CJEU: No time limit for invalidity based on bad faith

Art. 9 of the Second Trade Mark Directive (Directive 2008/95 (‘TMD’); now Art. 9 of Directive 2015/2436) and Art. 61 EUTMR require the owner of an earlier trade mark to take action against the registration or use of a later mark within a period of five years after obtaining knowledge of the registration and use of that later mark. Otherwise, both trade marks coexist and neither owner may take action against the other’s registration and use of their respective marks. There is no such limitation period for absolute grounds for invalidity, such as bad faith.

This caused a Spanish court to refer two questions to the Court of Justice of the EU (‘CJEU’) in Sánchez Romero Carvajal Jabugo (case C-322/24), where the plaintiff mentioned a legally non-existing deadline for filing an invalidity action against the defendant’s trade marks in a cease-and-desist letter and filed the action after the expiry of that deadline. The question was: Is this self-imposed deadline binding on the plaintiff?

Background

Sánchez Romero Carvajal Jabugo S.A.U. (‘Carvajal’) owns the following EU trade marks for goods in classes 29:

These trade marks were filed in 1999 and 2010 and enjoy a reputation in Spain.

Embutidos Monells S.A. (‘Monells’) applied for the following Spanish trade marks in 2011 and 2012 for goods in class 29.

They were registered in 2012.

In November 2016, Carvajal sent a cease-and-desist letter to Monells requesting them to withdraw their Spanish trade marks depicted above and to stop using the ‘5Ms’ mark. Carvajal also informed Monells that an invalidity action could be filed against the marks before 28 February and 18 March 2017 respectively.

In November 2021, Carvajal eventually filed an application for a declaration of invalidity against Monells’ trade marks with the referring court (Commercial Court No 1 in Alicante). Carvajal asserted bad faith.

Monells argued acquiescence under Art. 61 EUTMR and Art. 9 TMD, claiming that the marks at issue were registered in 2012, that Carvajal had acquiesced in the use of those marks for a long time and that the time limits for bringing an invalidity action stated in the cease-and-desist letter had expired.

The referring court found that Monells had acted in bad faith but was unsure about the following:

Should [Article 9(1) TMD] be interpreted as meaning that the proprietor of an earlier registration who sets a specific time limit in the warning letter for bringing an action for a declaration of invalidity that clearly and unambiguously coincides with the general time limit of five years for bringing an action for a declaration of invalidity, is subject to the principle of estoppel, since that party has given the proprietor of the later trade mark the expectation that that proprietor will not be sued on the basis of possible invalidity after the specified date? […]

The Alicante court also asked a second question regarding the type of conduct that may be regarded as interrupting the five-year period.

The CJEU’s decision

First, the Court made it clear that the matter was governed by the previous Trade Mark Directive and not the current one, the reason being that the contested trade marks were filed in 2011 and 2012, which are the relevant dates for determining the applicable law. Back then, the second Trade Mark Directive was in force.

Turning to the first question, the judges found that Art. 9(1) TMD does not apply in two situations, namely, where

1. Acquiescence has not been established on the part of the owner of the earlier trade mark, or

2. Acquiescence has not been established for a period of five successive years and (sic! It should rather be ‘or’) the proprietor of the later mark acted in bad faith when filing the application.

Referring to Budějovický Budvar (at para. 56), the judges found that one of the conditions for the five-year period to start running is that the application must have been filed in good faith.

This finding is supported by the fact that bad faith at the time of filing an application constitutes an absolute ground for invalidity (Art. 3(2)(d) TMD), for which there is no limitation period.

Further, Art. 3(2)(d) TMD allowed the Member States the option to provide for an absolute ground for refusal if a trade mark has been filed in bad faith.

Finally, the interpretation favoured by the judges is supported by the objective of the TMD, which is to contribute to the system of undistorted competition in the EU, in which undertakings must be able to have registered trade marks that enable consumers, without any possibility of confusion, to distinguish those goods or services from others which have a different origin. Bad faith is detrimental to the development of healthy competition, since it reflects the intention of the applicant of undermining, in a manner inconsistent with honest practices, the interests of third parties, or obtaining an exclusive right for purposes other than those falling within the functions of a trade mark.

The CJEU concluded that Art. 9(1) TMD does not apply to an invalidity action based on bad faith.

Thus, in the case referred to by the Alicante court, the fact that Carvajal mentioned a deadline not provided by law for filing an invalidity application and that Carvajal was aware of Monells’ bad faith when sending the letter did not prevent the filing of the invalidity application.

Given the answer to the first question, the Court did not see a need to respond to the second question regarding acts that could interrupt the five-year period.

Comment

The CJEU missed the opportunity to go beyond acquiescence under Art. 9 TMD because the reference for a preliminary ruling also contained elaborations on estoppel and good faith under Spanish law.

The bigger question is: Are defences under national law, such as estoppel/forfeiture and good faith still applicable despite the fully harmonizing Trade Mark Directive and the EUTMR? E.g. German courts still hold the opinion that the national law concept of forfeiture (as developed under the principle of good faith) can be invoked as a defence against trade mark infringement. Likewise, the German Trade Mark Act provides for a ten year period as of registration, within which an invalidity action based on non-distinctiveness, descriptiveness or genericness can be brought against a registered national trade mark (Sec. 50(2) German Trade Mark Act).

On the one hand, the Trade Mark Directive and the EUTMR refer to national law for issues not governed by these acts (e.g. Art. 17(1) EUTMR). On the other hand, the CJEU held in Martin Y Paz Diffusion regarding the Trade Mark Directive (and presumably also the EUTMR) that the limitations on trade mark claims provided for in that directive are exhaustive, meaning that national courts may not limit the claim beyond the limitations provided for in that act. It would obviously by contrary to the idea of harmonisation if each Member State court applied its own national defences, in particular in infringement actions based on EU trade marks. This might mean that an action could be successful in one Member State but not in another, simply because one national law has broader defences than others.