Trade marks: Use it, prove it, or lose it

A number of decisions handed down in the last year have dealt with the revocation of a trade mark for lack of use, including the reversal of the High Court judgment in La Mer Technology Inc v Laboratoires Goemar SA, which was discussed in our UK brands review 2005.

What constitutes “use”?

Although it is not necessary for a trade mark to have been used prior to an application for registration being made, continuing non-use can lead to a registration being revoked. Articles 10-12 of the Trade Marks Directive and Section 46 of the Trade Marks Act 1994 provide that a registered trade mark will be liable to revocation if it is not put to “genuine use” within a period of 5 years from registration or if it is suspended from use for a continuous period of

5 years, unless there are “proper reasons” for non-use. Clearly, the meaning of “genuine use” is crucial in determining an application for revocation. The English law view (under the pre-harmonised 1938 Act) has been, historically, that any use relating to a real commercial transaction (as opposed to sham use purely for the purposes of avoiding revocation) constitutes genuine use, no matter how small.

The La Mer case

High Court proceedings
Laboratoires Goemar was the proprietor of the trade mark LABORATOIRE DE LA MER, registered in classes 3 and 5. La Mer Technology applied for revocation on grounds of non-use, and, when its application was only partly successful, appealed on the basis that the registrations should have been completely revoked. In the High Court, Mr Justice Jacob (now Lord Justice Jacob) referred certain questions to the ECJ concerning the meaning of “genuine use”.

In fact, the only use that Goemar had made of the mark in the five-year period in question was the sale of £800 worth of goods to an agent in Scotland. These were sold over 5 months in the form of 5 separate deliveries. However, the agent soon ceased trading, and there was no evidence that any of the goods had been sold or offered to any member of the public.

The ECJ decision
Before delivering its decision in response to Jacob J’s reference, the ECJ had given a full judgment in the case of Ansul BV v Ajax Brandbeveiliging BV, which dealt with similar issues. Consequently its decision in La Mer was given in the form of a reasoned order referring to Ansul. Among the key points made in Ansul were the following:

• Genuine use must be use that is not merely token, serving solely to preserve the rights conferred by the mark.
• Genuine use must be consistent with the essential function of a trade mark, which is to guarantee the identity of the origin of the goods or services to the consumer or end-user by enabling him to distinguish the product or service from others which have another origin.
• Genuine use entails use of the mark on the market and not just internal use by the company concerned.
• In determining whether there has been genuine use, regard must be had to all the facts and circumstances; assessing these may involve consideration of the nature of the goods or services at issue, the characteristics of the market involved and the scale and frequency of use of the mark; because these may vary, use need not always be quantitatively significant for it to be genuine.

The reasoned order further emphasised the role of a trade mark in creating a market for the goods. Genuine use is “use in the course of trade, on the market for the goods”; use can qualify as genuine “on condition that it is deemed to be justified, in the economic sector concerned, for the purpose of preserving or creating market share”.

In both decisions, the ECJ emphasised that “genuine use” entails the use of the mark for the purpose of creating or preserving a market for the goods.

The High Court decision
When the case returned to the High Court it was heard by Mr Justice Blackburne (owing to Jacob J’s elevation to the Court of Appeal in the interim). His decision relied heavily upon the fact that the goods had not been offered for sale nor sold to the public as end-users. Although the transactions between Goemar and its agent were not merely token use, the fact that the goods were not offered to the public meant that the use of the mark in those transactions did not serve the essential purpose of a trade mark in creating or preserving a market.

Blackburne J found that the market in which the mark had to be used was that for consumers or end-users of the products, and concluded that, because these products had not been marketed or sold to consumers, the use made of it did not constitute “genuine use”. He therefore allowed the application for revocation.

The Court of Appeal decision
The judgment of Lord Justice Mummery, with which the other judges concurred, identified as the key issue the use of the mark in the market for the goods. He went on to find that Blackburne J’s emphasis on the market for consumers and end-users was misplaced: “The Court of Justice did not rule that the retail or end user market is the only relevant market on which a mark is used for the purpose of determining whether use of the mark is genuine.” Mummery LJ noted that trade marks are used to create a market and to identify the origins of goods on the market that exists between foreign manufacturers and importers just as they are on the retail market, and that in that market the mark had been used in accordance with its essential function. He also noted that use need not be on a large scale for it to be genuine.

Lord Justice Neuberger clarified the position with regard to the statement in Ansul referred to above that use of the mark had to be “consistent with the essential function of a trade mark”. Although that statement refers to the consumer or end-user market, it does not state that, to be genuine, the mark must actually be used in that market; it merely says that the use of the mark must be consistent with its use in the end-user market. The order for revocation of the mark was therefore set aside and the revocation proceedings dismissed.

This decision clarifies that, providing use of a trade mark is consistent with the essential function of a trade mark and not token or internal, it can constitute genuine use for the purposes of revocation regardless of the extent of the use or the market on which it is used.

What is “internal” use?

The La Mer case confirmed that internal use by a trade mark owner does not constitute “genuine use” for the purposes of opposing revocation proceedings. Blackburne J’s decision in the High Court that the transaction between Goemar and its agent amounted to nothing more than a transaction between a parent company and its subsidiary was decisively rejected. These were arm’s length transactions between companies at different levels of the supply chain who were otherwise not associated.

