specific evidence presented and lacking a one-size-fits-all approach. A recent General Court ("GC") decision places new emphasis on the importance of the evidence filed and the understanding of the commercial rationale behind the filing.

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By decision of 15 May 2024 in case T‑181/23, involving Allergan Holdings France SAS (“Allergan”) and Dermavita Company S.a.r.l. (“Dermavita”), the GC restated the relevant approach to be taken in cases involving bad faith, specifically examining the relevance of the EU trade mark (“EUTM”) proprietor's knowledge of the bad faith applicant's prior use.

Background

On 3 April 2007, Allergan’s predecessor-in-title (“the EUTM proprietor”) filed a EUTM application for the word mark JUVEDERM for goods in Class 5 of the Nice Classification, which was successfully registered on 13 March 2008.

On 1 April 2016, Dermavita's predecessor (“the applicant”) sought revocation of this EUTM, citing non-use for five years under Article 58(1)(a) EUTMR. The application was rejected on 26 October 2017, and subsequent appeals were dismissed, including to the General Court in Case T‑643/19, with the final decision upheld by the Court of Justice on 3 December 2020.

Subsequently, on 29 December 2020, Dermavita applied for an invalidity action against the EUTM, alleging bad faith by the proprietor under Article 59(1)(b) EUTMR. Therefore, the decision commented in this post marks the latest development in the ongoing dispute between the parties.

Analysis

In reaching its decision, the GC divided its analysis into two parts, corresponding to the pleas on which Dermavita had based its appeal. First, the Court addressed the second plea, alleging infringement of Article 51(1)(b) of Regulation No 40/94. Then, it ruled on the alleged breach of Article 94(1) of Regulation 2017/1001 and the principle of impartiality.

Article 51(1)(b) of Regulation No 40/94

In evaluating the bad faith claim, the GC specifically examined whether Allergan had prior knowledge of Dermavita's use of JUVEDERM at the time of filing the EUTM application, and whether it acted with any dishonest business intentions.

Firstly, the Court held that, while the evidence supported Dermavita’s prior use of the sign in Lebanon shortly before Allergan's registration of the French national trade mark in 2000, it did not conclusively establish Allergan's awareness of it. In particular, the Court highlighted that the decisions from the courts in Beirut, affirming Dermavita's use since 1999, did not even discuss Allergan's awareness of this use. Additionally, the cease and desist letter sent in 2000 also failed to substantiate the claim due to the applicant's failure to provide evidence of its actual receipt by Allergan.

On this point, the GC reiterated that mere use of a sign does not automatically imply that third parties were aware of its use – unequivocal evidence to this end is required.

Lastly, the Court also dismissed the applicant’s assertion that the choice of the sign JUVEDERM was intentional due to Dermavita's earlier use, thereby demonstrating Allergan’s knowledge of it. In doing so, the Court confirmed that the terms 'juve' and 'derm' were already widespread in cosmetic and dermatology products such as dermal fillers; thus, this wording choice alone could not prove Allergan’s knowledge of its prior use.

Therefore, the Court concluded that Allergan's actual knowledge of Dermavita’s prior use of the sign was not proven. Moreover, even if such knowledge were established, the Court highlighted that knowledge of prior use by third parties is just one factor; it alone does not establish bad faith. The crucial question then becomes whether the applicant engaged in business with dishonest intentions.

In examining this, the GC held that the Board of Appeal correctly determined the filing of the contested mark was part of Allergan’s legitimate market expansion efforts, supported by its existing ownership of numerous JUVEDERM registrations and its established presence in the Lebanese market. The applicant's argument that these registrations were as well made in bad faith lacks specificity, as they merely broadly refer to over 40 marks without distinguishing their individual, underlying intentions. The applicant thus failed to bring cogent evidence indicating the dishonest business practices by the EUTM proprietor.

Therefore, the EUTM filing was deemed a "normal development of the intervener’s expansion on the market” (paragraph 42).

Article 94(1) of Regulation 2017/1001 and the principle of impartiality

The last part of the GC judgment examined the alleged infringement of Article 94(1) of Regulation 2017/1001 and the principle of impartiality, divided into three parts. The Court rejected the plea as unfounded and reasoned as follows.

Firstly, the Court confirmed that the adjudicating bodies of the EUIPO are not obliged to address every argument submitted by the parties as it is sufficient to present only the most important and operative parts of the decision.

Secondly, the applicant claimed they had no opportunity to comment on several pieces of evidence. However, the evidence in question consists of references to judicial and administrative proceedings involving the revocation for non-use of JUVEDERM before the Courts of the European Union and the EUIPO, to which Dermavita was a party and was aware of. Naturally, the Board of Appeal could refer to them without consulting the parties. Furthermore, in this context, the GC clarified that proceedings involving genuine use can be relevant in assessing bad faith, as use of a mark can indicate whether the proprietor intends to engage fairly in competition, providing further insight into their intentions.

Finally, the Board of Appeal's examination of Allergan’s conduct to determine bad faith does not imply a lack of impartiality but rather a comprehensive assessment as per established case-law.

Comment

The decision serves as a useful reminder of the analysis required for evaluating a claim of bad faith. First, it underscores the rigorous evidentiary standard needed to establish that a proprietor's behaviour deviates from the honest norms of commercial practice expected by reasonable individuals in the relevant industry. It also clearly re-states that knowledge of a third party’s prior use of the sign alone would not establish bad faith; rather, bad faith requires a clear demonstration of a dishonest intent, such as seeking to unfairly undermine competitors' interests or obtain an exclusive right beyond the functions of a trade mark. Evidence showing prior use of the sign, their coexistence in the market, or even awareness of such use, along with pre-existing relationships between parties, falls short of successfully proving bad faith. Even if these circumstances may be suggestive, they may not exclude the possibility of the proprietor pursuing a legitimate objective. This analysis is consistent with recently published decisions by both the General Court and the Boards of Appeal on the topic, inter alia: mataharispaclub v EUIPO - Rouha (SpaClubMatahari), Gugler France v EUIPO - Gugler (GUGLER), R 1320/2022-4, CELESTINO, and R 470/2023-2, TOYA (fig.).

Therefore, it is crucial for bad faith applicants to prioritise thorough, high-quality evidence collection for a successful case. Simultaneously, EUTM owners must maintain records that substantiate the commercial rationale behind their trade mark fillings and be prepared to present a cohesive business plan to support them, especially considering that demonstrating a genuine business interest in the relevant field makes it easier to refute claims of unethical behaviour.

Lastly, the decision prompts consideration of whether the widespread use of a sign in the market can serve as a defence against a claim of bad faith. That said, it remains uncertain whether, in future proceedings, trade mark owners will opt to rely on such a claim, potentially indirectly acknowledging the registration of a sign that may be considered weakly distinctive.