Bad Faith Registrations and Protection of Well-know Marks

(IPRinfo 2/2006)
Mindaugas Civilka
Attorney
Norcous & Partners

Lithuania looks as good as any other EU member state when it comes to its statutory framework for trademarks, but it is the enforcement that matters to the companies and individuals. Concerning enforcement Lithuania has lacked predictability and transparency. For quite some time trademark protection seemed to be the matter of professionals rather than part of the usual business.

Lithuanian trademark law can be characterized as favouring the registration system. There is no stricto sensu property right in an unregistered mark.

At least four categories of right holders may be discerned: (a) holders of applications for registration of a national trademark; (b) owners of registered national trademarks; (c) owners of well-known trademarks; and (d) owners of the registered well-known marks. The extent and scope of the rights conferred varies depending on the category of the right holder. The general legislative approach is such that owners of the registered well-known trademarks are vested with the most extensive portfolio of the protection and enforcement-related rights.

Is registration necessary for effective protection?
An unregistered mark may, through use or marketing, come to enjoy the same or even higher protection than a registered trademark if the mark has been used in trade to such extent that it can be considered to have become “widely-known” or “established”.

A mark is considered established if the results of its use and marketing (promotion) suggest that it has become generally known in the appropriate commercial or consumer sectors in Lithuania. Interestingly, the law itself does not specify the criteria for this. Thus, the efficiency of protection and enforcement of a well-known mark has been left to be determined by case-law.

Although the First EU Trademark Directive 89/104/EEC employs the category of reputable registered trademarks (Article 5), the Lithuanian legal system protecting unregistered well-known marks clearly stem from the Article 6bis of the Paris Convention for the Protection of Industrial Property (Paris Convention) whereto Lithuania acceded in 1994.

In other words, Lithuanian system does not imply registration of the well-known mark and certain rights to the owner of the mark are conferred directly by the law, although registered well-known marks are afforded even wider protection.

Generally-known or famous?
When scrutinising the level as to which the mark is well-known in Lithuania, Lithuanian courts adhere to the rationale behind the Article 6bis of the Paris Convention lifting any formal requirements as to the determination and evaluation of the mark’s strength on the market. Moreover, WIPO Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks (WIPO Joint Recommendation) should be duly taken into account when interpreting national laws.

Thus, such factors as the level of the mark’s cognisance, awareness and identifiability on the market, the scope of use and marketing (advertising, promotion), the duration of registration and the value associated with the mark should be subject to consideration.

For instance, in one case (Distilleerderijen erven lucas bols B.V. v. UAB Mineraliniai vandenys, No. 3K-3-1222/2002) the court of first instance ruled that the fact of popularity and wide spread of the mark in the world and Lithuania were insufficient for the mark to qualify as a well-known mark. The court took the view that such facts merely hold the nature of rebutable presumption.

The Supreme Court of Lithuania overturned the decision. It held that the fact that a certain mark has earned popularity, wide usage, geographical spread of usage and famousness on the market are among those criteria that ought to be factored when deciding on the qualification of the mark as a well-known trademark.

The Supreme Court has held that to qualify as a well-known or well-established mark, the mark does not need to be recognized as the most famous and the best-known of all the marks used for the products in question (Breechan group p.l.c. v. I.Kalinin, No. 3K-3-1103/2003). However, in principle the comparison of marks, although credible, may not serve as the deciding factor when assessing the repute, popularity and scope of the use of the mark.

In relation to that, the Supreme Court has ruled that the mere fact that there are registered marks which may have wider applicability or be more known to the users in question may not serve as the ground for refusing to attribute qualities of a well-known mark to the mark in question.

In another case (Japan Tobacco Inc. (Japonija) v. Schrader-Bridgeport International Inc. (USA) , No. 3K-3-1191/2003) the Supreme Court ruled that the provisions of WIPO Joint Recommendation should be taken into account when interpreting national laws. Thus, among others, the wide-spread awareness of the mark, vogue of the mark all over the world and the fact that the information about the particular mark has reached Lithuanian market should be taken into consideration.

Appropriate commercial or consumer sectors
The term “appropriate commercial or consumer sectors” should apply to the target group for relevant goods or services – for example, individual consumers or wholesale businesses. Depending on the nature of the product in question, the size of the appropriate group may vary considerably. Also, a mark can qualify as well-known in a relatively short period and with little marketing effort in case of specialised equipment used by professionals.

On the other hand, for goods or services that can be obtained by businesses and consumers alike establishing trademark rights may occur over a substantially longer period.

The relevant business or consumer circles are obviously those situated in Lithuania. As indicated in one of the recent decisions of the Appellate Court (Lego Juris A/S v UAB Legosta, case 2A-219/2005, September 20, 2005), one of the most important considerations is the number of people (i) who are aware of the trademark, and (ii) who associate it with the mark owner.

In this case, the court stated that the LEGO trademark was already well known in Lithuania on the date that Legosta registered its business name. Accordingly, the court ordered Legosta to change its name.

