Registered trade marks are an invaluable aspect of brand protection, providing their owner with a monopoly over the use of the mark in connection with the goods and services for which it is registered. For example, The Coca-Cola company has the exclusive right to use the mark ‘Coca-Cola’ and its associated branding in connection with soft drinks. Most brand owners apply for trade marks in good faith, to protect their goodwill and reputation, and commercialise their brand. However, the law recognises the potential for the trade mark system to be used by businesses for illegitimate purposes, for example to stifle competition. The concept of ‘bad faith’ seeks to prevent brand owners from abusing the system by refusing registration for marks applied for in bad faith, or rendering marks registered in bad faith invalid.
Here, our trade mark solicitors discuss the concept of bad faith. We explain when it can arise, how to challenge a trade mark on bad faith grounds and how to minimise the chances of facing such a challenge.
Contents:
- What constitutes bad faith?
- Identifying bad faith trade mark applications
- What are the potential consequences of a bad faith trade mark filing?
- Who has to prove bad faith?
- What evidence do you need to claim bad faith?
- Challenging trade mark applications on the grounds of bad faith
- Who can raise bad faith in respect of trade mark applications?
- When can you challenge a trade mark application on bad faith grounds?
- What is the process for challenging a trade mark application on bad faith grounds?
- What happens if you successfully challenge a trade mark application on the grounds of bad faith?
- Challenging registered trade marks on bad faith grounds
- Who can bring invalidation proceedings?
- When can you invalidate a registered trade mark on bad faith grounds?
- What is the process for invalidating a registered trade mark on bad faith grounds?
- Can you raise bad faith as a counterclaim in trade mark infringement proceedings?
- How can you minimise the chances of your application being refused on the grounds of bad faith or successfully defend a claim?
- Summary
What constitutes bad faith?
There is no legal definition of bad faith. Bad faith cases are necessarily case-specific since the crucial factor is the applicant’s intentions when they made the application. As a very general rule, trade mark filings made dishonestly, or falling short of the standards of acceptable commercial behaviour, might be deemed to have been made in ‘bad faith’.
Bad faith can be divided into two broad categories: bad faith against a third party and bad faith against the trade mark system. The types of behaviour that might constitute bad faith include the following:
- Applications to block a competitor - This type of situation involves an applicant filing a trade mark to prevent a competitor from registering or using it. This is an example of bad faith against a third party
- Evergreening - Evergreening is the term given to a trade mark strategy intended to circumvent the requirement that a trade mark must be used within 5 years of registration, failing which it can be cancelled. To defeat a cancellation action, the brand owner must prove their use of the trade mark. By registering another trade mark identical to one for which they already have a registration before the end of the initial mark’s grace period, the brand owner essentially ‘evergreens’ their mark and avoids having to provide evidence of use. This is an example of bad faith against the trade mark system
- Using a trade mark to broaden a monopoly - Sometimes, a brand owner seeks to broaden the scope of their monopoly. For example, they might register several variations of a logo to prevent a competitor from using any of them, whilst having no intention of using all variants. This is an example of bad faith against the trade mark system
- Trade mark squatting - Trade mark squatting refers to a practice whereby someone other than the brand owner registers elements of the branding as trade marks, typically with a view to selling them to the brand owner for a significant profit. This is an example of bad faith against a third party
Example of bad faith cases
When considering the types of trade mark filings that might constitute bad faith, it helps to consider some real-life examples. We set out below two much publicised cases that illustrate not only when bad faith might operate to invalidate a trade mark and when it might not, but also how fact-dependent bad faith cases are.
A much-cited example of ‘evergreening’ involves the toy manufacturer Hasbro. In 2010, Hasbro obtained a trade mark across various classes for the word MONOPOLY. A third party subsequently sought to invalidate the trade mark on the basis that Hasbro had applied for it in bad faith, since it was identical to 2 of Hasbro’s earlier trade marks. They argued that Hasbro had applied for the mark solely to avoid proving genuine use of its earlier marks. The court agreed, invalidating the latest registration insofar as it related to goods and services covered by the earlier registrations.
Interestingly, Hasbro openly admitted its evergreening strategy, stating that it was common practice amongst brand owners to reregister existing marks. Whilst the court noted that such practices would not, of themselves, constitute bad faith, the matter would hinge on the applicant’s intentions. Hasbro’s admission that it was motivated by a desire to avoid the costs of proving use was a key factor in persuading the court that Hasbro’s actions amounted to bad faith.
The long-running battle between Apple and Swatch provides our second example of bad faith proceedings in action.
The above case highlights the extent to which bad faith depends on the circumstances of a situation. It is, therefore, crucial to work with experienced trade mark solicitors, like ours, when bringing or defending bad faith proceedings, to ensure your case is presented in the best possible light.
