Better safe than sorry: Monopoly, Banksy’s ‘Flower Thrower’ and the question of bad faith

We would like to thank Mathis Uhl, who joined us during his legal clerkship at HARTE-BAVENDAMM, for his significant contribution and his great support with this article.

1. Repeat filings in a nutshell

So-called repeat filings are not subject to legal statutes and thus, have no specific definition. Usually, a repeat filing means a trademark that is identical to an already existing trademark registration of the same trademark proprietor, i.e. a trademark with an identical sign designating identical goods. Whether and to what extent trademarks that are only similar to prior trademarks may also be classified as repeat filings is highly controversial.

In general, repeat filings are not prohibited. However, the fact that it became a common business strategy for trademark owners to file repeat applications right before the end of the 5-year grace period for genuine use under Article 18 (1) EUTMR in order to circumvent the obligation to put the trademark to genuine use and thus exploit further grace periods has caused severe concerns. This practice (also known as “evergreening”) also raised the question whether such repeat filing was made in bad faith and thus should be denied protection or, if already registered, should be vulnerable for cancellation.

Under German law, so far, there is no legal basis for such actions against repeat filings based on bad faith. A different view is taken in infringement proceedings as a repeat filing may be qualified as an abuse of law and thus the trademark owner may not rely on the repeat filing to prevent a third party from using the sign.

Under EU law, however, actions against repeat filings became subject to EU case law more frequently, including in the land mark case “MONOPOLY” and the more recent decisions of the EUIPO regarding Banksy’s best known artworks, the Flower Thrower. The legal basis is Article 59 (1) (b) EUTMR according to which an EU trademark shall be declared invalid on application to the Office or on the basis of a counterclaim in infringement proceedings “where the applicant was acting in bad faith when he filed the application for the trademark”.

Taking into account that the allegation of bad faith has become quite popular as a means of counter attack or defence, it is important to know the relevant principles developed by the European Courts and the EUIPO in order to build an efficient trademark strategy and effectively protect trademarks against third parties.

2. Monopoly – a landmark case

In its controversially discussed Monopoly decision (Judgment of the General Court of 21 April 2021, Hasbro v EUIPO – Kreativni Događaji (MONOPOLY), T-663/19, EU:T:2021:211), the General Court set forth the main principles regarding the issue of bad faith in repeat filings of earlier trademarks.

a) Background of the case

In 2010, the US toy manufacturer Hasbro applied for the registration of the word mark “MONOPOLY” for goods and services in Nice-Classes 9, 16, 28 and 41. Hasbro was already the proprietor of three earlier EU word marks “MONOPOLY”. The ‘new’ trademark, registered on 25 March 2011, partially covered new goods and services, but to a significant extent also covered goods already protected by the earlier marks. In 2015, a Croatian company filed a cancellation action against the new MONOPOLY trademark, alleging that Hasbro acted in bad faith at the date of filing because the application was a repeat filing of the three earlier marks mentioned above and aimed at circumventing the obligation to prove genuine use of those marks. The EUIPO's Cancellation Division rejected the invalidity request.

During an oral hearing in the following appeal proceedings, a witness of Hasbro stated that Hasbro had filed the trademark application also in order to avoid having to prove the use of the trademark in each individual case, which allegedly was a common practice in the industry.   This statement was crucial as the Second Board of Appeal of the EUIPO concluded that accordingly the repeat application was filed to allow enforcement of the trademark without having to prove its use and also with the aim of reducing the costs of providing evidence and attending hearings, thereby circumventing legal requirements and undermining the EU trademark system.

The Board of Appeal found that with regard to the goods and services covered by the contested trademark which were identical to the goods and services covered by the earlier trademarks, Hasbro had acted in bad faith when it filed the application for registration of the contested mark and thus, declared the contested mark invalid.

In particular, the office came to the conclusion that Hasbro knowingly had filed the repeat application with the aim to avoid having to prove genuine use of the trademark in opposition proceedings and saw no other commercial logic for such a filing strategy. It hold that Hasbro’s argument that this complied with common industry practice clearly implied that using such a strategy was intentional. This was also supported by the fact that Hasbro already used both, the earlier registrations and the contested EU trademark, together as a basis of opposition actions.

b) The decision of the General Court

The General Court of the EU confirmed the Board of Appeal’s finding that the repeat application was partially filed in bad faith and dismissed Hasbro's appeal.

The key findings of the judgment of April 2021 are the following:

• The good faith of the trademark applicant is presumed until proven otherwise. But where the EUIPO finds that the objective circumstances of the particular case may lead to the rebuttal of the presumption of good faith, it is for the proprietor of that mark to provide plausible explanations regarding the objectives and commercial logic pursued by the application. ‍
• Repeat filings of a mark are not prohibited, but a filing which is carried out with the intention to avoid the consequences entailed by non-use of earlier marks indicates the bad faith of the applicant.
• The GC confirmed that the fact that a filing is not only motivated by the advantage of not having to prove the genuine use of the trademark, but by other reasons as well, is not in itself sufficient to rule out bad faith.  
• Whether the applicant obtained an advantage or caused harm with the repeat filing is irrelevant for the purposes of assessing bad faith. ‍
• The length of the extension of a grace period (which depends on the chosen filing date) obtained through a repeat filing is not relevant for determining bad faith, but the applicant’s intention at the time of filing.
• Neither the fact that the strategy of repeat filings may be common in the industry, nor the fact that the applicant has followed the advice of a legal counsel, is itself sufficient to rule out bad faith.
• Bad faith extends to all goods covered by the contested trademark that are comprised in a more general category of goods covered by the earlier trademark.
  

3. Banksy’s Flower Thrower – recent case law on repeat filings

The trend of repeat filings seems not to have flattened, nor does the trend of bad faith defences.