The mark must normally be used within Lithuania, but this is not a formal requirement. For instance, extensive foreign marketing (through TV, internet, etc.) may also bring about such effects as make a mark to become established even where the products in question are not marketed or even sold in Lithuania.

Finally, for the mark to be approved as well known, the awareness of it must, in principle, be nationwide. However, the market share covered by the relevant products is not relevant. For instance, in the Legosta case the court rejected the defendant’s argument that the market share held by the relevant product of LEGO was insubstantial, amounting to some 3 percent of the national market of relevant products (toys).

Notably, establishing an unregistered mark through its use and marketing efforts may have a practical value where the mark has been rejected by the State Patents Bureau on the absolute grounds due to lack of distinctiveness. Should the mark become a well-known trademark, it will then also have achieved sufficient distinctiveness and can thus become eligible for registration.

Due to the obvious disadvantages inherent in unregistered trademark rights – uncertainty as to the scope, the priority date, the validity and the enforcement of trademark rights, together with the burden of proof in legal proceedings – it is always recommendable to apply for the mark to be registered.

Rights of the well-known mark owners
In addition to the rights of the registered trademark owner, which are exhaustedly enlisted in the Article 38 of the Law, the owner of the well-known trademark is vested with the right to prevent all third parties from using in the course of trade or industry any mark susceptible of being recognized as reproduction, imitation or translation of the well-known mark and which may lead to confusion as to the identical or similar goods as marked by the well-known mark.

The Supreme Court of Lithuania has clarified that the person may not be prevented from the use of the registered mark unless such registration is contested. Thus, the courts have always to take into account firstly if the user of the trademark has any justifiable and bona-fide ground to use this mark, registration of the mark or application therefore obviously being one of such grounds.

This extra protection of a famous mark rests in the functional approach of the deceptive use of any marks with the aim to take unfair advantage of the distinctive character or the repute of the trademark to the obvious detriment of the latter. Consequently, the legislator has sought to encompass and outlaw any use of imitative and deceptive marks thus avoid enlisting all viable and possible forms and ways of such deception.

Notably, qualification of the mark as well-established brings about legal consequences into the future only, having no retroactive or ab initio effect (i.e., the mark-owner may not claim that the rights were conferred upon him as of the start of the use).

In the land-mark case (Torgovyj Dom Potomkov PostavÅ čika Dvora Ego Imperatorskogo Veličestva P.A. Smirnova v. UDV North America Inc., case No. 3K-3-167/2003), the Supreme Court arrived at the conclusion that the bad-faith applications must deserve specific attention when conferring protection to the well-known marks.

The court must not satisfy itself with the finding that the applied or registered mark is in conflict with the well-known mark but it must establish whether the bad-faith mark (a) in an unfair manner detriments the distinctive character of the well-known mark; (b) delivers unfair advantage to the applicant. Thus, the court must in each case demonstrate as to how the registered bad-faith mark may detriment or otherwise impact interests of the well-known mark owner

Protection against bad-faith applications
The second most visible exception to the trademark protection residing in the national registration seems to come up with the protection of bona fide users of the non-registered marks vis-à-vis earlier bad-faith registrations.

Under the Trademark Law of 1993 there was no possibility to contest the registration on the grounds of unfair application. The owners of trademarks could protect their rights infringed by bad-faith applications only by the directly applicable provisions of Article 10bis of the Paris Convention, and the Law on Competition.

It was only 1 January 2001, when by virtue of the new Trademark Law the unfair or bad-faith application has been expressis verbis endorsed as a ground for the absolute refusal to register a trademark or for its invalidation should such registration happens to take place.

Until then cases where different undertakings filed trademark applications in bad faith or having dishonest intentions, e.g. to prevent others from using their own marks, to monopolize the market, to limit parallel import or to re-sell the trademark, were rather frequent.

Most cases were settled through negotiations. But quite often the actual bona fide user of the trademark was compelled to buy the registration of the trademark, because the litigation was too time consuming and the enforcement of unfair competition laws too ambiguous and cumbersome.

The Lithuanian Law of Competition (Article 16) prohibits undertakings from performing any acts contrary to good-faith and fair dealing business practices, including unauthorized use of a mark identical or similar to the registered or unregistered well known trademark or other reference having a distinctive feature and prior rights if this cause or may cause confusion with the undertaking or its activity or whether it is sought to take undue advantage of the reputation of the undertaking (its mark or reference) or where this may cause injury to the repute (its mark or reference) of the undertaking or detrimental to the distinctive character of the mark or reference in question.

Apparently, this provision prohibits only unauthorized “use of a mark”, which gives rise to the important question as to whether the registration of a trademark, without intention to actually use it, may be regarded as unfair competition.

