OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 4 April 2019 (1)
Case C‑104/18 P
Koton Mağazacilik Tekstil Sanayi ve Ticaret AŞ
v
European Union Intellectual Property Office (EUIPO)
Other party:
Joaquín Nadal Esteban
(Appeal — EU trade mark — Regulation No 207/2009 — Invalidity proceedings — Figurative mark with the word elements STYLO & KOTON — Rejection of the application for a declaration of invalidity — Bad faith)
I. Introduction
1. A trade mark for which an application was filed in bad faith can subsequently be declared invalid. But what constitutes bad faith and how can it be established?
2. The Court of Justice has already made some fundamental findings in this regard and the General Court has been able to examine these questions in greater depth in various cases. Nevertheless, there has still not been definitive clarification of these questions. The present appeal gives the Court an opportunity to refine its case-law.
II. Legal framework
3. The legal framework of the present case is provided by the Trade Mark Regulation. (2)
4. Article 52(1) of the Trade Mark Regulation (now Article 59(1) of Regulation 2017/1001) sets out the absolute grounds for invalidity:
‘An EU trade mark shall be declared invalid on application to the Office or on the basis of a counterclaim in infringement proceedings:
(a) …;
(b) where the applicant was acting in bad faith when he filed the application for the trade mark.’
5. Article 52(3) of the Trade Mark Regulation (now Article 59(3) of Regulation 2017/1001) provides for the possibility of partial invalidity:
‘Where the ground for invalidity exists in respect of only some of the goods or services for which the EU trade mark is registered, the trade mark shall be declared invalid as regards those goods or services only.’
6. Article 65 of the Trade Mark Regulation (now Article 72 of Regulation 2017/1001) contains rules on judicial proceedings and their consequences:
‘1. Actions may be brought before the General Court against decisions of the Boards of Appeal in relation to appeals.
…
6. The Office shall take the necessary measures to comply with the judgment of the General Court or, in the event of an appeal against that judgment, the Court of Justice.’
III. Facts and procedure to date
7. On 25 April 2011, Mr Nadal Esteban filed an application with the European Union Intellectual Property Office (EUIPO) for registration of the following trade mark for Classes 25 (Clothing, footwear, headgear), 35 (Advertising; business management; business administration; office functions) and 39 (Transport; packaging and storage of goods; travel arrangement) of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended:
8. The appellant, Koton Mağazacilik Tekstil Sanayi ve Ticaret AŞ (Koton), filed a notice of opposition to that application based on its own earlier figurative marks, which both take the following form:
9. Those trade marks had been registered inter alia for Classes 25 and 35, but not for Class 39. The opposition was successful in respect of the first two classes.
10. On the other hand, the trade mark at issue was registered on 5 November 2014 under No 9917436 for the services in Class 39.
11. On 5 December 2014, Koton filed an application for a declaration that that trade mark was invalid by reason of bad faith in accordance with Article 52(1)(b) of the Trade Mark Regulation.
12. The Cancellation Division of EUIPO rejected that application, just as the Board of Appeal dismissed the appeal filed against that decision. Finally, by the judgment under appeal of 30 November 2017, Koton Mağazacilik Tekstil Sanayi ve Ticaret v EUIPO — Nadal Esteban (STYLO & KOTON) (T‑687/16, not published, EU:T:2017:853), the General Court also dismissed the action brought against the decision of the Board of Appeal.
13. All three decisions were based on the ground that Koton’s trade marks do not extend to the services for which the trade mark at issue had been registered.
IV. Forms of order sought
14. On 13 February 2018, Koton brought the present appeal and claims that the Court should:
(1) set aside the judgment under appeal;
(2) annul the contested decision;
(3) declare EU trade mark No 9917436 to be invalid; and
(4) order Joaquín Nadal Esteban and EUIPO to pay the costs.
15. EUIPO contends that the Court should:
(1) grant the appeal and
(2) order EUIPO and Joaquín Nadal Esteban to pay the costs.
16. On the other hand, Joaquín Nadal Esteban claims that the Court should:
(1) dismiss the appeal and
(2) order Koton to pay the costs.
17. The parties submitted written observations and on 6 December 2018 presented oral argument.
V. Legal assessment
18. It should be stated, first of all, that the claim made by Koton for a declaration of invalidity of the trade mark at issue is inadmissible. Koton did not make that claim before the General Court and for that reason it would extend the subject matter of the proceedings. In addition, under Article 65(1) of the Trade Mark Regulation the decision of the Board of Appeal alone is the subject matter of the proceedings before the European Union courts.
