CANCELLATION No 10 780 C (INVALIDITY)
Khadi and Village Industries Commission, Gramodaya, 3, Irla road, Vile Parle (West), 400056 Mumbai, India (applicant), represented by Murgitroyd & Company, Scotland House, 165-169 Scotland Street, G5 8PL Glasgow, United Kingdom (professional representative)
a g a i n s t
Khadi Naturprodukte GbR, Zur Weser 5, 31737 Rinteln, Germany (EUTM proprietor), represented by Brandi Rechtsanwälte Partnerschaft MBB, Adenauerallee 12, 30175 Hannover, Germany (professional representative).
1. The application for a declaration of invalidity is rejected in its entirety.
2. The applicant bears the costs, fixed at EUR 450.
The applicant filed an application for a declaration of invalidity against European Union trade mark No 13 118 724 ‘Khadi Ayurveda’ (word mark) (the EUTM). The request is directed against all the goods covered by the EUTM, namely:
Class 3: Body cleaning and beauty care preparations; perfumery and fragrances; oral hygiene preparations; greases for cosmetic purposes; henna [cosmetic dye]; henna powders; cosmetics; massage oils; cosmetics in the form of oils; scalp treatments (non-medicated -); cosmetics for personal use.
The applicant invoked Article 52(1)(b) EUTMR, Article 52(1)(a) EUTMR in conjunction with Article 7(1)(g) EUTMR, Article 53(1)(a) EUTMR in conjunction with Article 8(1)(a) and (b) EUTMR based on an earlier well-known mark ‘KHADI’ and Article 53(1)(c) EUTMR in conjunction with Article 8(4) EUTMR based on company name and non-registered trade mark ‘KHADI’ used in the course of trade in all EU countries.
SUMMARY OF THE PARTIES’ ARGUMENTS
The applicant explains the meaning and history of the Indian term ‘khadi’, namely that it designates a type of traditionally made fabric, which was used in M. Gandhi’s political movement to promote Indian goods. The applicant is an Indian Commission established by the Indian Government to promote khadi and village industries. It claims that the term ‘khadi’ is used for a variety of traditionally made products. The applicant is responsible for granting authorization to producers to use the term ‘khadi’ upon fulfilling certain quality requirements.
The applicant argues that the contested mark is liable to mislead the public as to the existence of a connection between the owner of the trade mark and the applicant. Consumers who purchase the products labelled with ‘khadi’ assume that these products are authentic Indian products fulfilling the quality requirements imposed by the applicant. In the case of the EUTM proprietor’s goods, this is not guaranteed.
Moreover, the applicant argues that the EUTM proprietor filed the mark in bad faith, knowing of the use of the mark by the applicant and the strict manufacturing regulations applying to ‘khadi’ products, while not complying with them.
Finally, the applicant argues that the sign ‘khadi’ is a mark well-known within the EU in relation to a wide range of products. It claims that products under the name ‘khadi’ have been exported to Europe before the filing of the contested mark and that the applicant thus used the non-registered sign prior to the EUTM proprietor.
In support of its observations, the applicant filed the following evidence:
The Khadi and Village Industries Commission Act, 1956.
A declaration by Chief Executive Officer of the applicant explaining the nature and functions of the applicant and stating that the term ‘khadi’ cannot be registered in any country without the permission of Government of India and demanding the invalidation of the contested trade mark.
A printout from the applicant’s website showing categories of products bearing the name ‘khadi’.
A Wikipedia printout about the applicant.
Tables of unknown origin showing the value of export of different product categories and countries in which those goods were exported for years 2009 to 2014.
Documents related to export of goods from India by different entities:
One invoice (submitted three times) to a client in Germany dated 19/12/2007 for 923 pieces of Khadi cosmetic products.
Three airwaybills (two of them submitted twice) to one client in the United Kingdom, dated in 2010 for ‘khadi herbal products’; it is not clear from the documents how many products were sold or what was the economic value of those goods.
Documents (one bill of lading submitted three times, a document from customs system and a certificate of origin) related to one shipment of 200 boxes of Khadi handmade soap in April 2010 to Italy.
