Is it bad faith to “pay homage” to a fashion brand of the past? Not necessarily, says the EU General Court

There are brands that, after a successful run, fall into oblivion. Then, several years later, they are revived and experience renewed success.

From an IP perspective, it might be the case that – together with the oblivion these brands fall into – the related trade mark registrations lapse too. What happens, then, if a few years later someone attempts to register a trade mark that intends to pay homage to and corresponds to one of these dormant brands? Can this be regarded as a case of bad faith?

This very question was addressed a few days ago in the judgment that the General Court (GC) rendered in Zdút v EUIPO, T-250/21 (NEHRA). In providing guidance on how to intend the concept of bad faith in these situations, the GC ruled out that in the specific case at hand the trade mark owner’s behaviour would be caught within the scope of application of Article 59(1)(b) EUTMR.

Let’s see what happened.

Background

In 2013, Ladislav Zdút successfully applied to register the figurative mark below as an EU trade mark (EUTM) for goods in classes 18, 25, and 25. The following year he began using the EUTM in connection with womenswear.

In 2019, the grandchildren of Jan Nehera's filed a request for a declaration of invalidity of the registered EUTM for all the goods.

‘NEHERA’ was in fact a well-known fashion brand that Jan Nehera found in Czechoslovakia in the 1930s. In 1946, the company was nationalized and, during the communist period, the brand was not used but remained famous throughout the country.

If one browses the website of Zdút's NEHERA, the following is stated:

The Jan Nehera's estate submitted that, by using and registering the EUTM, Zdút had acted in bad faith.

The EUIPO Cancellation Division dismissed the application for a declaration of invalidity in its entirety, but then the Second Board of Appeal (BoA) reversed the decision. A further appeal to the GC followed.

The GC decision

The GC noted at the outset that, while the concept of bad faith is neither defined nor described in the EU trade mark instruments, case law of the EU courts has clarified the meaning thereof. To this end, the Court provided a useful recap and checklist:

1. First, bad faith presupposes the presence of a dishonest state of mind or intention, which must be understood in the context of trade mark law, which is that of the course of trade and in accordance with the rationale of ensuring a system of undistorted competition;
2. Second, even though bad faith refers to a subjective state of the trade mark applicant, it must be determined objectively, having regard to all the factual circumstances relevant to the particular case at hand;
3. Third, when such circumstances refer to the trade mark applicant’s intention to take unfair advantage of the reputation of an earlier sign or name, the assessment must be undertaken from the perspective of the average consumer of the goods for which the sign was registered;
4. Fourth, it is for the applicant for a declaration of invalidity to prove the circumstances that will substantiate a finding of bad faith on the side of the trade mark owner.

The BoA concluded that, in applying for registration of the EUTM, Zdút had sought to free ride on the reputation of Jan Nehera and the 'old' Czech trade mark.

The GC considered that, to determine whether in fact such a parasitic intention did subsist on the side of Zdút, account should be taken of factors like: (a) the factual and historical context of the dispute; (b) the degree of legal protection, the actual use and the reputation both of the former Czechoslovak trade mark and of Nehera’s name; as well as (c) the extent of Zdút's awareness of those factors.

The Court found that the applicants for a declaration of invalidity had not sufficiently demonstrated that either Jan Nehera or the former Czechoslovak trade mark were still well known in 2013 to a significant part of the relevant public, that is the public of the European Union.

In addition, while Zdút was aware of Jan Nehera and his trade mark, “he decided to use the trade mark Nehera Praguea, then the former Czechoslovak trade mark, in order to ‘pay a tribute’ to the ‘great days of [the] [C]zechoslovak textile industry of [the 19]30s’ and in particular to Mr Jan Nehera, who he regarded as a ‘great figure’ and a ‘symbol’ of those ‘great days’ for the Czechoslovak clothing sector.” (para 55).

All this considered, the GC concluded that the trade mark owner had not sought to free ride on any surviving reputation of the old NEHERA trade mark. As a result, no bad faith was found to subsist.

Comment

The fashion industry does have several cases of dormant brands that are subsequently and successfully revived.

Just to mention but a couple of examples: Schiaparelli (named after the iconic designer Elsa Schiaparelli, a close competitor of Coco Chanel) was revived in 2014, 60 years after the last clothes collection, and the creations are now worn by the likes of Lady Gaga and Bella Hadid; Balenciaga (founded in 1919 by Cristóbal Balenciaga) closed in 1972 until it was revived in 1986, becoming one of the most sought-after luxury brands today.

This phenomenon of fashion rediscovery has moreover become particularly frequent over the past few years. As it is well explained in this Vogue Arabia article (with plenty of examples), “The last decade or so has seen a revival of the grand old dames of fashion”.

The NEHERA case indicates that the line between homage and free riding may be a thin one. This said, the following broader guidelines can be extracted from the GC's reasoning:

• First, a finding of undue exploitation of the reputation of a sign or name presupposes that such a reputation or celebrity at the time when the trade mark application is filed is actually there or still there (see para 57);
• Second, the fact that a trade mark applicant knows about the past existence and reputation of a brand or name does not automatically mean bad faith on their side (see para 60);
• Third, the concept of unfair advantage being taken of the reputation of a sign or a name refers to situations in which there is actual parasitism, that is where one seeks to ride “on the coat-tails of a formerly renowned sign or name in order to benefit from its power of attraction, its reputation and its prestige and, without any financial compensation and without having to make any efforts of its own in that regard, to exploit the commercial effort expended by the proprietor or user of that sign or of that name in order to create and maintain the image of that sign or of that name” (para 65).

[Originally published on The IPKat on 13 July 2022]