Insights | June 18, 2021

Amendments to Swedish Trademark Law in relation to the Concept of Bad Faith

Successfully proving bad faith in an opposition or in an invalidity trademark action can be a real challenge. Until recently, case law has held that bad faith must be determined not only on the basis of whether the trademarks are visually confusing, but also on the basis of a similarity between the goods or services. This means that, if such a similarity cannot be shown, a bad faith invalidity action must be rejected. However, as a result of a decision by the Court of Justice of the European Union (CJEU) in 2019, the practice changed and the CJEU clarified very plainly how the concept of bad faith should be interpreted. This will now also be reflected in Swedish legislation.

For example, in case C-104/18 P of 12 September 2019 (Koton), the CJEU clarified that the concept of bad faith must be interpreted relatively broadly. The provision needed to be more general and a new absolute ground provision for refusing registration was going to be introduced.

On 29 June, 2020, in case PMÖÄ 595-20 (Shotluckan), the Patent and Market Court of Appeal (PMCA) questioned the Swedish implementation of the provisions on bad faith in the EU Trademark Directive of 2015, 2015/243. The new EU case law and the PMCA’s decision led to changes to the provisions concerning bad faith in the Swedish Trademarks Act and Company Names Act.

In the Swedish Trademarks Act, bad faith is currently categorized as a relative ground for refusing registration and invalidity based on earlier third-party rights. The current wording reads as follows:

“A trademark may not be registered if the trademark can be confused with a mark which was used in Sweden or abroad by any party at the time of the application and which is still in use, if the applicant was acting in bad faith at the time of the application”.

The concept of bad faith under EU law should be referred to in situations where an applicant has acted with some form of malice or commercial impropriety. The CJEU has clarified that bad faith can exist even when the mark applied for is not confusingly similar, for example when the application covers classes other than the class for which the earlier trademark is registered. It also includes situations where an applicant has no intention of using the trademark and, thus, takes advantage of the registration system, contrary to the underlying purpose of the system.

The amendments to the legislation

The purpose of the amendments to the legislation is to clarify the rules regarding bad faith in relation to new case law from the CJEU (see cases C-104/18 P (Koton) and C-371/18 (Sky)).

When aligning Swedish trademark legislation with EU law, bad faith will now constitute an absolute ground for refusal and invalidity.

The new wording of the provision in the Trademarks Act will be as follows:

“A trademark may not be registered if the application for registration was made in bad faith”

It corresponds to the new wording in the Company Names Act:

“A company name may not be registered if the application for registration was made in bad faith”

Since it is common for companies to use their company names as trademarks as well, a company name often performs the same function as a trademark and, consequently, the rules are amended in the same way.

When assessing whether a party has acted in bad faith, the circumstances that existed at the time of the application for registration of the trademark/company name are crucial. All relevant circumstances must be considered, according to the CJEU.  These could include the following:

• the applicant was aware that someone else was using an identical or similar mark for identical or similar goods or services;
• the applicant’s intention was to prevent third parties form using the mark applied for;
• the applicant has no intention of using the trademark for goods and services for which the application relates. This situation requires that the applicant either intends to harm the interest of another party in breach of good business practice or intends to acquire an exclusive right in breach of the fundamental functions of a trademark.

The new absolute ground for refusal and invalidity is intended to cover both the current relative ground for refusal and invalidity and situations where an application is contrary to the public interest that the trademark system intends to protect. The rules concerning bad faith will be more similar to the rules on bad faith in other Nordic countries.

The new provision will have a retroactive effect, which means that it will also apply to trademarks that were registered before the provision enters into force.  Applications for trademarks which have not yet been registered as of the date the new provision enters into force will be processed in accordance with the new provision.

The changes to the Swedish Trademarks Act and the Swedish Company Names Act will enter into force on 1 July 2021.

In addition to the new rules concerning bad faith, there will be a new provision concerning the situation where an agent or representative of a trademark holder files an application for an identical trademark. The new legislation will have the following wording:

“A trademark may also not be registered if the application for registration is made by an agent or another representative of a holder of a trademark and the application concerns the holder’s mark. However, the trademark may be registered if the representative has the holder’s permission or otherwise has valid reasons for their action.”

The purpose of this provision is to prevent the abuse of the good faith and trust which exist                in these kinds of business relationships. The terms “agent” and “representative” should include all types of contractual relationships regardless of how they have been formalized. However, there must be a fiduciary duty. Examples are licensees, consultants or legal representatives. It is important to note that pure customer relationships are not covered by this provision, the trademark in question must be a trademark belonging to the holder, and the courts of general jurisdiction have stated that the ground for refusal and invalidity relates to older identical rights.

If the agent or representative has the holder’s permission to register the trademark, the provision does not apply. But it is up to the applicant to show that they have permission or valid reasons to apply for registration.

Final comments

Trademark holders who invest a lot of resources in protecting and commercializing their trademarks have often struggled to gather enough evidence to prove that the applicant acted in bad faith at the time of the application.

The new legislation will definitely make it easier for a trademark holder to prevent those who are trying to ride on the success that others have achieved and invested in. It will be easier to prevent registrations that are improper, trademark holders will have a clearer understanding of the rules, and, last but not least, the case law of the CJEU will be reflected in a much better way.

Article written by Counsel, Brand Protection  Susanne Mellqvist