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Trademark application in bad faith as leverage in competition

Trademark applications in bad faith: How abusive registrations lead to a blocking position and circumvent competition law - an EGC case.

The background to the case is the cancellation of a trademark by the EUIPO (EU Intellectual Property Office). The canceled EU trademark, which was based on a previous application in Austria dated January 4, 2010, was canceled due to an application by a wholesaler. The earlier registration of the ATHLET mark would normally have had priority to defend against trademark infringement, but the business model behind the application was dubious. It turned out that for years trademarks had been registered in their own names or via affiliated companies in Austria and Germany without paying registration fees. Individual trademarks were then applied for on the basis of priority claims from the Austrian applications and transferred several times between different companies represented by the same person. This led to successful applications for a declaration of invalidity due to trademark applications filed in bad faith and later complaints before the EUIPO and actions before the General Court.

This approach was already part of a previous judgment of the General Court from 2016 (General Court, judgment of July 7, 2016 – T-82/14) and is well-known among trademark lawyers.

The case concerned the improperly registered trademark LUCEO. When a third party wanted to register a similar EU trademark (LUCEA LED), the party acting in bad faith invoked its priority claim. The further procedure of transferring the trademark corresponded to the current case.

The decision of the EGC

The EGC assumed that the trademark was not registered with the aim of competing in a fair manner. The registration was only intended to harm third-party interests and thereby generate an abusive source of income. According to the ECJ, this approach does not constitute a legitimate commercial act in the normal course of business and competition. The successive trademark registrations were made exclusively in order to achieve a blocking position vis-à-vis other users.

The EGC ruled that this concept is not free from the legal concept of abuse of rights.

It is true that the formal provisions of EU law relating to trademark applications and legal protection of the trademark have been complied with. However, the aim of this procedure was to claim priority for a trademark application by circumventing the six-month period for consideration and the five-year grace period for use pursuant to Art. 51 I lit. a EUTMR and thus create a blocking position. This is contrary to the objectives of the Union regulations.

Furthermore, there was no underlying interest in using the trademark as such. The sole purpose of the trademark registration was the defendant’s action in bad faith. This was to exert pressure so that the trademark would no longer be used and the user would pay financial compensation.

Finally, trademark law is also intended to create legal certainty. This is disturbed by the non-transparent approach of the defendant with the various affiliated companies. Consequently, according to the judgment of the ECJ, the applicant is already acting in bad faith when applying for such a trademark and the trademark application of an applicant acting in bad faith is null and void.

German jurisdiction

The reason for canceling trademark applications filed in bad faith typically concerns cases in which the applicant knows at the time of filing that a third party is already using the sign.

Even without this precise knowledge, however, “speculative or ambush marks” can be regarded as bad faith if the trademark owner registers a large number of trademarks for various products or services, shows no serious intention to use these trademarks and essentially hoards them in order to impose injunctive relief and claims for damages on third parties (BGH GRUR 2001, 242 f. – Class E).

The filing strategy assessed by the EGC fulfills these criteria, even if the court is not bound by them. The fact that the application fee does not have to be paid in advance in Germany and possibly also in Austria has made it possible to apply for a large number of trademarks simultaneously at low cost, which has significantly increased the blocking effect of the system. The subsequent transfer of ambush marks and the use of different companies as applicants have no effect on invalidity, as it depends on the bad faith of the applicant and this can be traced back to the principal, even if a straw man acts as applicant.

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