One invoice (submitted twice) to a client in the Czech Republic dated 04/03/2011; it is not clear from the documents how many products were sold or what was the economic value of those goods.
An invoice and bill of lading (submitted three times) dated in 2012 for a delivery of 1 670 pieces of Khadi cosmetic and hair preparations to a client in Poland.
Other documents demonstrating delivery of products to the USA, Canada, Japan, Australia and Kazakhstan or unknown destinations.
The EUTM proprietor argues that it has been creating cosmetics under ‘Khadi’ brand since 2008. It admits that the EUTM proprietor’s director encountered ‘Khadi’ products in India but claims that, since he was not aware of any export of those products in Europe, decided to start selling products under this name in Germany. It claims that the invoice submitted by the applicant for delivery of goods to Germany is the one issued to the director of the EUTM proprietor. After receiving the goods from India, the EUTM proprietor realized they did not comply with the ‘natural products’ requirements set by German law. Therefore, the EUTM proprietor created its own formulas, had them manufactured in India and sells them in Germany from then on. It points out that the term is not forcefully protected even in India, as can be inferred by the existence of several Indian trade mark registrations containing the term ‘khadi’ in the name of private entities. The mark does not deceive the public because the European public does not have any preconception about the term ‘khadi’ and does not expect any special qualities from products labelled with this term. Furthermore, it points out that the term ‘khadi’ is defined as a type of cloth, while the contested mark is registered for other products. Finally, the EUTM proprietor insists that it did not act in bad faith when filing for the contested mark. It emphasizes that the first EU trade mark filed by the EUTM proprietor that includes the word ‘khadi’ is EUTM No 8 216 343 ‘khadi naturprodukte aus Indien’ which was filed in 2009. The here contested trade mark must be perceived as a follow up on the first one and the intentions of the EUTM proprietor should be assessed in relation to the date of the filing of that first mark, that is, in 2009. At that time there was no sign of any ‘khadi’ products in Europe (the only export before that date in the export to Germany which shows the goods purchased by the EUTM proprietor) and the EUTM proprietor assumed that the applicant had no intention of establishing a market in the European Union. The EUTM proprietor also contends that the term ‘khadi’ is not well known in Europe and that the applicant failed to show that it used the sign in the course of trade to such an extent as to acquire a trade mark protection before the filing of the contested mark.
In their subsequent observations, the parties essentially maintain their positions and emphasize the arguments presented previously.
LIKELIHOOD OF CONFUSION
Article 53(1)(a) EUTMR in conjunction with Article 8(1) and 8(2)(c) EUTMR – well-known character of the earlier mark
The applicant claims that the mark ‘khadi’ is well known in all the Member States of the European Union for a wide range of goods and services in Classes 1, 3, 5, 16, 18, 20, 21, 23, 24, 25, 26, 27, 29, 30, 32 and 35.
According to Article 8(2)(c) EUTMR, for the purpose of paragraph 1, ‘earlier trade marks’ means:
‘trade marks which, on the date of application for registration of the European Union trade mark, or, where appropriate, of the priority claimed in respect of the application for registration of the European Union trade mark, are well known in a Member State, in the sense in which the words “well known” are used in Article 6bis of the Paris Convention.’
According to Article 6bis of the Paris Convention, ‘…the countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.’
Therefore, in order for Article 8(2)(c) EUTMR (in conjunction with Articles 8(1)(a) and (b) EUTMR) to be applicable, two conditions must be fulfilled:
(1) It has to be established that the earlier mark was well known in the relevant territory on the date when the contested mark was filed.
(2) That because of the identity or similarity between the contested mark and the earlier well-known mark, as well as between the goods and services covered by the marks, there exists a likelihood of confusion on the part of the public in the relevant territory.
In the WIPO recommendations, the assessment of well-known marks is principally based on the following quantitative considerations:
• the degree of knowledge or recognition of the mark in the relevant sector of the public;
• the duration, extent and geographical area of any use of the mark;
• the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies;
• the duration and geographical area of any registrations, and/or any applications for registration, of the mark, to the extent that they reflect use or recognition of the mark;
• the record of successful enforcement of rights in the mark, in particular the extent to which the mark has been recognised as well known by competent authorities;
• the value associated with the mark.
