CANCELLATION No C 36 561 (INVALIDITY)

Kleenoil Filtration Limited, Unit A, The Maltings, Fenton, Lane, LS25 6EZ Sherburn In Elmet, Leeds, United Kingdom (applicant), represented by Michał Jackowski, ul. Zbąszyńska 29, 60-359 Poznań, Poland (professional representative)

 

a g a i n s t

 

Kleenoil Panolin AG, Gewerbegebiet Schnöth, 79804 Dogern, Germany  (EUTM proprietor), represented by Gottschalk Maiwald Patentanwaltsgesellschaft und Rechtsanwaltsgesellschaft mbH, Jungfernstieg 38, 20354 Hamburg, Germany (professional representative).

On 13/11/2020, the Cancellation Division takes the following

 

 

DECISION

 

1.	The application for a declaration of invalidity is upheld.

 

2.	European Union trade mark No 8 297 822 is declared invalid in its entirety.

 

3.	The EUTM proprietor bears the costs, fixed at EUR 1 080.

 

REASONS

The applicant filed a request for a declaration of invalidity against European Union trade mark No 8 297 822 ‘KLEENOIL Microfiltration’ (word mark) (the EUTM), filed on 13/05/2009 and registered on 22/11/2009. The request is directed against all the goods covered by the EUTM, namely:

Class 4: Industrial oils and greases; lubricants; fuel (including motor fuel).

Class 7: Filters, filter housings, filter inserts and filtration installations, including being parts of machines, motors or engines, and accessories and spare parts for the aforesaid machines, motors, engines and installations; control apparatus for filtration installations.

Class 9: Measuring, control and regulating apparatus, in particular for monitoring pressure, temperature, additive content, viscosity in liquids, in particular industrial oils; apparatus for the mesurement of physical and chemical quantities; indicators; data-processing equipment and computers.

The applicant invoked Article 59(1)(b) EUTMR.

SUMMARY OF THE PARTIES’ ARGUMENTS

The applicant argues that the mark ‘KLEENOIL’ has been used since 1974, first by Cresco Kleenoil Limited, which was taken over in 1976 by Mr Brian Cornett, the current director of the applicant. Mr Cornett has been using the mark ever since, via several companies that he created. The applicant describes the business success and international growth of Mr Cornett’s companies. It explains that in 1985, Mr Cornett and one of the clients of Kleenoil Sales, the company Cardev Ltd, collaborated in setting up an export company named Kleenoil International Ltd, a company with four shareholders, in which Mr Cornett held the biggest share. According to the agreement concluded in 1987, Cardev Ltd would administer the sales in continental Europe and Kleenoil Filtration (one of Mr Cornett’s companies) in the UK and the rest of the world. In this agreement, Cardev Ltd expressly acknowledged that all the trade mark rights reside and remain with Kleenoil Filtration. In August 1987, the directors of Cardev Ltd exchanged the names of the companies Cardev Ltd and Kleenoil International in the Companies House. This action (for which one of the directors of Cardev Ltd even apologized later to Mr Cornett) was blocked and the original names were restored in January 1988. At that time two new directors were appointed in Cardev Ltd, one of them being Mr Krstic, the director of the EUTM proprietor. An attempt to revive Kleenoil International Ltd was made in autumn 1988, when an agreement between Kleenoil Filtration and Cardev Ltd was concluded, which included a non-competition clause for the directors of all the companies involved in the agreement including Mr Krstic. The business relationship was definitely terminated after Mr Cornett found out that Cardev Ltd had been copying the products and supplying them to consumers without the knowledge of Kleenoil Filtration. In December 1989, Mr Krstic began his business activity under the name Kleenoil Deutschland, later transformed to the EUTM proprietor. The applicant points out that the contested trade mark is highly similar to the mark used by Mr Cornett and his companies, because it contains the word ‘Kleenoil’ and the additional element ‘Microfiltration’ is exclusively descriptive, and it is registered for the same or very similar goods, namely products for oil filtering and oil analysis. The EUTM proprietor knew about the applicant’s trade mark given that its director was also the director of the company previously collaborating with the applicant in the use of the mark. As regards the dishonest intention on the part of the EUTM proprietor, the applicant points out that Mr Krstic repeatedly acknowledged the ownership of the mark ‘KLEENOIL’ by the applicant and he was also bound by the non-competition clause. By registering the mark in the name of his company, he acted in breach of honest commercial and business practices and attempted to unfairly benefit from the worldwide recognition of Kleenoil Filtration and its distribution network. The applicant provides a table including names and websites of its distributors in many countries or regions all over the world. Moreover, the applicant argues that the fact that the EUTM proprietor tried to enforce its rights against the applicant is another factor confirming the bad faith of the EUTM proprietor.

In support of its arguments, the applicant filed the following evidence:

 Annex 1: press release dated on 11/04/1974 introducing the benefits of filtration of used oil by Kleenoil and a brochure/invitation to a presentation taking place in May 1978 of Brian Cornett’s Kleenoil.

