14/06/2021
Losing a MONOPOLY – bad faith trade mark re-filing in the EU
The General Court of the European Union (‘the GC’) has issued its hotly anticipated decision in Hasbro Inc. v European Union Intellectual Property Office (‘EUIPO’). This case centres on whether one or more EU trade mark (‘EUTM’) registrations owned by Hasbro Inc. (‘Hasbro’) for the trade mark MONOPOLY are invalid because Hasbro’s intentions, when re-filing a mark that was already protected by an EUTM covering the same goods/services, was to undermine the requirement to prove use of an EUTM.
This decision is the latest development in the fast evolving EU jurisprudence on ‘bad faith’, and one that will be potentially worrying for a large number of EUTM owners because of the possible implications it has on the repeat filings of EUTMs.
The requirement to use a trade mark
When an EUTM has been registered for longer than five years the owner is under a legal obligation to prove that the mark has been put to genuine use in the EU for the registered goods/services. The requirement to prove genuine use of an EUTM arises when this is requested of the EUTM owner by a third party, because the EUTM has been relied upon to either i) oppose that third party’s application to register a trade mark, or ii) sue the third party for infringing the EUTM registration. Also, once the initial five year grace period has passed any third party can apply to revoke an EUTM registration if they believe that the trade mark has not been put to genuine use in the EU for some or all of the goods/services covered by the registration.
In contrast, during the initial five year period following registration EUTM owners can enforce their registrations without having to provide evidence that the mark is being used in the EU.
This system ensures that an EUTM registration cannot become a static barrier, granting an inactive proprietor a legal monopoly for an unlimited amount of time. The objective of the genuine use requirement under EU law is to allow for the moderation of EUTMs, and to ensure that the number of enforceable EUTM registrations reflect the marks that are actually used on the market in the EU.
This balances the legitimate interests of trade mark owners (who can exploit their registration for five years while they build up their commercial operations in the EU) and their competitors (who have recourse to revoke the registration after this period of time has elapsed, and can demand evidence of the mark’s use if the owner tries to enforce the registration against them).
There is, however, a well-known loophole. When EUTM registrations near their fifth anniversary, many trade mark owners might choose to file a new application for the same mark, seeking protection for some or all of the same goods/services that are covered by their older EUTM registration. This practice has become known as ‘evergreening’, because the EUTM owner’s rights are kept perpetually young and free from the requirements to prove genuine use. This is a relatively common practice with EUTMs.
Bad faith trade mark applications
The GC’s decision in MONOPOLY centres on whether the practice of evergreening of EUTMs constitutes an act of ‘bad faith’.
When a registration has been found to have been applied for in ‘bad faith’ it is struck from the register, either wholly or partially. This rule prevents people from abusing the trade mark system.
‘Bad faith’ is a nebulous concept, but in recent years the higher courts in the UK and EU have issued a number of decisions that help define its parameters and identify instances where trade mark owners fall on the wrong side of the line.
In essence, the courts and IP Offices are required to assess whether the applicant’s intention when filing the trade mark application fell short of standards of acceptable commercial behaviour.
A person is presumed to have acted in good faith until it is proved otherwise, which means that the party alleging bad faith must prove it. It is a serious allegation, akin to fraud, so it must be supported by particularly convincing evidence.
The beginning of the dispute
The current decision is the latest development in a long-running dispute between Hasbro and Kreativini Dogadaji D.O.O. (‘Kreativini’) that dates back to 2011. Kreativini had applied to register the following stylised trade mark in the EU for various games and toys:
Hasbro opposed this application and were successful in arguing that this mark would cause detriment to the reputation of its MONOPOLY mark. The EUIPO held that the public associates the MONOPOLY trade mark with wholesome family entertainment and that this image would suffer if Kreativini were to use its mark, which recalls the MONOPOLY mark and “encourages the irresponsible consumption of alcohol”.
This first instance opposition decision was issued in 2017 but is currently under appeal pending the outcome of invalidity proceedings brought by Kreativini against Hasbro on the ground of bad faith.
Invalidation against MONOPOLY
In 2015 Kreativini applied to invalidate one of the EUTM registrations for the MONOPOLY mark that Hasbro had relied upon in its opposition. They argued that Hasbro had re-filed the same MONOPOLY mark in order to protect it for the same goods on four occasions over a fourteen year period. Kreativini claimed that Hasbro’s intentions were to circumvent the obligation to prove genuine use of its registrations that were over five years old, and that by filing the application for the new registration Hasbro had acted in bad faith.
The Cancellation Division of the EUIPO rejected these arguments because Kreativini did not provide enough evidence to safely lead to the conclusion that Hasbro had dishonest intentions when re-filing the MONOPOLY mark.
The Cancellation Division commented that Hasbro was not under any obligation to provide evidence of the genuine use of its marks in the opposition against DRINKOPOLY. Instead, the opposition had been decided on the basis of MONOPOLY’s reputation, of which extensive evidence was provided. Likewise, Hasbro’s EUTM registrations were not the subject of non-use revocation actions. This led the Cancellation Division to reject Kreativini’s claim that Hasbro’s behaviour indicated an intention to evade the genuine use requirement.
Not satisfied with this outcome, Kreativini appealed the decision to the EUIPO Boards of Appeal.
Boards of Appeal decision
The Boards of Appeal (‘BoA’) reversed the earlier decision of the Cancellation Division, finding that Hasbro’s registration had been filed in bad faith. This decision took a different turn largely on the basis of fresh evidence and because the BoA took the unusual step of ordering oral proceedings to take place.
