For his first post in quite some time, this blogger would like to report an interesting decision from Porto’s Court of Appeal in a trade mark revocation action (published on Intellectual Property Bulletin no. 067/2014, 4 April 2014 - full text in Portuguese here).

The Claimant was Lupo, S.A. a 85 year-old Brazilian Company, market-leader in the Brazilian textiles, with a strong reputation in the manufacture of socks and lingerie, products which it sold under the brands ‘LUPO’ and ‘LOBA’ (registered as trade marks in Brazil since 1991) . The company had also been selling its products in Portugal since 1997. Recently, it had applied for the registration of the Community Trade Mark ‘LOBA’.

The Defendant was Pedro Silva, the owner of Portuguese Trade Marks ‘Loba’ (application filed on 1997), ‘Loba’ (registered in 2007) and ‘A Meia da Loba’ (registered in 2008). Before he made his first trade mark application, the Defendant had sold the Claimant’s products in Portugal. However, he was now selling his own products.

The proceeding resulted from what one can describe as a bad call by the Defendant. In fact, prior to the trade mark revocation action, the Defendant filed a complaint with ASAE (the Portuguese Authority for Food and Economic Security) based on the infringement of his trade marks, which lead to the apprehension of the Claimant’s products.

In response, Lupo initiated trade mark revocation proceedings. Among other grounds, the Claimant argued that the Defendant’s trade mark applications were made in bad faith. The First Instance Court decided in favour of the Defendant, finding that a registration is only made in bad faith when the Applicant is aware that he is unlawfully infringing a third party right (subjective bad faith). Considering that the Claimant was not the owner of any trade mark registration in Portugal at the time of the Defendant’s trade mark application, the First Instance Court held that one could not refer to a third party right.

On Appeal, this decision was reversed. The Court of Appeal found that bad faith is not dependent upon a prior trade mark registration. Instead, bad faith is also to be found whenever the Applicant knows that a third party is using the same trade mark despite not having obtained a prior registration. The Court of Appeal held that, under the Portuguese Industrial Property Code 2003, it was clear that unfair competition had to be seen as an autonomous ground for trade mark revocation and one that could even be used by a party that owns no trade mark registrations. As a (non-binding) precedent, the Court quoted a 2012 decision of Coimbra’s Court of Appeal. As for bad faith, the Court opted for a less demanding objective criterium.

Following such findings, the court moved to analyse how the bad faith concept should be applied in such a situation. It held that it was clear that the Defendant was aware of the Claimant’s use of the sign when he applied for the trade mark registrations, as it previously had been selling products bearing the Claimant’s (unregistered) trade mark. A registration under these circumstances can only have the purpose of obtaining illegitimate benefits (reputation, clients and advertising) resulting from the confusion between the parties’ products. As such, the Defendant’s registrations were made in bad faith, in unfair competition with the Claimant and, consequently, had to be revoked. Finally, the Court of Appeal dismissed the prescription defence previously advanced by the Defendant, holding that, as the application had been made in bad faith, the revocation right was imprescriptible.Considering the above, the Court of Appeal overturned the first instance decision, annuling the defendant’s trade mark registrations and forbidding him from using the signs. 

This decision shows that although Portugal uses the first-to-file system (and registration is granted to whoever properly files the application first), the existing law can be interpreted in a way that efficiently protect unregistered rights.