1 November 2009

Death by chocolate - the battle for the bunny

In the recent case of Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH Case C-529/07, the European Court of Justice (ECJ) was tasked with considering whether Lindt acted in bad faith when it filed a Community Trade Mark application for its chocolate bunny three-dimensional shape in 2000.

In proceedings for trade mark infringement by Lindt against Franz Hauswirth, the Austrian court had expressed the opinion that there was a likelihood of confusion between the Franz Hauswirth and Lindt bunnies, particularly based on the shape and colour of the bunnies produced.

Lindt instituted action against Franz Hauswirth in 2004 and sought to prevent it from producing and marketing its chocolate bunnies in the European Union. Lindt argued that it was the proprietor of the chocolate bunny three-dimensional Community Trade Mark and a likelihood of confusion existed between the competing products.

Hauswirth argued that the Lindt trade mark should be invalidated and relied on Article 51(1)(b) of Regulation No 40/94, which provides that 'A Community trade mark shall be declared invalid on application to the Office for Harmonisation in the Internal Market (Trade Marks and Designs) or on the basis of a counterclaim in infringement proceedings, where the applicant was acting in bad faith when he filed the application for the trade mark' . They argued that the mark cannot enjoy protection as a trade mark, based on the fact that Lindt had acted in bad faith when they applied for the registration of the mark. There was also a further accusation that Lindt used its dominant market position to kill competition.

Lindt had been producing chocolate bunnies since the 1950's and had been selling its chocolate bunnies in Austria since 1994. On the other hand, Hauswirth had been making and selling chocolate bunnies since the 1960s.

When first manufactured, the individual shapes of the chocolate bunnies differed significantly. However, the introduction of automated wrapping has led to industrially manufactured bunnies becoming increasingly similar.

Lindt argued that the fact that they were aware of the market competitors and were preventing them from gaining entry to the market did not amount to bad faith. They argued further that this had to be accompanied by dishonest conduct, which was absent in this instance.

In response, Hauswirth contended that bad faith is established where the applicant for registration of a sign as a trade mark was aware of the use by a competitor who had obtained a valuable right in at least one Member State, of an identical or similar sign for identical or similar goods or services, and applied for registration of the sign as a Community trade mark in order to prevent that competitor from continuing to use his sign.

This argument no doubt was made as Lindt only filed its application for registration of a Community Trade Mark, that would grant it protection in all the member states of the European Union, in 2000, while Hauswirth had already made and sold its chocolate bunnies in Austria, a member of the European Union, since the 1960's.

The ECJ ruled that the presumption of knowledge is not sufficient to prove bad faith. The test is the intention of the applicant for registration, which is subjective and determined by objective circumstances. Lindt's action could further be justified if such actions were in pursuit of a legitimate objective. If such application was, however, made with the knowledge that similar products were available elsewhere in the European Union, and if the application for registration was to form part of an attempt to prevent its competitors from selling their products, bad faith could be inferred on the part of such applicant.

The court ruled that, to determine whether the applicant is/was acting in bad faith within the meaning of Article 51(1) (b) of Regulation No 40/94, the national court must take into consideration all the relevant factors specific to the particular case at the time of filling the application for registration of the sign as a Community trade mark, in particular:

  1. the fact that the applicant knew or must have known that a third party is 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;
  2. the applicant's intention to prevent that third party from continuing to use such a sign; and
  3. the degree of legal protection enjoyed by the third party's sign and by the sign for which registration is sought.

The dispute has been referred back to the Austrian courts and its decision is eagerly anticipated.

Eben van Wyk, Director and
Rico Burnett, Associate,
Intellectual Property

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