Trade mark piracy does not constitute bad faith – Really?
Marcel Pemsel
Trade mark piracy does not constitute bad faith – Really?
For more than three decades, Ferrari has not sold a single new
Testarossa, yet, the trade mark ‘Testarossa’ is keeping the courts quite
busy. The Court of Justice of the EU (‘CJEU’) issued a ground-breaking
decision on genuine use by selling used cars and spare parts (Ferrari, IPKat here and me here). The General Court confirmed that the sale of second-hand cars can be sufficient to constitute genuine use (T-1103/23, IPKat here).
The cause for these decisions is a dispute between Ferrari and a model
car maker, who applied for ‘Testa Rossa’ trade marks. The German Patent
Court found that these marks were not filed in bad faith (29 W (pat) 14/21, IPKat here). Now, the German Supreme Court has weighed in on the issue of bad faith (case I ZB 6/25).
Background
Ferrari
used the ‘Testa Rossa’ brand for a front-engine racing car in the
1950s. From 1984 to 1996 it produced the ‘Testarossa’ model as a
streetcar. In total, more than 7,000 models were built.
The
applicant is the board member of a company that has been active in the
toy and model car industry for around 50 years. For decades, the
applicant has been in trade mark disputes with car manufacturers,
particularly over licensing claims due to the reproduction of the car
manufacturers’ brands on model cars.
The applicant filed several
non-use revocation applications against ‘Testarossa’ trade marks of
Ferrari. The parties have also filed opposition proceedings against each
other’s ‘Testarossa’ and ‘Testa Rossa’ trade marks.
In 2015, the applicant filed for registration of German trade mark no. 302013070212
‘Testa Rossa’ for various goods in classes 7, 8, 12, 18, 21 and 28.
Ferrari filed an opposition and an invalidity application based on bad
faith. The German Patent and Trade Mark Office (‘GPTO’) suspended the
opposition proceedings because of the invalidity application.
The GPTO and the German Patent Court rejected the application. Ferrari appealed.
The German Supreme Court’s decision
The judges dismissed Ferrari’s appeal.
They
relied on the case law of the CJEU, according to which a trade mark
application is considered to be in bad faith if it is clear from
conclusive and consistent evidence that the proprietor of a trade mark
did not file the application with the aim of participating in fair
competition, but rather with the intention of harming the interests of
third parties in a manner contrary to fair commercial practices or with
the intention of obtaining, without reference to a specific third party,
an exclusive right for purposes other than those inherent in the
function of a trade mark.
The Court interpreted this case law to
mean that an intention to harm or hinder third-party interests is
necessary for a bad faith trade mark application but it is not necessary
that this intention is directed against a specific third party. Ferrari
argued that an intention to harm or hinder third parties is not
required because the applicant can obtain a trade mark with the
intention of using it for purposes other than those inherent in its
function.
The judges argued that an application that is filed
with the intention not to use it in a way that fulfils the functions of a
trade mark harms third-party interests per se because of the absolute
right a trade mark grants. It precludes third parties from using an
identical or confusingly similar mark.
Ferrari also contended
that the trade mark owner did not have an intention to use the mark for
all goods and services. The Court countered with the case law of the
CJEU, according to which a trade mark applicant is not required to
specify or know precisely how it will use the mark at the time of filing
because of the five-year grace period. While the lack of a general
intention to use the mark may constitute bad faith, the latter cannot be
presumed on the basis of the mere finding that the applicant did not
have a business unit corresponding to the goods and services.
For
finding bad faith, the judges required that the trade mark was
primarily filed with the intention to impair the competitive development
of competitors and not to promote the trade mark owner’s business. Such
an intention was not established.
Ferrari relied on the CJEU’s
case law, which held that the burden of proof to establish acquired
distinctiveness and genuine use rests with the trade mark owner. They
argued that this also applied to bad faith, i.e. the trade mark owner
has to show cause for the registration. The Court disagreed. A trade
mark is presumed to have been applied for in good faith. It would be
contrary to this presumption to require the applicant to show cause for
the application. The applicant may only be required to show good faith
if the invalidity applicant established facts that rebutted the
presumption of good faith.
The most interesting part of the
decision concerns the fact that Ferrari owns earlier ‘Testarossa’ marks
of which the trade mark owner was aware. Ferrari relied on the General
Court’s SIMCA
decision (case T-327/12), in which bad faith was accepted for a
situation where the applicant intended to profit from the residual
reputation of a trade mark that is still registered but has not been
used and where the trade mark applicant has not filed revocation
applications based on non-use against the earlier marks.
The
German Supreme Court held that the mere fact that relative grounds for
refusal may exist (such as taking unfair advantage of Ferrari’s earlier
‘Testarossa’ trade marks) was not sufficient to establish bad faith.
This is particularly true for double identity and likelihood of
confusion, which do not require an intention, e.g. to cause confusion.
The
judges also uttered discontent with the SIMCA decision. They argued
that the residual reputation, which the applicant in the SIMCA case
intended to profit from, was not sufficient to constitute bad faith
because trade marks only enjoy protection as long as they are used.
The
Court did not go into the details of the SIMCA decision because they
found that the assessment of bad faith requires an assessment of facts,
which is up to the lower courts and, in principle, not subject to review
by the Court.
Comment
The
German Supreme Court’s decision is difficult to reconcile with the
SIMCA decision. The argument that trade marks only enjoy protection as
long as they are used is true but conflates absolute and relative
grounds for refusal. The judges did not sufficiently account for the
residual reputation of the ‘SIMCA’ and ‘TESTAROSSA’ trade marks, which
the applicants intended to profit from.
It is hard to believe
that a trade mark pirate, who applies for the same sign for identical
goods and who must have known about the earlier mark(s) is not supposed
to act in bad faith. The same applies if the signs are not identical but
are sufficiently similar to cause confusion. Do trade mark pirates
intend to compete fairly – Really?
The picture is by Tranmautritam and used under the licensing terms of pexels.com.