In Coinbase v European Union Intellectual Property Office (EUIPO) (Case T-366/21), the General Court had to assess whether registration in ‘bad faith’ also extends to dissimilar goods and services.
US Coinbase Inc is the owner of the international registration designating the European Union for the word mark COINBASE, registered since 2014. Coinbase filed an application for a declaration of invalidity with the Cancellation Division of the EUIPO against an international trademark registration designating the European Union for the word mark COINBASE, registered in 2016 by Japanese company BitFlyer Inc.
Both marks covered goods and services in Classes 9, 35, 36, 38 and 42. Some goods and services were similar, others were not. The grounds of invalidity invoked by Coinbase were Article 60(1)(a) of Regulation 2017/1001, read in conjunction with Article 8(1)(b) (likelihood of confusion) and Articles 59(1)(b) (filing in bad faith) of that regulation.
Both the Cancellation Division (decision of 26 June 2020, Case No 24.242C) and the Board of Appeal (decision of 29 April 2021, Case R 1757/2020-4) upheld the application for a declaration of invalidity, only on the ground that there was a likelihood of confusion for the identical or similar goods and services covered by the (identical) marks at issue (Article 8(1)(b) of the regulation). Both instances were of the opinion that there was no persuasive evidence that BitFlyer had acted in bad faith when it applied for the contested mark.
Coinbase appealed to the General Court. The scope of the appeal was limited to whether BitFlyer had acted in bad faith in relation to the dissimilar goods and services in respect of which the mark remained valid.
How to assess bad faith
First, it is important to note that the date on which the application for registration of the EU mark was filed is determinative for the purposes of assessing whether an applicant was acting in bad faith.
Second, the burden of proving the existence of bad faith lies with the invalidity applicant. Good faith is presumed until the opposite is proven (General Court, Case T-23/16 (8 March 2017), Paragraph 45; General Court, Cases T-3/18 and T-4/18 (23 May 2019), Paragraph 34).
Third, it is up to the trademark authorities or the courts to assess bad faith in concreto. In this respect, the Court of Justice of the European Union (CJEU) listed in its judgment of 11 June 2009 in Case C-529/07 some relevant factors that can be taken into consideration in order to assess whether an applicant was acting in bad faith:
- the fact that the applicant knows or must know that a third party is using, in at least one member state, an identical or similar sign, for an identical or similar product, capable of being confused with the sign for which registration is sought;
- the applicant’s intention to prevent that third party from continuing to use such a sign; and
- the degree of legal protection enjoyed by the third party’s sign and by the sign for which registration is sought.
As to the first factor (knowledge of use), case law has shown (Cancellation Division No 24 242 C, pages 21-22) that there is knowledge where:
- the parties have been in a pre-contractual or contractual business relationship with each other (General Court, Case T-321/10 (11 July 2013), Paragraphs 25 to 32; General Court, Case T-291/09 (1 February 2012), Paragraphs 85 to 87);
- the reputation of the sign, even as a historical mark, is a well-known fact (General Court, Case T-327/12 (8 May 2014), Paragraph 50); and
- the identity or quasi-identity between the contested mark and the earlier sign “cannot be mere coincidence” (General Court, Case T-335/14, 28 January 2016, Paragraphs 64 to 71).
As to the second factor (“dishonest intention” on the part of the owner of the contested mark), the General Court has already stated that the concept of ‘bad faith’ involves a subjective motivation on the trademark applicant, namely a dishonest intention or other deceitful motive. It involves conduct that departs from accepted principles of ethical behaviour or honest commercial and business practices (Case T-795/17 (14 May 2019), Paragraph 23).
