Airhole Facemasks, Inc. v European Union Intellectual Property Office (T-107/16)

Contents

Judgment of the General Court (Second Chamber)16 May 2017^note(EU trade mark — Invalidity proceedings — EU figurative mark AIR HOLE FACE MASKS YOU IDIOT — Bad faith — Article 52(1)(b) of Regulation (EC) No 207/2009 — Power to alter decisions)In Case T‑107/16,Airhole Facemasks, Inc., established in Vancouver (Canada), represented by S. Barker, Solicitor, and A. Michaels, Barrister,vEuropean Union Intellectual Property Office (EUIPO), represented by D. Hanf, acting as Agent,sindustrysurf, SL, established in Trapagaran (Spain),THE GENERAL COURT (Second Chamber),composed of M. Prek, President, F. Schalin and M.J. Costeira (Rapporteur), Judges,Registrar: J. Weychert, Administrator,having regard to the application lodged at the Court Registry on 18 March 2016,having regard to the response lodged at the Court Registry on 8 June 2016,further to the hearing on 25 January 2017,gives the following

Judgment

Background to the dispute

1On 1 July 2010, sindustrysurf, SL filed an application for registration of an EU trade mark with the European Union Intellectual Property Office (EUIPO) pursuant to Council Regulation (EC) No 207/2009 of 26 February 2009 on the European Union trade mark (OJ 2009 L 78, p. 1).

2Registration as a mark was sought for the following figurative sign in black and white:

3The goods in respect of which registration was sought are in Classes 25 and 28 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond, for each of those classes, to the following description:— Class 25: ‘Thermal clothing’;— Class 28: ‘Games and playthings; gymnastic and sporting articles not included in other classes; decorations for Christmas trees’.

4The contested mark was registered as an EU trade mark on 28 October 2010 under the number 9215427 in respect of all of the goods referred to above.

5On 26 July 2013, the applicant, Airhole Facemasks, Inc., filed with EUIPO an application for a declaration that that mark was invalid in respect of all the goods for which it had been registered. The grounds for invalidity relied on in support of that application were those set out in Article 53(1)(b) of Regulation No 207/2009, read in conjunction with Article 8(3) and Article 52(1)(b) of that regulation.

6In the first place, the applicant claimed, in essence, that sindustrysurf had registered the contested mark in its own name, without the applicant’s consent, since the applicant’s consent was limited solely to the filing of that mark in the applicant’s name. Furthermore, the applicant maintained that sindustrysurf, as the applicant’s agent or representative, was bound by a general duty of loyalty as regards the applicant and its business interests and could not therefore possibly justify the registration of the contested mark in its own name. In the second place, the applicant submitted that sindustrysurf was acting in bad faith when it filed the contested mark in its own name.

7By decision of 30 July 2014, the Cancellation Division declared the contested mark invalid in its entirety and ordered sindustrysurf to pay the costs. In particular, the Cancellation Division found that sindustrysurf had acted in bad faith when it filed the application for the contested mark.

8On 29 September 2014, sindustrysurf filed a notice of appeal with EUIPO against the decision of the Cancellation Division.

9By decision of 18 January 2016 (‘the contested decision’), the Fourth Board of Appeal of EUIPO upheld the appeal and annulled the Cancellation Division’s decision. In the first place, the Board of Appeal found that, since the conditions of Article 8(3) of Regulation No 207/2009 were not fulfilled, the application for a declaration of invalidity based on Article 53(1)(b) of Regulation No 207/2009 could not succeed. On the one hand, according to the Board of Appeal, there was no evidence of an ‘agent-principal’ relationship between the parties, since the applicant had not explained on what basis the distribution agreement concluded in 2009, before the applicant was incorporated, between Endeavor Snowboards Inc. and sindustrysurf (‘the distribution agreement’), could establish such a relationship. In addition, the Board of Appeal stated that there was no reference to the contested mark in that agreement. On the other hand, the Board of Appeal found there was no evidence that the applicant had not consented to the filing of the contested mark. In the second place, the Board of Appeal found that the application for a declaration of invalidity based on Article 52(1)(b) of Regulation No 207/2009 could also not succeed, since nothing in sindustrysurf’s behaviour at the time of filing the contested mark suggested that it had acted in bad faith. First, the Board of Appeal found that the contested mark had been filed with the applicant’s consent. Secondly, it took the view that the fact that sindustrysurf knew, at the time of filing the contested mark, that that mark was already in use by the applicant and other distributors was not in itself sufficient to establish bad faith on its part. Thirdly, it found that there was no evidence that sindustrysurf had filed the contested mark in its own name with the intention of using it against the applicant.

