Case C-65/12, Leidseplein Beheer – trade mark elements of Bull, due cause, and prior use in good faith [judgment 2014, ECLI:EU:C:2014:49]

Does the trade mark law concept of ‘due cause’ in Article 5(2) of Directive 89/104 apply to the situation where a similar sign was being used in good faith by a third party before the registration of the mark with a reputation?

Facts
Leidseplein Beheer, the applicant in cassation and defendant in the original action, holds various Benelux trade marks to a non-alcoholic drink known as ‘The Bulldog’. The claimant’s non-alcoholic drink is ‘Red Bull’. Spotting the occurrence of ‘bull’, Red Bull initially commenced proceedings in trade mark law to prevent the defendant from using the word ‘Bulldog’ or other sign containing the word ‘Bull’ on the defendant’s packaging. Red Bull alleged that the use of the word ‘Bull’ caused confusion with the corresponding trade mark registrations of Red Bull.

Red Bull commenced the litigation even though prior to registering its mark in 1983, ‘The Bulldog’ had been used in good faith as a trading name for ‘restaurant and catering services where drinks were sold’, and had been used for, and during, various merchandising activities. The dispute was litigated up to the Dutch Supreme Court.

The Dutch Supreme Court noted that the Amsterdam Court of Appeal had erred when it had applied the Benelux IP Convention’s concept of ‘due cause’ set out in Article 2.20(1)(c) together with its attendant case law of Claeryn v Klarein. The Benelux concept of ‘due cause’ should have been interpreted in accordance with the concept of ‘due cause’ found in Article 5(2) of trade mark law Directive 89/104 (now Directive 2008/95). However, it was not clear from the CJEU’s ‘keyword advertising’ judgment in Case C-323/09, Interflora that the EU’s concept of ‘due cause’ was in and of itself broader than the Benelux-concept of ‘due cause’ in circumstances, such as these, where the sign was being used in a trading name and in good faith before the registration of the mark with a reputation.

Question Referred

According to the Curia website, the Dutch Supreme Court asked:

Is Article 5(2) of Directive 89/104/EEC 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?

Update
The hearing before the First Chamber is scheduled for 27 February 2013.

Update 31 March 2013
After having read the written submissions of the parties, the EU Commission and Italy, and after having heard the oral observations of both parties and the Commission, Advocate General Kokott delivered her Opinion on 21 March 2013. Unofficially translated, she advised the CJEU to conclude:

When assessing whether a third party who, without due cause, uses a sign similar to a well-known mark takes unfair advantage from the distinctive character or the reputation of that well-known mark within the meaning of Article 5(2) of Directive 89/104/EEC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks, the fact that the third party has already been using that sign in good faith for other products or services prior to the mark with a reputation having been filed or having acquired its reputation, should be taken into account and favour the third party.

Her reasoning ran as follows. The wording of Article 5(2) reads: ‘Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark’.

Although the wording of Article 5(2) mentions only cases where signs are used which are identical or similar to a well-known mark but are dissimilar to those goods or services for which the trade mark is registered, the scope of protection also covers the situation where a sign is used for identical or similar goods or services. Therefore, Article 5(2) applies here because the goods at stake are the same, namely, energy drinks.

The scope of Article 5(2) means that the holder of the well-known mark can prohibit third parties from using identical or similar signs in the course of trade. This right can be invoked even where there is no confusion among the relevant public. And the right covers three types of trademark infringement: dilution, tarnishment, and free-riding – any one of these will contravene Article 5(2).

That said, in the Amsterdam Court of Appeal the discussion was whether ‘unjustified advantage had been taken’ by ‘hooking onto’ the distinctive character or reputation of the trade mark – the focus being placed not so much on the detriment caused to the mark but rather on the advantage taken by the third party as a result of the use of the identical or similar sign. ‘Hooking onto’ covers, in particular, cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation.

However, the Dutch Supreme Court was primarily concerned with whether the use of the sign could be said to be ‘without due cause’ since the sign had been used by a third party in good faith prior to the mark being filed.

Advocate General Kokott noted Red Bull’s key submission. Namely, the phrase ‘without due cause’ had to be interpreted restrictively. There had to be some form of necessity for the sign’s use, and no reasonable ground for that person refraining from using the sign. In other words, there had to be some urgent reason for the use to be excluded. Kokott AG noted that Red Bull’s submission was founded on: an earlier unpublished judgment of the CFI dating from 2009 (T-21/07, L’Oréal v OHIM – Spa Monopole (SPALINE); a 2010 decision of an OHIM Board of Appeal; and the earlier 1975 ‘Claeryn v Klarein’ case law of the Benelux court.

She remarked that Red Bull’s submissions could perhaps derive some support from the Dutch version of the Directive but their force was weakened when other language versions of the Directive were taken into account. For whereas the Dutch version referred to ‘geldige reden’ [‘valid reason’] (suggestive of there needing to be a real legal right to use the sign), the German version required a ‘rechtfertigender Grund’, the French a ‘juste motif’, and the English was couched in terms of ‘due cause’ – versions whose wording did not connote the use of the sign needing to be justified by something obligatory. Accordingly, she Opined that it might be sufficient if the use was based on a legitimate interest, an interest which might outweigh the trademark holder’s interest. And at first blush, she could see no impediment as to why the earlier use of a sign could not form the basis to an interest which outweighed that of the right holder.