For example, bad faith is found when:
- it can be inferred that the purpose of the applicant is to ‘free ride’ on the reputation of the earlier mark (General Court, Case T-795/17, Paragraph 51) or to take advantage of that reputation (General Court, Case T-327/12, Paragraph 56), even if those trademarks have lapsed (Board of Appeal, Case R 3028/2014-5, 21 December 2015, Paragraph 25);
- it is apparent that the applicant’s or the owner’s sole objective is to prevent a third party from entering the market (CJEU, Case C-529/09, Paragraph 44) and/or to obtain economic advantages (General Court, Case T-82/14 (7 July 2016), Paragraph 126); and
- if there are objective, relevant or consistent indicia showing that the applicant has filed the trademark application not with the aim of engaging fairly in competition, but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trademark, in particular the essential function of indicating origin (CJEU, Case C-104/18 (12 September 2019), Paragraph 46); CJEU, Case C-371/18 (29 January 2020), Paragraph 77).
As to the third factor, one can take into consideration “the degree of legal protection of the trademark” – ie, the distinctiveness of a trademark. In other words, the more distinctive a trademark is, the greater its scope of protection
Moreover, the General Court repeated in its judgment that, apart from the factors listed by the CJEU, account may also be taken of the origin of the sign and its use since its creation, the commercial logic underlying the filing of the application for registration of that sign as an EU trademark, and the chronology of events leading up to that filing (Case T-438/18 (16 December 2020), Paragraph 21 and the case law cited).
General Court annuls Board of Appeal’s decision: bad faith is bad faith
Since the Board of Appeal had not properly included the dissimilar products and services in its assessment of bad faith at the time of filing the application for registration, the General Court was of the opinion that the Board had not taken into consideration all the relevant factors specific to this particular case; its decision was therefore vitiated by an error in that regard.
In other words, where a finding of bad faith is made in respect of some goods or services, the trademark should be cancelled for all the goods and services in question. Therefore, although Article 8(1)(b) of the regulation offers protection only against identical or similar goods or services, the EUIPO will be obliged to cancel an application for registration of an EU mark or a registered EU mark for all goods and services, including the dissimilar goods and services, when bad faith at the time of the filing of the application of the EU mark can be established.
Significance of the decision
This judgment of the General Court is of crucial importance because an opposite decision would be an incentive for persons acting in bad faith to file applications for already existing EU trademarks for dissimilar goods and services. In other words, splitting an application for registration into a part filed in bad faith and a part filed in good faith would offer an incentive to apply to register marks for a larger set of goods and services than is justified by the actual intended use.
Final remark: will the Board of Appeal reverse its decision?
Notwithstanding this interesting judgment, the question of whether BitFlyer acted in bad faith remains open. The General Court annulled the decision of the Board of Appeal but did not assess bad faith in concreto on the basis of the underlying facts and circumstances.
Both the Cancellation Division and the Board of Appeal were of the opinion that BitFlyer had not acted in bad faith when it filed the application for the contested identical mark:
- Underlying facts: since it was founded in 2013, Coinbase had used its mark intensively in the United States. It extended its activities to the European Union in the summer of 2015. BitFlyer filed the contested international registration on 3 February 2016 with a Japan priority date of 18 December 2015. Both parties are direct competitors in a rather specialised market (ie, platforms to buy, sell and store cryptocurrencies). Coinbase’s platform was based in San Francisco, BitFlyer’s platform in Tokyo.
- Was BitFlyer acting in bad faith? The evidence of intensive use submitted by Coinbase merely related to the success of its platform in the United States. Moreover, the time between the expansion of its activities in the European Union in the summer of 2015 and the filing of the contested mark (3 February 2016) was rather short. On the other hand, it cannot be denied that both parties are direct competitors in a niche international market. In other words, BitFlyer should have known at the time of filing its application that Coinbase was using its mark. However, according to the Cancellation Division and the Board of Appeal, such awareness was not sufficient to presume bad faith and there were no indications to conclude that BitFlyer behaved dishonestly, had sinister motives or attempted to block a legitimate trademark use by a competitor. In this respect, the Board of Appeal also took into consideration the fact that COINBASE is a rather weak mark since it would – in the jargon of those who deal with cryptocurrencies – refer to the process of ‘mining’ a bitcoin (the board adding: “whatever that exactly is”) (Case R 1757/2020-4, Paragraph 36).
It will be interesting to see whether the judgment of the General Court will have an impact on the decision of the Board of appeal.
For any further questions, please contact Paul Maeyaert