Bad faith as grounds for refusal and invalidity
The Norwegian Trademarks Act is about to be amended to implement the new Trademark Directive 2015/2436, introducing new absolute grounds for refusal and invalidity in section 15 litra f. According to the new provision, an application for registering a trademark shall be refused or declared invalid if it was made in bad faith. The new provision replaces the previous relative grounds for refusal and invalidity in the Norwegian Trademarks Act section 16 litra b. This article will focus on how the term "bad faith" is interpreted in the EU and which changes the new provision will inflict on Norwegian trademark law.
By Anna Eide
Adopting bad faith as absolute grounds for refusal and invalidity entails that the Norwegian trademark legislation further harmonizes with the EU trademark legislation. As such, the term bad faith in the Norwegian Trademarks Act should be understood in light of the relevant provisions in the Trademark Directive. The trademark legislation in the EU has the objective of preventing unfair competition, by ensuring that the end-user or customer does not confuse the commercial origin of the products or services.
The usual meaning in the everyday language must be considered when determining the meaning and scope of the term bad faith. Bad faith is both vague and foreign in Norwegian law. It indicates that the application for trademark registration can be regarded as dishonest or deceiving. Interpreted in the context of the objectives pursued by the Trademark Directive, application which involves unfair competition is the core of what constitutes bad faith. Bad faith is not defined in the relevant EU legislation. The lack of a description of the meaning of the term makes a clarification necessary as well as establishing some guidelines for the application of the provision.
The Court of Justice of the European Union ("CJEU") has stated that the term bad faith shall be given a uniform interpretation within the EU. Therefore, the case law from the CJEU is the primary source for understanding the concept of bad faith. Bad faith has been described by the CJEU in case T-795/17 (Neymar) as relating "[…] to a subjective motivation on the part of the trade mark applicant, namely a dishonest intention or other sinister motives. It involves conduct which departs from accepted principles of ethical behavior or honest commercial and business practices". In light of this observation, bad faith must be viewed as suggesting the presence of a dishonest intention.
The assessment of whether an application has been made in bad faith must be subject to an overall assessment taking all the relevant factors in the particular case into consideration. The burden of proof does lie with the party claiming that the application has been made in bad faith, and therefore the applicant is presumed not acting in bad faith. In case C-529/07 (Lindt), the CJEU stated that three factors, in particular, are relevant in the overall assessment. The first factor is that the applicant knows or must know that a third party is using, in at least one Member State, an identical or similar sign for an identical or similar product capable of being confused with the sign for which registration is sought. The second factor is if the applicant's intention was to prevent that third party from continuing to use such a sign. Finally, the third factor is the degree of legal protection by the third party's sign and the sign for which registration is sought.
The three relevant factors mentioned by the CJEU in the Lindt-case are not exhaustive in the overall assessment. In cases concerning the interpretation of bad faith, the CJEU has highlighted the importance of subjecting the application to an overall assessment. Consequently, the presence of one of the above-mentioned factors is not adequate in establishing bad faith alone. Further, other relevant factors such as a business connection between the parties, the shape of the sign in question, and the history of the sign can be relevant in the overall assessment. Therefore, establishing a likelihood of confusion between the sign sought registration for and a third party's sign is not a condition for determining bad faith. Thus, the new provision in the Norwegian Trademarks Act section 15 litra f allows for a more flexible and dynamic assessment.
Bad faith implies the presence of a dishonest intention. Therefore, the applicant's intention is especially relevant. The case law from the CJEU reflects this observation. Reviewing the case law from the CJEU, three different kinds of intention indicating bad faith can be deduced:
- The intention of preventing a third party from entering the market in a manner inconsistent with honest practices.
- The intention of free-riding on the reputation or taking advantage of a third party's goodwill.
- The intention of circumventing other provisions such as the obligation to show genuine use of the trademark, and thereby extending the grace period granted to the applicant in accordance with the Norwegian Trademarks Act section 37.
Thus, the concept of bad faith is applicable both for instances of third party infringements as well as impediments of more public interest, such as safeguarding the integrity of the trademark institute.
If the applicant intends to prevent a third party from marketing a product, this may, in certain circumstances, be an element of bad faith. The CJEU has stated that if it subsequently becomes apparent that the applicant applied for registration of a sign without the intention of using it, this especially points in that direction. In such cases, the trademark will not ensure that the end-user can identify the origin of the product or service by enabling the end-user to distinguish the origin of the product or service from other products or services without any confusion. In such cases, the trademark will not fulfill its essential function, and thereby the application does not correspond with the objective of the trademark legislation.
The intention to free-ride on a third party's reputation is at the core of what constitutes conduct that deviates from accepted principles of ethical behavior or honest commercial and business practices. Moreover, such conduct deviates from the objective of the trademark legislation, which is to prevent unfair competition by ensuring that the customer or end-user does not confuse the commercial origin of the goods and/or services, thus pointing in the direction of bad faith.
The CJEU has stated that an intention to circumvent obligations such as to show genuine use of the trademark within five years of the registration may be an element of bad faith. If an applicant has submitted a chain of successive applications for registration, this may point to the application being filed in bad faith. In particular, where the applicant has no intention to use the trademark, and the application can be seen as part of an unlawful filing strategy to obtain a blocking position. However, if successive applications can be seen in the light of a normal business strategy, such as an application made in order to develop the trademark, the application does not involve bad faith.
The applicant's intention must be determined by reference to the objective circumstances of the particular case. To establish the applicant's intention, the CJEU has taken into consideration several different circumstances in the specific case. If the application can be seen as commercially logical considering circumstances such as a business expansion, increased turnovers connected to the goods or services that the trademark application is sought for, it indicates that the applicant did not have a dishonest intention.
In conclusion, the new Trademarks Act section 15 litra f entails a flexible and dynamic provision. At its core, applications that can be seen as unfair competition are targeted. A flexible rule based on an overall assessment results in a less predictable provision. However, the relevant factors assessing whether the applicant acted in bad faith mostly correspond with the terms in the previous provision in the Norwegian Trademarks Act section 16 litra b. Therefore, the change is less impactful than it appears.