Link puts an end to lengthy dispute
Gavin Stenton reports on Gugler France’s decade-long campaign. C 736/18 P, Gugler France SA v EUIPO, CJEU, 23rd April 2020
On 7th February 2002, Gugler France was registered in the commercial and companies register of Besançon, France. The company, acting as a distributor in France, managed the sale and installation of doors and windows produced and assembled by a German entity, Gugler GmbH. On 6th July 2002, Gugler GmbH acquired 498 shares in Gugler France.
On 25th August 2003, Gugler GmbH filed an application for a Community trade mark (CTM) under Regulation No. 40/94 in classes 6, 17, 19, 22, 37, 39 and 42. This mark (the Contested Mark) proceeded to registration on 31st August 2005 (No. 3324902). The Contested Mark was later assigned to A Gugler, an employee of Gugler GmbH and the son of its Managing Director, K Gugler.
On 24st August 2010, Gugler GmbH, K Gugler and A Gugler brought proceedings against Gugler France in France for infringement of the Contested Mark and sought damages of €5m.
In response, on 17th November 2010, Gugler France filed an application for a declaration of invalidity against the Contested Mark claiming, first, that the Contested Mark had been filed in bad faith within the meaning of Article 52(1)(b) of Council Regulation No 207/2009 (the Regulation) and, second, that under French law Gugler France’s company name allowed it to prohibit use of the Contested Mark within the meaning of Article 53(1)(c) of the Regulation, read in conjunction with Article 8(4).
Under Article L711-4 of the French Intellectual Property Code, “signs may not be adopted as trade marks where they infringe earlier rights, in particular… a company name or corporate name, if there is a likelihood of confusion on the part of the public”.
Initial decisions
The Cancellation Division (CD) upheld the application for invalidity, finding that Gugler France’s company name had been used in the course of trade (of more than mere local significance) prior to the Contested Mark’s filing date and that, according to French law, Gugler France’s company name conferred on it the right to prohibit the use of the Contested Mark. Having found in favour of Gugler France on this ground, the CD did not consider the second ground for invalidity relating to bad faith.
On appeal by A Gugler, the Fourth Board of Appeal (BoA) annulled the CD’s decision and dismissed the invalidity application, finding that Gugler France had not established a prior right that enabled it to prohibit the use of the Contested Mark.
Further, Gugler GmbH was not considered to be acting in bad faith when it filed the application for the Contested Mark. The BoA’s view was that filing an application for registration of a CTM was an obvious and completely justified action because Gugler GmbH “had had an active business producing, selling and exporting doors and windows under the name GUGLER for many years”.
Next steps
On appeal by Gugler France, the General Court (GC) annulled the Fourth BoA’s decision on the basis that it had not stated the correct reasoning when it ruled on both grounds of invalidity.
When revisiting the case, the First Board of Appeal (First BoA) upheld the application for a declaration of invalidity of the Contested Mark on the basis of Article 53(1)(c) of the Regulation, in conjunction with Article 8(4).
It found that Gugler France’s company name had been used in the course of trade with more than merely local significance. Second, it stated that Gugler France had acquired prior rights when it was registered in the register of trade and companies in France. Third, under Article L711-4 of the French Intellectual Property Code, Gugler France’s company name entitled it to prohibit use of a more recent trade mark if there was a likelihood of confusion on the part of the public.
Under the circumstances, it found that the Contested Mark and the earlier sign were highly similar, the contested goods and services were identical or similar to the activities of Gugler France and there was therefore a likelihood of confusion, meaning that the conditions set out in French law for prohibiting the use of the Contested Mark were satisfied.
The GC’s decision
Next, A Gugler sought annulment of the First BoA’s decision, alleging that it had incorrectly assessed the conditions of Article 8(4) of the Regulation and incorrectly assessed the likelihood of confusion.
The GC found that, at the filing date, business relations existed between Gugler France and Gugler GmbH. Gugler France was the distributor of Gugler GmbH’s goods in France, their business relationship dated back to 2000 and Gugler GmbH had held 498 shares in Gugler France since July 2002.
Further, in 2003, Gugler GmbH formed, with French partners (some of whom were founders of Gugler France), Gugler Europe SA, which has been the proprietor of the French figurative mark GUGLER since 28th August 2003, and that Gugler Europe had granted a licence for that mark to Gugler France.
In light of these factual circumstances, the GC held that, as Gugler France was distributing Gugler GmbH’s goods, consumers would believe that the goods in question came from economically linked undertakings, and there would be no error as to their origin and thus no scope for confusion.
As such, it held that the First BoA had erred in finding that there was a likelihood of confusion, since the economic link between Gugler France and Gugler GmbH precluded such a finding. Consequently, it annulled the First BoA’s decision.
The final chapter
Gugler France appealed the GC’s decision, alleging infringement of Article 8(1)(b) and (4) of the Regulation and of Article L711-4 of the French Intellectual Property Code, reasserting its claim that there was a likelihood of confusion between the Contested Mark and its company name.
The CJEU nevertheless upheld the GC’s decision, holding that, at the filing date, there was a veritable economic link between Gugler GmbH and Gugler France SA because the goods in question were manufactured by Gugler GmbH and, since July 2002, Gugler GmbH had held 498 shares in Gugler France.
In doing so, it rejected Gugler France’s argument, based erroneously on Schweppes SA v Red Paralela SL1, that the GC should have assessed the economic link only from Gugler France’s perspective, as the prior right owner. According to the CJEU, an economic link does not have to originate with one party. Further, the fact that Gugler France also sold third-party goods did not in any way detract from the fact that there was an economic link between it and Gugler GmbH.
1 C-291/16
Key points
Likelihood of confusion is unlikely to be established where an economic link exists between the relevant parties, irrespective of the source of the link
The sale by a distributor of third-party products in addition to those of the brand owner does not detract from the existence of an economic link between the brand owner and distributor
Brand owners and their distributors should carefully document the legal terms of their relationship, paying particular attention to the use and registration of IP rights both during the term of the contract and following its expiry/termination