 Annex 2: certificate of registration of Kleenoil Sales from 23/10/1979.

 Annex 3: extracts from Companies House regarding the incorporation of Kleenoil Filtration Limited on 25/07/1986, Mr Cornett is listed as one of the officers of the company.

 Annex 4: printout from DueDil platform regarding Kleenoil International Ltd., showing the current status as ‘dissolved’. It was founded in 1985, in August 1987 changed name to ‘Cardev Limited’ and back to ‘Kleenoil International’ in January of the next year.

 Annex 5: correspondence between Mr Cartwright and Mr Cornett regarding the establishment of Kleenoil International Ltd., from 1986. The logo of the company is displayed as . Mr Cartwright mentions he will be meeting Milorad the Yugoslav.

 Annex 6: an unsigned draft of Kleenoil International shareholders agreement from 1986, between the investors and executives (Mr Cartwright, Mr Devonshire, Mr Funnell and Mr Cornett). Kleenoil International was to be a substantial distributor of Kleenoil Bypass Filters.

 Annex 7: orders from Cardev Ltd to Kleenoil Sales and invoices to Cardev Ltd from Kleenoil Filtration and Kleenoil Sales, dated between 1986 and 1988, for oil changes and KLEENOIL filters.

 Annex 8: marketing agreement allegedly from 1987 (unsigned and undated) between Kleenoil Filtration and Cardev Ltd, by which Cardev is appointed the sole distributor of the Kleenoil Filtration equipment in Northern Ireland, Ireland and Europe with the exception of Great Britain, Scandinavia and Portugal. It includes the following point: “Cardev Ltd acknowledges that the ownership of and all rights in the trade marks used on the PRODUCTS (before defined as Kleenoil Filtration Equipment) reside and shall remain in Kleenoil Filtration and Cardev Ltd agrees that it will acquire no right., title or interest in any of said trade marks by virtue of this agreement.”

 Annex 9: printout from the DueDil platform regarding Cardev Ltd showing that a company established in 1983 changed name to Cardev Limited in 1984, in August 1987 it changed name to Kleenoil International Limited and in January 1988 the name was changed back to Cardev Ltd.

 Annex 10: a letter from Mr Cartwright to Kleenoil Sales, dated 05/09/1987, in which he is informing Mr Cornett that Cardev Limited changed name to Kleenoil International Ltd.

 Annex 11: a letter from Mr Devonshire to Mr Cornett, dated 12/10/1987, apologizing for any inappropriate actions undertaken, confirming that the name Cardev Ltd will be restored and planning further business within Kleenoil International.

 Annex 12: extract from Companies House regarding Cardev Ltd with the history of changes and correspondence between Mr Cartwright and Mr Cornett (already submitted as Annex 5) and a letter from Mr Cornett to Kleenoil Deutschland, dated 09/06/1987, in which Mr Cornett expresses his concerns over an article regarding problems with application of By-Pass Oil Filters and suggests that a reply should be published, while giving information of the fantastic success that the Kleenoil By-Pass Filters have been over the years, with only exceptional faulty installations.

 Annex 13: an agreement, undated and unsigned, regarding reactivation of Kleenoil International Ltd, containing the non-competition clause.

 Annex 14: an affidavit of Mr Cornett made before notary public in 2012, in which Mr Cornett summarizes the history of events between Kleenoil Filtration and Cardev Ltd, as explained in the applicant’s observations and adds that, in the 1990`s, after the dissolution of Kleenoil International, when Cardev Ltd begun to manufacture its own products which were identical to those of Kleenoil Filtration and sell them under the mark Kleenoil, Kleenoil Filtration was advised that the costs to challenge Cardev Ltd would be prohibitive and Kleenoil Filtration was not financially strong enough to take the risk.

 Annexes 15 to 17: printouts from the EUTM proprietor’s and Mr Krstic’s websites and excerpts from Handelsregister, according to which Mr Milorad Krstic is the executive director of the EUTM proprietor.

 Annex 18: a copy of the registration certificate of the contested mark.

 Annex 19: an article dated 10/08/2007, quoting Mr Krstic and mentioning that Mr Krstic founded the company Kleenoil International with two English business partners which was later renamed Cardev Ltd.

 Annex 20: a copy of registration certificate for a series of the marks No 2158513, , registered in 1998 by Mr Cornett for filters and filtration system in the UK.

 Annex 21: technical data sheet and specifications for the Kleenoil filter cartridge, dated in 1988 and 1989, to which the Kleenoil Filtration Limited stamp is printed and on which the mark is displayed; a leaflet regarding a Kleenoil By-pass filter dated in 1994.

 Annex 22: list of trade marks of Kleenoil Filtration and its distributors.

 Annex 23: statement of Mr Krstic, representing the EUTM proprietor, dated 22/05/2019, authorizing the distributor of the EUTM proprietor to enforce trade mark rights in Poland.

