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Anthonia Ghalamkarizadeh
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Benelux Court of Justice Rules on Bad Faith Trade Mark Infringement and a Claim for an Account of Profits

The Benelux Trade Mark Act (BTA) in its original form contained no provision that entitled a trade mark owner to demand from an infringer to hand over the profits obtained with infringing use of the trade mark. A trade mark owner could only demand compensation for his own damages. This changed on January, 1996. The following provision was introduced in art. 13 A par. 4 BTA:

'Next to or instead of a claim for damages a trade mark owner may claim that an infringer shall be ordered to hand over the profits made by the infringing use of the trade mark and render an account with regard to such profits. If the Court however finds that no bad faith is involved in the infringing use of the trade mark or that the circumstances of a case do not give rise to order a rendering of profits, the claims will be dismissed.'
From 1 January 2000 the provision was renumbered art. 13 A par. 5 BTA which was replaced on 1 September 2006 by art. 2.21 par. 4 of the Benelux Treaty on Intellectual Property (BTIP).On February 11, 2008, the Benelux Court of Justice delivered a preliminary ruling laying down judgement with regard to the interpretation of art. 13 A par. 5 BTA (the Dutch Supreme Court referred the case to the Benelux Court in a judgement of October 27, 2006). The case (reported on http://www.ie-portal.nl/ and subsequently on http://www.boek9.nl/) concerns the use of the trade mark CORBLOK, registered since June 24, 1992 in the Benelux by the Dutch company IWC, a company that produced corrosion inhibitants for the fertilizer industry since 1974. M. Michel Company Inc., a New York based company, purchased these inhibitants from IWC from 1978 till the end of 1995 and marketed them on the American market using the name CORBLOK (the name was not registered till June 24, 1992). Afterwards Michel purchased similar inhibitants from a competitor of IWC. On January 15, 1997 Michel registered CORBLOK as an own trademark in the Benelux. Since the parties disputed who was entitled to the trade mark CORBLOK Michel started proceedings on the merits before the District Court Utrecht claiming nullification of IWC's 1992 trade mark registration and an injunction to stop the infringing use of Michel's CORBLOK trade mark rights. IWC counterclaimed for nullity of Michel's trade mark registration and an injunction to stop any use of CORBLOK or any similar sign.

The District Court ruled in favour of Michel on 2 June 1999. After the decision was served to IWC on 14 June 1999 IWC stopped the use of CORBLOK. Michel not only claimed damages from IWC suffered as a result of the infringements during the period of January 15, 1997 and the service of the decision to IWC on 14 June 1999, but also claimed that IWC would hand over the profit made during this periode as a result of the infringing acts. The District Court once again found in favour of Michel. The Court of Appeal in Amsterdam confirmed and related with regard to the profit claim that although such a claim can have far- reaching consequences, IWC did not succeed in arguing that no bad faith was involved in the use of the trade mark, nor that the circumstances of the case gave rise to a dismissal of the profit claim. IWC brought an appeal before the Dutch Supreme Court.

The Dutch Supreme Court sums up the following circumstances that the Court of Appeal found inadequate for dismissal, decrease or moderation of the profit claim: (a) IWC created the market for the CORBLOK products outside the US and Canada, thus the profit claim is unreasonable as far as trade mark use on those markets is concerned; (b) a contractual relationship of many years' standing has existed between the parties, in virtue of which the IWC products where distributed by Michel in the US and Canada between 1974 and at least 1997, and by IWC, with Michel's permission, outside the US and Canada, while this relationship was not terminated validly, anyhow not with any compensation offer; (c) their was a dispute between the parties as to whom was entitled to the trade mark, which gave IWC a cause to assume to have a stronger right.

The Dutch Supreme Court formulated the following four questions of interpretation with regard to art. 13A par. 5 BTA:

1. Should this provision interpreted in such a way that there is only use in bad faith in cases of piracy, conceived as wilful imitation of trade marked products?

2. If the answer on the first question is negative: is use in bad faith only given in cases of wilful imitation?

3. If the answer on the second question is positive: what are the circumstances that define wilful imitation?

4 (a) Can the circumstances or any of them summed up by the Supreme Court give rise to the conclusion that there is no use in bad faith?

4 (b) Can the ciricumstances or any of them summed up by the Supreme Court be considered as circumstances of the case that can hamper the award of the profit claim?

In his conclusions Advocate General F.F. Langemeijer deepens extensively the parliamentary ramifications of the provision: in general, creating a set of tools for the industry to fight more effectively against piracy, and more specific for the profit claim: trade mark owners have a difficulty in establishing and proving what are exactly the own damages; the extent of illegal profits gained by the infringer is easier to establish mostly; the provision is furthermore profitable for the trade mark owner in that the burden of proof as to the extent of the profits is fully on the infringer). The wilful infringer -that seems to be the real backbone of the provision - should not benefit from infringements in spite of a judgment. Wilfulness justifies a profit claim. Where the infringer does not act in bad faith the profit claim should not be honoured. Langemeijer mentions that a profit claim is a difficult one from a methodological point of view. It is a longstanding principle of civil liability that a victim should be compensated fully for all damages suffered from infringing acts of an infringer, but that does not include an overcompensation. The risk of a profit claim is a cumulation with a claim for damages: the profit for the infringer could be the loss of profit for the trade mark owner. Another issue is that the profit for the infringer is higher as the loss of profit for the trade mark owner: is the trade mark owner in such a case still entitled to the profit of the infringer? Or should there be an extra justification? For example: wilful infringement? That seems to be the clue.

The Benelux Court of Justice answers the first question in the negative: there is no reason to restrict the radius of action to piracy cases, defined as wilful imitation of trade marked products. However it needs to be observed that there is no motive to make a difference with regard to the meaning of the terms 'deliberately' and 'wilful'.The second question received a positive answer: use in bad faith demands wilful or deliberate infringement. Third question: there is a case of wilful infringement if the defendant at the time of acting was aware of infringing the trade mark right. Every professional trader who uses a sign in economic trade is deemed to have knowledge of the trade mark registry. There is no such consciousness if the defendant fights the allegation of infringement with a reasonable defence that can not be qualified as worthless in advance.The fact that IWC created the market for CORBLOK outside the US and Canada does not hamper wilful acting against the trade mark, thus the answer on question 4 (a) rules out this fact as a relevant one to reach the conclusion that there is not a bad faith case. The other circumstances however are thought to be relevant.With regard to question 4 (b) the Benelux Court finds that all circumstances could be relevant to hamper a profit claim.

Posted by: Gino Van Roeyen @ 16.35
Tags: Bad faith, Benelux trade marks, Claim for an Account of Profits,
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MARQUES does not guarantee the accuracy of the information in this blog. The views are those of the individual contributors and do not necessarily reflect those of MARQUES. Seek professional advice before action on any information included here.

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