CANCELLATION No 21 162 C (INVALIDITY)

Martin Brudný, Konská 246, 73961 Třinec, Czec Republic and Nanostribro.Cz s.r.o., Prameny 601/14, 73401 Karviná, Czech Republic (applicants), represented by Lukáš Jansa, Sokola Tůmy 16, 709 00 Ostrava, Czech Republic (professional representative)

a g a i n s t

Zbigniew Nieciąg, Slovenská 2886/10, 73301 Karviná, Czech Republic (EUTM proprietor), represented by Pavel Cink, Veleslavínova 33, 30100 Plzeň, Czech Republic (professional representative).

On 23/10/2020, the Cancellation Division takes the following

DECISION

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

2. European Union trade mark No 16 885 311 is declared invalid in its entirety.

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

REASONS

The applicants filed an application for a declaration of invalidity against European Union trade mark No 16 885 311 ‘ ’ (figurative mark) (the EUTM). The request is directed against all the goods and services covered by the EUTM, namely:

Class 3: Tonics [cosmetic]; Beauty care cosmetics; Concealers; Decorative cosmetics; Make up foundations; Cosmetics for the use on the hair; Cosmetics and cosmetic preparations; Beauty masks; Nail varnish remover [cosmetics]; Cleansing milk for toilet purposes; Toiletries; Beauty lotions; Cosmetic soaps; Beauty serums; Cosmetic creams; Powder for make-up; Cosmetic kits; Cosmetic dyes; Cotton wool for cosmetic purposes; Cosmetic pencils; Moisturising preparations; Skin masks [cosmetics]; Nail hardeners [cosmetics]; Self-tanning preparations [cosmetics]; Sun bronzers; Tanning milks [cosmetics]; Facial masks; Self-tanning creams [cosmetic]; Suntanning oil [cosmetics]; Facial scrubs [cosmetic]; Cosmetic preparations for eyelashes; Eyebrow cosmetics; Liners [cosmetics] for the eyes; Self-tanning lotions [cosmetic]; Fluid creams [cosmetics]; Lip cosmetics; Sun-tanning gels; Body cream; Skin care oils [cosmetic]; Cosmetic moisturisers; Beauty tonics for application to the body; Facial toners [cosmetic]; Night creams [cosmetics]; Cosmetic rouges; Mousses [cosmetics]; Moisturising gels [cosmetic]; Cosmetic nourishing creams; Beauty balm creams; Henna [cosmetic dye]; Face packs; Cosmetic hair lotions; Cosmetic eye gels; Cosmetic body scrubs; Moisturising concentrates [cosmetic]; Cosmetics in the form of powders; Lip stains [cosmetics]; Sanitary preparations being toiletries; Impregnated cleaning pads impregnated with cosmetics; Cuticle conditioners; Facial preparations; Cosmetics for personal use; Cosmetic preparations for body care; Cleaner for cosmetic brushes; Cosmetics in the form of oils; Cuticle cream; Chalk for cosmetic use; Lacquer for cosmetic purposes; Adhesives for cosmetic purposes; Ointments for cosmetic use; Massage oils and lotions; Mineral water sprays for cosmetic purposes; Oils for cosmetic purposes; Oils for toilet purposes; Perfumed lotions [toilet preparations]; Pumice stone; Pedicure preparations; Nasal cleaning preparations for personal sanitary purposes; Make-up pads of cotton wool; Cotton balls for cosmetic purposes; Scented water; Perfumed creams; Perfumed toilet waters; Perfumed tissues; Eau de parfum; Scented body spray; Colour cosmetics for the skin; Hand gels; Henna for cosmetic purposes; Disposable wipes impregnated with cleansing compounds for use on the face; Cosmetic creams and lotions; Feminine hygiene cleansing towelettes; Cleaning preparations for personal use; Cleaning masks for the face; Washing creams; Hand washes; Baby sun-creams; Facial peel preparations for cosmetic use; Foot scrubs; Face oils; Skin cleansing foams; Cosmetics for use on the skin; Hand powders; Shower and bath foam; Body gels; Body glitters; Body cleansing foams; Glitter in spray form for use as a cosmetics; Antiperspirants [toiletries]; Deodorants for personal use [perfumery]; Colour cosmetics; Colour cosmetics for the eyes; Face paint; Eyebrow colors; Eyebrow colors in the form of pencils and powders; Cheek colors; Body paint (cosmetic); Body art stickers; Eyebrow gel; Make-up removing gels; Powder compacts [cosmetics]; Lip liners; Under-eye enhancers; Lip coatings [cosmetic]; Cosmetic eye pencils; Cosmetic pencils for cheeks; Cosmetic white face powder; Creamy rouges; Lip glosses; Make-up for the face and body; Make-up removing lotions; Face powder; Skin foundation; Lipsticks; Rouges; Make-up pencils; Mascara; Blemish balm creams; Lip balms [non-medicated]; Day creams; Skin cleansers [cosmetic]; Detergents for household use; Washing agents for textiles; Soaps for household use; Shining preparations [polish]; Dishwashing detergents; Stain removing preparations for use on household goods; Drain cleaning preparations; Floor cleaning preparations; Glass cleaning preparations; Wallpaper cleaning preparations; Drain and sink unblocking preparations; Washing preparations; All-purpose cotton buds for personal use; Toothpaste; Tooth whitening pastes; Vehicle cleaning preparations; Shampoos for vehicles; Vehicle tyre polish; Automobile polishes; Automobile cleaners; Automobile wax; Windscreen cleaning liquids; Detergents for automobiles.