In the present case, the contested trade mark was filed on 28/07/2014. Therefore, the applicant was required to prove that the non-registered mark on which the application is based was well known in at least one of the Member States of the EU before that date.
In order to prove the existence of a well-known mark, the applicant filed the evidence listed above.
The documents submitted do not give any indication of the level of recognition of the mark among the public. Some documents explain the meaning of the Indian term ‘khadi’ but do not demonstrate any connection between this Indian term and its recognition among the European public. According to the applicant’s explanations and the documents, this term is a rather specific term designating a traditional India fabric and was used by M. Gandhi during the independence movement to promote Indian products. In the absence of any evidence to the contrary, the general European public cannot be expected to be familiar with the details of the Indian independence movement or with specialised Indian terms in the field of textile industry. Other documents such as The Khadi and Village Industries Commission Act shed light on the character and functions of the applicant. Again, without any evidence to the contrary, the public in the European Union cannot be expected to know about the existence of very specific state commissions operating in Asia. In any case, even if the public was familiar with the term ‘khadi’ in any of the abovementioned contexts, that term would not be known as a trade mark but as a historical reference or foreign language term for fabric. For the term ‘khadi’ to be a well-known trade mark, the public would have to be exposed to a large extent of use of products bearing the name ‘khadi’ as a badge of commercial origin. To this effect, the applicant submitted export tables and documents related to specific export transactions.
The export tables are of unknown origin, they refer to many categories of exported goods without indicating whether those goods bore the mark ‘khadi’ and the numbers are not specific for European countries. Although the countries where the exports were allegedly made are indicated, these are mostly non-EU countries and even if an EU Member State appears in the particular group, from the respective ‘total’ number it is impossible to infer whether any substantial amount was in fact delivered to that EU country. Therefore, these tables have a very limited probative value. In any case, they do not provide any indications as to the level of recognition of the mark among the relevant public.
Finally, the documents demonstrating concrete export cases of ‘khadi’ goods to the European countries do not show volumes of sales significant to the point that a well-known character of the contested mark could be proven. The applicant demonstrated that there was one delivery to Germany in 2007, three deliveries to one client in the UK in 2010, one shipment to Italy in 2010, one in the Czech Republic in 2011 and one to Poland in 2012. The remaining documents relate to transactions not related in any way to the EU. The amounts of goods sold are not clearly indicated in the documents or not in such volumes (200 boxes of soap in Italy and around 2600 cosmetic products in total in Poland and Germany) that could lead to a general knowledge of the mark among the public in the particular country.
Overall, the documents show some sporadic use of the mark in the EU by isolated cases of sales to four EU countries by various entities. Most of the documents do not relate to the relevant territory or are not reliable evidence containing only vague data (the export tables). In the absence of any indications as to the level of knowledge of the mark among the European public, the demonstrated extent of use is clearly insufficient for a conclusion to be drawn that the mark was well-known in any EU country at the time of filing of the contested mark.
Since the well-known character of the earlier mark was not demonstrated, the applicant failed to substantiate its earlier right and the application must be rejected insofar as it was based on Article 53(1)(a) EUTMR in conjunction with Article 8(1)(a) and (b) EUTMR.
NON-REGISTERED MARK OR ANOTHER SIGN USED IN THE COURSE OF TRADE (Article 53(1)(c) EUTMR in conjunction with Article 8(4) EUTMR)
In relation to Article 53(1)(c) EUTMR in conjunction with Article 8(4) EUTMR, the application is based on the non-registered trade mark and company name ‘KHADI’ used in the course of trade in all the states of the European Union for a wide range of goods and services in Classes 1, 3, 5, 16, 18, 20, 21, 23, 24, 25, 26, 27, 29, 30, 32 and 35.
Pursuant to Article 53(1)(c) EUTMR, a European Union trade mark shall, on request to the Office, be declared invalid where there is an earlier mark as referred to in Article 8(4) EUTMR and the conditions set out in that paragraph are fulfilled.
