Resurrected brands and bad faith – EU General Court annuls decision of EUIPO Board of Appeal in NEHERA case

In its judgment of 6 July 2022 (case T-250/21), the General Court of the European Union annulled the decision of the Second Board of Appeal of the European Union Intellectual Property Office (EUIPO) that found that the Slovak owner of the EUTM registered trade mark ‘Nehera’ (see the figure below) acted in bad faith when he applied to register the mark in 2013. The Board found that the owner intended to take unfair advantage of the reputation of an identical brand that was famous in Czechoslovakia in the 1930s, but was no longer used in Europe after 1946. Although the owner was aware of the past existence and reputation of the old Nehera brand and admitted that he “revived” and “resurrected” the brand in order to “pay a tribute” to it, the General Court concluded that the Board of Appeal erred in finding that the owner had acted in bad faith at the time of filing the mark.

Background

The case concerned an invalidity action brought in 2019 by Isabel Nehera, Jean-Henri Nehera and Natacha Sehnal against a EUTM registration ‘Nehera’ owned by Ladislav Zdút, filed in 2013 and registered in 2014 for goods and services in classes 18, 24 and 25, pursuant to Article 59(1)(b) of the EU Trade Mark Regulation (EUTMR).

The grandfather of the invalidity applicants, Jan Nehera, was a businessman in the fashion sector who, at the beginning of the 1930s, had established a clothing and accessories business under his surname. The business was quite successful in Czechoslovakia and abroad, and at one point had more than 130 retail outlets in Europe, the US and Africa. Jan Nehera had also filed a trade mark in Czechoslovakia identical to the contested mark that was registered in 1936, but lapsed in 1946.

On 1 January 1946, Jan Nehera’s business was nationalised and its ownership was transferred to the Czechoslovak state. Nehera then continued its activity under a new business name that no longer referred to its founder’s surname. Jan Nehera had already left Czechoslovakia and had settled in Morocco, in which country he continued to operate two clothing shops and where he died in 1958.

Ladislav Zdút is a Slovak businessman with no family ties with Jan Nehera. Before registering the EUTM in 2014, he had registered a Czech trade mark identical to Jan Nehera’s mark and the contested mark in 2006, but the registration expired in 2016. In 2014, he began to market the contested mark in relation to women’s clothing.

The invalidity applicants claimed that Ladislav Zdút acted in bad faith when he filed the EUTM. In April 2020, the EUIPO Cancellation Division dismissed the application for invalidity on the ground that the owner’s bad faith had not been established. The invalidity applicants appealed. In March 2021, the EUIPO Board of Appeal upheld the invalidity applicants’ appeal, annulled the decision of the Cancellation Division and declared the EUTM invalid. According to the Board, Ladislav Zdút was acting in bad faith when he filed the EUTM because his intention was to take unfair advantage of the reputation of Jan Nehera and his identical Czechoslovak trade mark. Ladislav Zdút appealed the Board’s decision before the General Court.

General Court’s judgment

In the present judgment, the General Court upheld the appeal filed by Ladislav Zdút and annulled the decision of the Board of Appeal. According to the Court, the Board erred in finding that the owner intended to take unfair advantage of the reputation of Jan Nehera and of the former Czechoslovak trade mark and in finding that he was acting in bad faith.

The General Court held:

1. The Board of Appeal erred in finding that Jan Nehera’s Czechoslovak mark had retained a certain surviving reputation and that the name was still famous when the EUTM was filed. The evidence filed by the invalidity applicants did not prove this.
2. In the absence of surviving reputation, the subsequent use of the contested mark by the owner was not, in principle, capable of constituting free-riding behaviour indicating bad faith on the part of the owner.
3. Although the owner established a link between his Nehera business and the former Czechoslovak trade mark by stating that his business “revived” and “resurrected” the old Nehera brand, the existence of this link could not be sufficient on its own to support a finding of unfair advantage of the reputation of the older identical name.
4. Ladislav Zdút did not exploit in a parasitic way the past reputation of the former Nehera brand, which was completely forgotten when the EUTM was filed in 2013. The owner made his own commercial efforts in order to revive the image of the former Czechoslovak trade mark and thus, at his own expense, to restore that reputation. In those circumstances, the mere fact of having referred, for the purposes of promoting the contested mark, to the historic image of Jan Nehera and of the former Czechoslovak trade mark did not appear to be contrary to honest practices in industrial or commercial matters.
5. It was not established, nor even alleged, that Ladislav Zdút claimed a family tie with Jan Nehera or that he presented himself as the heir and the legal successor of Jan Nehera or of his business. By stating that he had revived and resurrected a mark that flourished in 1930s, the owner suggested rather an interruption and therefore a lack of continuity between Jan Nehera’s activity and his own. Therefore, it did not appear that the owner deliberately sought to establish a false impression of continuity or inheritance between his undertaking and that of Jan Nehera.
6. It did not appear that, in applying for registration of the contested mark, the owner intended to defraud the descendants and heirs of Jan Nehera or to usurp their alleged rights. In any event, since the former Czechoslovak trade mark and Jan Nehera’s name no longer benefited from any legal protection in favour of a third party at the date the EUTM was filed, the descendants and heirs of Jan Nehera did not hold any rights capable of being defrauded or usurped.
7. The owner could not be held responsible for the nationalisation of Jan Nehera’s business in 1946, nor the lack of protection and use of the former Czechoslovak trade mark for almost seven decades. The fact that Jan Nehera was unlawfully or unfairly deprived of his assets was not enough to establish bad faith on the part of the owner.
8. The concept of bad faith presupposes the presence of a dishonest state of mind or intention. In the present case, however, it was not established that the owner was driven by a dishonest state of mind or intention when he filed the EUTM.

Comment

This is an interesting case especially for brand owners who are considering ‘reviving’ or ‘resurrecting’ an old once-famous trade mark that was used/owned by an unrelated party in the past, but has not been used for numerous years.

The General Court’s findings show that, in certain circumstances, there may exist no bad faith on the part of the applicant who applies to register a trade mark identical to an old trade mark previously used/owned by an unrelated party, even in cases where the old trade mark was famous or reputed in the past. In particular, in such a scenario, the presence of one or more of the following factors may result in a finding of absence of bad faith on the part of the applicant at the time of filing the identical mark (although the other circumstances of the case will also be relevant in establishing whether bad faith exists):

1. The old trade mark has not retained a “certain surviving reputation” (see Simca, T-327/12); it has not been used for many years and is currently “forgotten” by the relevant public in the European Union.
2. The owner of the old trade mark, and/or its legal successors, own no active registrations for the mark, especially in the European Union.
3. Even if the applicant establishes a link between the new trade mark and the old trade mark, for example by “paying tribute” to the old mark and/or the owner of it, the applicant:
   1. does not appear to exploit in a parasitic way the past reputation of the old trade mark;
   2. makes its own commercial efforts in order to revive the image of the old mark and thus, at its own expense, restore that past reputation;
   3. does not present itself as the legal successor of the owner of the old mark or its related business; and
   4. does not seek to establish a false impression of continuity or inheritance between its business and that of the owner of the old mark.

Should all the above circumstances be present, it is more likely to be found that the applicant did not have a dishonest state of mind or intention at the time of filing the mark identical to the old mark with a past reputation. If so, bad faith would not be established.

It remains to be seen whether the EUIPO or the invalidity applicants will appeal the General Court’s decision before the Court of Justice. If so, for the appeal to proceed, the appellant must first demonstrate that the case raises an issue that is significant with respect to the unity, consistency or development of EU law. So far, the Court of Justice has been strict in applying this requirement and has allowed only one trade mark appeal to proceed.

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