Malaysia Dairy v Yakult - Interpreting Bad Faith

European law

Under the heading “Further grounds for refusal or invalidity concerning conflicts with earlier rights”, Article 4(4) provides:

Any member State may, in addition, provided that a trade mark shall not be registered or, if registered, shall be liable to be declared invalid where, and to the extent that…(g) the trade mark is liable to be confused with a mark which was in use abroad on the filing date of the application and which is still in use there, provided that at the date of the application the applicant was acting in bad faith.

It is important to note that incorporating Article 4(4)(g) into their national law is at the member state’s discretion.

The facts of the case

In 1965, Kabushki Kaisha Yakult Honsha (Yakult) obtained, in Japan, the registration for a model or design of a plastic bottle for a milk drink, which was subsequently registered as a trade mark in Japan and a number of other countries including member states of the European Union (EU). Malaysia Dairy (MD) has produced and marketed a milk drink in a plastic bottle since 1977. Following an application filed in 1980, MD obtained the registration as a trade mark of its similar plastic bottle in Malaysia.

Following an application for registration filed in 1995, MD obtained a Danish registration for its plastic bottles as a three-dimensional trade mark. Yakult opposed that registration, relying on the fact that MD knew (or should have known) of the existence of identical earlier marks abroad, of which Yakult was the proprietor at the time that MD’s application for registration was filed. For this reason Yakult considered MD to be in breach of Danish law.

In June 2005, the Danish Patent and Trade Mark Office rejected Yakult’s opposition. Yakult contested the decision before the Appeal Board, which found in their favour and cancelled the registration. MD then brought an action against that decision at the Danish Maritime and Commercial Court, which agreed with the decision of the Appeal Board to cancel the registration.

MD appealed against this judgment to the Supreme Court. These decisions were made under Danish law, which, in relation to bad faith was not harmonised with EU law. The Supreme Court decided it needed guidance from the Court of Justice of the European Union on this issue. Accordingly, it ordered a stay of proceedings and referred the following questions to the Court of Justice:

Questions referred for preliminary ruling

Question 1

The court considered whether the concept of bad faith in Article 4(4)(g) is an expression of a legal standard which may be filled out in accordance with national law, or is it a concept of EU law which must be given a uniform interpretation throughout the EU?

MD, the Italian Government and the European Commission submitted that EU law must be harmonised throughout member states, whereas Yakult and the Danish Government argued that, since the concept of bad faith is not defined by the Directive, member states are entitled to specify what it means, provided it is compliant with the objectives of that Directive and the principle of proportionality.

The court disagreed with the view of Yakult and the Danish Government, finding that in accordance with settled case law, EU law must be given an independent and uniform interpretation throughout the EU; although it agreed that any interpretation must take into account the context of the provision and the objective of the relevant legislation. It also added that the optional nature of a provision of the Directive did not mean that it did not have to be given a uniform interpretation in those member states where it did form part of national law.

The court held therefore that the concept of bad faith, within the meaning of the provision, was an independent concept of EU law, and must be given a consistent interpretation throughout the EU.

Question 2

Is knowledge or presumed knowledge of a mark in use abroad at the time that the application, and which may be confused with the mark being applied for, sufficient alone to conclude that the applicant was acting in bad faith?

MD, the Italian Government and the European Commission took the view that it is necessary to take into account all the factors and circumstances of the case, by relying not only on the applicant’s objective knowledge, but also its subjective intention at the time of filing. Yakult and the Danish Government on the other hand were of the view that bad faith must be understood as meaning that the fact the applicant knew (or should have known) of the foreign trade mark at the time of filing may be sufficient to establish that the applicant was acting in bad faith. They submitted that the need for predictability of the law should influence such an interpretation.

The court held that in order to determine the existence of bad faith, it is necessary to carry out an overall assessment, taking into account all the relevant factors of the case at the time of filing the application. The fact that the applicant knew or should have known that a third party was using a confusingly similar sign is not sufficient, in itself, to come to the conclusion that the applicant was acting in bad faith.

Question 3

Should the Directive be interpreted as allowing member states to introduce specific protection of foreign marks, based on the fact that the applicant knew or should have known of a foreign mark?

MD, the Italian Government and the European Commission took the view that the Member States’ freedom to implement the grounds of refusal or invalidity listed in the Directive was limited to merely maintaining or introducing those grounds in their respective legislation, and they were not allowed to add further grounds not listed in the Directive. Yakult and the Danish Government argued in the alternative.

The court concluded that given that the Directive prohibits member states from introducing grounds of refusal or invalidity other than those set out in the Directive, the answer to question 3 must be that member states are not allowed to introduce a system of specific protection of foreign marks which differs form the system established by the Directive and which is based on the fact that the applicant knew or should have known of a foreign mark.

Comment

As noted above, it is at the member states’ discretion as to whether they implement Article 4(4) of the Trade Marks Directive, and the UK has chosen not to incorporate this provision into its national law. Consequently, much of this preliminary reference is not directly relevant to the UK. What is of relevant however is the court’s finding on Question 3, that member states are not permitted to change the list of grounds for refusal and invalidity, as set out in the Directive. This confirmation may well be useful for the UK courts in the future.