On December 10, 2013, the Dutch Court of Appeal The Hague (Tanja-Van den Broek, Bonneur, Schaafsma) delivered an interesting decision on the ‘concept of use’ with regard to trade mark applications allegedly filed in bad faith and claims for invalidity based on that ground. The case concerns Mr Zhu Quping, a trader in tobacco products in South-East Asia, having his residence in Macau, China. Great Blue Sky (“GBS”), having its registered seat in China, specialises in the import of tobacco products into South-East Asia. GBS is a client of Promodyne, based in the Netherlands. Promodyne ordered HTH Tabak B.V. - a Dutch based company - to produce cigarette packaging bearing the word Maba and a picture of two tobacco leaves. In 2005, Promodyne shipped cigarettes in this packaging to Mr Zhu Quping in South-East Asia. It is important to note that the parties disagree as to which of them gave the orders for the production of these Maba cigarettes. Mr Zhu Quping filed trade mark applications for the word Maba and the two tobacco leaves in several countries in South-East Asia.

On 11 August 2008, GBS applied for a Community Trade Mark for the word Maba and a picture of two tobacco leaves, which was registered on 17 May 2009 (CTM 7181341). Mr Zhu Quping applied for a Benelux trade mark for the word Maba and a picture of two tobacco leaves on 21 November 2008. This trade mark with number 856170 was registered on 11 March 2009 (see pictures).

Promodyne and GBS brought a claim against Mr Zhu Quping for invalidity of Benelux trade mark 856170 on the basis of the seniority of GBS trade mark registration (article 2.3(a) and (b) and alternatively that it had been applied for in bad faith (art. 2.4 (f) Benelux Convention on Intellectual Property). Furthermore, Promodyne and GBS brought a claim against Mr Zhu Quping for infringement of their Maba trade mark in the Benelux. Mr Zhu Quping counterclaimed for invalidity of CTM 7181341 on the basis that GBS had filed the application for this trade mark in bad faith (52(1)(b) Trade Mark Regulation (TMR)).

In first instance, the District Court The Hague delivered its judgment on March 14, 2012 (Schippers) and upheld the claim for invalidity of Benelux trade mark 856170 brought by Promodyne and GBS on the basis that the trade mark of GBS was registered before the trade mark of Mr. Zhu Quping. Furthermore the District Court held that Mr. Zhu Quping had infringed the trade mark of GBS. Mr Zhu Quping’s counterclaim for invalidity of CTM 7181341 was rejected due to lack of adequate substantiation. 

Mr Zhu Quping appealed to the Court of Appeal The Hague claiming, inter alia, that the District Court’s decision with regard to the counterclaim was wrong and that the District Court should have upheld the counterclaim for invalidity of CTM 7181341 on the basis that this trade mark had been applied for in bad faith. The Court of Appeal, referring to the CJEU’s Lindt Goldhase decision (C-529/07), rejected the claim as - in short - no use had been made of the said trade mark by Mr Zhu Quping in at least one EU Member State.

According to the CJEU in the Lindt case, in order to invalidate a trade mark on the basis of article 52(1)(b) TMR, it is required 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. In addition, the applicant’s intention must be taken into account when determining whether a trade mark had been applied for in bad faith, according to the Lindt case.

The use of the Maba sign, according to Mr Zhu Quping, consists of affixing the mark on the cigarette packaging and the subsequent export of the cigarettes in this packaging to South-East Asia. The Court of Appeal points out that this use explicitly amounts to trade mark use according to article 9 TMR.

The Court then - quite interestingly - paraphrases a passage from the Opinion of A-G Kokott in C-119/10 (Frisdranken Industrie Winters BV v Red Bull GmbH, par. 46-61) which reads that these uses - i.e. the affixation of the Maba mark on goods and the export of these goods outside the EU - are only detrimental to the functions of a Community Trade Mark where there is a risk that the goods, despite being intended for export, nevertheless enter the EU market. This may occur if the owner changes its mind with regard to the marketing of the goods or if a third party takes possession of the goods. According to the Court, account should be taken of this passage when establishing whether relevant use of the trade mark has been made with regard to trade mark filing in bad faith. The Court establishes that if there is no risk that the goods are put on the market in the EU, the use in issue cannot be considered as use in at least one EU Member State according to article 52(1)(b) TMR and the Lindt case.