19. Nevertheless, Koton and EUIPO object above all to a relatively clear departure from previous case-law in the judgment under appeal. I will consider this departure first (see under A), before examining whether the judgment under appeal could still be based on other grounds (see under B). The decision in the present appeal therefore hinges on whether a further aspect presented by EUIPO and not previously taken into account is part of the subject matter of the proceedings or was submitted out of time (see under C). Lastly, I will make some remarks regarding the action before the General Court (see under D).
A. The need for use for identical or similar goods or services
20. Koton complains in its single ground of appeal that in paragraphs 44 and 60 of the judgment under appeal the General Court infringed Article 52(1)(b) of the Trade Mark Regulation. EUIPO supports that submission.
21. Under Article 52(1)(b) of the Trade Mark Regulation, an EU trade mark is to be declared invalid on application to the Office where the applicant was acting in bad faith when he filed the application for the trade mark.
22. In paragraph 44 of the judgment under appeal, the General Court confirmed the Board of Appeal’s view that bad faith on the part of the applicant within the meaning of Article 52(1)(b) of the Trade Mark Regulation presupposes that a third party is using an identical or similar sign for an identical or similar product or service capable of being confused with the sign for which registration is sought.
23. After rejecting further arguments made by Koton concerning whether Koton enjoys trade mark protection for similar or identical services, the General Court then ruled in paragraph 60 of the judgment under appeal that the Board of Appeal was fully entitled to conclude that Mr Nadal Esteban had not acted in bad faith when the contested mark was registered because it was registered for services dissimilar to those designated by Koton’s earlier marks.
24. Although the General Court nevertheless took into account other aspects which I will examine below (under B), those two paragraphs of the judgment under appeal are vitiated by a serious error in law.
25. As the General Court itself rightly explains in paragraphs 32 and 40 of the judgment under appeal, (3) the use of an identical or similar sign for an identical or similar product or service capable of being confused with the sign for which registration is sought is just one factor which is to be taken into account in particular. (4) Correctly, in order to determine whether the applicant for registration is acting in bad faith, it is necessary to take into account all the relevant factors specific to the particular case which pertained at the time of filing the application for registration of the sign as a Community trade mark. (5)
26. Nor can there be any objection to this case-law of the Court of Justice, as I will show in detail below on the basis of five arguments.
27. As Koton and EUIPO rightly state, first, the ground for invalidity in Article 52(1)(b) of the Trade Mark Regulation does not require that the applicant is the proprietor of a trade mark for identical or similar goods or services. Rather, anyone may, in principle, apply for a declaration of invalidity of a trade mark on grounds of bad faith.
28. The need to take into account all the relevant factors is, second, an inevitable consequence of the subjective nature of bad faith. Such a subjective factor can be determined only by reference to the objective circumstances of the particular case. (6) Accordingly, the Court has also interpreted the rules on registration of domain names in bad faith, which are related to trade mark law and, in some language versions, could actually be construed as exhaustively defining cases of bad faith, as meaning that those cases are not exhaustive. (7)
29. Third, the need to take fully into account all the relevant factors also follows from the object of the bad faith.
30. It is true that the Court — like the legislature — has not yet developed a comprehensive definition of bad faith. (8) Such caution is reasonable as it cannot really be foreseen what situations will arise and have to be assessed in the future.
31. Nevertheless, the case-law on finding abusive conduct can offer guidance in examining bad faith. (9) Such conduct is characterised by objective and subjective elements. With regard to the objective element, such a finding requires that it must be apparent from a combination of objective circumstances that, despite formal observance of the conditions laid down by EU rules, the purpose of those rules has not been achieved. With regard to the subjective element, it must be apparent from a number of objective factors that the essential aim of the transactions concerned is to obtain an undue advantage. The prohibition of abuse is not relevant where the activity carried out may have some explanation other than the mere attainment of an (undue) advantage. (10) A comprehensive assessment of the relevant factors is thus crucial.
32. If bad faith within the meaning of Article 52(1)(b) of the Trade Mark Regulation is understood as an expression of the prohibition of abuse, the primary aim of trade mark protection and the possibly undue advantage are to be determined having particular regard to the essential function of the trade mark. That function is to guarantee the identity of origin of the goods or services concerned to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. (11)
33. Accordingly, the Court has ruled that an application for registration of a trade mark which does not aim to use that mark in accordance with its essential function can be in bad faith. (12) Bad faith may be present in particular where the applicant does not intend at all to use the mark as such, (13) but also where he intends to use the mark to mislead consumers over the origin of goods or services.