According to Article 8(4) EUTMR, upon opposition by the proprietor of a non‑registered trade mark or of another sign used in the course of trade of more than mere local significance, the trade mark applied for shall not be registered where and to the extent that, pursuant to the European Union legislation or the law of the Member State governing that sign:
(a) rights to that sign were acquired prior to the date of application for registration of the European Union trade mark, or the date of the priority claimed for the application for registration of the European Union trade mark;
(b) that sign confers on its proprietor the right to prohibit the use of a subsequent trade mark.
Therefore, the grounds of refusal of Article 8(4) EUTMR are subject to the following requirements:
the earlier sign must have been used in the course of trade of more than local significance prior to the filing of the contested trade mark;
pursuant to the law governing it, prior to the filing of the contested trade mark, the applicant acquired rights to the sign on which the application is based, including the right to prohibit the use of a subsequent trade mark;
the conditions under which the use of a subsequent trade mark may be prohibited are fulfilled in respect of the contested trade mark.
These conditions are cumulative. Therefore, where a sign does not satisfy one of those conditions, the application for declaration of invalidity based on a non‑registered trade mark or other signs used in the course of trade within the meaning of Article 8(4) EUTMR cannot succeed.
The condition requiring use in the course of trade is a fundamental requirement, without which the sign in question cannot enjoy any protection against the registration of a European Union trade mark, irrespective of the requirements to be met under national law in order to acquire exclusive rights.
Furthermore, such use must indicate that the sign in question is of more than mere local significance. The rationale of this provision is to restrict the number of conflicts between signs by preventing an earlier sign which is not sufficiently important or significant from challenging either the registration or the validity of a European Union trade mark.
Rights falling under Article 8(4) EUTMR may only be invoked if their use is of more than mere local significance. The proprietors of rights the use of which is of mere local significance retain their exclusive rights under the applicable national law pursuant to Article 111 EUTMR. The question whether the use of a non-registered sign is of more than mere local significance will be answered by applying a uniform European standard (18/04/2013, T‑506/11 & T‑507/11, Peek & Cloppenburg, EU:T:2013:197, § 19, 47-48).
The General Court held that the significance of a sign used to identify specific business activities must be established in relation to the identifying function of that sign. That consideration means that account must be taken, firstly, of the geographical dimension of the sign’s significance, that is to say of the territory in which it is used to identify its proprietor’s economic activity, as is apparent from a textual interpretation of Article 8(4) EUTMR. Account must be taken, secondly, of the economic dimension of the sign’s significance, which is assessed in view of the length of time for which it has fulfilled its function in the course of trade and the degree to which it has been used, of the group of addressees among which the sign in question has become known as a distinctive element, namely consumers, competitors or even suppliers, or even of the exposure given to the sign, for example, through advertising or on the internet (24/03/2009, T‑318/06 - T‑321/06, General Optica, EU:T:2009:77, § 36-37 and 30/09/2010, T‑534/08, Granuflex, EU:T:2010:417, § 19).
The signs invoked under Article 8(4) EUTMR must be in use not only at the time of filing of the contested mark but it must continue to be used at the time of filing of the invalidity request. In this regard, the Cancellation Division refers to the decision of the second Board of Appeal in case R-1822/2010-2, where the Board confirmed that ‘the requirement to show use of the sign, and thus to show its continued existence between the filing date of the contested EUTM and the filing of the invalidity request, is a matter that must be proved. Rule 19(1) and (2)(d) EUTMIR state that, where an opposition is based on Article 8(4) [EUTMR], evidence of, inter alia, its ‘continued existence’ must be adduced within the period given by the Office for presenting or completing facts, evidence or arguments in support of the opposition. Failure to prove the existence, validity and scope of protection of the earlier mark or right within that period will lead to the opposition being rejected as unfounded (Rule 20(1) EUTMIR). In the Board’s opinion, these Rules apply mutatis mutandis to cancellation proceedings’.
This was confirmed by the General Court in judgment of 23/10/2013 in case T-581/11. The Court held that the earlier right relied on in support of an opposition must still exist at the time that notice of opposition is filed. By analogy, the earlier right relied on in support of an application for a declaration of invalidity must still exist at the time that application is made. This presupposes normally that the sign in question must still be in use at the time of the filing of the notice of opposition or of the application for a declaration of invalidity. Indeed, it is precisely the use of the sign in the course of trade which is the basis of the existence of the rights to that sign (23/10/2013, T‑581/11, Baby Bambolina, EU:T:2013:553, § 26 and 27).
