How many times have you heard someone ruminate on the ‘good old days’, about this handmade ice-cream shop, or that fine-dining restaurant, or that haute couture clothing line, that no longer exists? With time (and competition, market forces and development), like memories, brands fade too. Nostalgia is great, but you also lose relevance if you are not in the present.
Trademark law embodies this adage, in that trademark registrations need to be periodically “renewed” in order to be valid and enforceable, reminding us that they have limited lives too. Even if a trademark is renewed and kept alive, it needs to be “in use” in order to be relevant with the consuming public.
Take the case of the luxury couture brand Balenciaga. It remained dormant for almost two decades, until it reopened under new ownership in 1986. This revival exercise by the new company that acquired the fashion house, undertaken with the help of a new wave of designers, was what helped transport the brand into the 21st century.
If trademarks are not renewed, they are deemed to have lapsed. Theoretically, there is an opportunity for anyone to pick up a lapsed trademark and use it for themselves. If a trademark had been lesser known in its original use, a “revival” would not ruffle any feathers; but if it was a relatively well-known mark in some circles, interesting questions emerge about rights ownership, goodwill and more.
Dormant or dead luxury brands with a rich history but no present commercial activity are especially ripe for such revivals, and particularly attractive to prospective investors. Such investors need to focus on re-building two pillars - the history and heritage of the brand, and its intellectual property (IP). An investor may also choose to launch a new brand as an homage to a dormant brand. In both situations, the first step is to hunt down any shred of related IP left anywhere around the world. This is done so the brand can be built back up from scratch, and there are no surprises popping out with regard to trademark or copyright.
Is using a fashion brand as an homage in bad faith?
Many business houses have experienced success by reviving dormant fashion brands as homage. However, this exercise is generally categorized as a bad faith practice.
In the Indian Trade Marks Act, 1999, no proper definition is provided for bad faith. However, it receives a small contextual mention in Section 11(10)(ii), qualifying as one of the relative grounds for the refusal of trademark registration. The Delhi High Court in Manish Vij v. Indira Chugh has defined bad faith as something that does not merely imply bad judgment, but “the conscious doing of a wrong with a dishonest purpose.” Interestingly, despite not being defined in the statute, bad faith is an absolute ground for invalidity of a trademark. The primary intention behind “bad faith” filings is to obtain an unfair advantage by clever manoeuvring. Courts in India and other jurisdictions are increasingly focusing on the concept of “bad faith” and, perhaps as a result, objections on these grounds are arising more frequently in practice.
In this piece, we discuss a recent decision of the General Court of the European Union, which censored a broad interpretation of the concept of bad faith. In its July 6 judgment in Zdút v. EUIPO, the Court annulled the decision of a lower appellate court [the Second Board of Appeal of the European Union Intellectual Property Office (EUIPO)] in connection with the revival of a classic Czech clothing brand.
Facts of the case
‘NEHERA’ was a well-known fashion brand that Jan Nehera founded in the erstwhile Czechoslovakia in the 1930s, which made and sold ready-to-wear clothing. NEHERA was registered as a trademark in 1936. In 1946, after the Second World War, the company was taken over by the Germans, and its name changed (no longer including the Nehera name) in 1946 when it was nationalised, with the company’s ownership transferring to the Czechoslovak state. Jan Nehera emigrated to Morocco, where he ran two shops, and died in 1958.
Many decades later, in 2006, Ladislav Zdút, a young Slovak with no connection to the Nehera family, decided to “relaunch” the NEHERA brand. He registered a Czech trademark and subsequently, in 2013, an EU trademark. In 2014, he began presenting a womenswear collection at fashion shows under the NEHERA brand name. Zdút was aware of the past existence and reputation of the old Nehera brand and admitted that he “revived” and “resurrected” the brand in order to “pay a tribute” to it.
In 2019, three of Jan Nehera’s grandchildren filed an action before EUIPO seeking to have the NEHARA EU trademark invalidated, claiming that it had been filed “in bad faith”.
The Cancellation Division dismissed their action, but the Board of Appeal invalidated the trademark on the grounds that Jan Nehera was a “celebrity” and that the old Czechoslovak trademark still had “a certain surviving reputation” and retained “historical value”, of which Zdút must have been aware as he referred to it in the story he built around the NEHERA brand.
Decision of the General Court
Zdút brought a further action before the General Court, which set aside the Board of Appeal’s decision in its entirety. The Court held that bad faith must be assessed with reference to the filing date of the contested trademark and that good faith is presumed until proven otherwise.
The factors that the Court took into consideration before passing the judgment included:
● Existence of bad faith on the part of the applicant;
● Factual and historical context;
● Legal protection of the former trademark and of Nehera’s name;
● Use of the former trademark and Nehera’s name;
● The applicant’s awareness of the past existence and reputation of the former trademark and of Nehera’s name;
● Overall assessment
The Court recognized that Zdút “made his own commercial efforts in order to revive the image of the former Czechoslovak trademark and thus, at his own expense, to restore that reputation. In those circumstances, the mere fact of having referred, for the purposes of promoting the contested mark, to the historic image of Jan Nehera and of the former Czechoslovak trademark does not appear to be contrary to honest practices in industrial or commercial matters."
The Court also held that in the absence of surviving reputation, the subsequent use of the contested mark by the owner was not, in principle, capable of constituting free-riding behaviour indicating bad faith on the part of the owner.
Reviving brands in India
This is an interesting case for brand owners who are considering ‘reviving’ once-famous trademarks used or owned by unrelated parties in the past, but have not been used for numerous years.
From an investor’s point of view, investing in a dormant brand is an easy shot as it is a recognizable name, saving considerable time and resources in building a reputation, and gaining recognition and loyalty. But such adoption also requires some caution.
As an investor, before taking a decision to revive any brand, it is advisable to ensure that the adoption of the brand name is based on the principle of good faith. In a lawsuit, the defence of honest and bona fide use of the trademark becomes a valid defence. There is also the matter of goodwill, which is inclusive of brand value and is based on a number of factors. The revival of a brand does not automatically transfer goodwill in the original trademark to the new owner. The transfer of goodwill in cases of assignment is at the option of the trademark owner. But where trademarks are revived, the rights to goodwill are in a much greyer territory.
As India increasingly becomes a consumer-driven economy, this issue might become relevant here too, as newer enterprises seek to encash the past days of glory of dormant brands. A true revival is yet to be tested in a court of law here, but the EU decision gives some guidance as to how prospective brand owners can strategize about trademark ownership and use without falling foul of the law.
Mehak Dhingra is a Senior Trademark Attorney at Obhan & Associates.
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