The cross examination of a witness is rare in EUTM proceedings – but in this case the BoA felt it necessary to summon the decision maker behind Hasbro’s EUTM portfolio to the EUIPO headquarters in Alicante to provide a testimony that would enable them to better understand Hasbro’s decision to re-file the MONOPOLY trade mark.
During cross examination it was revealed that “being able to rely upon one registration without the need to prove use” was a benefit to Hasbro and that they considered this obvious benefit as something that is “considered by all brand owners and in many different industries”. Hasbro’s witness also elaborated on other considerations for re-filing the same mark, including new product offerings and licensing opportunities, and stated that freedom from the “administrative burden” of having to provide evidence of use was not the overriding factor when deciding to re-file a mark. Hasbro’s later submissions made the argument that re-filing trade marks is standard procedure for many companies, so this act cannot be considered to fall short of standards of acceptable commercial behaviour (part of the definition of bad faith).
The BoA did not agree. The fact that the re-filing is not solely motivated by the advantage of not having to prove the genuine use of the mark concerned, but other reasons as well, does not make this strategy legal and acceptable, they said. Nor does the fact that other companies use the same filing strategy.
Ultimately, the BoA held that Hasbro had dishonest intentions when re-filing its MONOPOLY mark. It intended to fraudulently extend the five year grace period in which it did not have to prove use of its mark. As such, Hasbro’s latest MONOPOLY trade mark registration (the registration challenged by Kreativini) was declared invalid for all goods and services that had been covered by previous registrations.
The BoA’s decision was seen as a significant development in the case law relating to bad faith and one that had potentially significant ramifications for all EUTM owners. As many expected, Hasbro appealed this decision to the GC.
The General Court decision
The GC did not depart from the BoA’s earlier decision and the partial invalidation of the MONOPOLY registration was upheld.
The rules governing EUTM law accord with the system of undistorted competition that underpins the European Union, the GC explained in its decision. Trade mark registrations are granted in order that their owners may use their trade marks to attract customers and enable those customers to repeat or avoid previous purchases. When a trade mark registration is filed in bad faith the intention is not to engage in fair competition, but rather to undermine it.
With this in mind, the GC confirmed that repeat filings of a mark “are not prohibited” under EUTM law, but that the proven intention to avoid the genuine use requirement attached to earlier registrations is “a relevant factor which is capable of establishing bad faith”.
It is not the fact that the MONOPOLY mark had been re-filed that led to a finding of bad faith, but that the evidence proved that the commercial logic behind the re-filing was to sidestep the legal requirement to prove genuine use of Hasbro’s earlier EUTM registrations.
This part of the GC’s decision provides some positive news in what could otherwise be viewed as a worrying decision for EUTM owners. Protecting the same mark for the same goods/services through multiple registrations over many years is not, on its own, an indication of attempting to evade the legal obligation to prove genuine use of an EU registration. The onus is on the party alleging bad faith to provide evidence of the brand owner’s fraudulent intentions at the time of filing.
One argument that Hasbro raised before the GC was that if the BoA’s decision was allowed to stand, the EUIPO would be flooded with applications for invalidity. Any trade mark that had been re-filed for a list of goods and services that are the same as those covered by an earlier mark (of which there are many) could be attacked.
Hasbro did not convince the GC how this scenario would change the ruling in respect of their own acts and did not provide sufficient supporting evidence of this ‘common practice’, so the argument was dismissed. Even if Hasbro were to prove that evergreening was common practice across all industries it would not help their case, because their intentions when re-filing the MONOPOLY mark had been found to directly contradict the objectives of EU trade mark law.
Comment
Although the GC found reasons to dismiss Hasbro’s argument that this ruling will invite many more bad faith allegations, this is nonetheless a very real danger. An large number of EUTM registrations are likely to be re-filings of an existing registered mark covering at least some of the same goods/services. And while the presumption of good faith stands, and the burden of proving bad faith still lies with the alleger, it may now be easier for a party seeking to invalidate an EUTM registration to put forward these allegations. In particular, as a result of this ruling it may now be easier for the party alleging bad faith to flip the burden of proof on to the EUTM proprietor, requiring the proprietor to prove that it did not act in bad faith when refiling its EUTM.
Establishing a bad faith claim is not as simple as pointing to the earlier identical registrations and accusing the owner of evergreening. The success of an evergreening argument rests on the evidence of the applicant’s intentions when filing the application and perhaps also their conduct (either before or after the event). Brand owners may see this decision as a warning to document the commercial logic behind their filing programmes, so that they are able to rebut claims that they have evergreened their existing EUTM registrations and acted in bad faith.
Although it could be argued that the decision in this case is so fact specific that it does not set a general precedent, in an attempt to avoid the bad faith issues highlighted in this case we expect to see brand owners filing EUTM applications for marks that are variations on those that are already registered. And when it comes to filing oppositions the safer bet may be to rely on the older registrations, which may mean incurring the cost of filing evidence of the genuine use of these marks in the EU during the relevant five year period.
The effect of this decision in the UK
The GC is a constituent court of the Courts of Justice of The European Union (‘CJEU’), which as of 1st January 2021 is a foreign court with no part in the UK judicial system.
Decisions of the GC and CJEU were binding on UK courts pre-Brexit (i.e. before 31 December 2021), and decisions from before this date continue to be so. The Withdrawal Act specifies that UK courts and tribunals are not bound by GC and CJEU decisions issued after 1st January 2021, but may have “regard to anything done on or after exit day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal”. That is, they may choose to follow EU decisions if they agree with them.
Although the UK and EU have historically had different conceptions of bad faith, it is possible that the UK courts and UK IP Office may have more than mere ‘regard’ for this decision. In particular because this decision interprets EU law as it stood before 31st December 2021, when it applied equally to the UK, and from which the UK has yet to depart.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
