Bad faith hits the headlines again – the Monopoly and Swatch cases

Quick read

What has happened?

A trade mark may be declared invalid if the application was filed in bad faith. Two recent decisions have considered the concept of bad faith in more detail, adding to the already burgeoning pot of high-profile decisions on the topic (including last year's SkyKick case). The Hasbro case, in particular, is likely to impact brand owners' filing strategies.

In Hasbro, Inc. v the EUIPO (MONOPOLY), the General Court considered whether the practice of "ever-greening" constitutes bad faith. Ever-greening occurs where the same trade mark covering the same or overlapping goods and services is re-filed to prolong the five-year grace period for showing genuine use.
Confirming the decision of the EUIPO Board of Appeal, the General Court held that this practice does amount to bad faith. This is so even if there are other legitimate reasons for re-filing the mark in question.
Assuming that this decision is not successfully appealed to the ECJ, it will put into question the validity of many registrations that overlap with earlier ones. It does, however, clarify that merely filing a later mark that overlaps with an earlier mark does not automatically amount to bad faith. Brand owners will want to carefully consider the commercial rationale for re-filing a mark and factor in the risk of a bad faith "counter-attack" when seeking to enforce a re-filed mark.
In a separate decision – Swatch v Apple – the English High Court considered whether filing a trade mark application with the intention of using the mark in an amusing way (such as to parody or poke fun at another business or to bring another trade mark to mind) constitutes bad faith.
Over-turning the decision of the UKIPO, the High Court held that there was no bad faith by Swatch – it is not an inherently dishonest business practice to use a sign which brings another trade mark owner to the mind of some consumers in an amusing but inoffensive way.
In the rare case where a brand owner wishes to file an application that references a third party's brand or business, care should be taken to consider a possible bad faith attack. Whether there is bad faith will largely depend on the nature of the humour and its consequent impact on the business interests of the third party.

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Hasbro, Inc. v the EUIPO, MONOPOLY

The General Court has confirmed that re-filing a trade mark application can constitute bad faith in certain circumstances. Where an identical trade mark covering identical (or overlapping) goods and/or services is filed with the intention of extending the five-year grace period for showing use (so-called "ever-greening"), there is bad faith. This applies even if there are other legitimate reasons for re-filing the mark in question.

While the decision is not binding on the UK now that it has left the EU, it is likely that a similar decision would have been reached in the UK on the same facts.

The case concerned an EUTM registration for the mark MONOPOLY (filed in 2010), which Hasbro had relied on to oppose a third party application for the mark DRINKOPOLY. When the MONOPOLY EUTM had been filed in 2010, Hasbro already had several EUTMs (dating back to 1996) for MONOPOLY covering overlapping goods and services. The owner of the DRINKOPOLY mark applied to invalidate Hasbro's 2010 MONOPOLY registration on the grounds that it was filed in bad faith.

While Hasbro put forward a number of reasons for refiling the mark, it acknowledged that reducing the administrative burden of having to prove use was a relevant factor. This led the General Court to find that the application had been filed in bad faith; it was an abuse of law. The fact that other legitimate reasons existed for refiling the mark did not alter the position.

The factors that were fatal to Hasbro were:

Hasbro relied on the repeat filings and on the earlier marks in the context of two sets of opposition proceedings.
To justify the repeat filings, Hasbro mentioned the reduction of the administrative burden.
Hasbro argued that re-filing was normal industry practice, which the General Court took to clearly imply that Hasbro's strategy was intentional.
The earlier marks had not been surrendered.

The General Court commented that the following were all irrelevant:

That the goods and/or services covered by the subsequent MONOPOLY EUTM were broader than those covered by the earlier EUTMs – the later mark will only be declared invalid for those goods/services that overlap.
That there were other good reasons for re-filing the MONOPOLY mark (such as for licensing purposes, to reflect expanding product lines, or to reflect new approaches to specification drafting).
That Hasbro could have actually proved use of its MONOPOLY marks. It is the intention of the applicant for a mark at the time of filing which is to be evaluated not whether the grace period is extended in fact.
That the re-filing did not take place on a date close to the end of the five-year grace period. The length of the extension of the grace period is irrelevant.
That re-filing is a common practice in the industry and Hasbro acted in accordance with advice from counsel. The fact that other companies may be using a specific filing strategy does not necessarily make that strategy legal and acceptable.
That the Cancellation Division would be swamped with cases in which bad faith would be invoked if the contested decision were upheld.

The practice of ever-greening has been controversial and this decision will surely not end it. However, trade mark owners will want to carefully consider the commercial rationale for re-filing any mark and litigants will be alive to the potential of a counter-attack based on bad faith where there are multiple filings.

Swatch AG v Apple Inc

This dispute made headlines after Swatch appealed a UKIPO decision in which its trade mark applications for ONE MORE THING and SWATCH ONE MORE THING were refused registration. The UKIPO had refused the applications on the ground that they were filed by Swatch with the intention of poking fun at/parodying Apple in a way that constituted bad faith. Famously, Steve Jobs of Apple used to use the phrase "one more thing" during his new product launches. The English High Court overturned this decision on the basis that poking fun/parody doesn’t always amount to bad faith.

Where an applicant files a trade mark application with no real intention to use the mark and simply to block others from using it, there is bad faith. However, Apple did not rely on this ground in its opposition to Swatch's applications. Instead, it argued that there was bad faith as the use of the marks applied for would parody Apple, divert trade from Apple and make use of Apple's reputation. All three grounds necessitate an intention by the applicant to use the mark applied for in a manner amounting to bad faith, rather than simply block another's use.

The UKIPO decided in Apple’s favour on the basis that the applications were filed by Swatch as a retaliatory measure to upset and to "raise the stakes with Apple by poking fun at it in a manner akin to parody".

This was not upheld by the High Court. Acknowledging that parody can cover a multitude of possibilities, it held that it is not an inherently dishonest business practice to use a sign which brings another trade mark owner to the mind of some consumers in an amusing but inoffensive way. This activity would not necessarily undermine the interests of a third party – as was the case here. However, much would depend on the nature of the humour and its consequent impact on the business interests of the third party.

The High Court also held (obiter) that using a phrase in a humorous parodic skit may not be trade mark use for the purposes of infringement. At the same time, a mark that has parodic character may also be capable of functioning as a trade mark. In short, not all parodies will infringe, but some might. Ultimately, it will depend on whether the use of a third party trade mark might affect the essential function of that trade mark.

This is an interesting case which helps clarify the interaction between parody and bad faith. It remains to be seen whether Apple will apply to invalidate Swatch's marks once they are registered perhaps on the grounds that Swatch has no intention to use the marks and filed them merely to prevent Apple from using them.