34. Fourth, it is easy to conceive of other variants of bad faith which do not require any overlap with an already existing application. One thinks of an application for registration of a trade mark filed by a person who applies for a trade mark with the sole aim of preventing an imminent trade mark application by others (‘trade mark squatting’). (14)
35. In addition, fifth, the Court has already recognised the possibility of an application for registration of a trade mark in bad faith by which the applicant wishes to establish a basis for acquiring a descriptive domain name. (15) It was irrelevant in this regard to what extent applications for trade marks had already been filed for identical or similar goods or services.
36. It is not therefore essential for recognition of bad faith that a third party is using an identical or similar sign for an identical or similar product or service capable of being confused with the sign for which registration is sought.
37. This finding would also not be called into question if bad faith were not dependent, like abuse, on a misuse of purpose and an undue advantage but, as Advocate General Sharpston has suggested, constitutes a departure from accepted principles of ethical behaviour or honest commercial and business practices. (16) All the relevant factors would also have to be taken into account in respect of this question.
B. The actual examination by the General Court
38. It does not necessarily follow from the finding of the abovementioned error in law, however, that the judgment under appeal should be set aside as, notwithstanding its statement in paragraphs 44 and 60 of the judgment under appeal, the General Court took other factors into account.
39. In paragraphs 54 to 57 of the judgment under appeal, the General Court mentions that a few years earlier Mr Nadal Esteban had a business relationship with Koton and must therefore have had knowledge of its marks and the fact that Mr Nadal Esteban filed a notice of opposition against the registration of one of Koton’s marks in Spain. However, in the view of the General Court, these were not sufficient indications to establish bad faith.
40. It can be inferred from this that, contrary to its own findings in paragraphs 44 and 60 of the judgment under appeal, the General Court did not consider the identity or similarity of the services designated to be indispensable in order to conclude bad faith.
41. The General Court therefore assessed comprehensively the arguments raised by Koton. Nevertheless, there is still a contradiction in the grounds of the judgment under appeal.
C. The additional factor identified by EUIPO
42. EUIPO bases its appeal on an additional factor not taken into account by the General Court.
43. Mr Nadal Esteban had in fact originally sought to register his trade mark for identical goods and services in Classes 25 and 35. His application was refused in respect of those classes on the basis of the opposition filed by Koton. It was therefore only on account of that opposition upon the registration in respect of the goods and services claimed that there was no longer an overlap between Koton’s trade marks and the trade mark at issue.
44. At the hearing Koton accepted this argument.
45. Two questions arise in this regard: first, whether this argument raised by EUIPO is actually admissible and — if it is admissible — second, what importance this factor has.
1. The admissibility of the argument raised by EUIPO
46. Koton did not expressly make the overlap of the original application with the protective scope of its earlier marks the subject of its respective pleas in law either before the General Court or in its appeal. It merely asserted that, as a former business partner, Mr Nadal Esteban must have had knowledge of its trade marks and that his trade mark was very similar to those trade marks. Furthermore, it pointed out a pending legal dispute with Mr Nadal Esteban in Spain in which he has contested one of its trade marks.
47. It is therefore doubtful whether the argument in EUIPO’s response concerning the overlap of the goods and services is sufficient to make that aspect part of the subject matter of the appeal proceedings.
48. Under Article 174 of the Rules of Procedure, a response must seek to have the appeal allowed or dismissed, in whole or in part. Furthermore, in accordance with Article 176 of those Rules of Procedure, a party to the relevant case before the General Court may submit, by document separate from the response, a cross-appeal which, according to Article 178(1) and (3), second sentence, of the Rules of Procedure, must seek to have set aside, in whole or in part, the judgment under appeal on the basis of pleas in law and arguments separate from those relied on in the response. It is apparent from those provisions, read together, that the reply may not seek the annulment of the judgment under appeal on the basis of distinct and independent grounds from those raised in the appeal, since such grounds may only be raised as part of a cross-appeal. (17)
49. If it were therefore concluded that the original overlap in the goods and services was not argued by Koton, the argument in that regard by EUIPO would have to be rejected as inadmissible.
