The Spanish Supreme Court allows the “Alicante torpedo”

1. Summary

On 14 January 2025, the Spanish Supreme Court ruled that both the EUTM Court and the Alicante Court of Appeal shall have suspended the trademark infringement proceedings ex officio, even though the defendant had not requested the suspension, until the EUIPO decides on the invalidity request filed after the infringement claim was brought.

2. Details on the case

Last July 2018, the wine company Vega Sicilia initiated infringement proceedings against Bodegas Sanviver, S.L. on the basis of its EUTM No 3181971 “Unico”, granted in 2013 to distinguish goods in class 33 (wines), in relation to the marketing of its vermouth named “Unico”.

Bodegas Sanviver opposed the claim and announced that it would file a request for a declaration of invalidity against the EUTM “Unico” at the EUIPO. At the preliminary hearing, Bodegas Sanviver submitted a copy of the request, however, it did not request the Court to suspend the EUTM infringement proceedings until the EUIPO had issued its decision.

The judgment (at first instance) substantially upheld the infringement claim on the grounds that there was indeed a likelihood of association between the signs at stake. As expected, Bodegas Sanviver appealed the judgement.

During the appeal proceedings, Bodegas Sanviver submitted the EUIPO's Cancellation Decision declaring the invalidity of Vega Sicilia's EUTM “Unico” on the absolute grounds set out in Article 7(1)(c) and (d) EUTMR. Therefore, since the EUTM on which the infringement was based was declared invalid, Bodegas Sanviver sought to have its appeal upheld. On the other hand, Vega Sicilia argued that the Cancellation Decision should not be taken into consideration as it was appealed to the Board of Appeal of EUIPO.

The Alicante Court of Appeal considered that, as the Cancellation Decision was not final, it could not interfere with its decision and therefore dismissed the appeal. The Court relied on the following arguments:

1. The principle of validity of the EUTMs provided for in Article 127(1) EUTMR must apply, since the defendant did not challenge the validity of the EUTM by way of a counterclaim for revocation or invalidity within the infringement proceedings.
2. Bodegas Sanviver decided not to file a counterclaim before the Court but instead chose to file a request for a declaration of invalidity before EUIPO, thus limiting the subject matter of the proceedings to the infringement.
3. According to the case law of the CJEU^[1] , the Court finds it impossible to rule on the validity of the EUTM which serves as the basis for the infringement action brought by Vega Sicilia since Bodegas Sanviver has not challenged it by way of counterclaim.
4. Article 62(3) EUTMR already foresees the scenario that consist of the Court declaring the infringement and subsequently the declaration of invalidity of the infringed EUTM. It establishes that the retroactive effect of revocation or invalidity, respectively, should not affect decisions on infringement which have acquired the authority of a final decision and which have been enforced prior to the revocation or invalidity decision.

Against the judgment on appeal, Bodegas Sanviver further appealed before the Supreme Court. It argued that the mere filing of an application for a declaration of invalidity of the EUTM on which the infringement action was based should lead to the suspension of the infringement proceedings ex officio, even if the defendant had not challenged the validity of the EUTM by way of a counterclaim.

The Spanish Supreme Court upheld the appeal grounds on the basis of Article 132(1) EUTMR, which states the following:

"An EU trademark court hearing an action referred to in Article 124 other than an action for a declaration of non-infringement shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the EU trade mark is already in issue before another EU trade mark court on account of a counterclaim or where an application for revocation or for a declaration of invalidity has already been filed at the Office".

In particular, the Supreme Court sustains that:

1. The defendant has the possibility to seek the invalidity of the EUTM within the same infringement proceedings by way of counterclaim, or, as it did, before EUIPO itself.
2. In such a case, the court must therefore stay the proceedings before issuing its decision, as the outcome of the invalidity proceedings before EUIPO has a direct impact on the infringement proceedings.
3. Even if the defendant had not requested the suspension of the infringement proceedings, both the EUTM Court and the Court of Appeal were aware that Bodegas Sanviver had initiated invalidity proceedings before EUIPO. Therefore, both courts should have suspended their judgment of their own motion, after hearing the parties, until the decision on the invalidity of the EUTM was final.

In short, the Supreme Court set aside the judgment under appeal and remitted the case file to the Court of Appeal to hold its judgment in abeyance until the decision on the invalidation before the EUIPO becomes final.

3. Observations

We understand that the Supreme Court's position is intended to avoid contradictory judgments, but it constitutes a change in the views of the EUTM courts, which suspended the legal proceedings only when the application for invalidity before the EUIPO had been filed prior to infringement action.

It should be recalled that this practice is not permitted by the Spanish Trademark Law (as set forth in Article 61 bis paragraph 4). However, the Supreme Court has considered it appropriate, by application of EU regulations, to suspend the ruling in an EUTM infringement proceedings.

In any case, the Supreme Court's decision raises a number of issues that will give rise to debate in the coming months:

1. This practice could give the infringer the opportunity to stay the infringement proceedings in an obstructive manner without any basis for a request for cancellation filed with EUIPO.
2. The claimant will be obliged to present a request for precautionary measures before the main proceedings begin, in order to mitigate the effects that a delay could have on the outcome of the case.
3. The Supreme Court is equating the intensity of the EUIPO’s decision with a judicial decision issued by specialised judges.
4. When the Supreme Court refers to “the suspension of the decision”, it is not clear when it should be stayed. That is, whether it should be suspended after the entire infringement proceedings (after the preliminary hearing and trial) or whether it should be suspended as soon as the court becomes aware of the invalidity sought in the EUIPO.

Notwithstanding the above, the Supreme Court’s interpretation would not necessarily prevent the courts from invoking the exception envisaged in Article 132(1) EUTMR (“unless there are special grounds for continuing the hearing”). In other words, where it is clear that the alleged infringer intends to take advantage of this torpedoing practice to block the infringement proceedings, the EUTM courts could continue with the proceedings, thus leaving a lifeline for trademark owners.

We will see if this happens.
 

^[1] Judgment of the Court of Justice of the EU of 19 October 2017 (Case C-425/16).