CFI guidance on reputation and unfair advantage

Grounds of opposition

In 1999, Aktieselskabet af 21 november 2001 (the Applicant) had applied for a CTM for the word mark “TDK” in respect of class 25 for clothing, footwear and headgear. TDK Kabushiki Kaisha (the Opponent) subsequently filed an opposition based on a prior CTM and some 35 earlier national trade marks which included the word mark TDK, all of which were registered in class 9. TDK had no registrations that included a class 25 specification.

The Opponent originally opposed the application on two grounds, namely that: (i) the mark applied for was identical or similar to its own registered mark for similar goods, and registration of the later mark would lead to a likelihood of confusion in the public mind (Article 8(4) CTM Regulation 40/94/EC); and (ii) the mark applied for was identical or similar to its own registered mark for dissimilar goods and that the Opponent’s mark had a reputation such that use of the mark applied for would take unfair advantage of, or be detrimental to, its distinctive character or repute (Article 8(5) CTM Regulation).

The OHIM’s Opposition Division dismissed the opposition in relation to the first ground but upheld it on the second ground and the application for the CTM was refused. After the Applicant’s appeal to the OHIM Board of Appeal was dismissed, the Applicant appealed to the CFI.

The concept of dilution

The CFI emphasised that the dilution standard in either an opposition or an action for infringement is, as a matter of policy, a higher standard than that for a likelihood of confusion as, in the case of the former, the owner need not prove actual or potential confusion of trade origin in the marketplace. In considering the requirements that needed to be met to qualify for the broader protection under Article 8(5), the CFI focused particularly on two requirements, namely: (i) that the earlier trade mark must have a reputation in either the Community or in the Member State concerned, depending on whether it is a CTM or a national trade mark; and (ii) that use of the mark applied for would take unfair advantage of, or be detrimental to the distinctive character of reputation of the earlier trade mark.

Proof of reputation

Although not defined in the CTM Regulation, the CFI considered that it is generally accepted that to satisfy the requirement of reputation the earlier trade mark must be known to a significant part of the public concerned by the goods or services covered by such mark (the CFI did not stipulate a percentage of the relevant public for the purpose of determining whether the part of the relevant public was significant). In making its assessment, the CFI noted that the Court would typically consider the market share held by the mark, the intensity, geographical extent and duration of its use, and the size of the investment made by the undertaking in promoting it.

The evidence submitted by the Opponent to satisfy the requirement of reputation included evidence of its presence and manufacturing activities in Europe, the sales levels achieved by its goods bearing the TDK marks, the nature, frequency and regularity of its sponsorship for sporting and musical events and the period of time over which the TDK marks had been used. On the evidence the CFI was convinced that the mark enjoyed a reputation of substantial value and was well known by a significant part of the public in the Community. Accordingly, it upheld the decision of OHIM on reputation.

Unfair advantage?

The Opponent’s role as a significant sponsor of sporting and musical events and the associated general merchandise and branded clothing bearing the mark at such events were key in determining whether the use of the later mark TDK for clothing would result in an unfair advantage. The relevant consumer would be familiar with such goods in association with the sponsored event and, as such, the relevant public would inevitably assume that the goods under the later mark were produced under licence from the Opponent as part of its sponsorship activities.

Accordingly, the later mark would benefit from the goodwill associated with the Opponent as a sponsor of sporting and musical events, in which the Opponent had invested a considerable amount of money. Such acts would amount to free-riding on the coat tails of the reputation of the earlier mark, and would take unfair advantage of both repute and distinctive character.

Welcome guidance

Cases on unfair advantage at the appellate level are rare and this case is notable for its guidance on this aspect of the legislation. The comments on the evidential standard and practical requirements needed to satisfy the reputation requirement are also very useful.

It is also particularly interesting to note that the Opponent managed to generate a substantial reputation in unrelated goods to their primary area of manufacture solely as a result of their sponsorship program of high profile musical and sporting events. As a result of the incidental use of the mark on clothing under this sponsorship, the general public would make a link between the earlier mark and its owner’s activities because of its reputation. This link would take unfair advantage of the reputation in the mark, and damage its distinctive character.

One might question whether this decision would have been reached on the facts in the UK, which has developed a slightly different approach to unfair advantage from the European courts. In particular, several UK first instance decisions state that a link is not enough, and it must have some appreciable effect on economic behaviour. The CFI decision in this case emphasises that the Opponent is not required to establish actual and present harm to an earlier mark, merely evidence on the face of it of a future risk which is not hypothetical, of unfair advantage.