50. However, I consider such an assessment of the argument raised by Koton to be too strict.
51. The original overlap in respect of Classes 25 and 35 was in fact part of the undisputed facts of the case from the beginning in the proceedings before the General Court and the Court of Justice. (18) The account of the facts given by the General Court takes from it, in paragraphs 3 and 8 of the judgment under appeal, at least the refused application for Class 35. (19) The General Court even relies, in paragraph 39 of the judgment under appeal, on findings made in the relevant opposition proceedings in order to establish that Koton’s earlier trade marks did not extend to Class 39.
52. The parties therefore made the original overlap in the goods and services part of the subject matter of the proceedings before the General Court and the Court of Justice. Consequently, this fact must be taken into account in examining bad faith.
2. The importance of the original overlap of the application with the goods and services protected for Koton’s trade marks
53. The General Court thus failed to take one factor into account in examining bad faith.
54. This factor is also relevant because it allows inferences to be drawn as to Mr Nadal Esteban’s intentions when he filed the application for the trade mark at issue. Those intentions are important in assessing bad faith as, under Article 52(1)(b) of the Trade Mark Regulation, an EU trade mark must be declared invalid on application to the Office or on the basis of a counterclaim in infringement proceedings where the applicant was acting in bad faith when he filed the application for the trade mark. (20)
55. Koton and EUIPO submit in this regard, relying on a decision of the General Court, (21) that it is not possible to divide the application for registration for the purposes of assessing bad faith such that only one part, in this case the application for registration for Classes 25 and 35, was considered to have been filed in bad faith, while the other part, the application for registration for Class 39, was not.
56. This issue is currently also being considered in a quite different case, which concerns whether the entire application was made in bad faith if and to the extent that the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use it in relation to other specified goods or services. (22) In view of the earlier practice of filing applications for trade marks for entire classes of goods and services (23) which the applicant was not even able to, let alone wished to cover comprehensively, this is a highly explosive issue.
57. The divisibility of a trade mark application filed partly in bad faith is suggested by Article 52(3) of the Trade Mark Regulation, which provides that an EU trade mark may be declared invalid in respect of only some of the goods or services for which it was registered. (24)
58. Unlike the other grounds for invalidity, however, bad faith is not an inherent defect in the trade mark itself, but stems from the circumstances in which it was applied for. (25) Where there are defects in a trade mark, it is perfectly conceivable that these relate only to certain goods or services but do not preclude its use for other goods or services. It is far more difficult, however, to recognise an application for the grant of the exclusive right to designate certain goods or services by a certain sign as having been made in good faith where the same right is also applied for in bad faith in relation to other goods or services.
59. Furthermore, dividing an application for registration into a part filed in bad faith and a part filed in good faith would offer an incentive to apply to register trade marks for a larger set of goods and services than is justified by the actual intended uses. There would be no fear of any disadvantage for the trade mark actually being used if bad faith were discovered. The submissions made by Mr Nadal Esteban at the hearing confirm this risk. He asserts that he applied to register his trade mark for Classes 25 and 35 only because no additional fees were incurred. Had he known that if an application were filed in bad faith for those classes his application for Class 39 would be null and void, he would certainly not have taken that course of action.
60. In the present case, however, there is ultimately no need to make definitive findings on whether an application for registration can or even must be split into a part filed in bad faith and a part filed in good faith. The fact that an application was originally filed for a trade mark for goods and services in respect of which the applicant knew or should have known that identical or similar trade marks existed may in any event be an important indication that the application to register that trade mark for other goods or services was also filed in bad faith.
61. On account of this additional aspect it is now for the applicant for registration, Mr Nadal Esteban, to allay doubts whether the application was filed in good faith. It is of crucial importance in allaying these doubts whether the applicant is able to show that by filing the application he pursued a comprehensible and — at least to his knowledge — legitimate economic purpose or an ‘economic logic’. (26) (27)
62. The judgment under appeal does not, however, contain any indications that such economic logic was presented or assessed.
63. As a consequence, not all relevant factors for possible bad faith were taken into account in the judgment under appeal and therefore it must be set aside.
D. The action before the General Court
64. In accordance with Article 61(1) of the Statute of the Court of Justice of the European Union, the latter may, after setting aside the decision of the General Court, either itself give final judgment in the matter, where the state of the proceedings so permits, or refer the case back to the General Court for judgment.