Forms of order sought

10The applicant claims that the Court should:— alter the contested decision and declare the contested mark invalid;— in the alternative, annul the contested decision;— order sindustrysurf to pay the costs incurred in the present action, the proceedings before the Board of Appeal and the proceedings before the Cancellation Division.

11EUIPO contends that the Court should:— dismiss the action and order the applicant to pay the costs;— in the alternative, annul the contested decision and order EUIPO to bear its own costs.

Law

12The applicant puts forward five pleas in law in support of its action. The first plea in law alleges a misinterpretation on the part of the Board of Appeal regarding the absence of any reference to the ‘Airhole sign’ in the distribution agreement. The second plea alleges infringement of Article 8(3) and Article 53(1)(b) of Regulation No 207/2009. The third plea alleges that the Board of Appeal erred as regards the nature of the relationship between the parties. The fourth plea alleges that the Board of Appeal erred as regards the scope of the applicant’s consent at the time when the contested mark was filed. The fifth plea alleges infringement of Article 52(1)(b) of Regulation No 207/2009.

13The Court considers it appropriate to combine the five pleas put forward by the applicant into two pleas since the first four pleas put forward all relate to infringement of Article 53(1)(b) of Regulation No 207/2009, read in conjunction with Article 8(3) of that regulation. Consequently, the first plea in law will relate to infringement of Article 8(3) and Article 53(1)(b) of Regulation No 207/2009. The second plea will relate to infringement of Article 52(1)(b) of Regulation No 207/2009.

14Furthermore, each of the grounds for invalidity taken into account by the Board of Appeal in the contested decision and relied on by the applicant in its action is sufficient for the contested mark to be declared invalid. In that context, the Court will examine the second plea, relating to infringement of Article 52(1)(b) of Regulation No 207/2009, first and will, if necessary, examine the first plea, relating to infringement of Article 8(3) and Article 53(1)(b) of Regulation No 207/2009.

The second plea, relating to infringement of Article 52(1)(b) of Regulation No 207/2009

15The applicant submits, in essence, that the Board of Appeal erred in finding, in paragraph 25 of the contested decision, that the mere fact that sindustrysurf knew that the contested mark was already in use by the applicant and other distributors in the European Union was not enough to establish its bad faith. Furthermore, it maintains that, according to the Board of Appeal, there was no evidence that sindustrysurf intended to use the contested mark against the applicant. The applicant takes the view that sindustrysurf acted in a manner which breached its contractual duties in applying to register the contested mark. It submits that it can be inferred from this that Sindustrysurf had the intention of wrongfully seeking to appropriate to itself the applicant’s property. According to the applicant, sindustrysurf therefore acted in a manner which fell short of the generally accepted standards of commercial behaviour and which departed from accepted principles of ethical behaviour or honest commercial and business practices. The applicant submits that the EU trade mark application was therefore made in bad faith.

16EUIPO submits, in essence, that if the Court, like the Board of Appeal, were to find that the contested mark had been filed by sindustrysurf in its own name with the applicant’s consent, any possibility of bad faith would be excluded. Accordingly, the action for annulment based on Article 52(1)(b) of Regulation No 207/2009 would have to be dismissed. EUIPO maintains that if the Court were, however, to hold that the contested mark was filed by sindustrysurf in its own name without the applicant’s consent, the contested decision would have to be annulled.

17It should be noted at the outset that the EU trade mark system is based on the principle, laid down in Article 8(2) of Regulation No 207/2009, that an exclusive right is granted to the person who is first to file. In accordance with that principle, a mark may be registered as an EU trade mark only in so far as this is not precluded by an earlier mark, whether that mark is, inter alia, an EU trade mark, a trade mark registered in a Member State or by the Benelux Office for Intellectual Property, a trade mark registered under international arrangements which have effect in a Member State, or a trade mark registered under international arrangements which have effect in the European Union. By contrast, without prejudice to the possible application of Article 8(4) of Regulation No 207/2009, the mere fact that a non-registered mark is used by a third party does not preclude an identical or similar mark from being registered as an EU trade mark for identical or similar goods or services (see judgment of 28 January 2016, Gugler France v OHIM — Gugler (GUGLER), T‑674/13, not published, EU:T:2016:44, paragraph 70 and the case-law cited).

