EU General Court finds bad faith in VENMO trade mark dispute

Venmo is a mobile payment service which is now owned by PayPal. It allows users to transfer money between one another using a mobile phone app or web interface. It is fairly well known in the US but less well known in Europe.

In 2007, Hub Culture Ltd established a virtual digital social currency called VEN which can be exchanged and traded online and at selected physical premises. On 6 July 2007, Hub Culture registered a US word mark for VEN for finanical services.

Because this decision hinged on whether there was good or bad faith at the time of filing, the order of events is important.  The key events are set out below.

The background

Venmo launched in April 2009 but did not come onto Hub Culture's radar until June 2010 when they wrote to express their concern at the potential confusion with their earlier trade mark for VEN.  They proposed a commercial resolution to the matter.  Venmo did not respond.

In October 2010, Hub Culture registered the domain name venmoney.net.

In late October 2010, Hub Culture sent a follow up letter which essentially repeated the complaint and proposal for a "commercial resolution".

In early November 2010, representatives from Venmo and Hub Culture met in Philly.

A few days later on 9 November 2010, Hub Culture filed an EU trade mark application for VENMO in classes 9 and 36.

On 8 December 2010, Venmo wrote to Hub Culture to say that (i) it was not interested in a partnership or similar between them but was planning to limit its services to specific US cities and (ii) it was willing to continue conversations throughout 2010 after a mutual NDA had been signed; (iii) there was no likelihood of confusion between VEN and VENMO.

On 6 January 2011, Hub Culture responded to suggest a licence agreement covering Venmo's use of VENMO as a potential solution.

On 26 April 2011, VENMO was registered as an EU mark.

The Cancellation Division

On 27 June 2013, Venmo's former owner filed a request for a declaration of invalidity.  On 23 September 2014, the Cancellation Division declared that the mark was invalid because:

1. There was a pre-contractual relationship which created "a close enough link to deem it fair to expect the intervener not to file an application for an EU trade mark, such as the mark at issue, without giving the applicant prior notice. 
2. Hub Culture's intention to register VENMO as a defensive mark or "weapon" was not in line with the essential function of the trade mark (i.e. to guarantee trade origin).

The Board of Appeal

The decision was appealed and the Board of Appeal annulled the Cancellation Division's decision on the basis that no act in bad faith had been established because:

1. There was no evidence that Venmo's sign had been used over a long period of time and was protected through registration or by being well known or otherwise reputed.  In particular, it had not been used in the EU.  By contrast, Hub Culture had had US trade mark protection for VEN since 2007 and could have been validly concerned about the likelihood of confusion posed by the Venmo sign in both the US and EU. 
2. Registration of the sign VENMO could be seen as a logical commercial trajectory i.e. a truncation of Hub Culture's domain for venmoney.
3. On 8 December 2010, Venmo said that it was not seeking to expand its operations to the EU. It was therefore unreasonable to expect Hub Culture to perpetually refrain from filing the mark whilst bearing the risk that a third party could register it in the meantime.
4. There was no clear evidence as to whether Hub Culture intended to use the mark genuinely and under the EU system, they had a five year grace period in which to decide what to do with the mark. Hub Culture might have had a legitimate interest in consolidating its VEN and VENMO marks in the EU.  Even if one reason for doing so was to block a competitor this did not of itself constitute bad faith as Venmo had indicated that they were not interested in the EU market. Further, Hub Culture had taken no steps to create associations with Venmo's business or take advantage of its reputation.

The Board of Appeal indicated that it would have taken a different view if Venmo had indicated its plans to go global or the VENMO sign enjoyed a reputation which Hub Culture was trying to appropriate.

The Board of Appeal's decision was appealed to the General Court. 

The General Court

The General Court confirmed that:

1. The EU operates a first to file system so mere use by a non-registered mark does not preclude an identical or similar mark from being registered.
2. Bad faith is not "defined, delimited or even described" in EU legislation.
3. The relevant time for determining bad faith is the time of filing.
4. In order to establish bad faith, the following factors are relevant: (i) the applicant must know about the third party's sign and the goods/services for which it is used (knowledge can be inferred); (ii) the applicant's intention to prevent the third party from continuing to use the sign; and (iii) the legal protection enjoyed by the third party's sign compared to the applicant's mark.

The court referred to Lindt C-529/07 (EU:C:2009:361) which established that intention to prevent a third party from marketing a product may be bad faith and in these circumstances, the mark does not fulfil its essential function (i.e. origin). They also noted that the three factors identified above are examples of many factors which can be taken into account.

Applying the factors, the court noted that Hub Culture knew about Venmo's use of the VENMO mark and considered there was a likelihood of confusion between the signs. Although the Board of Appeal had concluded that it was logical for Ven money to be contracted to Venmo, the Board of Appeal noted that other than the venmoney.net domain name (which simply redirected to the main Ven website), there was no evidence of Ven money being used.  Any examples of use after the filing date was not relevant to determining bad faith.  Further, the "mo" element of "Venmo" is not a natural abbreviation of the word "money" and would not be considered as such.  

An important factor was that the applicant could have registered Ven Money, which it claimed to use, but instead opted to use Venmo which had not been used at all by it previously and which it knew was used by Venmo.

It was also important that the application was made in the course of negotiations regarding alleged infringement and without notice to Venmo (a "concealed act").

Other factors were also considered, e.g. Venmo's letter stating that it was limiting its operations to US cities at that time did not state that this was forever and was sent after the filing date.  Nothing could shake the General Court's conclusion that the mark should be invalidated.

This is a fairly clear cut case of bad faith.  It's good that the General Court's decision was so clear on this point but a shame it needed to go that far to reach a fairly logical conclusion.

And finally, a disclaimer.  I was fortunate enough to be seconded to work at eBay when PayPal was still part of the same group back in 2010.  Although I worked in the eBay building, a lot of my work ended up being for PayPal and I have remained a big fan of both companies ever since.  If there is a pro PayPal stance here, it is unintentional!