The EUTM proprietor argues that the applicant did not substantiate its claim of ownership, since 1974, of an unregistered trade mark, since it did not demonstrate sufficient use. It also did not provide proof of authorship of the mark or any other proof of ownership of copyright. It quotes from the Guidelines of the EUIPO regarding Article 8(4) EUTMR and concludes that the applicant did not comply with any condition listed therein. Furthermore, the EUTM proprietor refers to Article 61(2) EUTMR and argues that the applicant knew about the use of the contested mark at least since 2001 and that it did not take any action against such use and tolerated it for 18 years, until the application was filed. Consequently, the applicant is not entitled to apply for the declaration of invalidity. Finally, the EUTM proprietor also puts forward arguments regarding the bad faith allegations. It insists that the mark was not filed in bad faith. It contends that the ground of bad faith covers trade marks which were not filed with the intention of using them but whose sole purpose is to obstruct third parties in competition. It argues that the EUTM proprietor has been using the trade mark in accordance with its essential function and, therefore, the mark cannot be invalidated on the grounds of bad faith. It reminds that the mere knowledge of use of the mark by another entity is not sufficient to proclaim bad faith, but dishonest intentions have to be proven. The EUTM proprietor emphasizes that it is not a legal successor of Cardev Ltd and is therefore not bound by any agreement between the applicant and Cardev Ltd. It maintains that it registered the contested mark in order to participate in competition and not with the intention of harming the interests of the applicant in a manner contrary to honest business practices. It argues that it has actively used the mark since the founding of the EUTM proprietor company in 1986 and continued using it after the registration of the trade mark. The EUTM proprietor stresses that there was never any agreement closed between the applicant and the EUTM proprietor according to which the EUTM proprietor would be bound not to use or register the contested trade mark. It repeats that the agreements between the applicant and Cardev Ltd are not binding for the EUTM proprietor as it is not the legal successor of Cardev Ltd. It refers to the agreement submitted by the applicant as Annex 13 and points out that the applicant itself allowed its distribution partners the use of KLEENOIL sign. It also uses the mentioned agreement to show that Mr Cornett understood that the geographical split of the use of the mark agreed then with Cardev Ltd was to continue in relation to the EUTM proprietor. The EUTM proprietor claims that it was its understanding that Mr Cornett, by not taking action against the use of the contested mark, by continued conversations between the two parties and by the gentlemen’s agreement, which was, in Mr Cornett’s own words, respected between the parties, gave an implicit consent to the EUTM proprietor to register the mark. While Mr Cornett discontinued the collaboration with Cardev Ltd in 1990, he did not end the business relationship with the EUTM proprietor. The EUTM proprietor concludes that the applicant did not demonstrate bad faith on the part of the EUTM proprietor and that the latter could, at the time of filing of the contested mark, rightfully assume the consent of the applicant with respect to the registration and use of the contested mark.

In support of its arguments, the EUTM proprietor filed the following evidence:

 Enclosure 1: a letter from Mr Krstic to Mr Cornett dated 30/05/2001 written after ‘a long time since we were in contact’ in which Mr Krstic proposes further collaboration and a meeting to consider some options to proceed more positively.

 Enclosure 2: a letter from Mr Cornett to Mr Krstic dated 19/04/2002 in which Mr Cornett declares that there is no reason for any animosity between the two of them. He states that he is not happy about the restriction on him using his company name in certain areas but that this does not present him with such a big problem. He sees no reason why he should not supply Mr Krstic or any other business in Germany as he has no exclusive distributors there and he welcomes the opportunity to meet.

 Enclosure 3: an excerpt from the agreement between Kleenoil Sales, Kleenoil International and Cardev Ltd., undated and unsigned.

 Enclosure 4: Affidavit of James Byrom, who was employed by Cardev International since 1991 and was involved in its management until 2007. Mr Byrom was aware of historical arrangements between Mr Cartwright, Mr Devonshire and Mr Cornett, according to which Mr Krstic was using the Kleenoil brand in Germany while Mr Cornett was using the brand in the UK and other territories. Between 2005 and 2009 Mr Byrom engaged in conversations with Mr Cornett, during which Mr Cornett acknowledged that he was aware of that Mr Krstic used the brand KLEENOIL in some territories and the two parties observed an unwritten gentleman’s agreement to avoid clashes, for example Mr Cornett cited that he never went anywhere near German market as he was aware that Mr Krstic used the mark there. Mr Byrom also acted as an intermediary to facilitate discussions between Mr Krstic and Mr Cornett over the years. Mr Byrom states that brand registrations were not as important when the companies were small, it was always clear that the use of the Kleenoil brand by different parties in different territories had been accepted by both parties involved and never challenged.