Class 25: Camisoles; Ladies' underwear; Babies' undergarments; Functional underwear; Underpants; Boy shorts [underwear]; Gussets for underwear [parts of clothing]; Gussets for stockings [parts of clothing]; Slips [underclothing]; Leggings [trousers]; Undershirts; Boxer shorts; Men's socks; Men's underwear; Trouser socks; Brassieres; Strapless bras; Stocking suspenders; Chemise tops; Socks and stockings; Bed socks; Pants; Underwear; Maternity lingerie; Lingerie; Sports bras.

Class 35: Updating of advertising material; On-line promotion of computer networks and websites; Online advertisements; Advertising; Advertising services relating to the sale of goods; Advertising services relating to cosmetics; Publicity and sales promotion services; Retail services in relation to clothing; Retail services in relation to beauty implements for humans; Wholesale services in relation to clothing; Clerical services for the taking of sales orders; Administrative processing of purchase orders; Goods or services price quotations; Commercial information and advice services for consumers in the field of cosmetic products; Commercial information and advice services for consumers in the field of beauty products; Arranging business introductions relating to the buying and selling of products; Providing consumer product information.

The applicants invoked, inter alia, Article 59(1)(b) EUTMR.

PRELIMINARY REMARK

In its application for invalidity, the applicants also invoked relative grounds for refusal on the basis of Article 60(1)(b) EUTMR in relation to Article 8(3) EUTMR, Article 60(1)(c) EUTMR in relation to Article 8(4) EUTMR and Article 60(2)(c) EUTMR.

However, in its communication sent on 17/10/2018, the Office found the application for invalidity inadmissible pursuant to Article 15(4) and (5) EUTMDR insofar as it was based on the abovementioned grounds. It stated that the application will continue as regards the remaining admissible ground, namely Article 59(1)(b) EUTMR, that the contested mark was filed in bad faith as for this ground there are no restrictions regarding the entitlement for filing a cancellation and regarding the relationship between the multiple applicants.

Therefore, the Cancellation Division will examine the application for invalidity on the basis of Article 59(1)(b) EUTMR only.

SUMMARY OF THE PARTIES’ ARGUMENTS

The applicants argue that the contested mark was applied in bad faith.

They state that one of the applicants, Mr. Martin Brudný, has the copyright of the sign ‘nasil’ and he is licensor to the company Nanostribro.cz (the other applicant) which acts as licensee. The said company has been selling the products bearing the sign ‘nasil’ since 2012 in the Czech Republic and Slovakia.

They explain that the original owner of the sign ’nasil’ is one of the applicants, namely, Mr. Martin Brudný who concluded a contract with Mr. Miloslav Molin, graphic designer, for the creation of it. The said sign was created based on the order of the applicant who became the only person who has the right to it and to grant the right to use it to third parties according to the License agreement concluded in 2011 between Mr. Miloslav Molin (graphic designer and licensor) and Mr. Martin Brudný (one of the applicants and exclusive licensee).

Later on, the applicants concluded a verbal license agreement in 2011, in which Mr. Martin Brudný granted to the company Nanostribro.cz the right to use the sign ‘nasil’. It has used it in relation to beauty care cosmetics, creams, soaps, shampoos and hair care cosmetics, shower gels, preparations for intimate hygiene in Class 3 and clothes (especially socks and underwear) in Class 25. It has been selling its products primarily via distribution channels and its e-shop located on the internet domain nanostribro.cz since 2012 and, according to the applicants, the volume of the sold products under the sign ‘nasil’ is almost huge. They consider that, based on all this, it is clear that the company Nanostribro.cz started to use the sign ‘nasil’ before the application for registration of the contested mark was filed. According to the applicants, the main element with distinctive character of the earlier sign is the word ‘nasil’ and the graphic elements applied to this word. The other words ‘nanosilver cosmetics’ do not have any distinctive character.

The applicants explain that the proprietor of the contested mark was the Director of the company Nanostribro.cz from 25/8/2011 to 26/9/2017 therefore it is evident that, at the time of filing the application for registration of the contested mark, (20/06/2017) he was in the said position. The applicants claim that, because the proprietor was the Director of the company, he has had to logically know that the company Nanostribro.cz sells the products under the sign ‘nasil’ in the Czech Republic and Slovakia. On 26/09/2017, the proprietor was dismissed from the position of Director of the company Nanostribro.cz (stated in a notarial record). He registered the contested mark without the consent of the applicants.