In its recent decision of 21 December 2023 (No. C 47 807), the EUIPO declared a trademark representing one of the most famous artworks by the well-known artist Banksy, the Flower Thrower (depicted below), partially invalid based on Article 59 (1) (b) EUTMR finding that the trademark was as a so-called repeat filing applied for in bad faith.

The trademark was filed by Banksy’s company Pest Control (the “proprietor”) on 30 August 2019, directly after the expiry of the grace period of an identical prior EU trademark which had been registered on 29 August 2014. Except for a few ‘new’ goods and services, the trademarks mainly coincided in their list of goods and services.

Considering the timing and the fact that the trademark was registered for mostly identical goods and services, the Cancellation Division found that the filing of the application of the contested EUTM was made without any commercial logic and thus in bad faith, as far as it designated goods and services already covered by Banksy’s earlier EU trademark. As the Division points out, the proprietor “did not provide any convincing argument explaining why it re-filed an identical mark for goods and services which are identical to some of the goods and services already covered by its earlier registration”.

The proprietor’s defence was only based on the argument that it had filed the contested mark due to the risk of losing its registered mark against which an application of invalidity based on absolute grounds had been filed about five months before the refiling. The Division did not find this convincing but saw the actual reason in the circumvention of the obligation to prove genuine use of the mark. And even taking this argument into account, the Division found that such an intention of re-filing to avoid the consequences of a decision on the validity of the first mark based on (absolute) grounds “could not be considered per se legitimate”. The trademark was therefore cancelled for those goods and services identical with the prior trademark.

The decision has been appealed, but as of today, no decision has been issued by the Board of Appeal. However, in light of the recent EU case law it seems rather likely that the Board will reject the proprietor’s arguments and uphold the Cancellation Division’s decision.

This latest Banksy case (one in a row of cancellation decisions relating to his trademarks) is a good example of the risks involved in repeat filings and demonstrates how a well-founded claim of bad faith might lead to the cancellation of the respective trademark.

4. Practical consequences for trademark owners

Repeat filings – as defined by the General Court – are generally considered a legitimate business practice. This includes, in particular, cases where a trademark has evolved over time (as in the Pelikan case, see Judgement of the General Court of 13 December 2012, T-136/11, EU:T:2012:689) or where the repeat filing designates new goods and services because the proprietor expands his business.

Only a dishonest intention behind a repeat filing could make it a bad faith application.

Whether a trademark has been applied for in bad faith has to be assessed on a case-by-case basis and depends on various factors. The absence of economic activity as such or lack of use of the repeat filing do not itself establish bad faith, the decisive factor is the dishonest intention of the applicant.

Generally, good faith is presumed until the opposite is proven; so the burden of proof of the existence of bad faith lies on the claimant.

The claimant or cancellation applicant must therefore establish the circumstances that make it possible to conclude that the trademark was applied for in bad faith. This may comprise evidence, for example, that at the time of filing, the trademark owner had no intention of using the trademark or intended to artificially extend the grace period for non-use by filing a repeat application of an earlier EU trademark in order to avoid the loss of a right as a result of non-use. Such intention may be supported, amongst others, by evidence showing that the proprietor relies exclusively on repeat filings in opposition or infringement proceedings.

The burden of proof, however, may shift if the Office or Court concludes, that the objective circumstances presented by the cancellation applicant, can rebut the presumption of good faith.

In that case, the proprietor of the repeat filing must prove that there was some legitimate underlying commercial logic for the filing.

Under EU law repeat filings are exposed to a significant risk of being attacked with an application for a declaration of invalidity (or a counterclaim) on grounds of bad faith.

Therefore, from the proprietor’s perspective, it is essential to have sufficient evidence to show legitimate reasons for the repeat filing. It should be kept in mind that the presumption of good faith may be rebutted if sufficient objective circumstances are presented that indicate a dishonest intention at the time of filing which would then lead to a reversal of the burden of proof.

5. Strategies to prevent bad faith allegations regarding repeat filings

Although bad faith is assessed on a case-by-case basis and depends on  various factors, following aspects should be considered from an applicant’s perspective in order to minimize the risk of an allegation of bad faith:

• Consider to avoid a repeat filing very close to the end of the grace period of the earlier trademark, at least when both, the trademark’s sign and the respective specifications of the goods and services are identical or highly similar.
• Further mitigate the risk by modernizing or amending the sign of the trademark, particularly in case of a logo or figurative trademark.
• Be prepared, if necessary, to prove a legitimate commercial logic by providing a plausible explanation for the repeat filing (e.g. modernization of the brand, extension of commercial activities and, if applicable, the reason why an earlier trademark was not renewed) and have available sufficient evidence (e.g. documentation as e.g. internal presentations on your filing strategy, documents that prove expansion plans, anniversaries or new projects requiring an updated trademark).
• Where this is an option, consider to change the specifications of the goods and services covered by the repeat filing by limiting and specifying them or by adding new items, relating it to a legitimate commercial strategy.
• If applicable, it is also recommended to prove the reputation of the trademark, as this may speak against an intention to circumvent the proof of use requirements.

In view of the recent case law regarding repeat filings it is important to plan trademark applications with foresight and highly recommended to have a carefully considered trademark filing strategy in place.

6. Trademark strategy as a key to success - we can help

This article only touched the surface of repeat filings and respective bad faith actions. But the recent decisions under EU law emphasize the importance of a thorough trademark strategy to avoid time and cost consuming proceedings based on an allegation of bad faith and in particular the risk of a (partial) declaration of invalidity of a EU trademark due to bad faith.

If you are looking for advise on your trademark strategy, please feel free to get in touch.