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3 June 2024

Bad Faith in trade marks: looking back at Lidl v Tesco

The recent decision in Lidl v Tesco covered a number of areas of trade mark and intellectual property law. Amongst these was the concept of bad faith. In the United Kingdom, the relevant law states that “a trade mark shall not be registered if the application is made in bad faith” or to the extent that it is.

There is no concrete definition as to what acts might constitute bad faith, largely because bad faith must be established and will depend on the given circumstances in any case. However, case law developed over time has established some general principles and answered some common questions on what it means to have acted in bad faith. We will discuss these in this article.

When does bad faith occur?

The 2009 case of Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH, Case C-529/07 stated that the relevant time for determining whether there was bad faith was the time of filing of the trade mark application.

Who must prove bad faith?

In 2012 in the case of Pelikan Vertriebsgesellschaft mbH & Co KG (intervening), Case T-136/11, it was found that it is for the party claiming bad faith to prove it.

This was reinforced in 2021 in the case of Hasbro, Inc. v EUIPO, Kreativni Dogaaji d.o.o. intervening, Case T-663/19, which added that there is a presumption of good faith of the trade mark applicant until proven otherwise.

However, the burden of proof can be interchangeable, as demonstrated in the recent 2024 case of Lidl Great Britain Limited v Tesco Stores Limited [2022] EWHC 1434 (Ch).

The case concerned Tesco’s use of marks which Lidl claimed infringed their registrations:

Tesco’s marks

Lidl’s marks

Tesco were able to argue that the objective circumstances were sufficient to create a rebuttable presumption of a lack of good faith against Lidl’s ‘wordless registration’, essentially passing the burden of proving good faith to Lidl, which was unable to explain the rationale for the initial or repeat filings or demonstrate a genuine intention to use. Its registrations for the wordless mark were invalidated, on the basis the registrations were a ploy to stop other users from using it. (This was a pyrrhic victory for Tesco, as Lidl came away with the overall spoils. The use of Tesco’s marks constituted trade mark infringement of Lidl’s other mark, passing off, and copyright infringement of Lidl’s earlier rights.)

Is intention of the applicant relevant?

This is crucial. According to Lindt, consideration must be given to the applicant’s intention at the time of filing. The intention to prevent a third party from marketing a product may be an element of bad faith when it becomes apparent that this was the sole objective and the applicant had no intention to use the mark applied for.

The 2019 case of Koton Mağazacilik Tekstil Sanayi ve Ticaret AŞ, Case C-104/18 P went further, explaining that bad faith applies where it is apparent that a trade mark applicant has applied for registration not with the aim of engaging fairly in competition but with some dishonest intention of obtaining an exclusive right for purposes other than those falling within the function of a trade mark, which includes in particular the essential function of indicating trade origin.

Hasbro also included reference to intention, stating that the concept of bad faith relates to a dishonest intention or other sinister motive, involving conduct which departs from accepted principles of ethical behaviour or honest commercial and business practices.

What would be a dishonest intention?

This has been defined broadly by the Courts as an intention to obtain a result which is inconsistent with the purposes of trade mark registration.

This could include so-called trade mark squatting, where an applicant applies for registration of another’s trade mark with the intention of selling that right to the true trade mark owner at an inflated price.

It could also include ever-greening, the concept of filing a new application for the sole purpose of maintaining a monopoly of rights beyond those to which the trade mark applicant is entitled.  If a registered trade mark is not used during the first five years of the registration, it may be subject to cancellation on the basis of non-use. An owner could theoretically file a new trade mark application before the five-year cancellation period, thus constantly extending this grace period, and avoid having to provide evidence that the mark has been used. In the Hasbro case, this strategy had been adopted for the mark “MONOPOLY”.

According to the 2012 decision in Red Bull Gmbh v Sun Mark [2012] EWHC 1929, the purpose of bad faith legislation is to prevent abuse of the trade mark system.

Is it bad faith to file for a broad list of goods or services?

In short, no.  The 2011 case of Psytech International Ltd v OHIM, Institute for Personality & Ability Testing, Inc (intervening), Case T-507/08 was clear that a finding of bad faith cannot be made solely on the basis of an extensive list of goods or services.

The Pelikan case went further, stating that it is legitimate to seek registration of a mark, not only for the categories of goods and services which the applicant markets at the time of filing the application, but also for other categories of goods and services which it intends to market in the future.

However, intention is always relevant. In the 2021 case of Sky Limited & Ors v Skykick, UK Ltd & Ors, [2021] EWCA Civ 1121, the Court found that a broad specification is not an immediate ground for bad faith if the applicant has a genuine intention to use the mark in a sub-category within that broad term. The decision was appealed to the Supreme Court in 2023 and a decision is awaited.

Summary

In practice and through the development of case law, it has been established that the threshold for proving bad faith is very high, predominantly due to the subjective element involved.

The Courts will take into account all the factors relevant to a particular case before making a decision, and will only refuse or invalidate registration if it finds that the application was filed in bad faith. A finding of partial bad faith for some goods or services can be made.

It is important that trade mark owners protect their brand adequately, but it is also imperative for them to ensure they have done so using a justifiable approach. A few practical considerations for trade mark owners are:

  • Keep a record of evidence and reasoning demonstrating why a particular trade mark was adopted and why the decision was made to register the trade mark. This will show the intentions of the applicant at the time of filing. Documenting at an early stage could provide later proof against a future bad faith claim.
  • Collate evidence of how the mark is or has been used in a rolling five-year period. This will save future costs if you are ever asked to provide use of a trade mark and can be used as a defence to a claim of ‘evergreening’
  • Consult with a professional to review your application prior to filing. Filing an application with an inappropriate specification that includes broad terms for which there is no intention to use could amount to bad faith and result in your application being cancelled. A professional will be able to advice you on how to gain the best protection for your brand.
  • If you think a third party has applied for or registered a trade mark in bad faith, it is important to collate as much evidence as possible prior to making an application for its cancellation – as mentioned the standard of proof is very high.

Our experienced trade mark attorneys can provide you with an effective strategy on how best to protect and maintain your brand.

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