18The application of that principle is qualified, inter alia, by Article 52(1)(b) of Regulation No 207/2009, under which an EU trade mark must be declared invalid on application to EUIPO or on the basis of a counterclaim in infringement proceedings where the applicant was acting in bad faith when he filed the application for registration of the trade mark. It is for the applicant for a declaration of invalidity who intends to rely on that ground to establish the circumstances which make it possible to conclude that the proprietor of an EU trade mark was acting in bad faith when he filed the application for registration of that mark (see judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 71 and the case-law cited).

19The concept of ‘bad faith’ referred to in Article 52(1)(b) of Regulation No 207/2009 is not defined, delimited or even described in any way in the legislation (see judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 72 and the case-law cited).

20In that regard, it must be observed, that, in the judgment of 11 June 2009 Chocoladefabriken Lindt & Sprüngli (C‑529/07, EU:C:2009:361, paragraph 53), the Court of Justice provided some clarification regarding the way in which the concept of bad faith, as referred to in Article 52(1)(b) of Regulation No 207/2009, should be interpreted. Accordingly, in order to determine whether the applicant for registration is acting in bad faith, within the meaning of that provision, account must be taken of all the relevant factors specific to the particular case which obtained at the time of filing the application for registration of a sign as an EU trade mark, in particular: (i) the fact that the applicant knows or must know that a third party is using, in at least one Member State, an identical or similar sign for an identical or similar product or service capable of being confused with the sign for which registration is sought; (ii) the applicant’s intention to prevent that third party from continuing to use such a sign; and (iii) the degree of legal protection enjoyed by the third party’s sign and by the sign for which registration is sought (judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraphs 73 and 74).

21That being so, it is apparent from the wording used by the Court of Justice in the judgment of 11 June 2009, Chocoladefabriken Lindt & Sprüngli (C‑529/07, EU:C:2009:361, paragraph 53), that the factors listed are only examples drawn from a number of factors which can be taken into account in order to determine whether an applicant for registration was acting in bad faith at the time when the trade mark application was filed (see judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 75 and the case-law cited).

22It must therefore be held that, in the context of the overall analysis undertaken pursuant to Article 52(1)(b) of Regulation No 207/2009, account may also be taken of the origin of the contested sign and its use since its creation, the commercial logic underlying the filing of the application for registration of that sign as an EU trade mark, and the chronology of events leading up to that filing (see judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 76 and the case-law cited).

23It is in the light of those considerations that it must be examined whether the Board of Appeal erred in finding, in the contested decision, that the application for a declaration of invalidity based on Article 52(1)(b) of Regulation No 207/2009 could not succeed, since nothing in sindustrysurf’s behaviour when it filed the contested mark suggested that it had acted in bad faith. More specifically, first, the Board of Appeal found that the contested mark had been filed by sindustrysurf in its own name with the applicant’s consent. The Board of Appeal took the view that the correspondence which took place between the parties before and after the mark was filed confirms that, at the time of filing, the applicant considered sindustrysurf to be in charge of the protection of the contested mark. Secondly, the Board of Appeal found that the fact that sindustrysurf knew, at the time of filing the contested mark, that that mark was already in use by the applicant and other distributors was not in itself sufficient to establish bad faith on its part. Thirdly, it found that there was no evidence that sindustrysurf had filed the contested mark in its own name with the intention of using it against the applicant.

24In that regard, it must be pointed out that the parties to the proceedings before EUIPO agree that the contested mark was filed by sindustrysurf at the applicant’s request. By contrast, the parties do not agree on whether that request, which was made in the correspondence of 22 June 2010 between Mr Max Jenke, the President of Endeavor Design Inc., Chief Executive Officer of the applicant and Director of Endeavor Snowboards, and Mr Iker Gomez, the Director of sindustrysurf, included the filing of that mark in the name of sindustrysurf and not in the name of the applicant.

25It must be held that, contrary to what the Board of Appeal states in the contested decision, nothing in the correspondence which took place before the contested mark was filed suggests that the applicant had consented in a clear, specific and unconditional manner to that filing in the name of sindustrysurf (see, by analogy, judgment of 29 November 2012, Adamowski v OHIM — Fagumit (FAGUMIT), T‑537/10 and T‑538/10, EU:T:2012:634, paragraph 23 and the case-law cited).

