CTM Ruled Invalid On Ground of "Bad Faith": Home About OHIM

OHIM - OAMI-ONLINE - Newsletter 09 - 2010 - CTM ruled invalid on ground of “b...
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faith”
September 2010
CTM ruled invalid on ground of "bad faith"

A Community trade mark for tablet coating equipment, owned by a US company, has been declared invalid on the
ground of “bad faith” following a dispute with a UK firm which held a long-standing agreement to distribute
equipment under this mark.
The invalidity applicant, BWI PLC, based in Knowsley in the UK, argued that the “ACCELA-COTA” CTM, applied for
in 2004 and registered the following year by Thomas Engineering Inc. from Illinois, was contrary to a contractual
relationship between the parties according to which the CTM proprietor was barred from distributing their products
within the Community.
The UK company said it had an exclusive sub-license contract, later changed to a distributorship agreement in
1996, entitling it to sell tablet coating machines under the “ACCELA-COTA” mark throughout the world, apart from
some US States and territories.
The applicant said they had extensively marketed tablet coating machines marked until 2002 and from 2006
onwards with the sign “ACCELA-COTA” within the Community. In the meantime, its machines were rebranded as
“XL COTA”.
Opposing the invalidity application, the CTM proprietor said they had invented the mark “ACCELA-COTA” for the
technology licensed to the applicant and had owned the US mark “ACCELA-COTA” since 1969, which it used to
market tablet coating systems in the US . It had always been the parties' common understanding that the
“ACCELA-COTA” sign belonged to the CTM proprietor. Even though it has not been explicitly mentioned in the
1996 distribution agreement, it was evidently included in “The Thomas Trade Marks” as defined in this agreement,
which prohibited the applicant to lay any claim on the sign.
The CTM proprietor also claimed to have sold directly within the Community, without any involvement of the
applicant, coating apparatus marked with the sign in question. The applicant's use of the sign was always under
license and depending on the parties' business relationship. After its termination, the applicant was obliged under
the 1996 agreement to assist the CTM proprietor in maintaining its rights and was prohibited from filing any
applications on its own. This is the reason why the applicant never filed for a sign corresponding to the CTM.
OHIM's Cancellation Division found that the invalidity applicant based its assertion of bad faith on the US
company's contractual obligation not to use the sign within the Community. The case was based on legitimate
interests and expectations arising from a commercial relationship which at the time of filing in 2004 had lasted for
more than 35 years.
Throughout the whole period of the parties' business affiliation, the applicant's territory included the Community
where in consequence of this agreement the CTM proprietor was not entitled to distribute its own goods. The
agreement in essence amounted to a division of territories.
Under Article 13(3) of the 1996 agreement, each party was barred from altering, obscuring, removing, cancelling
or otherwise interfering with the other party's markings when distributing the other party's goods in their own
territory. By virtue of Article 13(5), each party was also obliged to cooperate fully to protect and maintain the
other party's trade marks and any effective registrations thereof and give assistance in registering them.
Furthermore, the parties were prohibited from applying or registering the other party's trade marks.
In the Cancellation Division's view, contrary to the CTM proprietor's assertion, it could not be inferred from the
1996 agreement that the ACCELA-COTA mark exclusively belonged to the CTM proprietor. Even if the CTM
proprietor invented the term and registered it first in the US, taking the territorial split and the apparent lack of
commercially relevant sales of the CTM proprietor's products marked with a sign corresponding to the CTM within
the Community into consideration, it rather followed that the parties were independently using the same sign
during their business affiliation. Nothing in the evidence indicated that the parties had a different common
http://oami.europa.eu/ows/rw/pages/OHIM/OHIMPublications/newsletter/1009/CTM... 2010.10.18.
OHIM - OAMI-ONLINE - Newsletter 09 - 2010 - CTM ruled invalid on ground of “b... Page 2 of 2
understanding as claimed by the CTM proprietor.
Against this background, if the applicant had still been using the ACCELA-COTA sign when the CTM was filed in
2004, due to the continuing affiliation of the parties there would have been no doubt that the filing for the CTM at
this time would haven been against honest practices, and therefore in bad faith according to Article 52(1)(b)
CTMR.
The Cancellation Division concluded that the key issue to decide upon in the present case was whether the fact
that the invalidity applicant stopped using the ACCELA-COTA sign within the Community at the end of 2002 shed a
different light as to the filing of the CTM.
“In the Cancellation Division's view, this is not the case, mainly for two reasons: First, the 1996 agreement was
still in force at the time of the application for the CTM. It obliged the parties to respect each other's territory and
their signs used in the course of trade. Secondly, as the invalidity applicant's “Accelacota” tablet coating machines
were evidently intended for long-term use, it is reasonable to assume that they were still in use in 2004 within the
Community and, for example, required maintenance and repair. In this respect, it should also be noted that a
trade mark does not only fulfil its function to indicate a commercial origin of the respective product at the time of
sale but also, as the case may be, thereafter.
“The Cancellation Division therefore concludes that the CTM proprietor has applied for the CTM in bad faith.”
Page last updated 14 September, 2010 © 1995-2010
Office for Harmonization in the Internal Market (Trade Marks and Designs)
Avenida de Europa 4, E-03008 Alicante, Spain Tel +34 96 513 9100 Fax +34 96 513 1344
http://oami.europa.eu/ows/rw/pages/OHIM/OHIMPublications/newsletter/1009/CTM... 2010.10.18.

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OHIM - OAMI-ONLINE - Newsletter 09 - 2010 - CTM ruled invalid on ground of “b...

CTM ruled invalid on ground of "bad faith"

understanding as claimed by the CTM proprietor.

Page last updated 14 September, 2010 © 1995-2010

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