Furthermore, the applicants argue that the proprietor, being Director of the company Nanostribro.cz, established in March 2017 a new company Nanostribro Plus s.r.o which is focused on the same products as the applicant. He also created the domain name in the same year. According to the applicants, when they found out that the proprietor had created its new company, they requested him to stop with its concurrent behavior. The applicants also discovered that the proprietor’s new company attempted to take over the main customer of Nanostribro.cz, using the confidential information the EUTM proprietor had when he was Director.

In support of its observations, the applicants filed the following evidence in Czech with a partial translation into English:

 Annex No 1: A statement from the Commercial Register of the Czech Republic concerning the company Nanostribro.cz. It includes the date of registration and the names of the executives. It states that Ing. Zbigniew Nieciąg (the proprietor) was appointed executive on 25/08/2011 and terminated on 26/09/2017.

 Annex No 2: An extract from TMView showing the registration details of the contested mark.

 Annex No 3: Exchange of emails on 06/06/2011 between one of the applicants Mr. Martin Brudný and the creator of the sign ‘nasil’ Mr. Miloslav Molin.

 Annex No 4: A license agreement on 09/06/2011 concluded between Mr. Martin Brudný (one of the applicants) and Mr. Miloslav Molin (the graphic creator of the sign ‘nasil’). In the said agreement, the creator provides the applicant with the license to use the sign .

 Annex No 5: A statement from Mr. Miloslav Molin, graphic creator of the sign ‘nasil’ dated 14/02/2018 in which he declares that he has created the sign and has licensed it to the applicant Mr. Martin Brudný. He also states that he has created the domain www.nanostribro.cz.

 Annex No 6: Several screenshots (non-dated) from the website nanostribro.cz. showing the sign ‘nasil’ in relation to soaps, shampoos and shower gels. The producer of the products is the company Vinsvin although the seller is the company Nanostribro (one of the applicant’s).

 Annex No 7: An extract (non-dated) showing the sales terms and conditions of e-shop on the domain name nanostribro.cz.

 Annex No 8: Several photos of products (shampoos, shower gels, antiperspirants) and the product labels (non-dated) showing the sign as follows: and the company .

 Annex No 9: More than thirty invoices issued by Nanostribro.cz and addressed at two companies in the Czech Republic from 2013-2017. It includes the products (soaps, next to the sign ‘nasil’) and the amounts are in Czech crowns (Kč).

 Annex No 10: An overview of issued invoices sent from Nanostribro.cz to the said companies in Czech Republic from 2012-2017. According to the applicants, they concern products sold under the sign ‘nasil’ through the distribution channels.

 Annex No 11: More than fifty invoices issued by Nanostribro.cz and addressed at different customers in the Czech Republic from 2012-2017. It includes the products next to the sign ‘nasil’ and the amounts are in Czech crowns (Kč). According to the applicants, they refer to the e-shop to customers from the Czech Republic.

 Annex No 12: Two extracts which, according to the applicants, refer to an overview of issued invoices regarding the products sold under the sign ‘nasil’ through e-shop in 2017.

 Annex No 13: A statement from the Commercial Register of the Czech Republic concerning the company Nanostribro Plus s.r.o. It was established on 06/03/2017 and it states that Ing. Zbigniew Nieciąg (the proprietor) was appointed executive on the same date.

 Annex No 14: Several screenshots from the domain name nanostribroplus.cz including the first part of the terms of sale and .

 Annex No 15: The notarial record dated 26/09/2017 about the general Meeting of the company Nanostribro.cz s.r.o. In the said meeting it is stated that: the reason of the proposal to dismiss Ing. Zbigniew Nieciag (current proprietor) is the continual and serious breaching of his obligations during the execution of the position of the statutory body of the company.

 Annex No 16: A criminal complaint issued by the applicant to the proprietor dated 10/11/2017 about a violation of the confidentiality and a conflict of interest. According to it, the proprietor tried to intentionally damage the company Nanostribro.cz s.r.o., at the time when he was both the only partner and the executive of the aggrieved party. From this illegal action, the proprietor tried to continue to damage the aggrieved party in the form of demanding for money for the use of the sign ‘nasil’, even though he is fully aware that he does not have any authority to do so.

 Annex No 17: The record statement from the domain registry .cz regarding the domain name nanostribroplus.cz.

 Annex No 18: More than ten invoices issued by Nanostribro.cz and addressed at different customers in Slovakia from 2015-2017. It includes the products next to the sign ‘nasil’ and the amounts are in Euros. According to the applicants, they refer to the e-shop to customers from Slovakia.

 Annex No 19: The record statement from the domain registry .cz regarding the domain name nanostribro.cz. whose holder is the applicant Mr. Martin Brudný.

 Annex No 20: An affidavit issued by Mr. Miloslav Molin, creator of the sign ‘nasil’ in 2019 with the verified signature.

 Annex No 21: A copy of the sub-licence agreement dated 29/9/2017 between Mr. Martin Brudný and the company Nanonasil s.r.o.

 Annex No 22: A copy of the withdrawal for the sub-licence agreement dated on 27/10/2017.

 Annex No 23: Several invoices sent by Nanostribro.cz and addressed at the company Bat Marketing in the Czech Republic in 2018. It includes the products (soaps) next to the sign ‘nasil’ and the amounts are in Czech crown (Kč).