Even though the language versions of the Directive did not match, Kokott AG recognised that the provision still needed to be interpreted uniformly. Thus, the provision had to be interpreted by reference to the purpose and general scheme of the rules of which it formed a part. Looking at the drafting of Article 5(2), showed various interests had to be weighed. After all, the holder of a well-known mark cannot prohibit every single use of a mark or similar sign but can only prohibit use which without due cause allows either an unjustified advantage to be taken from, or a detriment to, the distinctive character or reputation of the mark. Accordingly, there is a close relationship between the fact that unjustified advantage is taken, or detriment occurs, and the fact that no due cause exists for the sign’s use. Determining whether due cause exists links to determining whether a sign has taken an unfair advantage from the distinctive character or reputation of the mark.

Kokott AG outlined the relevant circumstances to be taken into account: the extent of the reputation and the scale of distinctive character; the degree of similarity between the conflicting marks; the nature of the goods and services concerned, and the degree to which they are related. In so far as the extent of the reputation was concerned and the degree to which the older mark had a distinctive character, the greater the distinctive character and the reputation of that mark, the easier it will be to make a finding of detriment. The more direct and stronger the mark is evoked, the greater the likelihood that the use of the sign, either at that moment or in the future, will take advantage from, or be detrimental to, the distinctive character or the reputation of the older mark.

She also thought the referring court should also keep in mind that where the same goods were involved, the association was going to be made very quickly with the goods of the well-known mark. Yet the marks in the present case were not identical and corresponded only in their use of the word ‘bull’ – and the word bull used in De Vries’ sign was but one element in the word ‘Bulldog’, and was linked to a completely different image.

‘Unfair advantage’ is characterised by the fact that a third party attempts to use signs corresponding to trade marks with a reputation, to ride on its coat-tails in order to benefit from its power of attraction, its reputation and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of its own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark.

In that context, she attributed great importance to the fact that the sign ‘The Bulldog’ was filed under alcohol-free drinks as early as 1983. Although the trade mark ‘Red Bull’ was older by only a few days, it was doubtful whether Red Bull was already well-known at that particular moment. Mr De Vries can, in so far as this mark is concerned, rely on the principle recognised in EU law of ‘protected acquired rights’ in order to justify use for an alcohol-free energy-drink. If advantage is taken from an existing right, then this cannot in principle be unjustified and impermissible where on the basis of the fact that another mark subsequently becomes well-known, the scope of protection of the mark comes to clash with the scope of protection of existing marks.

On the other hand, Mr De Vries does not submit that he used this mark for energy-drinks before 1997. And the Dutch Supreme Court was not clear in its referring order that it had taken into consideration what the consequences were for this mark – its starting point had been much more that the mark had been used for other economic activities in the hotel, restaurant and catering sectors.

And yet such a use of a mark must also form a part of the balancing of the interests. After all, the use was also the result of the third party’s efforts. Through its earlier use, the sign could also have acquired a power of attraction, reputation and prestige whereby the legitimate interest of the third party also needed to be taken into account. This will apply to a lesser extent where the sign is used after the mark has been filed but before this mark becomes well-known.

Since the earlier use of a sign can also give rise to a power of attraction, reputation and prestige, current use can also be an appropriate means of satisfying the necessary origin-denoting function of the mark, and thereby contribute to informing the consumer. And thus it is quite possible in the present case that consumers in Amsterdam would sooner associate the sign of ‘The Bulldog’ with a specific company than they would with say the names of ‘De Vries’ or ‘Leidseplein Beheer’ or some other new indication.

The legitimate interest arising from the use of an earlier sign was equally not destroyed by the fact that Mr De Vries potentially only started his trade in energy-drinks after Red Bull had scored considerable success with its product. Trade mark law should not preclude specific companies from participating in the competition that exists in specific markets. As was apparent in the Interflora judgment, this form of competition in the internal market is actually desirable. In the context of this competition, companies must in principle have the right to use the signs with which they are known in the marketplace unless there is a risk of confusion.

Accordingly, to use Red Bull’s example of an established bookshop with the name of ‘Green Apple’ which starts to sell computers under that name, it cannot automatically be presumed that there is infringement in the rights of the well-known ‘Apple’ trade mark. In this respect, the Commission is correct in its submission that it will still be possible to stop specific forms of use of earlier-used signs when, having taken all of the relevant considerations into account, without due cause unfair advantage is being taken from, or detriment is being done, to the distinctive character or reputation of a a well-known mark. That could be the case where the form in which the sign appears creates the impression on the consumer that there is a special affinity with the well-known mark.

Therefore, when assessing whether the use of a sign without due cause takes an unfair advantage of the distinctive character or reputation of a well-known mark, the referring court should take account of each of the above factors.