The applicant emphasizes that the application is not based on Article 8(4) EUTMR but on bad faith. This is also the reason why Article 61(2) EUTMR cannot be applied to the present case. The arguments raised by the EUTM proprietor in relation to the abovementioned provisions of the EUTMR are, therefore, irrelevant. Out of abundance of caution, nevertheless, the applicant maintains that use of its mark was proven and that even the documents submitted by the EUTM proprietor demonstrate this. Moreover, the applicant clarifies that it never suggested that the EUTM proprietor is the legal successor of Cardev Ltd but that it nevertheless considers to be a dishonest business practice for a director of a company that undertakes a commitment to break such a commitment from within another company. It argues that the directors of Cardev Ltd, Mr Krstic being one of them, on multiple occasions accepted the status of the trade mark ‘KLEENOIL’ as belonging to the applicant. Mr Krstic then could not possibly consider that the mark was his to register in the name of his new company. The applicant does not consider that the agreements referred to legally bind the EUTM proprietor company but insists that the EUTM proprietor’s behavior goes far beyond acceptable market practice. The applicant also puts forward that from the correspondence between Mr Krstic and Mr Cornett it is clear that the applicant did not give consent to the EUTM proprietor for registering the mark at issue. In fact, the applicant filed a trade mark application in the UK in 1998, after it found out about the application for the first ‘KLEENOIL’ trade mark registered by the EUTM proprietor, in an attempt to prevent total restriction of use of its very own trade mark in the UK. The applicant concludes that the EUTM proprietor has implemented a long-term strategy to limit the use of the original authorized user of the Kleenoil trade mark and its official and authorized distributors. The enforcement of the rights in relation to the original holder of the mark and related entities is unacceptable market situation and does not confirm honest intentions of the EUTM proprietor.

The EUTM proprietor stresses again the length of the time period that passed between the filing of the contested mark and the filing of the invalidity request and contends that this may serve as an indication that the applicant did in fact accept the split of territories. It also stresses that the applicant did not take any action between 2001, when it was aware of the use of the mark by the EUTM proprietor, and 2009, when the contested mark was filed. It argues that the contested mark contains an additional element ‘Microfiltration’, which causes the contested mark to create a different overall impression when compared to the mark ‘KLEENOIL’. It reiterates that the agreements concluded between the applicant and Cardev Ltd have no relevance for these proceedings and points out that even the applicant itself acknowledges that the EUTM proprietor is not legally bound by any of them. On the contrary, the territorial split contained in one of the agreements also existed, in the form of an amicable coexistence, between the applicant and the EUTM proprietor. The EUTM proprietor has not intended to eliminate the applicant or its business at any point of time.

ABSOLUTE GROUNDS FOR INVALIDITY – ARTICLE 59(1)(b) EUTMR 

General principles 

Article 59(1)(b) EUTMR provides that a European Union trade mark will be declared invalid where the applicant was acting in bad faith when it filed the application for the trade mark. 

There is no precise legal definition of the term ‘bad faith’, which is open to various interpretations. Bad faith is a subjective state based on the applicant’s intentions when filing a European Union trade mark. As a general rule, intentions on their own are not subject to legal consequences. For a finding of bad faith there must be, first, some action by the EUTM proprietor which clearly reflects a dishonest intention and, second, an objective standard against which such action can be measured and subsequently qualified as constituting bad faith. There is bad faith when the conduct of the applicant for a European Union trade mark departs from accepted principles of ethical behaviour or honest commercial and business practices, which can be identified by assessing the objective facts of each case against the standards (Opinion of Advocate General Sharpston of 12/03/2009, C-529/07, Lindt Goldhase, EU:C:2009:361, § 60). 

Thus, Article 59(1)(b) EUTMR meets the general interest objective of preventing trade mark registrations that are abusive or contrary to honest commercial and business practices (03/06/2010, Internetportal und Marketing, C‑569/08, EU:C:2010:311, § 36 and 37). Such registrations are contrary to the principle that the application of EU law cannot be extended to cover abusive practices on the part of a trader which do not make it possible to attain the objective of the legislation in question (14/12/2000, Emsland-Stärke, C‑110/99, EU:C:2000:695, § 51 and 52, and 07/07/2016, LUCEO, T‑82/14, EU:T:2016:396, §52).

In that regard, if, insofar as it characterises the applicant's intention at the time of filing the application for registration of an EU trade mark, the concept of bad faith, within the meaning of Article 59(1)(b) EUTMR, constitutes a subjective element, it must be determined in the light of the objective circumstances of the case (11/06/2009, Lindt Goldhase, C‑529/07, EU:C:2009:361, § 42).

It is for the applicant for a declaration of invalidity who intends to rely on Article 59(1)(b) EUTMR to establish the circumstances which make it possible to conclude that an application for registration of a European Union trade mark was filed in bad faith, the good faith of the applicant being presumed until proven otherwise (08/03/2017, Formata, T‑23/16, EU:T:2017:149, § 45).

Whether an EUTM proprietor acted in bad faith when filing a trade mark application must be the subject of an overall assessment, taking into account all the factors relevant to the particular case (11/06/2009, C‑529/07, Lindt Goldhase, EU:C:2009:361, § 37).