The evidence submitted by the applicant was listed above.
To sum up the above mentioned, for the successful application of this ground, the applicant would have to show use of the sign in the course of trade of more than a mere local significance in at least one country of the EU, both at the time of filing of the contested mark and at the time of filing of the invalidity request.
In the present case, the applicant claims that the sign was used in all the countries of the EU. As already mentioned above in the assessment of evidence for the purposes of the alleged well-known character of the mark, the majority of the documents do not relate to the EU. The export tables are of unknown origin and it is impossible to infer from them the specific amounts of goods allegedly exported to any individual European country. The remaining evidence shows export of ‘khadi’ goods to only five European countries, namely Germany, Italy, Poland, the United Kingdom and the Czech Republic.
As regards Germany, there is evidence of one shipment of products in 2007. This clearly cannot demonstrate use of the sign in this country at the time of filing of the invalidity application (23/04/2015). Therefore, use of the invoked sign in Germany was not proven.
As far as the remaining four countries are concerned, the evidence shows sales of products in 2010, 2011 and 2012. Apart from the fact that such use can hardly be considered sufficient to demonstrate any use at the time of filing of the invalidity request in 2015, the use in each country is limited to an isolated shipment (in the UK three shipments but to the same client and within the same year) of either an unknown amount of goods or, as is the case of Italy and Poland, a limited number of goods (200 boxes of soap in Italy and less than 1700 cosmetic products in Poland). Such use, being extremely limited in frequency, length, territory (only one place in each country) and volume, cannot be considered sufficient to fulfil the condition of being of more than mere local significance.
Moreover, and not less importantly, the applicant did not submit any applicable national law whatsoever. The onus to provide the necessary information about the applicable national law is on the applicant. The evidence to be submitted must allow the Cancellation Division to safely determine that a particular right is provided for under the law in question, as well as the conditions for acquisition of that right. The evidence must further clarify whether the holder of the right is entitled to prohibit the use of a subsequent trade mark as well as the conditions under which the right may prevail and be enforced vis‑à‑vis a subsequent trade mark. Since the applicant did not provide the Cancellation Division with any information at all about any national law, the application would fail as regards this ground just for this reason alone.
It follows that the applicant failed to prove that the earlier non-registered mark and company name was used in the course of trade with more than mere local significance. Moreover, it did not prove that it would be entitled, according to the respective national law, to prohibit the use of a subsequent trade mark. Since two of the requirements of Article 8(4) EUTMR were not fulfilled, the application has to be rejected insofar as it is based on Article 53(1)(c) EUTMR in conjunction with Article 8(4) EUTMR.
ABSOLUTE GROUNDS FOR INVALIDITY – ARTICLE 52(1)(a) IN CONJUNCTION WITH ARTICLE 7 EUTMR
According to Article 52(1)(a) and (3) EUTMR, a European Union trade mark will be declared invalid on application to the Office, where it has been registered contrary to the provisions of Article 7 EUTMR. Where the grounds for invalidity apply for only some of the goods or services for which the European Union trade mark is registered, the latter will be declared invalid only for those goods or services.
Furthermore, it follows from Article 7(2) EUTMR that Article 7(1) EUTMR applies notwithstanding that the grounds of non‑registrability obtain in only part of the European Union.
As regards assessment of the absolute grounds of refusal pursuant to Article 7 EUTMR, which were the subject of the ex officio examination prior to registration of the EUTM, the Cancellation Division, in principle, will not carry out its own research but will confine itself to analysing the facts and arguments submitted by the parties to the invalidity proceedings.
However, restricting the Cancellation Division to an examination of the facts expressly submitted does not preclude it from also taking into consideration facts that are well known, that is, that are likely to be known by anyone or can be learned from generally accessible sources.
Although these facts and arguments must date from the period when the European Union trade mark application was filed, facts relating to a subsequent period might also allow conclusions to be drawn regarding the situation at the time of filing (see order of 23/04/2010, C332/09 P, ‘Frosch Touristik’, paragraphs 41 and 43).
