With numerous recent rulings on bad faith, including the UK High Court's decision in Lidl v Tesco, we summarise the key issues brand owners need to consider when considering bad faith.

What is bad faith?

In the UK, a trade mark will be refused registration (or if registered, will be invalidated) if or to the extent that the application is made in bad faith. The same is true for EU trade marks (EUTM) except that bad faith can only be raised once an EUTM is registered. Despite this procedural difference, the substantive law on bad faith is still largely harmonised across the UK and EU (notwithstanding Brexit).

There is no definition of bad faith in the legislation. It has been broadly defined as presupposing a dishonest state of mind or intention on the part of the applicant or being present when the applicant's conduct falls short of honest standards of acceptable commercial behaviour observed by reasonable and experienced persons in the particular field. 

The intention of the applicant at the date the application was filed is what is relevant. This is a subjective factor which must be determined by reference to the objective circumstances of the particular case. Whether an applicant was acting in bad faith must be the subject of an overall assessment, considering all the factors relevant to the particular case. 

Importantly, bad faith cannot be presumed on the basis of the mere finding that, at the time of filing its application, the applicant had no economic activity corresponding to the goods and/or services in question.

When does bad faith arise? 

Bad faith occurs in two broad scenarios: bad faith vis-a-vis third parties and bad faith vis-a-vis the trade mark system. These are considered further below. 

Bad faith against third parties

This arises where the applicant had the intention, at the time of filing the application, of undermining, in a manner inconsistent with honest practices, the interests of third parties. It includes a number of scenarios such as:

• Where an application is filed solely for the purposes of preventing a third party (such as a competitor) from registering or using the mark in question.
• Where an application is filed for a mark properly owned by someone with whom the applicant has a business interest. 
• Where the applicant acts in a co-ordinated manner to prevent the trade mark in question from being part of the insolvency assets of the trade mark owner. 
• Where an application is filed in the context of trade mark squatting ie to prevent the legitimate owner using and registering the brand in one or more jurisdictions. This often occurs where the trade mark in question has been launched - but not yet applied for - by a high-profile entity. 

Mere knowledge that a third party is using a sign is not sufficient on its own for a finding of bad faith. The concept of bad faith is broader than the deliberate registration of a third-party mark for similar or identical goods or services. The commercial logic (or lack thereof) underlying the application must be considered. 

Thus, filing an EUTM application with the sole intention of taking over the clients of the legitimate owner of the mark (which was already using the mark through its distributor in one EU member state) constituted bad faith. Conversely, filing an application simply to parody or poke fun at a third-party or where the applicant itself has a legitimate interest in the mark might not constitute bad faith (see our article here).

Bad faith against the trade mark system

This arises where the applicant had the intention, at the time of filing the application, of obtaining (without even targeting a specific third party) an exclusive right for purposes other than those falling within the functions of a trade mark. It includes the situation where the applicant applies for a mark with no genuine intention to use it for some or all of the goods/services covered, for example:

• Where an application is filed solely for the purposes of broadening a monopoly (to use as a so-called defensive weapon).

• Where an application is filed to circumvent the rules on proving genuine use, which only apply to registrations of more than five years old (so-called ever greening). 

However, filing for a broad term (such as computer software or telecommunications services) might not constitute bad faith if the applicant has a genuine intention to use the mark on a small number (and potentially only one) item within that broad term. The UK Supreme Court will consider this issue later this year. Conversely, filing an application to circumvent the rules on proving use constitutes bad faith even if the applicant had other legitimate reasons for applying for the mark.

What is the consequence of a finding of bad faith?

Where there is a finding of bad faith, the application or registration is refused or invalidated only in respect of those goods and/or services for which there was a finding of bad faith (in keeping with the usual rules on invalidity). The whole application or registration does not fall down. 

Who can raise bad faith and when?

In the UK, bad faith can be raised by third parties by way of an opposition against a pending application or invalidity action against a registration. The UK IP Office can also raise bad faith of its own volition at the application stage and has just issued renewed guidance on this (see our article here). Similarly, the Registrar of the UK IP Office may apply to the court to invalidate a registration on the grounds that it was applied for in bad faith. 

The position is slightly different for EUTMs. They cannot be opposed or objected to on the basis of bad faith; bad faith can only be raised once an EUTM is registered by way of an invalidity action by a third party. 

The Trade Marks Directive (which governs the national trade mark laws of EU member states) provides that EU member states have the option of including bad faith as an absolute ground for refusal of an application, but they must include it as an absolute ground for invalidity. 

Who has the burden of proving bad faith?

It is on the party alleging bad faith to prove it. Even where there are circumstances pointing to bad faith, it cannot be excluded that the applicant's objective was in pursuit of a legitimate objective.

Where the court/tribunal finds objective circumstances that may raise a rebuttable presumption of lack of good faith, it is for the applicant to provide plausible explanations regarding the objectives and commercial logic pursued by the application. 

It is clear from recent caselaw that the burden of proof can shift seemingly quite easily (see our article here). 

What does this mean for you?

• Collating evidence and keeping records of commercial decision making that clearly illustrates your intention at the time of filing or at very least shows the commercial logic for the filing can be important to rebut any presumption of bad faith. This is particularly so for repeat filings and where a mark might not be used in the form in which it was registered (including where it might be used as a component part of another mark) or where there are other unusual circumstances. 

• Filing a relatively broad specification covering current and anticipated plans and leaving some room for future expansion may well be permissible. Filing for a broad term is generally acceptable if there is an intention to use the mark on a few (and potentially even one) item(s) within that broad term. 

• Re-applying for the same mark periodically with no commercial rationale (eg covering the same or substantially the same goods or services as previous applications) is liable to lead to allegations of bad faith by ever-greening.
• Brand owners should not assume that they will be deemed to have filed an application in good faith just because they subsequently use the mark in question. Bad faith and use are different issues. Where there might not have been an intention to use a particular mark at the time of filing, but use is later commenced, a new filing might be merited.
• Don’t assume that you can stop a third party from using or registering a conflicting mark based on bad faith. The deliberate registration of a mark that conflicts with a third party's mark is not generally of itself sufficient for a finding of bad faith; something more is usually required. Filing first can therefore be key.
• Bad faith does not adopt a one size fits all approach. The decisions are made on a case-by-case basis, wholly dependent on the facts at hand.

This article was co-authored by Leon Gibbs.