Outline of the relevant facts

The evidence on file indicates that the mark ‘KLEENOIL’ was first used by Mr Brian Cornett via his companies, mainly Kleenoil Sales, in the 1970’s in relation to oil filtration systems. The beginning of use in the 1970’s is shown by Annexes 1 and 2 and further documents demonstrate use of the mark by these companies in the 1980’s and later (Annexes 3, 7 and 21, as well as correspondence between Mr Cornett and other gentlemen). The EUTM proprietor argues that the documents do not show any significant use of the mark by these entities, certainly not use of more than mere local significance. However, the standard of use that has to be demonstrated for the purposes of Article 8(4) EUTMR is different from that necessary for the assessment of bad faith. In the present case, the matter of extent of use is of secondary importance. The key issue is the fact that Mr Cornett and his companies were the first ones to use the mark and that they supplied products to one particular company, named Cardev Ltd, with which they begun closer collaboration. All these facts are sufficiently shown by the evidence.

In 1985, Kleenoil International was founded (Annex 4) by the directors of Cardev Ltd and Mr Cornett. Although there is no document showing the personal composition of this company or of Cardev Ltd, from the letters sent between Mr Cornett and Mr Cartwright, it becomes clear that the directors of Cardev Ltd and the director of Kleenoil Sales were involved in the new Kleenoil International company set up in order to facilitate manufacture and sales of Kleenoil products. In 1987, the names of the companies Cardev Ltd and Kleenoil International were exchanged (Annexes 4 and 9) and two letters to Mr Cornett are connected with this event. In the first one (Annex 10), Mr Cartwright informs Mr Cornett, in September 1987, about the change of name of the company Cardev Ltd to Kleenoil International, and in the second one, only one month later, Mr Devonshire (another director of Cardev Ltd), apologizes for the inappropriate actions undertaken and promises that the names will be changed back (Annex 11). This was fulfilled in January 1988 (Annexes 4 and 9).

The applicant submits three agreements relating to the creation of Kleenoil International and the relationship between Kleenoil Sales (Mr Cornett), Cardev Ltd and the new company Kleenoil International. None of these agreements are signed and two of them are also undated. On the other hand, the EUTM proprietor does not contest the existence or validity of these agreements and it even actively refers to one of them as if it was a binding document. Therefore, these documents will not be entirely disregarded.

The key figure on the part of the EUTM proprietor is Mr Milorad Krstic. Mr Krstic is the Executive Director of the EUTM proprietor (Annexes 15 to 17). Mr Krstic’s relationship with Kleenoil International and Cardev Ltd is less clear. The first mention is in the letter from Mr Cartwright dated in 1986, in which he informs Mr Cornett that he is going to meet Milorad the Yugoslav. In the letter from 1987 by Mr Devonshire, in which he assures Mr Cornett that the exchanged names of the companies will be reversed, Mr Devonshire mentions that Miele will be left on the board of directors (it is not clear whether he refers to the board of directors of Cardev Ltd or Kleenoil International). Miele seems to be the nickname of Mr Milorad Krstic. Mr Cornett addresses ‘Dear Miele’ a letter from 1987 to Kleenoil Deutschland, which appears to be Mr Krstic’s first company. Moreover, in the affidavit of Mr Byrom submitted by the EUTM proprietor (Enclosure 4), it is stated that Mr Krstic used the mark in Germany. Finally, Annex 19 contains an article which quotes Mr Krstic, in which it is stated that Mr Krstic founded the company Kleenoil International with two English business partners and that the company was later renamed Cardev Ltd. Whilst it is not possible, from these documents, to ascertain the exact role or position of Mr Krstic within Cardev Ltd or Kleenoil International, it seems to be beyond doubt that Mr Krstic was involved in both companies on a level sufficiently high as to be in direct contact with the directors and to be responsible for certain markets. The EUTM proprietor does not contest this.

Assessment of bad faith

The case-law shows three main cumulative factors to be particularly relevant for the existence of bad faith:

- Identity/confusing similarity of the signs and the goods/services,

- EUTM proprietor’s knowledge of the use of an identical or confusingly similar sign,

- Dishonest intention on the part of the EUTM proprietor.

The knowledge of the EUTM proprietor of the applicant’s mark is not a matter of dispute in these proceedings. The Executive Director of the EUTM proprietor was involved in the companies Cardev a Ltd nd Kleenoil International, at least since 1986 when he is first mentioned in a letter by Mr Cartwright. Therefore, in view of the facts explained above, there is no doubt that the EUTM proprietor had knowledge that the mark had been used by other entities at the time of filing of the contested mark in 1997.

The EUTM proprietor contests the extent of the previous use of the mark and argues that the applicant did not have any existing right to the mark at the time of filing of the contested mark. As explained above, the present application is not based on Article 8(4) EUTMR and the applicant was not obliged to demonstrate use of the mark of a certain extent and in certain specific time periods. What is substantial for the present proceedings is that the mark was used to such an extent that it was perceived by the directors of Cardev Ltd, a company in which Mr Krstic was personally involved, to be a good business opportunity to participate in such use in the 1980’s. Even Mr Krstic himself considered that Mr Cornett is using the mark still in 2001, as evidenced by his letter (Enclosure 1).