65. In the present case, the General Court assessed neither the fact that Mr Nadal Esteban had originally applied to register the trade mark at issue for two classes of goods or services for which Koton enjoys trade mark protection nor any submissions made by Mr Nadal Esteban regarding the economic logic of his application. This suggests that the case should be referred back to the General Court in order to complete the assessment of the facts. (28)
66. On the other hand, there is no dispute as to the application for the other two classes and Mr Nadal Esteban explained his reasons for filing the application at the hearing before the Court of Justice in particular. While Koton has doubts over that reasoning, those doubts would have been examined in detail only if the reasoning justified the application to register the trade mark. As that is not the case, it is merely a matter of the legal characterisation of those facts, for which the Court of Justice has jurisdiction. (29)
67. On the basis of the above statements, the examination of bad faith depends crucially on whether Mr Nadal Esteban is able to allay the doubts whether the application was filed in good faith by explaining his economic logic.
68. This claim is subject to strict requirements as the very fact that an applicant knows or must know that others are using an identical or similar sign as a trade mark, albeit for different goods or services, gives rise to doubts whether an application for registration was filed in good faith. Why should a person deliberately create the risk that consumers will associate his own goods or services with another supplier?
69. If, as in the case of Mr Nadal Esteban, an attempt is even knowingly made to apply to register such a sign additionally for goods or services for which others enjoy trade mark protection, those doubts become much more significant.
70. The economic logic put forward by Mr Nadal Esteban is not sufficient to allay those doubts. He relies, in essence, on his intention to offer certain services and in this connection to use bags on which the trade mark at issue already appeared, because he had received those cotton bags as packing material for specific goods. Mr Nadal Esteban’s motivation is thus limited to pure convenience. However, there is no indication of a legitimate interest in accepting the risks of his services being associated with Koton or of Koton being impaired in future activities.
71. The application for registration of the trade mark at issue must therefore be considered to have been filed in bad faith. Accordingly, the decision of the Board of Appeal must be annulled.
72. On the other hand, the claim made by Koton that the General Court should order EUIPO to declare the trade mark at issue to be invalid was inadmissible. It is not for the General Court and the Court of Justice to issue directions to EUIPO. It is for the latter under Article 65(6) of the Trade Mark Regulation to draw the appropriate inferences from the operative part and grounds of judgments of the Community judicature. (30)
VI. Costs
73. Under Article 184(2) of the Rules of Procedure, where the appeal is well founded and the Court itself gives final judgment in the case, it is to make a decision as to the costs. Under Article 138(1), which applies to the procedure on appeal in accordance with Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Those costs include costs necessarily incurred by the parties for the purposes of the proceedings before the Board of Appeal under Article 190(2) of the Rules of Procedure of the General Court.
74. In the present case, Mr Nadal Esteban has been entirely unsuccessful in his claims.
75. Although EUIPO has been successful with its claim in the appeal proceedings, on account of its contested decisions and because it claimed before the General Court that the action should be dismissed, it also bears responsibility for the appeal becoming necessary at all. It is thus only logical that it submits that it should be ordered to bear the costs itself.
76. While Koton has been unsuccessful in its claims that the Court should declare the trade mark at issue to be invalid or order EUIPO to do so, it has been entirely successful in substance because EUIPO is nevertheless obliged to draw the appropriate inferences from the present judgment.
77. Mr Nadal Esteban and EUIPO must therefore be ordered to pay the costs incurred by Koton, whilst they should each bear their own costs.
VII. Conclusion
78. I therefore propose that the Court should:
(1) Set aside the judgment of the General Court of the European Union of 30 November 2017, Koton Mağazacilik Tekstil Sanayi ve Ticaret v EUIPO — Nadal Esteban (STYLO & KOTON) (T‑687/16, EU:T:2017:853);
(2) Dismiss the appeal lodged by Koton Mağazacilik Tekstil Sanayi ve Ticaret as to the remainder;
(3) Annul the decision of the Second Board of Appeal of the European Union Intellectual Property Office of 14 June 2016 (Case R 1779/2015‑2);
(4) Dismiss the action brought by Koton Mağazacilik Tekstil Sanayi ve Ticaret as to the remainder;
(5) Order Mr Nadal Esteban and EUIPO each to bear their own costs and together, in equal parts, to pay the costs incurred by Koton Mağazacilik Tekstil Sanayi ve Ticaret in the proceedings before the Board of Appeal, the General Court and the Court of Justice.