 Annex No 24: A letter from the proprietor Mr. Zbigniew Nieciąg dated 17/03/2017 informing that he is the sole partner of the company Nanostribro Plus s.r.o., which has the same or similar subject of business as the company Nanostribro.cz s.r.o. of which he is also executive.

 Annex No 25: A letter sent from the representative of Mr. Martin Brudný to the proprietor on 11/04/2017 to cease in its competitive behavior.

 Annex No 26: A document from the Regional Prosecuting Attorney’s Office in Ostrava on 17/12/2018 bringing the charges against the proprietor.

The EUTM proprietor argues, that contrary to the applicants’ statements, the contested mark was filed in good faith and he was in no way trying to freeride on the claimed sign. He solely aims at registering a brand of its own product, which he has been already selling for many years. It claims that he became the sole seller of the products of the company Vinsvin Sp. z o.o., Sp. k. with its registered office in Poland. He obtained the sole right to sell cosmetics containing pieces of silver (nano silver) in the Czech Republic and Slovakia.

He explains that one of the applicants, Mr. Martin Brudný, was interested in getting involved in the trade of the products of Vinsvin Sp.z.o.o and in a possible cooperation with the proprietor. Therefore, they agreed on establishing the company Nanostribro.cz s.r.o. under the condition that the applicant put to the property of the company the domain www.nanostribro.cz. However, according to the proprietor, the said applicant never transferred the said domain to the company.

Furthermore, the proprietor claims that, before the company Nanostribro.cz s.r.o. was founded, the proprietor launched the products of the company Vinsvin Sp. z o.o. to the market in the Czech Republic and Slovakia under the sign ‘nasil’. He adds that the applicants offered the proprietor to arrange the creation of the sign ‘nasil’ by the graphic designer however the contract was concluded only in Mr. Martin Brudný’s name. Therefore, for the proprietor, the applicants concealed the existence of the License agreement concluded between Mr. Martin Brudný and the graphic designer in 2011. In view of the above, the proprietor states that he was in good faith when he filed the application for the contested mark, because he did not know about the concluded license agreement, and in his opinion, the conclusion of the said agreement was only purposive. According to him, the company Nanostribro.Cz s.r.o. has never been owner of any rights to the sign ‘nasil’ and this was created only for the use of the proprietor.

Moreover, the proprietor points out that Mr. Martin Brudný is no longer the owner of the license to the graphic sign ‘nasil’ since he confirmed that he sold the alleged license to another company Nanonasil s.r.o. Therefore, both applicants are not entitled to claim the proprietorship of the registered trade mark since they do not have any rights to the sign ‘nasil’. The proprietor states, that since he only sells the product as the exclusive seller for the market of the Czech republic and Slovakia of the company Vinsvin Sp. z. o.o under the company Nanostribro Plus s.r.o., he informed one of the cancellation applicants about his intention to establish his own limited company for the trade of those products under the sign ‘nasil’. He never intended to sell the products under the sign ‘nasil’ within the company Nanostribro.cz s.r.o. therefore he requested the applicant to remove from the e-shop Nanostribro.cz products sold under the sign ‘nasil’, as he sold those products on his own and under his name. However, the applicant did not react to his request. The cancellation applicant Mr. Martin Brudný knew about his intention to establish the new company since the very beginning of their cooperation and he had no obligation to the non-competition. Moreover, the proprietor denies that between the company Nanostribro.cz s.r.o. and himself has ever been concluded an agreement which would oblige the proprietor to supply the products to the company.

On the other hand, the proprietor argues that the cancellation applicant Mr. Martin Brudný acted in bad faith as a representative of the company Nanostribro.cz s.r.o. due to misuse of his own responsibility as a business partner in the company. The proprietor therefore initiated the General Meeting where the applicant Mr. Martin Brudný was dismissed as Company Director of the company Nanostribro.cz s.r.o.. The proprietor of the registered trade mark was trying to agree with the applicant about the liquidation of the company, but the applicant did not accept any agreement. Subsequently, the applicant Mr. Martin Brudný dismissed the proprietor from the position of Executive Director of the company.

In support of its observations, the EUTM proprietor filed the following evidence in Czech with a translation into English submitted on 02/11/2019:

Attachment 1: An extract in Czech which according to the proprietor shows the company establishment of Nanostribro.cz s.r.o.

Attachment 2: E-mail communication dated 2016 concerning the renewal of the domains nanostribro.cz and loterieonline.cz.

Attachment 3: An extract about Nanolaboratory Nantes (2016).

Attachment 4: Email exchange between Mr. Martin Brudný and the graphic designer of the creation of ‘nasil’ in 2011.

Attachment 5: Seven invoices issued by Nanostribro Plus s.r.o. in 2017-2019 with no addressees although the amounts are in Czech crowns.

Attachment 6: The notarial record dated on 13/07/2018 drawn up by JUDr. Martina Niklová, a notary on the request of the proprietor to record the General Meeting of the company Nanostribro.cz s.r.o. It includes a proposal to remove the Executive Director of the Company, Mr Martin Brudný due to continuous and serious violation of his obligations in the discharge of the office of the Executive Director.