The EUTM proprietor argues that the addition of the word ‘Microfiltration’ changes the overall impression created by the contested mark, when compared to the mark ‘KLEENOIL’. However, as the applicant correctly states, the word ‘Microfiltration’ is totally descriptive in relation to the goods for which the mark is registered and which are designed to perform microfiltration (filters in Class 7 and devices in Class 9) or they are substances to be microfiltered (oils, lubricants and fuels in Class 4). Therefore, its presence in the contested mark does not substantially divert the contested mark from the mark used by the applicant, as they both contain the verbal element ‘KLEENOIL’. Moreover, as also correctly stated by the applicant, one of Mr Cornett’s companies created in the 1980’s was named Kleenoil Filtration and this name appears, together with Kleenoil Sales, throughout the documents. Therefore, the contested mark is not only highly similar to the mark previously used by the applicant but it also fits the broader pattern of names used by it.

There is bad faith when the EUTM proprietor intends through registration to lay its hands on the trade mark of a third party with whom it had contractual or pre-contractual relations or any kind of relationship where good faith applies and imposes on the EUTM proprietor the duty of fair play in relation to the legitimate interests and expectations of the other party (13/11/2007, R 336/2007‑2, CLAIRE FISHER / CLAIRE FISHER, § 24).

The essential question is, therefore, whether the relationship between the parties created a close enough link to suggest that it is fair to expect the EUTM proprietor not to file an identical EUTM application independently without giving the invalidity applicant prior information and sufficient time to take action against the contested EUTM (13/12/2004, R 582/2003‑4, EAST SIDE MARIO’S, § 23).

The EUTM proprietor argues that there was no relationship between the EUTM proprietor and the applicant. It repeats that the EUTM proprietor is not a legal successor of Cardev Ltd. However, the Cancellation Division must concur with the applicant in that in the assessment of bad faith, an actual existing legally binding contractual relationship between the two parties is not a crucial factor. Instead, it has to be assessed, as mentioned above, whether or not there is some type of relationship between the parties that could give a rise to a duty of fair play and whether or not the EUTM proprietor, when filing the application for the contested mark, acted in compliance with honest business practices. Bad faith may broadly be explained as the state of somebody who consciously does something wrong or by mistake – for example, contrary to accepted principles of ethical behaviour or honest business practices – thereby achieving an unjust advantage and/or causing others an unjust damage (07/03/2013, R 383/2012-1, ‘LLRG5’, § 38).

As explained above, the exact nature of Mr Krstic’s position in Cardev Ltd and Kleenoil International cannot be ascertained from the evidence; however, it is clear that he was involved in high levels of these companies and had personal contact with Mr Cornett (Annex 12). Mr Krstic was thus involved in companies which were close business partners of Mr Cornett and the applicant (essentially Cardev Ltd joined Mr Cornett in creating Kleenoil International) and which started this business partnership on the premise that Mr Cornett’s companies have already been using the mark. The Cancellation Division considers that the relationships between Cardev Ltd, Kleenoil International and Mr Cornett (or the applicant), were of such nature as to create a duty of fair play between them and that this duty of fair play does not only include the companies as such but extends to their directors and employees, including to Mr Krstic.

The applicant submitted an agreement (Annex 8) between Kleenoil Filtration (one of Mr Cornett’s companies) and Cardev Ltd, in which Cardev Ltd acknowledges that the ownership of and all rights in the trade marks used on the Kleenoil Filtration Equipment reside and shall remain in Kleenoil Filtration and Cardev Ltd agrees that it will acquire no right, title or interest in any of said trade marks by virtue of that agreement. However, this agreement is not signed. Although the EUTM proprietor does not contest its existence or validity, its content must be evaluated with caution. This agreement also contains a provision according to which the business activity of the two companies is divided by territories. Another agreement submitted by the applicant as Annex 13 (also unsigned), contains another provision regarding territories in which each company will market Kleenoil products. This is specifically referred to by the EUTM proprietor. It claims, on the one hand, that the EUTM proprietor is not bound by any agreements concluded between the applicant and Cardev Ltd because it is not its legal successor, but on the other hand it considers that the EUTM proprietor had the right to continue using the mark in the territories assigned to Cardev Ltd in the agreement presented as Annex 13. It would thus appear that the EUTM proprietor (more precisely Mr Krstic) was aware of this agreement and of the territorial split agreed between Mr Cornett, his companies and Cardev Ltd. Consequently, even disregarding the first agreement in which Cardev Ltd allegedly acknowledged the proprietorship of the trade mark to Mr Cornett’s company, the EUTM proprietor knew that there are other companies who rightfully use the mark in the EU and to which it was personally connected through its Executive Director, Mr Krstic, and that these companies divided territories in which they would use the mark KLEENOIL. Even in the best possible light for the EUTM proprietor, if it was considered that it honestly believed that it had rights to the trade mark based on previous use or based on some type of succession from Cardev Ltd and the territorial split agreed by the applicant, it would have known that it had no such rights in some parts of the EU, at least the UK. Therefore, a standard honest commercial behavior in such a case would be to register trade marks in territories where the EUTM proprietor believed it had the right to do so but not in the entire EU, by which action it knew that it would have deprived its former business partner (strictly speaking the partner of its executive director) of exercising its own trade mark right in relation to some territories, at least the UK.

