Did an entity using a trademark under a non-exclusive license granted by the rights holder have the right to register the trademark and subsequently request others to cease using it? The General Court of the European Union issued a judgment in the dispute over the FALUBAZ trademark, resolving the allegation that it had been applied for in bad faith (judgment of the General Court of 25 January 2023 — Zielonogórski Klub Żużlowy Sportowa v. EUIPO — Falubaz Polska (FALUBAZ), case T-703/21).
The dispute between Falubaz S.A. S.K.A. (hereinafter: “the company Falubaz”), operating in the construction and mechanical engineering industry, and Zielonogórski Klub Żużlowy Sportowa S.A. (hereinafter: “ZKŻS”, “Club”), operating the speedway sports club Falubaz Zielona Góra, began when the Club registered the EU trademark FALUBAZ.
The motion for cancellation of the EU trademark FALUBAZ, based on an allegation of bad faith, was brought by the company Falubaz, i.e., a long-standing sponsor and business partner of the Club. In 2009, the Parties entered into a non-exclusive license agreement for the trademark FALUBAZ registered in favor of the company Falubaz for goods and services in classes 6, 7, 8, and 40. Subsequently, in 2015, the Club applied for the trademark FALUBAZ for goods and services related in part to sports, education, recreation, and tourism activities, which were the subject of the license agreement, and subsequently issued letters calling on other clients of its business partner to cease using the trademark FALUBAZ.
By a decision of 18 June 2020, the Cancellation Division canceled the EU trademark FALUBAZ. In the course of the proceedings, it was established that the legal predecessor of the Falubaz company, i.e,. the Polmatex-Falubaz factory, had been a patron of the Club for many years, and the company had subsequently entered into an agreement with the Club first to promote the designation at sporting events, and then into a non-exclusive license agreement for the use of the FALUBAZ designation. In the EUIPO’s opinion, this meant that the Club acted in bad faith when filing for the FALUBAZ trademark, as its aim was to prevent Falubaz Company from continuing its sponsorship and cooperation with other entities in the sports industry. The decision was upheld by the Board of Appeal.
The Club brought the action to the General Court seeking the annulment of the EUIPO decision, arguing, inter alia, that the concluded license agreement was retroactively invalidated due to the statements made in 2017 and 2018 to the extent that the Club was misled regarding the scope of protection of the FALUBAZ trademarks that are the subject of the said license agreement.
The EU Court noted, however, that before the Club started questioning the agreement it maintained the commercial and professional relationship with Falubaz for more than eight years, and during that period filed an application for the disputed trademark FALUBAZ for a wide range of goods and services, including some related to sporting activities.
The Court identified a number of prerequisites indicating bad faith on the part of the applicant of the trademark, namely:
- The contractual relationship between the parties prior to the filing of the application for the trademark at issue may indicate circumstantial evidence of bad faith on the part of the applicant;
- Whether the applicant was aware at the time of filing the application for registration of the trademark that a third party had previously used a designation identical or similar to the trademark applied for;
- The chronology of events and commercial strategy in which the application for registration of the disputed trademark fits.
After analysis of the case, the General Court dismissed ZKŻS’s action, confirming that the trademark FALUBAZ had been applied for in bad faith and pointing out that:
- The parties had an ongoing commercial and professional relationship even before the conclusion of the license agreement on the basis of the, so-called, advertising contract;
- At the date of the application for registration of the disputed trademark, the Club did not dispute the validity of the concluded license agreement;
- The Club filed the application for the disputed trademark for goods and services related in part to the concluded license agreement, which its business partner – the company Falubaz had also concluded with other entities;
- The trademark applied for was practically identical to the trademark previously registered in favor of Falubaz;
- The Club intended to prevent its business partner from continuing its sponsoring activities and cooperation with other entities active in the field of sports or sports training;
- The Club immediately after the registration of the disputed trademark sent warning letters to the clients of its business partner, calling on them to stop using the designation FALUBAZ;
- The Club’s notorious use of the designation FALUBAZ was the result of many years of acquiescence by its business partner, and the fact that a number of people associate the name FALUBAZ with a sports club is irrelevant.
The Court, therefore, confirmed that applying for registration of a trademark not with the intention of fair market competition, but for purposes contrary to fair practices, with the intention of infringing the interests of one’s long-standing business partner, as well as of other entities, i.e. licensees legally using the same designation, in the knowledge that those entities are using the designation on the basis of the licensor’s consent, must be considered an application made in bad faith.
This judgment has been appealed to the Court of Justice of the European Union. The case is currently pending under case number C-199/23 P.
Written by Beata Wojtkowska, Advocate, Patent & Trademark Attorney and member of The Trademark Lawyer Editorial Board, and Mariola Połeć, Lawyer, Advocate Trainee, of Kulikowska & Kulikowski Sp. K.