EU Trademark and Insolvency

International Jurisprudence

On 10 August 2012, M. Srl. filed an application for registration of an EU trademark with the European Union Intellectual Property Office (EUIPO, the word sign MARINA YACHTING After several transfers of the application for registration, the mark applied for was registered on 28 September 2014 in the name of the I. Sp. Co. Srl. On 13 October 2017, I. Sp. Co. Srl was declared insolvent by judgment No 142/2017 of the Tribunale di Venezia (District Court, Venice, Italy).

 On 18 October 2017, the transfer of the mark at issue, from M. Srl to S. H. SARL, was entered in EUIPO’s register.

On 25 October 2017, the appointed liquidator of the I. S. Co. Srl informed EUIPO that the company had been declared insolvent, he requested that the bankruptcy proceedings relating to the I. S. Co. Srl be entered in EUIPO’s register, in accordance with Article 24 of Regulation 2017/1001, and that the recordal of the transfer of the mark at issue to S. H. Sarl be cancelled, in accordance with Article 103 of that regulation, applications admitted by the EUIPO.

On 16 April 2018, the applicant, M. Y. B. M. Co. Ltd, filed a recordal application for the transfer of the mark at issue to itself. It claimed that that mark, which had initially been assigned by M. Srl to S. H. SARL, had subsequently been assigned to it by S. H. Sarl. The application was admitted by the EUIPO.

On 9 April 2019, the liquidator filed an application for recordal of a judgment delivered on 13 March 2019 by the Tribunale di Venezia (District Court, Venice), which was responsible for the bankruptcy proceedings relating to I. S. Co. Srl, authorising judicial seizure of the mark, as a precautionary measure under the Italian Code of Civil Procedure, on account of the invalidity and fraudulent nature of transfers.

On 31 January 2019, M. Y. B. M. Co. Ltd filed two notices of appeal, pursuant to Articles 66 to 71 of Regulation 2017/1001, against the decisions of the department in charge of EUIPO’s register, for cancelling registrations referring to transfers to I. S. Co. Srl și S. H. SARL. By decision of 10 February 2020 the Board of Appeal dismissed the appeals of M.Y. B. M. Co. Ltd.

 

In the Case T‑169/20 an action was made against the Decision of 10 February 2020 of the EUIPO Board of Appeal that dismissed two notices of appeal of 31 January 2019 against the decisions of the department in charge of EUIPO’s register cancelling register entries. The EU General Court (Ninth Chamber) dismissed the action by decision of 22 September 2021.

 

The case analyses the application and interpretation of Articles 103, 20, 24 and 27 of Council Regulation (EC) No 207/2009 on the European Union trademark, and of Articles 3, 7 and 19 of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings.

 

The case is of interest from an insolvency law perspective in several respects.

 

Firstly, The General Court established that under Article 24(1) of Regulation 2017/1001 and also under Article 7, Article 19, Article 27(2,4) of Regulation 2015/848, the Italian Law on bankruptcy, as the law of the Member State in the territory of which the I. S. Co. Srl had its centre of main interests at the time when it was declared insolvent, governs the insolvency proceedings in which the mark is involved. It also regulates the issues relating to the effects vis-à-vis third parties of those insolvency proceedings, as well as the rules regarding the nullity, annulment, or unenforceability of legal acts prejudicial to the creedal mass. The insolvency decision of Tribunale di Venezia is automatically effective throughout the European Union regarding all the third parties and therefore, in the present case, regarding the applicant and EUIPO.

 

Secondly, The General Court established that it is not for EUIPO to consider the validity and the legal effects of a transfer of an EU trademark under the applicable national law, Italian law in the case. Although it is true that EUIPO must confine itself to examining the formal requirements for the validity of an application for registration of a transfer of a mark, that examination nonetheless implies that it must diligently take into account facts that are capable of having legal implications for the application for registration of such a transfer, including the existence of insolvency proceedings, in order to take into consideration the objective of guaranteeing the effectiveness’ of the insolvency proceedings which is referred to in recital 36 of Regulation 2015/848, in particular if the existence, validity or certain date of that transfer is disputed by the liquidator.

 

Finally, the General Court explained that the EUIPO had the obligation to suspend the registration of transfers at the request of M.Y. B. M. Co. Ltd until the national court examines the merits of the case. Since the mark was mentioned in the inventory list annexed to the judgment declaring I. S. Co. Srl in liquidation proceedings, EUIPO was required to take that fact into account and enter the insolvency proceedings relating to that mark in the register, as requested by the liquidator. The lack of effects vis-à-vis third parties of the agreement to transfer the mark which have not been entered in the register is intended to protect a person who has, or may have, rights in an EU trademark as an object of property. Article 27(1) of Regulation 2017/1001 is intended, in the present case, to protect any person who has, or may have, rights in the mark at issue as an object of property, as the creditors of the company which has been declared insolvent. The fact that the company which subsequently entered bankruptcy/liquidation proceedings was aware of the transfer of the trademark, but not registered, is not relevant and cannot affect the rights of its creditors to its liquidated assets.