The EUTM proprietor argues that the applicant did not take any actions against the EUTM proprietor’s use of the mark, from which it concluded that the applicant had given an implicit consent to such use and to the registration of the trade mark by the EUTM proprietor. It refers to the correspondence between Mr Krstic and Mr Cornett (Enclosures 1 and 2) illustrating that Mr Cornett was willing to continue collaboration with Mr Krstic. In Enclosure 4, a former employee and manager of Cardev Ltd declares that Mr Cornett acknowledged that he was aware that Mr Krstic used the brand KLEENOIL in some territories and the two parties observed an unwritten gentleman’s agreement to avoid clashes, for example that Mr Cornett never went anywhere near the German market as he was aware that Mr Krstic used the mark there. This gentleman’s agreement is not mentioned anywhere else and from this document it is not clear which territories it supposedly covered, other than Germany. However, precisely the reference to the German territory seems to be in contradiction with Mr Cornett’s letter (Enclosure 2), in which Mr Cornett is not concerned about the rights of Mr Krstic or the EUTM proprietor but only mentions that he does not want to act in breach of any exclusive distribution agreement he has with his distributors, while stating that this will not be a problem for Germany, where he has no such agreements and therefore, sees no reason not to supply any business in Germany. In any case, even considering the existence of the ‘gentleman’s agreement’, this would not clarify the reason why the EUTM proprietor registered a trade mark which included the territories in which Mr Krstic’s former business partner used the mark.

The EUTM proprietor’s assumptions of ‘implicit consent’ by the applicant arise from the applicant’s lack of action against the EUTM proprietor and from its collaborative approach. Firstly, lack of hostile actions can hardly be interpreted as a consent to register a trade mark as there can be many reasons for such an absence of legal actions, the most obvious of them being the unwillingness of the other party to enter costly and lengthy legal disputes. Indeed, the lack of action was explained by Mr Cornett in his affidavit from 2012 as the result of an advise which warned him that such actions will be very costly, to a point which the company could not afford at that time. Secondly, there are no indications that Mr Krstic (more precisely the EUTM proprietor) used the mark anywhere outside Germany. That Mr Krstic’s companies used the mark in Germany is suggested by the affidavit of Mr Byrom (Enclosure 4). The lack of action from the side of the applicant, against this use of the mark KLEENOIL by the EUTM proprietor, could be interpreted as that the applicant was not bothered by this use in Germany; however, there is a long way from there to a consent to a registration of a trade mark covering the entire European Union. This argument of the EUTM proprietor must, therefore, be dismissed.

The EUTM proprietor also refers to the willingness of the applicant to collaborate with the EUTM proprietor, another factor suggesting that the applicant consented to the registration of the contested trade mark. Again, the applicant’s lack of willingness to engage in hostilities over the EUTM proprietor’s use in limited territories cannot be interpreted as that it consented to the EUTM proprietor’s registration of a trade mark that would include territories in which the applicant is using the mark and is interested to keep using it. Moreover, Mr Cornett’s letter appears to be more of a result of the applicant preferring to make business not war, as Mr Cornett clearly states that he is not happy about the restrictions imposed on him but that it does not cause him a major problem.

In any event, to interpret the above circumstances as an implicit consent to the EUTM proprietor’s registration of the mark by the applicant is highly doubtful. Any doubts regarding the existence and the extent of a possible consent [for registration of a trade mark] are to the detriment of the one who invokes the existence of such consent as it is the one who is under the burden of proof. Implied consent cannot be inferred from the mere silence of the trade mark proprietor (20/11/2001, C-414/99 and C-416/99, Davidoff-Levi Strauss, EU:C:2001:617, § 54-57).

Considering all the above, it must be concluded that the EUTM proprietor did not have any sound basis for an assumption that the applicant consents to the EUTM proprietor’s registration of the mark KLEENOIL in the entire European Union.

The EUTM proprietor repeatedly argues that bad faith consists in registering the mark without intentions of making a genuine use of it in the course of trade, which is not the case with the contested mark which has been continuously used by the EUTM proprietor. The EUTM proprietor also mentions that bad faith consists in registering the mark with the intention to eliminate competition, which is again not the case in the present proceedings, because the EUTM proprietor did not attack the applicant or try to damage it in any way. However, there are many forms of bad faith. The examples given by the EUTM proprietor do not form an exhaustive list. One of the types of bad faith is usurping another’s trade mark while achieving an unjust advantage and/or causing others an unjust damage, as mentioned above. This is the case here. By registering the contested mark, the EUTM proprietor gained an exclusive right to the mark ‘KLEENOIL’ in the entire European Union, something it was aware that it is not entitled to.