Attachment 7: A bank statement showing that a cash withdrawal of 50.000 CZK from the company Nanostribro.cz s.r.o. has been made on 07/07/2017.

Attachment 8: An invoice dated 2017 from a supplier to Mr. Martin Brudný on the prolongation of the domain www.nanostribro.sk for one year.

Attachment 9: Several invoices issued by the supplier Pharmedis in 2015 specifying products (soaps, creams) with nanosilver and other substances.

Attachment 10: A Court decision from the Regional Court in Ostrava (2019) for the requested changes in the entry of Nanostribro.cz s.r.o. in the Commercial Register, specifically deleted Martin Brudný, Executive Director, from the Commercial Register and resolution concerning dissolution of the company with liquidation, order to perform its liquidation and appointment of a liquidator.

Attachment 11: An e-mail sent by the proprietor to Mr. Martin Brudný in 2017 requesting to remove all photos containing the word ‘nasil’ from the texts, irrespective of its form and regardless of its font, and to stop selling the products with this designation.

Attachment 12: A letter from the Liquidator of Nanostribro.cz s.r.o. concerning the list of receivables of the company.

Attachment 13: One invoice issued by Shoptet s.r.o and addressed at Nanostribro Plus s.r.o. in 2017.

Attachment 14: Email exchange between the proprietor and the Executive Director of Nanonasil in 2017 stating that the proprietor is not authorised by the brand owner to sell and promote products under nasil and Nanostříbro brands.

Attachment 15: Email exchange between the parties in 2017.

Attachment 16: Accounts of the company Nanostribro.cz s.r.o.

Attachment 17: A declaration issued by Ms. Jolanta Cebula, Chairman of the committee dated 11/09/2018 in which the company Vinsvin Sp.z.o. declares that due to the agreement between it and the proprietor in 2011, he has the status of the exclusive importer of cosmetic products containing nanosilver for the Czech and Slovak matters.

Attachment 18: Exchange of emails between the proprietor and the insolvency administrator dated 2019.

Attachment 19: Exchange of emails between Mr. Brudný and the company Vinsvin Sp.z.o. in 2017. The applicant informs that the proprietor is no longer director of the company Nanostribro.cz s.r.o. and Vinsvin as producer may no longer use the sign ‘nasil’ for distribution.

Attachment 20: Two invoices issued by Apis Farmacja Sp.z.o.o and addressed at Nanostribro.cz s.r.o. in 2018.

In reply, the applicants challenge the proprietor’s allegations. They claim that the proprietor did not provide any evidence that he launched the products under the sign ‘nasil’ to the market before the company Nanostribro.cz s.r.o. Furthermore, even if the proprietor sold the products of the company Vinsvin Sp. z o.o,, that does not mean that he sold the products under the sign ‘nasil’. According to the applicants, it was not the proprietor who delivers the goods to the company Nanostribro.cz s.r.o. but it was directly the company Vinsvin Sp. z o.o. based on the orders of the company Nanostribro.cz s.r.o.

The applicants also point out that the proprietor had no rights to the logo ‘nasil’ since he has not communicated with the graphic creator of the sign and he did not order the creation of the logo ‘nasil’. The applicants admitted that the original owner of this logo is Mr. Martin Brudný but himself and the company Nanostribro.cz concluded a binding verbal license agreement based on which Mr. Martin Brudný has granted to the said company the right to use the logo ‘nasil’. The applicants also deny that they have ever given permission to the proprietor to be a member of the statutory body of another legal entity engaged in a similar sphere of activity or business. In fact, it was explicitly refused.

Finally, the applicants also explain that Mr. Martin Brudný granted to the third company Nanonasil s.r.o., the non-exclusive sub-license of the logo ‘nasil’ because the potential cooperation between them. The fact that the right to use the contested mark ‘nasil’ by the company Nanostribro.cz s.r.o. has not been terminated is proved among others by several invoices sent to the customer BAT Marketing which is selling the products to the wholesale nets, pharmacies and in Internet.

The proprietor insists on the fact that the company Nanostribro.cz s.r.o. is clearly not involved in this case, has no rights to the sign ‘nasil’ and it is only a reseller company that resold the goods through the proprietor. He also states that Mr. Brudný abused his position in the company and he is acting in bad faith to the company Nanostribro.cz s.r.o. He claims that the representative of the applicant has no right to represent the company Nanostribro.cz s.r.o., because there is no valid full power of attorney when the company has lost its legal personality and is in liquidation.

In reply, the applicants insist that the registration of the contested mark took place at the same time as when the proprietor established a new company and used the business order for Nanostribro.cz s.r.o. for his own company Nanostribro Plus s.r.o. Therefore, the proprietor acted in bad faith.

In its final observations, the proprietor reiterates its previous arguments. It states that there has never been signed any sub-licence agreement between the cancellation applicant – Mr. Brudný and Nanostribro.Cz s.r.o. company. Moreover Mr. Brudný was not able to conclude any verbal agreement with the company Nanostribro.cz when Mr. Brudný was at the same time the executive of the company.