26In the first place, the correspondence which took place before the contested mark was filed shows only that the contested mark was filed at the request of the applicant. It does not in any way show that the applicant consented to the registration of the contested mark in the name of sindustrysurf. Furthermore, it cannot be deduced from the phrase ‘let’s go ahead with Airhole for now’ that the applicant consented clearly, specifically and unconditionally to the registration of that mark in the name of sindustrysurf.

27Furthermore, that correspondence tends more to show that the applicant intended the contested mark to be filed in its own name. It shows, first, that the initiative and decision to file came from the applicant alone and, secondly, that the applicant intended to pay the cost of filing.

28In the second place, contrary to the Board of Appeal’s finding, the correspondence which took place after the contested mark had been filed only confirms the assessment that the consent given by the applicant was confined solely to the filing of that mark. As soon as it became aware of the registration of that mark, the applicant requested straight away that sindustrysurf transfer it, which sindustrysurf, without any dispute, undertook to do immediately. Accordingly, it matters little that it took the applicant almost one year to discover that the contested mark had been registered in the name of sindustrysurf because it had not, in any event, consented to that.

29Furthermore, as the applicant rightly submits, the Board of Appeal should also have assessed the matter of the applicant’s consent in the light of the objective circumstances of the present case.

30In that regard, first, it is important to point out that, on the one hand, the contested mark is identical to the mark which has been used since 2006 in, in particular, the United States and Canada, by the parent company and the sister company of the applicant, Endeavor Design and Endeavor Snowboards, and that, on the other hand, the goods covered by the contested mark are identical or closely related to the goods covered by that mark.

31Secondly, the mark referred to in paragraph 30 above was registered in the name of the applicant in the United States and Canada prior to the filing of the contested mark.

32Thirdly, sindustrysurf was, under the distribution agreement, the exclusive distributor for Belgium, Germany, Spain, France, Italy, Luxembourg and the Netherlands of the goods designed and manufactured by Endeavor Snowboards under the registered trade marks Airhole Ninja Masks and Endeavor Snowboards.

33Fourthly, the distribution agreement stated that the distributor’s primary purpose was the stocking, selling and servicing of various snowboarding products. Article 11 of that agreement, relating to the use of names and trade marks, provided, inter alia, that the distributor could not use any logo, advertisement or mark owned by Endeavor for sales or promotional purposes without Endeavor’s express written consent.

34Fifthly, the distribution agreement was still in force at the time when the contested mark was filed and at the time when the request to transfer that mark to the parent company was made.

35It follows that the filing of the contested mark could readily be perceived as being part, for the applicant, of a commercial logic the purpose of which was to extend the protection of its mark to the territory of the European Union.

36Consequently, the Board of Appeal erred in finding that the contested mark had been filed by sindustrysurf in its own name with the applicant’s consent.

37In addition, it must be held that sindustrysurf, by filing the contested mark in its own name, sought to usurp the applicant’s rights.

38First of all, sindustrysurf could not claim any priority with regard to the contested mark. It has been established that that mark has been used by the applicant’s parent company and sister company in the United States and Canada since 2006 and that it had been registered in respect of those countries in the name of the applicant before the contested mark was registered.

39Secondly, by reason of the distribution agreement, sindustrysurf was fully aware that an identical trade mark existed and was being used by the applicant’s parent company and sister company at the time when the contested mark was filed.

40Lastly, sindustrysurf’s distribution rights were, pursuant to the distribution agreement, strictly restricted in substantive and territorial terms. First, the distributor’s primary purpose was the stocking, selling and servicing of various snowboarding products. Furthermore, sindustrysurf could not use any logo, advertisement or mark owned by Endeavor for sales or promotional purposes without Endeavor’s express consent. Secondly, its distribution rights were restricted to only six countries in the European Union. As the Board of Appeal pointed out in paragraph 16 of the contested decision, the contested mark was already being used by Endeavor’s distributor in the United Kingdom at the time when the distribution agreement was signed.

41Furthermore, it must be added that sindustrysurf’s attitude following the filing of the contested mark tends to bear out the assessment that it sought to usurp the applicant’s rights. First, it is apparent from the information in the file that sindustrysurf did not inform the applicant of either the filing of the contested mark or of its registration in its own name. That information was brought to the applicant’s attention only when it enquired about the protection of that mark. Secondly, sindustrysurf expressly undertook, in the correspondence which took place after the contested mark had been filed, to transfer that mark, but never did so. Thirdly, some weeks after relations with the applicant had deteriorated, sindustrysurf gave the applicant and the other distributors of its goods in the European Union notice to cease using the contested mark, failing which it would bring infringement proceedings.