The nature of internal use also arose in the decision of Professor Ruth Annand as Appointed Person in respect of an application for the revocation of a graphic trade mark including the word OMEGA. The registered proprietor of the trade mark, Omega SA (Swiss) adduced in its defence of the trade mark certain transactions that had taken place between it and The Swatch Group (UK) Limited (UK). Swiss and UK are subsidiaries of the same parent company. However, the hearing officer characterised this use as internal. Swiss appealed, complaining (inter alia) that the hearing officer was wrong to characterise the relationship thus.

Professor Annand referred to Ansul in coming to her decision on this point. She concluded that nothing in Ansul led to the conclusion that transactions between companies in the same group must necessarily be classed as internal. Instead, she referred to the ECJ’s statement that “regard must be had to all the facts and circumstances relevant to establishing whether commercial exploitation of the mark is real”. She decided that the hearing officer had erred not only on the facts (he appeared to have been mistaken as to the nature of the relationship, believing that UK was a subsidiary of Swiss), but also in law, by concentrating excessively on marketing and sales to the retail market (as in the High Court decision in La Mer) and failing to take into account all the circumstances of the case. She went on to find that, on the facts, which included evidence that UK paid the same price for Swiss’s products as any other third party importer, the relationship between Swiss and UK was at arm’s length in relation to at least one category of products.

Taken together, La Mer and Omega give a narrow meaning to “internal use”, which is a phrase that is not found in the Community Trade Marks Regulation (CTMR) and appears to have been introduced by Ansul. Arm’s length transactions between a manufacturer and an importer are not to be regarded as internal use, and, subject to the other circumstances of the case, transactions between sister companies do not necessarily constitute internal use either. This is consistent with the wording used in Ansul, which refers to “internal use by the undertaking concerned”.

Does use by a third party count?

Ansul also confirmed that use of a trade mark by a third party with the permission of the registered proprietor can be sufficient to establish use for the purposes of opposing revocation.

The issue of third party use in this context was considered further by Advocate General Jacobs in his opinion in the case of The Sunrider Corporation. Sunrider had applied to register the mark VITAFRUT for certain non-alcoholic drinks. Juan Espadafor Caba (Caba) opposed the application on the grounds of similarity to its mark VITAFRUIT. Sunrider put Caba to proof on use of the mark, as it is entitled to do by Article 43 of the CTMR. Caba presented evidence of the use of the mark by a third party and argued that this use met the requirements of Article 15(3) of the CTMR, which provides that “use of the Community trade mark with the consent of the proprietor shall be deemed to constitute use by the proprietor.” The Office for Harmonisation in the Internal Market (OHIM) agreed and rejected Sunrider’s application. Appeals to the OHIM Board of Appeal and to the Court of First Instance of the European Communities (CFI) having failed, Sunrider appealed to the ECJ.

Sunrider complained that the CFI had failed to consider properly whether the use of the mark by the third party constituted use by Caba. In particular, it argued that the CFI had taken into account implicit statements and evidence and had made improper assumptions rather than relying on solid evidence. Effectively, Sunrider argued that the CFI could not assume that the third party use was with consent, and that it had erred in failing to require Caba to prove that the third party use was with consent.

Advocate General Jacobs, agreeing with the decisions of OHIM and the CFI, allocated the burden of proof differently. He considered that, by maintaining that the use by the third party constitutes genuine use, Caba impliedly claimed to have consented to that use. He also noted that, had Caba not consented to the use by the third party of the mark, the third party would have committed a trade mark infringement, in which case it would have been very unlikely to have assisted the proprietor of the trade mark. The fact that it did assist was of itself evidence that the use was with permission.

If endorsed by the ECJ, this reasoning creates a new presumption in favour of the proprietor of an earlier trade mark that use of the mark by a third party is with consent. The applicant for the new mark now bears the burden of proof, and must prove that such use was without consent.

Like La Mer, the opinion in The Sunrider Corporation also emphasises that small quantities are no bar to establishing genuine use; in this case the value of the goods bearing the mark was just 4,800, but this was sufficient.

Is the use in the correct form?

Finally, the meaning of use for the purposes of defending an application for revocation was also considered in the context of use of a graphical mark in a form other than that in which it was registered.

In GfK AG v OHIM, GfK applied to register as a CTM the word mark ONLINE BUS in the field of business consultancy services. This was opposed by another German company, Betreuungs- und Unternehmensberatungs (also known as Bus) which had registered as a national mark a graphical sign in which the word BUS was prominent.

GfK took advantage of Article 43 of the CTMR to require Bus to provide proof of genuine use. Article 43(3) provides that use of a national trade mark can also be adduced as grounds for opposing a new CTM registration.

Article 15(2)(a) of the CTMR provides that use of a CTM includes use “in a form differing in elements which do not alter the distinctive character of the mark in the form in which it was registered”. However, there is no equivalent provision relating to national marks.

In this case, the proof of use provided by Bus was of use of a national trade mark in a form differing from the form registered. However, OHIM and the OHIM Board of Appeal upheld Bus’s opposition. GfK appealed to the CFI on the grounds that use in a form different from that registered did not fulfil the requirements of Article 43 of the CTMR, and that the saving provision at Article 15(2)(a) for uses of a mark in a different form did not apply to national marks.

In the event the CFI upheld the opposition, agreeing with OHIM that Article 15(2)(a) of the CTMR should be interpreted to apply to earlier national marks as well as CTMs. This appears to close a lacuna in the CTMR, OHIM having accepted that Article 15(2)(a) does not expressly cover use of an earlier national mark in a form different from that of its registration.

This article first appeared in our UK Brands Review March 2006. To view this publication, please click here to open it as a pdf in a new window.