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).

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).

The burden of proof of the existence of bad faith lies with the invalidity applicants; good faith is presumed until the opposite is proven.

Outline of the relevant facts

Assessment of bad faith

The previous relationship between the parties and the EUTM proprietor’s awareness of the earlier sign

Bad faith might be applicable when the parties involved have, or have had, any kind of relationship, such as (pre-/post-) contractual relationships, giving rise to mutual obligations and a 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).

In the present case, the evidence submitted by the applicants proves that the company Nanostribro.cz s.r.o. existed since 25/8/2011. Its Executives are Mr. Brudný and the proprietor who are also equal owners of the company (exhibit 1). The corporate relationship terminated on 26/09/2017 when the proprietor was dismissed as Director of Nanostribro.cz. for breaching of his obligations during the execution of the position of the statutory body of the company (Annex No 15).

Furthermore, it has also been established that on 17/03/2017, while he was Director of the company Nanostribro.cz s.r.o., the proprietor informed that he is the sole partner of another company Nanostribro Plus s.r.o., which has the same or similar subject of business as the company Nanostribro.cz s.r.o. of which he is executive (annex 24). Moreover, a letter was sent from the representative of Mr. Martin Brudný to the proprietor on 11/04/2017, in which the proprietor was requested to cease in his competitive behavior (annex 25). Therefore, all these documents are sufficient to establish that a corporate business relationship between the parties existed before the EUTM was filed (20/06/2017).

In this case, the evidence proves that the applicant Mr. Martin Brudný has rights over the sign ‘nasil’ since a license agreement was concluded between Mr. Martin Brudný (one of the applicants) and Mr. Miloslav Molin (the graphic creator of the sign ‘nasil’) on 09/06/2011 granting license to use the sign (annexes 3-5 and 20).

According to the proprietor, the company Nanostribro.cz s.r.o. has never been owner of any rights to the sign ‘nasil’ and this was created only for the use of the proprietor. The applicants alleged that Mr. Martin Brudný and the company Nanostribro.cz concluded a binding verbal license agreement based on which Mr. Martin Brudný has granted to the said company the right to use the logo ‘nasil’.

Although, indeed, any license agreement between the applicants has not been submitted as, according to the applicants, it was verbally concluded, it cannot be ignored that the evidence, namely the invoices, the screenshots and the pictures of the packaging of the products (annexes 6-12, 18, 23) prove that the signs ‘nasil’ and have been used by Nanostribro.cz in relation to certain products from 2012 in the Czech Republic and in Slovakia. Therefore, the documents furnished demonstrate that the applicant Nanostribro.cz used the said signs before the contested mark was filed (20/06/2017).

The pictures, the samples of products and the invoices show that the signs ‘nasil’ and were used in relation to products such as creams, soaps and shampoos from 2012. The exchange of emails between the parties also show the corporate relationship between the parties where the proprietor acknowledges about the applicants’ products.

Therefore, it follows from the evidence that, at the time of filing the contested EUTM, the EUTM proprietor was aware of the existence of the invalidity applicants’ signs.

Finally, the proprietor’s claim that the sign was created to be used by him is not supported by any evidence and the proven facts, namely, the rights granted by the graphic designer to Mr. Brudný and the factual use of the sign by the company, show the contrary. Therefore, the proprietor’s claim is dismissed as unfounded.

Similarity of the signs

Article 59(1)(b) EUTMR does not require, in principle, that the contested EUTM be identical or similar to an earlier right. However, in cases where the invalidity applicant is claiming that the intention of the EUTM proprietor was to misappropriate one or more earlier rights, such as the present one, it is difficult to envisage how a claim of bad faith may succeed if the signs at issue are not at least similar.

In the present case, the contested mark consists of the sole verbal element written in lower case letters in black and grey whereas the earlier sign also includes the same word written in lower case letters in black and grey. Below it and in a smaller size, almost imperceptible, the elements ‘nanosilver cosmetics’ are written in fairly standard characters. On the left hand size of the sign, there is a concave form.

In its observations, the applicants point out that the main element with distinctive character is the word ‘nasil’ and the graphic elements applied to this word. The other words ‘nanosilver cosmetics’ do not have any distinctive character.

In this case, the common element ‘nasil’ is a fanciful term and therefore distinctive whereas the terms ‘nanosilver cosmetics’ do refer to the characteristics of the products and they are thus descriptive of them. Therefore, the marks are similar in their distinctive element ‘nasil’.

In the present case, the Cancellation Division concurs with the applicants’ assertions that the signs are similar.

Intentions to misappropriate the rights of a contractual partner (duty of fair play)

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).

Such a relationship might be sufficiently close if the parties have entered into contractual or pre-contractual negotiations which, inter alia, concern the sign in question. Such a relationship does not have to be specific in such a way as to deal exclusively with, for example, franchise rights for the territory concerned (13/12/2004, R 582/2003‑4, EAST SIDE MARIO’S, § 23).