Identifying bad faith trade mark applications
Bad faith trade mark filings can severely impact on your brand, so the sooner problematic issues come to your attention, the better. The types of measures that can help detect bad faith filings include the following:
- Proactively monitoring trade mark applications - Monitoring trade marks at the application stage facilitates the early detection of potential issues. The most efficient way of carrying out these checks is through a specialist trade mark monitoring system. These systems consistently monitor trade mark applications to identify any that might be problematic, and alert you to them.
Our trade mark solicitors offer a comprehensive trade mark monitoring service to identify problematic applications, including bad faith filings. If a potential bad faith filing is detected, they will liaise with you regarding its likely impact on your business and devise a strategy to address the issue as swiftly and cost-effectively as possible.
- Ongoing checks that competitors are using their marks as registered - Sometimes, bad faith filings do not come to light until sometime after registration. Since bad faith filings can give a brand owner an unfair commercial advantage, it is a good idea to monitor your competitors’ activities to check that they are using their trade marks properly. If they are not, and if such use is likely to detrimentally affect your business interests, speak to us. We will consider whether the trade mark owner’s actions constitute bad faith and, if so, advise on the best course of action.
What are the potential consequences of a bad faith trade mark filing?
Bad faith trade mark filings can be costly for both the applicant’s competitors and the market in general. Examples of the potential consequences bad faith filings can have include the following:
- Preventing third parties from entering the market by, for example, registering the brand name of a business not yet operating within the jurisdiction or sector
- Preventing fair competition
- Damaging the goodwill and reputation of existing trade marks
- Giving the applicant an unfair competitive advantage, for example by broadening their monopoly
Who has to prove bad faith?
A presumption of good faith exists until the court is convinced otherwise, and the burden of doing so falls on the party alleging bad faith. However, if the evidence points to a lack of good faith, the applicant must explain the commercial rationale behind their actions.
What evidence do you need to claim bad faith?
Bad faith cases are notoriously complex and difficult to prove. Since every case turns on its facts, evidence is critical. The court will not draw inferences of bad faith from conduct that could be legitimate, so you must be able to convince the court, with clear, objective evidence, that the applicant’s intentions at the time of filing were dishonest or fell short of acceptable commercial behaviour. If you cannot, your claim will likely fail.
The types of evidence required will depend entirely on the circumstances of the case, but might include the following:
- The applicant’s trade mark filing history if, for example, it shows extensive filings of marks the applicant does not use, with no commercial rationale
- A history of reregistering existing marks, with no commercial rationale
- The applicant’s illegitimate use, or non-use, of the trade mark
Experienced trade mark solicitors like ours are well-versed in the types of evidence required in bad faith proceedings and will assist you in identifying and collating material in support of your position.
Challenging trade mark applications on the grounds of bad faith
If your trade mark monitoring system flags a bad faith application, you should consider challenging it.
Who can raise bad faith in respect of trade mark applications?
The issue of bad faith can be raised by either a third party or the UK Intellectual Property Office (IPO), the body responsible for registering trade marks in the UK.
When can you challenge a trade mark application on bad faith grounds?
You can challenge a trade mark application on bad faith grounds if the applicant’s intentions were dishonest or fell short of acceptable commercial behaviour.
The legal process for challenging a trade mark application is known as trade mark opposition. There is an initial 2-month period from the date of publication within which oppositions can be raised.
What is the process for challenging a trade mark application on bad faith grounds?
An opposition begins with a notice of opposition being lodged at the IPO with the appropriate fee. The notice is sent to the applicant, who can withdraw, amend or defend their application. If they wish to defend the application, they must do so within 2 months unless the parties agree to a ‘cooling off period’ to facilitate settlement discussions. The cooling off period can last for a total period of 18 months, but either party can terminate it at any time.
If the applicant defends their application, the matter proceeds to evidence and submissions rounds before being decided by the Trade Marks Tribunal on paper or at a hearing. If the Opposition succeeds, the trade mark will be refused. If the Opposition fails, the trade mark will be registered.
There are several alternatives to proceeding immediately to formal Opposition proceedings, which include the following:
- Contacting the applicant directly. Sometimes, sending a letter to the applicant detailing their bad faith and requesting they surrender their application can suffice to resolve the issue. However, careful consideration must be given to the content and tone of the letter to avoid making the situation worse and prejudicing your position, so always enlist the help of a trade mark solicitor
- Filing a Notice of Threatened Opposition to warn the applicant of your intention to oppose their application. This extends your time limit to raise an Opposition by a further month and is a useful tactic if you need more time to confirm bad faith or to open negotiations
What happens if you successfully challenge a trade mark application on the grounds of bad faith?
If bad faith is established, registration will be refused for the goods and services in respect of which bad faith was found.
Challenging registered trade marks on bad faith grounds
Trade marks already registered can be challenged on the grounds of bad faith through invalidation proceedings.
Who can bring invalidation proceedings?