42In view of all of the foregoing, following an overall assessment taking account of all the relevant factors, it must be held that sindustrysurf did not have any lawful reason to file the contested mark in its own name and that, consequently, the Board of Appeal erred in finding that there was no bad faith on its part.

43It follows that the present plea must be upheld.

44Since the infringement of Article 52(1)(b) of Regulation No 207/2009 is sufficient for the contested decision to be annulled, there is no need to examine the first plea, alleging infringement of Article 8(3) and Article 53(1)(b) of Regulation No 207/2009.

The claim that the contested decision should be altered

45It must be borne in mind that the power of the Court to alter decisions pursuant to Article 65(3) of Regulation No 207/2009 does not have the effect of conferring on that Court the power to carry out an assessment on which the Board of Appeal has not yet adopted a position. Exercise of the power to alter decisions must therefore, in principle, be limited to situations in which the Court, after reviewing the assessment made by the Board of Appeal, is in a position to determine, on the basis of the matters of fact and of law as established, what decision the Board of Appeal was required to take (judgment of 5 July 2011, Edwin v OHIM, C‑263/09 P, EU:C:2011:452, paragraph 72; see also, judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 100 and the case-law cited).

46The request that a contested decision be altered is not a request to the Court to require EUIPO to do or to refrain from doing something, which would constitute a direction addressed to the latter. On the contrary, it is a request to the Court to decide, on the same basis as the Board of Appeal, whether the contested mark must be declared invalid in the light of Article 52(1)(b) of Regulation No 207/2009 (see judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 98 and the case-law cited).

47Such a decision is among the measures which, in principle, may be taken by the Court in the exercise of its power to alter decisions (see judgment of 28 January 2016, GUGLER, T‑674/13, not published, EU:T:2016:44, paragraph 98 and the case-law cited).

48In the present case, it must be pointed out that the Board of Appeal adopted a position, in the contested decision, on whether there was bad faith (paragraphs 22 to 27 of the contested decision), with the result that the Court has the power to alter that decision in that regard.

49It follows from the considerations set out in paragraphs 26 to 44 above that the Board of Appeal was required to find, as the Cancellation Division had found, that sindustrysurf had acted in bad faith when it filed the application for the contested mark. Accordingly, it must be held, in view of all of the foregoing, that the conditions for the exercise of the Court’s power to alter decisions are satisfied.

50Consequently, the appeal brought by sindustrysurf against the Cancellation Division’s decision, which had declared the contested mark invalid, must, by way of alteration of the contested decision, be rejected.

Costs

51Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

52In the present case, EUIPO has been unsuccessful, but the applicant has not applied for EUIPO to be ordered to pay the costs. Each party must therefore be ordered to bear its own costs. Furthermore, as sindustrysurf is not a party to the present proceedings, the applicant’s claim that it should be ordered to pay the costs of the present action cannot but be rejected.

53The applicant has also applied for sindustrysurf to be ordered to pay the costs incurred before the Board of Appeal and before the Cancellation Division. In that regard, it must be borne in mind that, under Article 190(2) of the Rules of Procedure, costs necessarily incurred by the parties for the purposes of the proceedings before the Board of Appeal are to be regarded as recoverable costs. However, that does not apply to costs incurred for the purposes of the proceedings before the Cancellation Division. Consequently, the applicant’s claim regarding the costs relating to the proceedings before the Cancellation Division, which do not constitute recoverable costs, is inadmissible. As far as the claim that sindustrysurf should be ordered to pay the costs of the proceedings before the Board of Appeal is concerned, the Court holds that sindustrysurf must be ordered to pay the costs incurred by the applicant before the Board of Appeal.

Operative part

On those grounds,THE GENERAL COURT (Second Chamber),hereby:

1.Annuls the decision of the Fourth Board of Appeal of the European Union Intellectual Property Office (EUIPO) of 18 January 2016 (Case R 2547/2014-4), relating to invalidity proceedings between Airhole Facemasks, Inc. and sindustrysurf, SL, and alters it to the effect that the appeal brought before EUIPO by sindustrysurf against the Cancellation Division’s decision of 30 July 2014 is dismissed;

2.Orders Airhole Facemasks and EUIPO to bear their own respective costs incurred before the General Court;

3.Orders sindustrysurf to pay the costs incurred by Airhole Facemasks before the Board of Appeal of EUIPO;

4.Dismisses the action as to the remainder.

Delivered in open court in Luxembourg on 16 May 2017.