CJEU guidance on the definition of “due cause”: Leidseplein Beheer & Hendrikus de Vries v Red Bull (case C-65/12)
This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
In a decision handed down last month, the CJEU addressed the concept of "due cause" and specifically, whether a brand extension into goods for which a mark (RED BULL) had a reputation (i.e. energy drinks) was with "due cause".
In summary, the CJEU concluded that a sign can be used with "due cause" in relation to a product which is identical to that for which a trade mark is registered (for the purposes of Article 5(2) of the Trade Marks Directive) if it can be shown that the sign was in use before the trade mark was filed, and that the use of the sign in relation to the identical product is in good faith.
Facts
Red Bull is the proprietor of the Benelux word and figurative mark RED BULL KRATING-DAENG, registered on 11 July 1983 for non-alcoholic drinks. It was common ground at the CJEU that this mark enjoyed a reputation in the Benelux countries.
Leidseplein Beheer and Mr de Vries manufacture an energy drink under the brand "THE BULLDOG". Mr de Vries claimed to have been using the sign "The Bulldog" for hotel, restaurant and cafe services since 1975, and use had been established by the Dutch court from a date prior to that on which Red Bull's mark was registered. Mr de Vries is also the proprietor of several word and figurative marks for THE BULLDOG covering non-alcoholic drinks.
Red Bull brought trade mark infringement proceedings against Leidseplein Beheer and Mr de Vries requesting that Mr de Vries be ordered to cease production and marketing of energy drinks displaying the sign "Bulldog".
Decisions of the Amsterdam Courts and questions referred
Red Bull lost its claim at first instance, and appealed to the Amsterdam Regional Court of Appeal.
The Court of Appeal held that the mark RED BULL KRATING-DAENG had a reputation and because of the similarity between the mark and sign (both consisting of "BULL"), the relevant public would make a connection, even if there was no confusion. As a result, Mr De Vries, by riding on the coat-tails of the mark with a reputation, had sought to take advantage of the reputation of the mark.
Mr de Vries argued that use of THE BULLDOG for energy drinks was a continuation of his use (commencing prior to 1983) of the same sign for hotel, restaurant and cafe services, including the sale of drinks. However, the Court did not consider this to constitute "due cause", as Mr de Vries had not substantiated such a need to use the sign that he could not reasonably be expected to stop using it.
Mr de Vries lodged an appeal before the Amsterdam Supreme Court. The Supreme Court stayed the proceedings and referred the following question to the CJEU:
"Is Article 5(2) of Directive [89/104] to be interpreted as meaning that there can be due cause within the meaning of that provision also where the sign that is identical or similar to the trade mark with a reputation was already being used in good faith by the third party/parties concerned before that trade mark was filed?"
Legal context and CJEU decision
Article 5(2) of the Trade Marks Directive provides enhanced protection for trade marks with a reputation. It allows proprietors of these marks to prevent use of a similar sign in respect of similar and dissimilar goods when the use of the sign is without due cause and takes (or would take) unfair advantage of; or is (or would be) detrimental to the distinctive character or the repute of the earlier mark. The proprietor does not need to show a likelihood of confusion, only that a consumer would make a link between the sign and the registered mark.
Where the proprietor of a mark with a reputation has demonstrated the existence of one of the forms of injury - either unfair advantage or detriment to the mark, the onus is on the party using the sign to establish that he has due cause for such use.
Mr de Vries submitted that use, in good faith, of a sign that is similar to a mark with a reputation, in circumstances where that sign was used before the mark was filed can be covered by the concept of "due cause".
Counsel for Red Bull submitted that Mr de Vries' position would (i) lead indirectly to the recognition of unregistered marks (the Benelux Convention only provides protection for registered marks); and (ii) that it would result in the scope of protection conferred by Article 5(2) being wrongly narrowed. As such, the concept of due cause should only cover objectively overriding reasons. However, the CJEU disagreed and found that the concept of "due cause" is intended to strike a balance between the interest of the rights holder and that of party using the sign. In doing so, the claim by a third party that there is due cause for using a sign which is similar to a mark with a reputation cannot lead to the recognition of trade mark rights for the benefit of that third party, but rather, obliges the proprietor of the mark with a reputation to tolerate the use of the sign.
The CJEU reasoned that the concept of "due cause" cannot only include objectively overriding reasons, but may also relate to the subjective interests of the party using the offending sign. As a result, consideration was given to determining the conditions under which use of an identical or similar sign in relation to identical goods for which the mark with a reputation is registered, where the sign was already being used before that mark was filed, may be covered by the concept.
The Court found that the proprietor of a trade mark with a reputation may be obliged to tolerate the use by a third party of a sign similar to that mark in relation to a product which is identical to that for which that mark was registered, if it is demonstrated that (i) the sign was being used before that mark was filed; and (ii) the use of the sign in relation to the identical product is in good faith. In order to determine whether that is so, the national court must take account of:
- How the sign has been accepted by, and what its reputation is with, the relevant public; and
- The intention of the person using the sign. To determine whether use of the sign was in good faith, one should take into account:
- The degree of proximity between the goods and services for which the sign was originally used and the product for which the mark with a reputation was registered; and
- The economic and commercial significance of the use for that product of the sign which is similar to that mark.
The CJEU commented that where a sign has been used prior to the registration of a mark with a reputation in relation to goods and services which may be linked to the product for which the mark has been registered, the use of the sign in relation to the latter product may appear to be a natural extension of the goods for which the sign already enjoys a certain reputation with the relevant public.
On the facts in question, Mr de Vries' energy drinks may be perceived not as an attempt to take advantage of the repute of RED BULL, but rather as genuine extension of the range of goods offered by Mr de Vries.
Practical Implications
This ruling provides some welcome guidance on the concept of "due cause" and the circumstances in which it will apply. However, it seems somewhat paradoxical to say a party can take unfair advantage, but still be acting in good faith. We anticipate this ruling will have a fairly narrow application in specific factual circumstances that closely resemble the facts in issue here.
