Bad Faith and Intent to Use

According to Austrian law, reasons for trade mark invalidity, such as bad faith, can be raised as defences in an infringement action. Such defences have to be decided as preliminary questions.

For deciding on bad faith we have two decisions of the CJEU (Court of Justice of the EU) as guidance, namely C529/07 Chocoladefabriken Lindt & Sprüngli AG and C-320/12 Malaysia Dairy Industries Pte Ltd. It is true that bad faith has been found primarily with regard to breach of loyalty duties or for obstructing third parties who are already using the sign. But it cannot be inferred from them that bad faith is limited to these two cases.

It has to be clear that under European trade mark law no intent to use the mark for one's own goods or services is necessary. It is sufficient to have an intention to use the trade mark by licensing or by assignment to third parties for their use as is the case with advertising agencies or trade mark designers. However, the application and registration of trade marks with the speculative intent to warn or threaten others to sue those who use the same or similar signs is unlawful and therefore bad faith. Such behaviour can only be deducted from circumstantial evidence such as quantitatively (a multitude of applications) and qualitatively (broad list of goods and services) and eventually on criteria of time as well as the lack of a realistic model for business activities with such trade marks.

The purpose of trade mark law is the use of trade marks as signs of origin. Accordingly the CJEU sees the intent to use as a sign of origin as a decisive criteria in judging bad faith. If it can be shown that from the beginning a trade mark was not intended as sign of origin but to be used to harass third parties then its application was made in bad faith. That is not only the case when the application is aimed against a specific enterprise already using that sign but also when with it threats become possible against unspecific enterprises who would wish to use the sign in future.

In a case recently decided by the Supreme Court of Austria (OGH) (4 Ob98/14m) confirming bad faith, the plaintiff and trade mark owner had applied for a multitude of mostly descriptive trade marks (3,000 Austrian trade marks and 450 Community trade marks) but only registered them in small numbers (120). This proportion is very unusual since statistically only 12% to 15% of all applications are refused. The applicant usually did not pay the application fees and waited until the last minute of the term for payment before withdrawing his applications so that he had to pay no or minimal official fees. That alone speaks already to a speculative intent. In addition there is not the least evidence that the applicant offered concrete marketing concepts or ideas for future business activities together with his trade marks.

The main focus of his activity is to pursue third parties wanting to use such marks. Since marketing agencies usually develop new trade marks together with their client and in connection with concrete goods and services, the application for trade marks in the expectation that enterprises would buy trade marks off the peg is not a comprehensible business model. The intent rather was to draw financial profit from the descriptive and only weak marks that the applicant applied for, which he hoped would be used in advertising by different enterprises, in the expectation that the Patent Office would register a fair amount of them and that many enterprises would shrink from the expenses of a legal defence and prefer to pay a transfer fee. In the weak or descriptive character of all these applications lies strong circumstantial evidence of the intent of the applicant not to use these marks as sign of origin but for unlawful purposes. Since the application was hence made in bad faith the infringement action based on this trade mark had to be dismissed.

This decision of the OGH shows that the concept of bad faith is akin to non-intent to use in a specific facet. Even with intent to use, one might have bad faith but without a sensible concept for use bad faith will easily be found.

DI Helmut Sonn