The EUTM proprietor argues that it did not try to block the applicant from using the mark. However, by holding the contested EUTM, the EUTM proprietor is in a position of power in comparison to the applicant, a position that is not justified by the circumstances or previous relationship between the companies. The fact that the EUTM proprietor did not use the ownership of the EUTM against the applicant for many years does not ‘heal’ the unjustified situation. The parties may have, for years, each used the mark in certain territories. The EUTM proprietor refers to the ‘gentleman’s agreement’ mentioned in the affidavit of Mr Byrom; however, it was not able to demonstrate the content of such agreement. It cannot be automatically considered that such an agreement (the very existence of which was not even convincingly demonstrated) would copy the territorial division agreed between Mr Cornett and Cardev Ltd, because, as the EUTM proprietor itself repeatedly emphasises, the EUTM proprietor is not the legal successor of Cardev Ltd. In view of such uncertainty, the EUTM proprietor was aware that, in case a conflict arises between the two parties in the EU territory, it would have the upper hand in the conflict on account of its ownership of the contested EUTM, a position that gave the EUTM proprietor an unjust advantage. Essentially, the applicant, who was the original user of the mark, was at the mercy of the EUTM proprietor regarding the use of the mark. Indeed, a conflict seemingly arose in 2019, when the EUTM proprietor authorised its distributors in Poland to enforce the trade mark rights, following which the applicant filed the present invalidity action.

Consequently, the objective circumstances point to that the EUTM proprietor filed the contested mark with an intention to gain unjustified power over the use of the name ‘KLEENOIL’ in the European Union to the detriment of the applicant, while there was a previous business relationship between the Executive Director of the EUTM proprietor and the applicant. Such act is not compatible with honest business practices. None of the arguments given by the EUTM proprietor to justify this action was found to be sound.

The EUTM proprietor also argues that the fact that the applicant filed the invalidity application only 10 years after the filing of the contested mark and at least 18 years after it had known of the EUTM proprietor’s use of the mark is another factor showing that the applicant consented to the EUTM proprietor’s registration of the contested EUTM. The Cancellation Division acknowledges that the time period that passed between the filing (and also registration, both in 2009) of the contested mark and the filing of the invalidity application is unusually long. The applicant did not explain this otherwise than in the affidavit of Mr Cornett redacted in 2012, in which he explains that he was advised that potential legal actions taken against the EUTM proprietor’s use of the mark would have inhibitive costs, which the applicant could not afford at that time. Be that as it may, the intentions of the EUTM proprietor must be assessed at the time of filing of the contested mark, and while events that occurred after that may still shed light on the situation prior to the filing date, the time period that passed between the filing or registration of the contested mark and the filing of the invalidity request, in the present case, does not present any relevant information for the case, as it is independent of the intentions of the EUTM proprietor at the time of filing for the contested mark. The Cancellation Division considers it useful to note that the legislator, while inserting the limitation to the possibility of declaring a trade mark invalid if the applicant waits for too long with taking legal actions by way of Article 61 EUTMR, it expressly excluded from this limitation trade marks that were filed in bad faith. This must be interpreted as that the intention of the legislator in this context was that a trade mark filed in bad faith cannot be legitimised by acquiescence, regardless of the length of time during which it lasted.

Conclusion

In the light of the above, the Cancellation Division concludes that it was sufficiently demonstrated that the application for the contested EUTM was filed in bad faith and the invalidity application is successful. As the contested mark is registered for filters and devices that may be used in the process of filtering, that is, the goods for which the applicant has been using its mark, and oils, fuels and lubricants, that is, goods complementary to those of the applicant (oil filters), the contested mark must be declared invalid in its entirety.

COSTS

According to Article 109(1) EUTMR, the losing party in cancellation proceedings must bear the fees and costs incurred by the other party.

 

Since the EUTM proprietor is the losing party, it must bear the cancellation fee as well as the costs incurred by the applicant in the course of these proceedings.

According to Article 109(7) EUTMR and Article 18(1)(c)(ii) EUTMIR, the costs to be paid to the applicant are the cancellation fee and the representation costs, which are to be fixed on the basis of the maximum rate set therein.

 

 

The Cancellation Division

 

Oana-Alina STURZA

Michaela SIMANDLOVA

Pierluigi M. VILLANI

 

According to Article 67 EUTMR, any party adversely affected by this decision has a right to appeal against this decision. According to Article 68 EUTMR, notice of appeal must be filed in writing at the Office within two months of the date of notification of this decision. It must be filed in the language of the proceedings in which the decision subject to appeal was taken. Furthermore, a written statement of the grounds of appeal must be filed within four months of the same date. The notice of appeal will be deemed to be filed only when the appeal fee of EUR 720 has been paid.