When is a TM registration made in bad faith?
Updated: Nov 24, 2022
In June 2022, we reported on a judgment striking out aspects of Tesco’s counterclaim in its trade mark dispute with rival supermarket Lidl.
The Court of Appeal recently upheld Tesco’s appeal against that finding, in a decision that provides further clarification on the law on bad faith and trade marks (Lidl Great Britain Ltd & Anor v Tesco Stores & Anor).
The appeal mainly concerned Lidl’s wordless mark (pictured). Lidl’s first application to register this at the UK IPO was filed in April 1995. Further applications to register the mark were made in 2002,
2005, 2007 and 2021 – leading to Tesco’ accusation that it was purely a defensive mark and that Lidl’s attempt at “evergreening” was an abuse of the trade mark system.
However, at first instance, Mrs Justice Joanna Smith DBE said that Tesco had not persuaded her that the mark was registered in bad faith. Tesco’s application was therefore struck out on the basis that it had no real prospect of success.
On appeal, Tesco argued that the judge failed properly to consider the pleaded facts and inferences of the bad faith counterclaim as a whole and in the context of Lidl’s infringement case, taking into account that no disclosure had yet been given by Lidl as to its intentions when registering the wordless mark.
The Court said that argument was well founded.
Writing the Court’s judgment, Lord Justice Arnold relied on two cases: Ferrero SpA’s Trade Marks (concerning five trade marks including the word KINDER) and Target Ventures, an EU General Court judgment from October 2020. He also referred to the recent Hasbro case at the EU General Court.
Arnold LJ said he disagreed with the first instance judge for two reasons. First, he said it was not correct for the judge to say that Tesco’s argument that the wordless mark was applied for solely for deployment as a legal weapon is “no more than assertion” as all allegations in statements of case are assertions by parties as to the facts. As Lidl had not adduced evidence in its summary judgment application to show that factual assertion as manifestly unsustainable, Tesco’s allegation must be assumed to be true.
Second, he said it was clear from the case law that “for an applicant to seek unjustifiably broad protection may amount to an abuse of the trade mark system which constitutes bad faith” and that whether it does constitute bad faith is a fact-sensitive question which depends on the applicant’s intentions. He added:
“I agree with the judge … that the question on a strike out application such as this is whether the statement of case pleads sufficient objective indicia to give rise to a real prospect of the presumption of good faith being overcome so as to shift the evidential burden to the applicant for registration to explain its intentions. In my view Tesco’s pleading does so.”
In his judgment, therefore, the relevant claims in Tesco’s defence and counterclaim had a real prospect of success.
As Arnold LJ noted, the question of bad faith is complex and evolving. Indeed, the UK Supreme Court is set to consider some of these issues in the Sky v SkyKick case next year.
Given the current uncertainty, many trade mark owners remain concerned that trade marks with a wide scope and/or those with multiple overlapping registrations may be vulnerable to bad faith attacks.
While there will probably be further twists and turns in this litigation, this appeal judgment is likely to reinforce such concerns.