The proprietor states, that since he only sells the products as the exclusive seller for the market of the Czech republic and Slovakia of the company Vinsvin Sp. z. o.o under the company Nanostribro Plus s.r.o., he informed one of the cancellation applicants about his intention to establish his own limited company for the trade of those products under the sign ‘nasil’. He never intended to sell the products under the sign ‘nasil’ within the company Nanostribro.cz s.r.o. therefore he requested the applicant to remove from the e-shop Nanostribro.cz products sold under the sign ‘nasil’. The cancellation applicant Mr. Martin Brudný knew about his intention to establish the new company since the very beginning of their cooperation and he had no obligation to the non-competition.

It can be clearly inferred from the evidence and arguments referred to above that, by virtue of the business corporate relationship between the parties, there existed a close relationship based on confidence which implies that the EUTM proprietor had to inform the applicants of his intention to file an application of a EUTM which included the word ‘nasil’ and yet creating another company competing with the entity for which he is working for as an Executive. Although the proprietor informed the applicant about the creation of his new company, the applicants expressly rejected its consent to create another company with the same business object when they requested to cease the competition.

It has been proven that the parties had a close corporate relationship which involves the word ‘nasil’. This type of business relationship justifies that, in compliance with fair business practices, the EUTM proprietor should have informed the applicants about the registration of the contested mark and he should not have applied for the mark without the approval of the applicants, when it was indeed aware of its existence as mentioned above. Not only there is no evidence of the applicants’ consent to register the mark in the EUTM proprietor’s name, but there is evidence of active disapproval by the applicants to the EUTM proprietor’s business activity connected to the trade mark, which was even the reason for the dismissal of the EUTM proprietor from the company Nanostribro.cz.

The proprietor argued that he never intended to sell the products under the sign ‘nasil’ within the company Nanostribro.cz s.r.o. therefore he requested the applicant to remove from the e-shop Nanostribro.cz products sold under the sign ‘nasil’, as he sold those products on his own and under his name.

Nevertheless, the Cancellation Division considers that this proprietor’s declaration is rather confusing in view of the fact that he was the executive of the said company for six years during which the company he was working for was using the mark.

The proprietor also claims that the applicants concealed the existence of the license agreement concluded between Mr. Martin Brudný and the graphic designer in 2011. In view of the above, he filed the contested mark in good faith because he did not know about the concluded license agreement, and in his opinion, the conclusion of the said agreement was only purposive.

However and contrary to the proprietor´s arguments, the existed close relationship based on confidence implies that the EUTM proprietor had to inform the applicants of his intention to file an application of a EUTM which included the word ‘nasil’ even if he ignored the said license agreement.

On the other hand, both parties alleged and proved that corporate issues arouse between them. Precisely, the proprietor accused the applicant Mr. Martin Brudný of acting in bad faith as representative of the company Nanostribro.cz s.r.o. due to misuse of his own responsibility as a business partner in the company. The proprietor therefore initiated the General Meeting where the applicant Mr. Martin Brudný was dismissed as Company Director of the company Nanostribro.cz s.r.o.. The proprietor of the registered trade mark was trying to agree with the applicant about the liquidation of the company, but the applicant did not accept any agreement. Subsequently, the applicant Mr. Martin Brudný dismissed the proprietor from the position of Executive Director of the company.

Even if the said disputes cannot be ignored, in the Cancellation Division’s view the corporate issues of running a business does not imply that the proprietor files the contested mark on his name when he was still part of the company Nanostribro.cz. without informing the applicants due to his position as Director and its close business relationship. Moreover, the proposal to dismiss the applicant Mr. Martin Brudný as Company Director of the company Nanostribro.cz s.r.o. took place in 2018 (attachment 6), after the contested mark was filed. In the same sense, the Court decision from the Regional Court in Ostrava (2019) for the requested changes in the entry of Nanostribro.cz s.r.o. in the Commercial Register, specifically deleting Mr. Martin Brudný, Executive Director, from the Commercial Register and resolution concerning dissolution of the company with liquidation was issued in 2019 (Attachment 10), that is, after the filing of the contested mark (20/06/2017).

Secondly, if a duty of fair play exists, it must be established whether or not the EUTM proprietor’s actions constitute a breach of a duty of fair play, thereby having been made in bad faith.

In this case, the relationship between the parties creates an obligation for the proprietor of a duty of fair play, and to consult the issue with the applicants before applying for the contested mark. The relationship between the parties, together with the awareness and knowledge of the proprietor, was unfairly used to obtain an exclusive right.

Demonstrating bad faith implies proving that at the time of filing the EUTM proprietor was aware that it was causing harm to the invalidity applicant and that this harm was a consequence of its reproachable conduct from a moral or commercial view (decision of 21/04/2010, R 219/2009‑1 – ‘Gruppo Salini’, § 66).

Taken all the circumstances of the case into account, the Cancellation Division considers that the EUTM proprietor’s actions constitute a breach of the duty of fair play, and as such, the filing was made in bad faith.