Anyone can bring invalidation proceedings on bad faith grounds. Sometimes, the Registrar of the IPO applies to the court to invalidate a registration.
When can you invalidate a registered trade mark on bad faith grounds?
You can apply to invalidate a registered trade mark on bad faith grounds any time after the mark has been registered. You need to show that the applicant’s intentions when making the application had been dishonest or fell short of acceptable commercial behaviour.
What is the process for invalidating a registered trade mark on bad faith grounds?
Applications for invalidity are made by filing the appropriate form at the IPO, together with the fee. On the form, you must explain how the applicant’s intentions amounted to bad faith. Since the form must be completed accurately and comprehensively to give your application the best possible chance of success, most applicants instruct experienced trade marks solicitors, like ours, to prepare the application on their behalf.
The IPO will forward a copy of your application to the trade mark owner, who has 2 months to file a defence. The case then proceeds to the evidence and submissions rounds before being decided by the Trade Marks Tribunal either on paper or at a hearing. If the application for invalidation succeeds, the trade mark will be declared invalid and removed from the Trade Marks Register.
Before you make an application for invalidity, you must contact the registered owner to alert them to your concerns and open settlement discussions. If you don’t, and the trade mark owner subsequently surrenders their application, you will not be entitled to your costs.
Can you raise bad faith as a counterclaim in trade mark infringement proceedings?
Yes; if you are accused of trade mark infringement and consider that the registered mark was applied for in bad faith, you can issue a counterclaim on that basis when filing your defence. If your counterclaim succeeds, the trade mark will be held invalid in relation to the goods or services in respect of which bad faith is established. However, you may still be held liable for infringement of the unaffected parts of the trade mark.
Bad faith was raised as a counterclaim by Skykick in the long running dispute between Sky and Skykick. In this case, Sky brought proceedings against Skykick alleging infringement of various trade marks for the word ‘SKY’. Skykick challenged the validity of the trade marks on the grounds that Sky had acted in bad faith when applying for them. Skykick contended that Sky operated a policy of registering overly broad trade marks covering goods and services it does not offer and for which it has no commercial justification, and that the trade mark in question was one such registration.
Skykick’s counterclaim was initially successful, with the Judge finding that Sky’s marks were partially invalid. Skykick was, however, found liable for infringing certain aspects of the marks. Sky appealed the bad faith finding to the court of Appeal who overturned the earlier decision and ruled that Sky had not acted in bad faith. The court of Appeal noted that, to succeed in a claim based on bad faith, a Claimant needed to show more than the trade mark owner filing broad marks; there must be no sensible commercial rationale for including all of the goods and services. The court of Appeal considered that, in this case, Sky could justify its actions, so its trade marks were valid.
Skykick has appealed the court of Appeal’s decision to the Supreme court whose deliberations will focus on the concept of bad faith. The Supreme court’s decision is highly anticipated since the Law Lords are expected to provide some much-needed clarity on the correct approach to bad faith trade mark applications, and establish a clear test for ‘bad faith’. Further, if the Law Lords rule in favour of Skykick, many brand owners may need to rethink their strategies of seeking broad trade mark protection and be prepared to file narrower specifications.
How can you minimise the chances of your application being refused on the grounds of bad faith or successfully defend a claim?
Bad faith proceedings can be time consuming and expensive, so it makes sense to avoid becoming embroiled in them insofar as possible. The following steps can help minimise the chances of facing allegations of bad faith, and assist in defending such allegations
- Ensure your trade mark specifications relate to your business operations. Your trade marks should cover the goods and services you currently offer and there may well be scope to include those you plan to diversify into. Broad trade mark filings do not, of themselves, amount to bad faith, as long as you have a commercial rationale for them. Working with experienced trade mark solicitors is the best way to ensure your trade marks provide the broadest possible protection whilst minimising the risk of refusal or invalidation on bad faith grounds
- Collect and retain evidence of your commercial decision making in the lead up to, and at the time of, your trade mark applications. This is particularly pertinent in cases where you file a trade mark identical to an earlier one, or do not use the mark in the form it is registered. You must be able to show a justifiable commercial reason for your actions
- Collect and retain evidence of your use of the mark
Summary
Business owners naturally seek the most far-reaching, cost-effective protection available for their brand, and a comprehensive trade mark portfolio is one of the most efficient ways of doing so. However, you must strike a balance between comprehensive brand protection and ensuring your strategy is commercially justifiable.
To defeat any bad faith allegations, you must have a clear rationale for acting as you have, supported by cogent evidence. It is, therefore, vital to involve trade mark solicitors at the earliest stages of brand development to ensure the reasoning behind your trade mark filings will likely stand up to any future challenges, your trade mark specifications are appropriately drafted and all relevant evidence is collated and retained. Experienced trade mark solicitors will help you devise an effective brand protection strategy that offers the most extensive protection possible within the confines of the law.