 

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Action under Article 263 TFEU. The applicant, Mr E. P., seeks the annulment and alteration of the Decision of the Fourth Board of Appeal of the European Union Intellectual Property Office (EUIPO) of 23 March 2021 (Case R 888/2020-4).

 

Earlier marks: the Slovenian word mark TALIS, registered on 24 February 1994; the Slovenian word mark TALIS, registered on 24 February 1999; the Slovenian figurative mark registered on 18 April 2000; international registration designating the European Union in respect of the figurative mark registered on 27 April 2012.

 

On 11 July 2016, KPMS filed an application for registration of an EU trademark with EUIPO, for the word sign TALIS. The trademark was registered on 26 October 2016. On 5 January 2017, a transfer of ownership of the trademark from KPMS to its subsidiary, Š. (KPMS has a majority shareholding of 56.85% in Š.), was entered in the EUIPO register. On 3 April 2018, that mark was transferred from Š. to company ETA.

 

On 21 August 2018, Mr. EP filed an application for a declaration that the mark was invalid, application based on earlier trademarks, over which he had a lien following enforcement proceedings against his debtor B., now S., trademarks being assets of the bankrupt company of formerly B, from liquidation proceedings.

On 17 March 2020, the EUIPO Cancellation Division rejected the application for a declaration of invalidity.

On 12 May 2020, Mr EP notice of appeal with EUIPO against the decision of the Cancellation Division.

 

By the decision of the Fourth Board of Appeal (EUIPO) of 23 March 2021, the EUIPO Board of Appeal upheld the decision of the Cancellation Division.

In this procedure, Mr. E.P sustained that the company P.Š. has transferred the earlier trademarks and its business operations to B., and B., in the light of a bankruptcy procedure, transferred them to the company M. The effect of the transfer has been annulled by decision of the District Court of Nova Gorica. When M. itself entered bankruptcy proceedings, all its business activities have been transferred to Š.

Immediately after the sale of P. Š. to B., the company P. Š. bought business share in Š. The latter is owned by KPMS, which holds a share of 56,85%, and which applied for the registration of the contested EUTM.

The applicant puts forward that KPMS is a partial owner of Š., which is a by-pass company of P. Š., owned by B. The company Š. is, therefore, de facto part of the pyramidal ownership of the holder of the earlier trademarks, B.

The applicant submitted observations by the Bankruptcy Trustee of Bankruptcy Estate B. Ltd., who is the successor of B. According to these observations, the bankruptcy estate of B. Ltd. has obtained ownership of the earlier marks.

 

The Board of Appeal set out, inter alia, the following relevant facts relied on by the parties.

On 12 June 2008, Mr E.P. sold 100% of his shares in P. Š. to B. for a total amount of EUR 6 million, of which EUR 2 million was not paid by B. In 2008, P. Š. transferred those marks to B; on 15 February 2009, B. and Š. concluded a contract under which B. authorised Š. to manufacture and sell goods under debated trademarks, and on 14 May 2023 transferred to Š. the respective intellectual property rights; those transfers were not recorded at WIPO or national office.

Mr EP enforced his claim for EUR 2 million, he was granted a lien over the Slovenian marks and the international registration, which were pledged on 9 May 2013 and 13 April 2016 respectively. By decision of 16.04.2018, the Belgrade Commercial Court, enforceable in Slovenia, confirmed Mr. E. P’s claim against B., as well as the right to separate reimbursement of the claim, the amount of which represents the value of the seized trademarks. By the Decision of 23.01.2018, the Supreme Court of the Republic of Slovenia, regarding the registration of the trademark "Taliss" by Š., stated that the very nature of the pledge gives the pledgee the right to prevent the devastation of an intellectual property right that is subject to lien. Therefore, claims Mr EP, he has active legal standing in promoting the action, as guarantor/pledgee of an earlier mark.

Mr EP maintains that the contested mark was registered in the knowledge and with the intention that such registration would be detrimental to his rights as pledgor of the earlier marks. Companies B., KPMS and Š. acted in bad faith, their aim was to prevent repayment of the debt owed to him by B.

 

In the Case T‑238/21 Mr. E.P. brought an action against ETA for the annulment/modification of the Decision of 23 March 2021 of the EUIPO the Fourth Board of Appeal. The EU General Court (Second Chamber), by decision of 13 July 2022, partially admitted the action, annulled the decision of the Fourth Board of Appeal of the EUIPO of 23 March 2021 (Case R 888/2020-4).


As a preliminary point, the Court explained that the concept of bad faith referred to in Article 52(1)(b) of Regulation No 207/2009 is not defined, delimited, or even described in any way in EU legislation, the determination criteria being highlighted by jurisprudence.

The Court pointed out that the earlier marks were pledged as part of B.’s bankruptcy assets, but the contested mark does not form part of that group of pledged marks. It follows that, if the earlier marks were to be sold, to ensure that the applicant would obtain repayment of B.’s debt, the contested mark would not form part of that sale.