Deceptiveness – Article 7(1)(g) EUTMR
Pursuant to Article 7(1)(g) EUTMR, trade marks which are of such a nature as to deceive the public, for instance as to the nature, quality or geographical origin of the goods or services shall not be registered.
According to case-law, this ground for invalidity presupposes the existence of actual deceit or a sufficiently serious risk that the consumer will be deceived (04/03/1999, C‑87/97, Cambozola, EU:C:1999:115, § 41). Thus, a mere theoretical possibility that the public may be mistaken does not itself fall within an objection pursuant to Article 7(1)(g) EUTMR (decision of 17/04/2007, R 1102/2005-4, “SMARTSAUNA”, § 32).
In addition, Article 7(1)(g) EUTMR “implies a sufficiently specific designation of potential characteristic of the goods and services covered by the trade mark. Only where the targeted consumer is made to believe that the goods and services possess certain characteristics, which they do not in fact possess, will he be deceived by the trade mark.” (24/09/2008, T‑248/05, I.T.@Manpower, EU:T:2008:396, § 65).
When assessing whether a given trade mark is deceptive or not, account should be taken of market reality, meaning the way the goods are normally distributed and purchased, as well as of consumption habits and the perception of the relevant public. The relevant public is normally composed of reasonably well-informed, observant and circumspect persons. The average consumer is usually reasonably attentive, and should not be regarded as easily vulnerable to deception.
The applicant argues that the contested mark could deceive the public since consumers will expect the products labelled ‘khadi’ to follow the methods used to produce the ‘khadi’ products certified by the applicant and meet the quality requirements imposed by the applicant. Since the EUTM proprietor’s products do not have the applicant’s approval and did not pass the applicant’s quality checks, they deceive the public in this sense.
However, the applicant failed to show that the relevant public in the European Union has any expectations whatsoever as to products labelled with the term ‘khadi’. The relevant public is general public. The products are not specific products but general cosmetic products in Class 3. These are products for everyday consumption directed at public at large. There is no indication in the file that such a relevant public is familiar with the term ‘khadi’. It is not a term of common knowledge among the general public in Europe as it is a rather specialised Indian term for a specific product. On the other hand, the word ‘khadi’ is included in the Oxford online dictionary defined as ‘Indian homespun cotton cloth’. In view of this fact, it cannot be excluded that at least a part of English-speaking public is familiar with this term. However, they would understand it as a term designating a type of traditional Indian fabric, as it is defined in the dictionary and as was used in the context of M. Gandhi’s movement for independence. This is also the definition given to this word in The Khadi and Village Industries Commission Act submitted by the applicant. Therefore, even these consumers would not have any expectations about products bearing this term which do not have anything in common with textile goods. The contested goods in Class 3 are sufficiently far removed from textiles. Therefore, consumers, even those familiar with the Indian term ‘khadi’, cannot be deceived as to any characteristic of the contested goods.
It follows that the contested mark does not lead consumers to any clear expectation as regards a characteristic of the contested goods. Consequently, the consumers cannot be deceived into thinking that the goods possess any quality or nature that they in fact do not possess.
As seen above, it is a requirement of the application for invalidity to be successful under Article 52(1)(a) EUTMR in conjunction with Article 7(1)(g) EUTMR that the contested trade mark is liable to deceive the public. Since this has not been established, the application must, with regard to Article 52(1)(a) EUTMR in conjunction with Article 7(1)(g) EUTMR, be rejected.
ARTICLE 52(1)(b) EUTMR – Bad Faith
Article 52(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 applicant; good faith is presumed until the opposite is proven.
Assessment of bad faith
The Case-law shows four cumulative factors to be particularly relevant for the existence of bad faith:
Identity/confusing similarity of the signs,
EUTM proprietor’s knowledge of the use of an identical or confusingly similar sign,
dishonest intention on the part of the EUTM proprietor,
degree of legal protection enjoyed by both signs.