Registration of a mark without use
In one of its unofficial explanations the Lithuanian Competition Council in 2000 opined that the Law of Competition, Article 16 stricto sensu does concern the use of marks only. Thus applying for registering a mark falls outside the reach of the law. For a long time, however, this question was open, and it was not until 2002 when the court realized an opportunity to rule on it in Stada Arzneimittel AG vs. Nestra Limited (case No. 3K-3-482, 14 April 2003).

Stada Arzneimittel AG had invented and produced the medicinal preparation Pfeil Zahnschmerz-Tabletten, which had been used in Germany since 1989. However, in Lithuania this trademark was applied for registration only on June 16, 1998 and was taken in use since 1999. Meanwhile Nestra Limited on June 3, 1998 also filed an application for the registration of the identical trademark Pfeil Zahnschmerz-Tabletten.

Despite the fact that at the moment of Nestra’s application for the registration there were no identical or similar trademarks registered with the Trademark’s Registry and no identical or similar medical preparations were registered with the competent state institutions, the Supreme Court held the actions of Nestra Limited to run counter the honest business practices and to be qualified as unfair competition.

The court stated that Nestra Limited had registered the product name of the other party as its own trademark with the purpose to prohibit Stada Arzneimittel AG from using the trademark Pfeil Zahnschmerz-Tabletten in the Lithuanian market and to frustrate the distribution of this medicinal preparation in Lithuania. The decision was supported by the evidences that at the time of the application Nestra Limited had real intentions to use the trademark in its economic activity.

Another recent case decided by the Supreme Court (UAB Merand vs. UAB Opra, case No. 3K-3-617/2004, 14 December 2004) concerned the registration of the figurative trademark IKRA LOSOSEVAJA ZERNISTAJA (Russian for red caviar) by UAB Opra, which is one of the importers and distributors of red caviar in Lithuania.

The court found that the registration of the trademark amounted to unfair competition, because until the date of filing a handful of other companies were engaged in import and trade in red caviar in Lithuania bearing the same label IKRA LOSOSEVAJA ZERNISTAJA.

The Supreme Court held that it was beyond reasonable doubt that UAB Opra’s application for registering the trademark, which by that time had been in use by a number of other companies for a substantial period of time, was determined by the intention to establish its monopolistic rights in the market. However, the court refrained from recognizing the trademark (label) to be generic in the market.

When establishing whether the acts of unfair competition took place the courts were factoring in a lot of circumstances, such as the actual intentions of the applicant, circumstances related to the creation of the trademark, its first usage, etc.

After the new trademark law
With the entry into force of the new Trademarks Law on January 1, 2002 the trademark owners obtained new legal weapons in fighting unfair and bad faith trademark applications. They have been empowered to file the oppositions before the Board of Appeals of State Patent Bureau directly invoking the norms of the Trademark Law.

According to the Law (Article 7.3), the registration of a trademark may be declared invalid where it becomes evident that the application had been made in bad faith. This procedure enables trademark owners to save costs and time involved in legal proceedings.

Delimitation of trademark law and competition law
In the case (Distilleerderijen Erven Lucas Bols B.V. vs. Bennet Distributors, case No. 3K-3-374/2003) the Supreme Court guided that unfair competition could serve as a ground for abolishment of registration (creating consequences as of the date of decision only) rather than for invalidation thereof ab initio. The Competition Law does not concern registration of trademarks and/or invalidation or abolishment thereof.

Nevertheless, in some other instances the court was inclined to invoke Article 16 of the Competition Law with respect to the protection of the packaging of a product (i.e. the bottle), which is neither a registered trademark nor a patented design.
How to define “Bad faith”

The notion “in bad faith” seems to be rather wide. By the case law one may conclude that the following facts may be considered as evidences of bad faith by the Board of Appeals of State Patent Bureau:

o registration of several trademarks, which all are similar or identical to the marks of others;
o registration of trademarks with no actual intention to use them;
o registration of trademarks with the intention to monopolize the market;
o selling or proposing to sell registered trademarks.

In recent disputes the following circumstances have led to a ruling that the application was made in bad faith:
(A) the applicant registers a trademark, identical to another mark which is well known on the market for designation of the similar goods;
(B) an employee starts his/her own business and registers a mark which has been used by the former employer but has not been registered.

Finally, in order to prevent the use of a sign that infringes exclusive rights, it must be first ascertained whether use of the mark is not authorised. On 27 September 2004 the Supreme Court has held that the application submitted for registration of the mark is in itself legitimate ground for the use of the mark in question.

Therefore, before prevention of the use of the mark may be enforced, such registration should be contested by the decision of the court, which in practice means lengthy litigation, which may cost considerable damage to the IP holder in the meantime.

Concluding remarks
Lithuanian case-law heralds approach towards liberalization of trademark protection in respect of well-known trademarks thus deferring to the rationale behind the Article 6bis of the Paris Convention. Protection of bona fide users of unregistered marks or marks with the later date of registration versus earlier registrations made in bad-faith serves as a meaningful security for multinational business approaching the market.

Norcous & Partners is part of RoschierRaidla Group.