The Court of Appeal then gives its judgment on whether GBS had applied for the Maba trade mark in bad faith. As the parties agree the cigarette packaging bearing the Maba sign was not put on the EU market before the application date of CTM 7181341, the aforementioned risk had not manifested itself because no confusion with the sign for which registration is sought can occur, so the Court of Appeal concludes the use made of the Maba mark does not constitute trade mark use for the purpose of article 52(1)(b) TMR. So use has been made of the Maba sign by Mr Zhu Quping in the sense of article 9 TMR, but this is no relevant trade mark use in the light of article 52(1)(b) TMR. As a result, the application for CTM 7181341 had not been filed in bad faith.

The passage from the Conclusion of A-G Kokott in Winters v Red Bull, which should be taken into account according to the Court of Appeal, considered a case on trade mark infringement instead of invalidity on the basis of a trade mark application filed in bad faith. The use in that case, contrary to the Maba case, consisted of the filling of cans bearing infringing signs. Furthermore, the paraphrased passage of A-G Kokott’s Opinion is part of his answer to a question referred to the CJEU in Winters v Red Bull which the CJEU eventually not answered. Moreover, despite referring to previous CJEU case law in which it was held that goods destined to be exported outside the EU did not infringe the trade marks in issue,

A-G Kokott concluded that such goods may be infringing trade mark rights because they are manufactured within the EU so that the aforementioned risk exists.

As a result, the question arises whether the Court of Appeal was right stating that the passage from the Opinion of A-G Kokott should be taken into account in a case on invalidity on the basis of a trade mark application having been filed in bad faith. It looks as if the Court of Appeal did not find it justified to grant a bad faith claim only on the basis of certain forms of  trade mark use of which the legal ‘portée’ could be diminished by certain restrictions. However it is not clear that the restrictions which A-G Kokott formulates form established EU law, let alone whether these restrictions (which A-G Kokott formulates within the framework of an infringement case) are applicable to grant a counterclaim for invalidity based on bad faith.

The Court continues its judgment by a - remarkable - extensive obiter dictum on the intention of GBS when filing the trade mark, presumably to provide additional substantiation of its ruling that CTM 7181341 had not been applied for in bad faith (maybe because the primary substantiation by the Court of Appeal may be questionable as discussed above). In this obiter dictum, the Court determines whether the application for CTM 7181341 had been made in bad faith in the hypothetical situation where affixing the trade mark to packaging and export would consist of use of the trade mark in the EU. For this purpose, the Court also assumes that Mr Zhu Quping gave the orders for the production of the Maba cigarette packaging in 2005 and that GBS knew or must have known this. Even under these circumstances, the Court rules, GBS cannot be held to have filed the application for CTM 7181341 in bad faith.

As Mr Zhu Quping has brought no products on the market in the EU, but has only carried out the aforementioned use, the products on which the Maba sign was affixed are unknown to the public. Hence, no confusion with GBS’s Maba mark could arise. Accordingly, the Court states that the use of the Maba sign by Mr Zhu Quping is ‘so weak’ that he acquired no protection for the sign through use which could be invoked to successfully challenge use of the sign by a third party. As for the intention of GBS, Mr Zhu Quping argued GBS had only applied for the Maba trade mark to prevent him from exploiting the Maba mark in the EU because GBS’s activities are not aimed at the EU market. The Court of Appeal disagrees, stating GBS only applied for the trade mark to be able to exploit it in the EU itself. As the Court for the purpose of its reasoning in the obiter dictum assumes that affixing the mark on goods and the subsequent export of these goods amounts to relevant trade mark use, GBS can be held to have registered the mark to use it within the EU. Furthermore, it is important to note in this light that Mr Zhu Quping recognised that at least some use of the trade mark by GBS on the EU market is possible, as he stated that GBS did not or hardly used the mark in the EU.

Written by Denise Verdoold & Gino van Roeyen