The applicant argues that the EUTM proprietor must have been aware of the strict Khadi manufacturing regulations and despite not being a certified producer, applied for a trade mark ‘khadi’. The invoice addressed at Heinrich Jacob dated in 2007 for ‘khadi’ cosmetic products demonstrates that the EUTM proprietor knew about the applicant’s mark. It argues that ‘khadi’ products were exported to Europe before the time of filing of the contested mark, not just to the EUTM proprietor but to other entities, as shown by the other invoices. The EUTM proprietor thus knew about the consistent trade of products under the ‘khadi’ sign in Europe before the filing of the contested mark.
The EUTM proprietor admits that when its director, Heinrich Jacob, was in India, he encountered products sold under the name ‘khadi’ and upon his return to Europe had some of these products delivered to be sold in Germany. Later he developed his own formulas and has been offering products under the name ‘khadi’ since.
It seems undisputed that the EUTM proprietor knew about the existence of the mark ‘khadi’ on the Indian market. However, it was not proven that, as the applicant claims, the EUTM proprietor knew about the regulating function of the applicant as regards ‘khadi’ products. It is reminded that the burden of proof lies with the applicant and the applicant did not provide any evidence indicating that the EUTM proprietor knew that production of ‘khadi’ products is somehow regulated in India. Neither did it prove that this fact was so well-known (in India or in Europe) that a German person, even spending some time in India, would have to know about it. As a matter of fact, the applicant repeatedly emphasizes that it is the body that authorizes producers to produce and offer products under the name ‘khadi’ but even this was not demonstrated by the evidence. The Khadi and Village Industries Commission Act establishes the applicant, regulates its operation and specifies its functions. The Commission’s functions are defined in a general manner and the one described above, that is, authorizing producers to label their goods ‘khadi’, is not among them. No other legal, administrative or other provisions were submitted that would show that the applicant holds such a power or even that use of the word ‘khadi’ on products other than textiles should be somehow regulated. The abovementioned Act defines ‘khadi’ as ‘any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from mixture of any two or all of such yarns’. It does not mention use of this term in relation to products other than such cloth.
In any case, the EUTM proprietor knew about the existence of the ‘khadi’ products in India. However, the fact that the applicant knows or must know that a third party has long been using, in at least one Member State, an identical or similar sign for an identical or similar product capable of being confused with the sign for which registration is sought is not sufficient, in itself, to permit the conclusion that the applicant was acting in bad faith. In order to determine whether there was bad faith, consideration must also be given to the applicant’s intention at the time when he files the application for registration (11/06/2009, C‑529/07, Lindt Goldhase, EU:C:2009:361, § 40 and 41).
Before assessing the intentions of the EUTM proprietor, the Cancellation Division emphasises that the Court in the abovementioned judgment specifically mentioned as one of the condition for concluding bad faith that the EUTM proprietor should have known about the use of the mark in at least one Member State. In the present case, it was only demonstrated that the EUTM proprietor knew about the use in India. The applicant claims that at the time of filing for the contested mark, products under the name ‘khadi’ were already consistently exported to Europe. As seen above in the assessment of use for the purposes of Article 8(4) EUTMR, the applicant did not prove any significant use of the sign in the EU up to the filing of the contested trade mark. There was only one shipment of products to Germany, and that was to the EUTM proprietor’s director. It was not demonstrated that the EUTM proprietor knew about any other shipments and they were clearly not sufficiently significant to allow for an assumption to be made that the EUTM proprietor knew about them. Moreover, when assessing a possible bad faith on the part of the EUTM proprietor, all relevant circumstances have to be taken into account. To this effect, the Cancellation Division concurs with the EUTM proprietor that a relevant circumstance is that the EUTM proprietor already filed for the first EUTM including the conflicting term ‘khadi’ in 2009. The applicant did not show that any products bearing the name ‘khadi’ were exported to Europe other than the one shipment of the EUTM proprietor before 2009. In any case, the applicant failed to show that the EUTM proprietor knew, at the time of filing of the contested mark, of any use of the mark ‘khadi’ in any of the EU Member States.
Even if the ‘use in any of the EU Member States’ was to be given a lesser weight in the assessment and the EUTM proprietor’s knowledge of the use in India would be sufficient to fulfil the condition of knowledge, as seen above, the knowledge alone is not sufficient to conclude bad faith. A dishonest intention on the part of the EUTM proprietor would have to be shown. This could exist, for example, where a previous business relationship existed between the two parties that would create a duty of fair play on the part of the EUTM proprietor towards the applicant, which would be breached by the filing of the mark in the name of the EUTM proprietor. However, such a relationship did not exist, or at least it was not shown or even argued by either party. The one delivery of products from India to the EUTM proprietor’s director does not create such a type of relationship.
