Trade Marks and bad faith

A trade mark registration may be attacked, or its registration opposed, on the grounds that the application was made in “bad faith“.

Basing themselves on UK decisions on the corresponding provision, Australian courts have sought to test this by whether people adopting proper standards would regard the decision to (apply to) register the trade mark as “falling short of acceptable commercial behaviour”. See e.g. Fry Consulting at [165] and DC Comics at [62].

Generally speaking, influenced by the examples in the EM, this has meant allegations of bad faith have tended to have success where the applicant can be said to have been aware of some other person’s trade mark and has sought to take advantage of that unfairly or opportunistically.

The IPKat, however, reports that the UK Supreme Court has accepted bad faith may be found where the applicant did not have an intention to use the trade mark in relation to all the goods, or services, specified in the application.

This decision was reached in circumstances where Sky’s trade mark was registered in respect of:

(a) good which it never had any intention of using – such as “bleaching preparations” and “whips”;

(b) categories of goods and services such as “computer software” which were so broad that Sky could not have intended to use its trade mark across the full range; and

(c) in some cases all goods or services in particular classes.

Now, it is certainly arguable that Lord Kitchin’s reasoning is not directly transferable to Australia as it was made under the strictures of EU law and his Lordship considered that the position under the 1938 Act had been superseded and replaced by the requirements of the 1994 Act implementing the requirements of the EU Trade Marks Directive.

That said, as Lord Kitchin pointed out, the EU regime has been developed to implement obligations under the Paris Convention and the TRIPS Agreement – both of which our 1995 Act sought to implement.

Moreover, Lord Kitchin recognised that challenges based on non-use did not preclude a challenge on the grounds of bad faith. At [193] – [194], his Lordship explained:

I accept these propositions and submissions [based on the non-use provisions] so far as they go. But they seem to me to be directed at the wrong target. We are not concerned at this point with a claim for revocation of a registration on the basis that the registered trade mark, though it may have been perfectly valid when it was registered, has not been put to use by the proprietor for an uninterrupted period set by the rules starting at any time after registration. I also accept that, at the time the application is made, an applicant does not need to have a firm or settled intention to use the sign as a trade mark in relation to the goods or services for which it seeks protection. That intention may, for example, be conditional on securing a source of supply at an appropriate cost, or upon finding suitable distributors, or upon perfecting a manufacturing process. None of these matters would of themselves undermine the validity of a registration granted on that application.

We are concerned here with a different objection, namely that the application was made in bad faith because it constituted (and constitutes) an abuse of the trade mark system. As the CJEU has explained, the fact that the proprietor was not using the mark at the date of the application and did not intend to use it, does not constitute an objection to the validity of the mark but may be evidence in support of an appropriate allegation that the application was made in bad faith. To understand how that may be so, it is necessary to consider some of the more important decisions in which the issue has been considered.

Indeed, in Ragopika at [73] – [74], Kennett J considered that “bad faith” requires to be tested by whether or not the conduct involves and attempt to use the trade mark system contrary to the purposes of the system:

What these examples have in common is an attempt to use the statutory regime for registration and protection of trade marks for a purpose that is foreign to the purposes of that regime, and undermines or hampers the proper use of that regime by businesses consistently with those purposes. Trade mark legislation balances various interests, as discussed by reference to the 1955 Act in Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12; 202 CLR 45 at [40]–[49], but its objectives can be said to boil down to “consumer protection and protecting the interest of traders in both the goodwill associated with their trade mark and the value of the registered trade mark as property in its own right” (Davidson and Horak, Shanahan’s Australian Law of Trade Marks and Passing Off (7^th ed, Thomson Reuters 2022) at [1.05]). A leading English case described registration of a trade mark as “designed to enable bona fide proprietors to protect their proprietary rights without having to prove unfair trading” (Harrison v Teton Valley Trading Co Ltd [2004] 1 WLR 2577 at [24], quoted in Fry Consulting at [147]).

The concept of “falling short of acceptable commercial behaviour”, as an aspect of or pointer to “bad faith”, needs to be understood in this context and anchored in the Act. The behaviour needs, in my view, to be more than simply ruthless or morally questionable. If not actually fraudulent or dishonest, it needs to have some quality that makes it repugnant to the purposes for which the statutory regime exists. ….

His Honour’s reasoning is reflected in Lord Kitchin’s analysis. So, at [152] – [153], Lord Kitchin explained:

In seeking to identify the relevant principles, it is necessary to have in mind two fundamental aspects of trade mark law to which I have already referred: first, it is concerned with the use of marks in trade to denote the origin of goods and services. Secondly, the aim of the trade mark regime is to contribute to a system of undistorted competition in which businesses are able to attract and retain customers by the quality of their goods and services, and for that purpose are able to have registered signs which enable consumers to distinguish the goods and services of one undertaking from those of another. Such a system must also provide an incentive and protection for the investment by a brand owner in the quality and other beneficial aspects of its goods and services, and so allow it to develop a goodwill in its business relating to their sale and supply.

Against this background, the essence of the objection that an application to register a mark was made in bad faith may be understood: it is that the motive or intention of the applicant was to engage in conduct that departed from accepted principles of ethical behaviour or honest commercial practices having regard to the purposes of the trade mark system which I have described. Whether the conduct was undertaken with that motive or intention and did indeed depart from such ethical behaviour or honest commercial practices must be assessed having regard to all the objective circumstances of the case ….

SkyKick UK Ltd & Anor v Sky Ltd & Ors (Rev1) [2024] UKSC 36