Legitimate objectives of the EUTM proprietor

Account must also be taken of whether the EUTM proprietor’s filing intentions may be in pursuit of legitimate objectives. This may be the case, for example, if at the time of filing the contested EUTM, the EUTM proprietor knows that a third party, who is a newcomer on the market, is trying to take advantage of that sign by copying its presentation, and the EUTM proprietor seeks to register its sign with a view to preventing use of such a copy (11/06/2009, C‑529/07, Lindt Goldhase, EU:C:2009:361, § 49).

The EUTM proprietor claims that he solely aims at registering a brand of its own product, which he has been already selling for many years. It claims that he became the sole seller of the products of the company Vinsvin Sp. z o.o., Sp. k. with its registered office in Poland. He obtained the sole right to sell cosmetics containing pieces of silver (nano silver) in the Czech Republic and Slovakia. Furthermore, the proprietor claims that, before the company Nanostribro.cz s.r.o. was founded, he launched the products of the company Vinsvin Sp. z o.o. to the market in the Czech Republic and Slovakia under the sign ‘nasil’.

In support of its claim, the proprietor files a declaration issued by Ms. Jolanta Cebula, Chairman of the committee dated 11/09/2018 in which the company Vinsvin Sp.z.o. declares that due to the agreement between it and the proprietor in 2011, he has the status of the exclusive importer of cosmetic products containing nanosilver for the Czech and Slovak matters (Attachment 17). However, the declaration does not include that it was the importer of the said products under the contested mark ‘nasil’.

In this case, there is no clear and conclusive evidence in the file that the proprietor was the exclusive importer of the products containing nanosilver under the sign ‘nasil’, as argued by the applicants. Moreover, this is even not plausible in the light of the contract of the graphic designer with Mr. Martin Brudný dated on 09/06/2011 which demonstrates that the sign was created at the same time as the Nanostribro.cz company, something that would not have taken place if the proprietor would had already been using the mark ‘nasil’ himself.

The Cancellation Division considers that, given the existing relationship between the parties, this does not constitute a legitimate motive for the EUTM proprietor to apply for the trade mark without the applicants’ previous knowledge and consent.

Therefore, the Cancellation Division concludes that the alleged legitimate interest of the EUTM proprietor must be rejected.

Other argument of the EUTM proprietor

In its observations, the proprietor points out that Mr. Martin Brudný is no longer the owner of the license to the graphic sign ‘nasil’ since he confirmed that he sold the alleged license to another company Nanonasil s.r.o. The applicants on the other hand argue that Mr. Martin Brudný granted to the third company Nanonasil s.r.o., the non-exclusive sub-license of the logo ‘nasil’ because the potential cooperation between them. Annex No 21 includes a copy of the sub-licence agreement dated 29/9/2017 between Mr. Martin Brudný and the company Nanonasil s.r.o.

In the Cancellation Division’s view, granting a non-exclusive sub-license does not remove Mr Brudný of his rights to the mark.

Conclusion

In light of the above principles and of the circumstances and facts presented by the applicants, the Cancellation Division is of the view that the applicants have succeeded in proving their allegation that the EUTM proprietor was acting in bad faith when filing the contested EUTM. The applicants confined themselves to statements supported by evidence or facts leading to a safe conclusion that the EUTM proprietor had a duty to refrain from filing the contested mark. As a consequence, the applicants are considered to have established the EUTM proprietor’s dishonest intention on their part.

The contested mark is registered for goods and services in Classes 3, 25 and 35. Some of them such as cleaning preparations for personal use; antiperspirants [toiletries] are identical to the products soaps, antiperspirants for which the applicants’ earlier sign has been used. Furthermore, some of the contested services, namely, commercial information and advice services for consumers in the field of beauty products and clothing in Class 25 have some commonalities with the earlier goods.

However, other contested services such as updating of advertising material; on-line promotion of computer networks and websites; online advertisements; advertising; advertising services relating to the sale of goods; advertising services relating to cosmetics; publicity and sales promotion services in Class 35 have no close commonalities with the applicants’ cosmetics and soaps since they do not belong to the same market sector.

However, when bad faith of the EUTM owner is established, the whole EUTM is declared invalid, even for goods and services that are unrelated to those protected by the invalidity applicants’ mark. The General Court confirmed this approach and stated that a positive finding of bad faith at the time of filing of the contested EUTM could only lead to the invalidity of the EUTM in its entirety (11/07/2013, T–321/10, Gruppo Salini, EU:T:2013:372, § 48). The protection of the general interest in business and commercial matters to be conducted honestly justifies invalidating a EUTM also for goods and services that are dissimilar to the invalidity applicants’ ones and which do not even belong to an adjacent or neighbouring market.

In light of the above, the Cancellation Division concludes that the application is totally successful and the European Union trade mark should be declared invalid for all of the contested goods and services.

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 applicants in the course of these proceedings.

According to Article 109(1) and (7) EUTMR and Article 18(1)(c)(ii) EUTMIR, the costs to be paid to the applicants 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

Michaela SIMANDLOVA

Carmen SÁNCHEZ PALOMARES

Ana MUÑIZ RODRIGUEZ

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.