The applicant sees bad faith of the EUTM proprietor in that it knew about the strict requirements imposed on the ‘khadi’ products and wanted to circumvent such requirements. However, not only the applicant did not demonstrate that the EUTM proprietor was aware of any type of restrictions regarding the term ‘khadi’, it did not even prove that it (the applicant) is entitled to enforce some type of quality standard on goods bearing the term ‘khadi’, in India or elsewhere.
The applicant also sees bad faith in that the EUTM proprietor wanted to take advantage of the reputation of the ‘khadi’ products and to enjoy this reputation for its own products without being submitted to the quality checks. Again, the applicant did not show that the term ‘khadi’ is associated, among the European public, with any type of reputation or expectations as regards any characteristics of the products bearing the name ‘khadi’. Therefore, this argument of the applicant holds no water. Even if it was accepted that the term ‘khadi’ might be known by a part of the public as a part of M. Gandhi’s fight for independence or as a traditional Indian type of cloth, such associations are made only in connection with the textile goods, possibly clothing by extrapolation. The contested goods have nothing in common with either textiles or clothing.
Finally, the last criterion mentioned above as set up by the Court of Justice is the degree of legal protection enjoyed by both signs. To this effect, it has to be reminded that the applicant failed to show (and it was not for the lack of trying) that the term ‘khadi’ did enjoy any type of legal protection within the European Union, or elsewhere, in relation to the contested goods.
The Cancellation Division notes that the overall assessment of bad faith must bear in mind the general principle that the ownership of a European Union trade mark is acquired by registration and not by prior adoption by way of its actual use, let alone its use in a territory outside of the European Union. Particularly when the invalidity applicant is claiming rights to a sign which is identical or similar to the contested EUTM, it is important to remember that Article 52(1)(b) EUTMR moderates the ‘first-to-file’ principle, according to which a sign may be registered as an EUTM only in so far as this is not precluded by an earlier mark with effect either in the European Union or in a Member State. Without prejudice to the possible application of Article 8(4) EUTMR, the mere use of a non-registered mark does not prevent an identical or similar mark from being registered as a EUTM for identical or similar goods or services (14/02/2012, T‑33/11, Bigab, EU:T:2012:77, § 16‑17 and 21/03/2012, T‑227/09, FS, EU:T:2012:138, § 31‑32). Moreover, in the present case the use (not proven but accepted by both parties) of the identical mark took place in India. The principle of territoriality is another basic principle of the trade mark law and in general, the use of a sign in India does not grant any protection for the territory of the European Union. Article 52(1)(b) EUTMR can also be used to moderate this principle of territoriality under certain circumstances if strong evidence indicating bad faith of the proprietor is filed. In the present case, the applicant failed to submit such evidence.
In the light of all the above, the Cancellation Division concludes that the applicant failed to prove that the EUTM proprietor acted in bad faith when filing the application for the contested EUTM and the application should be rejected also insofar as it was based on Article 52(1)(b) EUTMR.
According to Article 85(1) EUTMR, the losing party in cancellation proceedings must bear the fees and costs incurred by the other party.
Since the applicant is the losing party, it must bear the costs incurred by the EUTM proprietor in the course of these proceedings.
According to Rule 94(3) EUTMIR and Rule 94(7)(d)(iv) EUTMIR, the costs to be paid to the EUTM proprietor are the representation costs, which are to be fixed on the basis of the maximum rate set therein.
The Cancellation Division
Pedro JURADO MONTEJANO
According to Article 59 EUTMR, any party adversely affected by this decision has a right to appeal against this decision. According to Article 60 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.
The amount determined in the fixation of the costs may only be reviewed by a decision of the Cancellation Division on request. According to Rule 94(4) EUTMIR, such a request must be filed within one month from the date of notification of this fixation of costs and shall be deemed to be filed only when the review fee of EUR 100 (Annex I A(33) EUTMR) has been paid.