No simple test for bad faith bunnies

Today Advocate General Eleanor Sharpston QC gave her Opinion to the Court of Justice of the European Communities in the latest round of the Battle of the Bunnies, Case C‑529/07 Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH.

Swiss-based Lindt and Austrian-based Hauswirth both made and sold sacramental bunnies for the Easter chocolate trade. Lindt had made and sold bunnies (right) since the early 1950s, with its first Austrian rabbit roll-out taking place in 1994. In June 2000, and applied to register as a three-dimensional Community trade mark the form and presentation of its bunny wrapped in gold-coloured foil, with red and brown markings, wearing round its neck a red ribbon with a bell attached, and bearing on its haunch a design including the words ‘Lindt Goldhase’. This mark was registered on 6 July 2001.

Hauswirth made and sold its own chocolate bunnies (left) from 1962. These were usually decorated with a ribbon, but not a bell, and bore no identifying name; its label, affixed to the underside, was normally invisible when the rabbit was placed on its base.

Following registration, Lindt sued Hauswirth for trade mark infringement proceedings, alleging a likelihood of confusion. Hauswirth counterclaimed that Lindt's registration was made in bad faith and that its trade mark should therefore be declared invalid. The Handelsgericht (Commercial Court) in Vienna dismissed Lindt's claim and upheld the counterclaim. On appeal by Lindt to the Oberlandesgericht (Higher Regional Court), that judgment was quashed, but not on grounds which gave Lindt satisfaction. According to Hauswirth, the appeal court ruled simply that, since Lindt’s presentation had acquired a reputation before the mark was applied for, Lindt could not be held to have acted in bad faith; that, however, while disposing of Hauswirth’s counterclaim, did not uphold Lindt’s main claim.

Both parties appealed further to the Oberster Gerichtshof (Austrian Supreme Court), which considered that (i) there was a likelihood of confusion between the two presentations; (ii) a number of other models have been marketed since the 1930s, bearing a greater or lesser degree of similarity with Lindt’s presentation, and Lindt was aware of at least some of those models before it applied to register its trade mark; (iii) before Lindt's application was made, the various producers, or at least some of them, had acquired ‘valuable rights’ to the protection of their products under Austrian competition law and German trade mark law, even though none of them had been registered; (iv) by registering the mark, Lindt wanted to ‘create a basis for taking proceedings against other manufacturers’ products which were already available and at least some of which were known to it in Germany’. The court then decided to seek a preliminary ruling on the following questions:

"1. Is Article 51(1)(b) of [the Trade Mark Regulation] to be interpreted as meaning that an applicant for a Community trade mark is to be regarded as acting in bad faith where he knows, at the time of his application, that a competitor in (at least) one Member State is using the same sign, or one so similar as to be capable of being confused with it, for the same or similar goods or services, and he applies for the trade mark in order to be able to prevent that competitor from continuing to use the sign?

2. If the first question is answered in the negative:

Is the applicant to be regarded as acting in bad faith if he applies for the trade mark in order to be able to prevent a competitor from continuing to use the sign, where, at the time he files his application, he knows or must know that by using an identical or similar sign for the same goods or services, or goods or services which are so similar as to be capable of being confused, the competitor has already acquired “valuable property rights”?

3. If either the first or the second question is answered in the affirmative:

Is bad faith excluded if the applicant’s sign has already obtained a reputation with the public and is therefore protected under competition law?’

The Advocate General has advised the Court to rule as follows:

"In order to determine whether ‘the applicant was acting in bad faith when he filed the application for the trade mark’ within the meaning of Article 51(1)(b) ..., a national court must take account of all the available evidence from which it is possible to conclude that the applicant was or was not acting knowingly in a manner incompatible with accepted standards of honest or ethical conduct. In particular:

– an intention to prevent others from using similar signs in respect of similar products may be incompatible with such standards if the applicant was, or must have been, aware that others were already legitimately using similar signs, particularly if that use was substantial and longstanding and enjoyed a degree of legal protection, and if the nature of the sign was dictated to some extent by technical or commercial constraints;

– however, such an intention would not necessarily be incompatible with those standards if the applicant himself had enjoyed similar or greater legal protection in respect of the mark applied for and had used it in such a way, to such an extent and over such a time that the use by others of their similar signs could be considered to derive unjustified benefit from the applicant’s sign, and if those others were not constrained in their ability to choose dissimilar signs".

The IPKat is fascinated by this: can the bad faith of an applicant for registration of a Community trade mark be determined by the issue of whether the use by third parties of their own signs, after the date of application for the Community trade mark, could be considered as deriving an unjustified benefit from the applicant's sign? And surely competitors can never be constrained in their ability to choose dissimilar signs, if the use of a dissimilar sign is by definition incapable of constituting an infringement of the registered right. Merpel says, the most important bit of this Opinion is at [75] where she says:

" ... the gist of my analysis is that there is no simple, decisive test for establishing whether a trade mark application was submitted in bad faith. The various sets of circumstances which have been advanced before the Court as exhaustively delimiting the notion of bad faith are in fact illustrative examples of that concept. Bad faith is a subjective state – an intention incompatible with accepted standards of honest or ethical conduct – which is ascertainable from objective evidence, and which must be assessed case by case. It requires, at least, knowledge of the circumstances from which incompatibility with accepted standards of honest or ethical conduct may be deduced. Whether the trade mark applicant possesses such knowledge is an issue which may be determined by reference to the common state of knowledge in the economic sector concerned, if direct evidence is lacking. An intention to prevent competitors from continuing to use unregistered signs which they have hitherto been entitled to use and to defend against competition from other such signs is indicative of bad faith. However, the assessment must take account of all relevant factual and legal elements which might justify such an intention or, on the contrary, underline its dishonest or unethical nature".

Make your own chocolate bunny here