Lindt had made chocolate Easter Bunnies in Switzerland since the 1950's, and Hauswirth had made them in Austria since 1962. Lindt introduced their product to Austria in 1994, aware of the fact that there were already bunnies (including Hauswirth's) on the market there, and in 2000 it applied to register a 3-D CTM.
During the 90s, developments in the technology of wrapping machines had dictated that the shapes of different manufactures' bunnies had become more and more similar.
Lindt sued Hauswirth for infringement of its Austrian trade mark, and Hauswirth counterclaimed for invalidity on the grounds of bad faith. The Austrian Supreme Court referred the case to the Court of justice, asking for guidance on what was meant by bad faith.
AG Sharpston confirmed that bad faith is a ground for invalidity distinct from grounds based on conflicting prior rights. While it could not be precisely defined, it can be said that it involves conduct that departs from accepted principles of ethical behaviour or honest commercial and business practices: it is not confined to situations where the application is made purely to stop someone else using a mark, with no intention on the part of the applicant to use it. This was the Commission's take on the matter, and looks as if it would let Lindt off the hook (though of course it is not the court of justice's job to decide whether the registration is valid or not).
Should he test be subjective or objective? The AG thought a bit of both - there has to be some sort of dishonest intention or sinister motive, which is normally established by reference to objective factors. In the absence of direct evidence of the trade mark owner's state of mind, evidence of the common state of knowledge n the relevant sector will be taken into account.
Bad faith therefore falls to be considered on a case-by-case basis, and must take account of the historical context. If the applicant intends to stop others using signs that they have used in the past, this indicates bad faith, but the intention might be justifiable and for that, all the circumstances have to be considered.
The fact that this case involves a shape mark, and that the technology limited the choice of shapes available to competitors, introduces an important additional dimension that will be lacking in cases involving less exotic trade marks. The more limited the choice available, the less likely the trade mark is to be valid. The AG's conclusion was:
In order to determine whether ‘the applicant was acting in bad faith when he filed the application for the trade mark’ within the meaning of Article 51(1)(b) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark, a national court must take account of all the available evidence from which it is possible to conclude that the applicant was or was not acting knowingly in a manner incompatible with accepted standards of honest or ethical conduct. In particular:
– an intention to prevent others from using similar signs in respect of similar products may be incompatible with such standards if the applicant was, or must have been, aware that others were already legitimately using similar signs, particularly if that use was substantial and longstanding and enjoyed a degree of legal protection, and if the nature of the sign was dictated to some extent by technical or commercial constraints;
– however, such an intention would not necessarily be incompatible with those standards if the applicant himself had enjoyed similar or greater legal protection in respect of the mark applied for and had used it in such a way, to such an extent and over such a time that the use by others of their similar signs could be considered to derive unjustified benefit from the applicant’s sign, and if those others were not constrained in their ability to choose dissimilar signs.
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