Relating the pledged marks, a potential purchaser would be faced with a situation where, after its potential purchase of those marks, another mark would continue to exist, which would be identical or like those marks, and in which that potential purchaser would have no rights. The parties do not dispute that the marks at issue are identical or similar. In the present case, it must be held that, from the point of view of a potential purchaser of the earlier pledged marks, the contested mark, which is identical or similar to the earlier marks, might be perceived as being capable of exploiting their distinctive character or their reputation.

 

Court observed that the applicant has provided sufficient evidence of the potential effect which the registration of the contested mark might have on the value of the earlier marks and on their attractiveness to potential purchasers, which inherently affects that value. KPMS transferred the contested mark to Š. shortly after its registration, those two companies are linked economically. KPMS ought to have been aware of the pledge of the earlier marks, that would mean that, when it filed the application for registration of the contested mark, it would have known or ought to have known that such filing it could prevent enforcement of the debt owed to the applicant. Such conduct on the part of KPMS could not be perceived as irrelevant to the assessment of whether it was acting in bad faith. Secondly, the systemic analysis of the links between the applicant, KPMS, Š. and B., as part of the same group of companies, of their contractual relationship and potential economic interdependence, are relevant to the outcome of the case. The assessment of whether the applicant is acting in bad faith requires that all relevant factors specific to the particular case to be taken into account.

 

The Court stated that EUIPO Board of Appeal did not correctly assess whether there was bad faith in the case and accordingly infringed Article 52(1)(b) of Regulation No 207/2009, upheld the action and annulled the decision.

 

 

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Case R1298/2020-4

Decision of the Fourth Board of Appeal of 23 June 2021

Cancellation decision 33322

 

On 21 February 2019, P. Bank S.A., Eurobank E. S.A., and the N. Bank of Greece S.A. filed against N. LTD (‘the EUTM proprietor’) request for a declaration of invalidity of European Union trademark ‘ELLO’ (word mark), filed on 30/01/2014 and registered on 19/07/2014 for all the goods and services covered by the EUTM in Class 35, by Article 59(1)(b) EUTMR.

 

The applicants argue that when filing for the contested EUTM, the EUTM proprietor acted in a fictitious, misleading and abusive manner, as an interposed legal person of the applicants’ debtor, the Greek company K. S.A., in order to achieve the fraudulent ‘rescue’ of K’s identical national trade mark from bankruptcy and thus to ensure the continuation of the monopoly on the distinctive feature, through the European trade mark and against the legitimate interest of K’s creditors.

· K. used to be the proprietor of several highly reputed Greek trademarks. In the same group, the Greek company B. S.A., having the same seat and a similar object of activity to K., also owned Greek national trademarks, which became reputed.

· On 15 May 2013, the EUTM proprietor was incorporated in Cyprus. During 2014 and 2015, the EUTM proprietor filed nine EUTMs, all related to the Greek trademarks owned either by K., or B. S.A. Licenses were granted to K. and B. S.A., to use the EUTM trademarks for the whole EU, including Greece, even though the licensees held or had held identical or highly similar Greek trademarks.

· K. and other companies from the B. Group faced for some time difficulties regarding liquidity and the carrying out of their obligations. The company K. has significant lending obligations (several thousands of millions of Euros) towards several lender banks (inter alia, the applicants) arising from a series of credit agreements entered starting with 1995. On 23/06/2017, K. filed the application before the Multimember Court of First Instance of Piraeus requesting to be declared bankrupt due to its failure to fulfil its overdue financial obligations. Its lender banks (inter alia, the applicants), requested to the same Court to submit K. to an extraordinary procedure of special administration. The aim of such procedure was the expedient sale of the company’s assets by a special administrator appointed by the court for the bankruptcy to be avoided. The application was upheld on 19/04/2018. Two months before the application for bankruptcy and even though its national marks had been renewed for another decade, K. started to surrender its most famous Greek national trademarks.



By decision of 29 April 2020, EUIPO, the Cancellation Division upheld the application for a declaration of invalidity, declared the EUTM invalid, applying the Article 59(1) EUTMR.

·  The Cancellation Division finds that the EUTM proprietor’s intention when applying for the contested mark was to be a stand-in for the applicants’ debtor, in an asset protection scheme, and with the intention of effectively putting an obstacle to K’s creditors in recuperating their debts.

·  It was established that on 19 July 2014 N. LTD (‘the EUTM proprietor’) obtained the registration of European Union trademark consisting of the word mark ELLO, for a variety goods and services in Classes 29 and 35. Several licenses were registered between 2017-2018. The EUTM proprietor also filed several other EUTMs which were all surrendered on 17 June 2018 upon its request. On the same day the EUTM proprietor requested the surrender of the four EUTMs, another Cypriot company, C. LIMITED, with the same registered address and representative as the EUTM proprietor, applied for the registration of four identical EUTMs for the same goods and services.

· In the present case, the timing and circumstances of filing the EUTM, the subsequent events (in particular, allowing the Greek mark to lapse, less than two years later the exclusive license to K. or C., followed by its cancellation), the granting of other licenses, the lack of any evidence as to the actual use of the mark by the proprietor or by any of its licensees topped with the filing and subsequent registration of eight other EUTMs (following essentially the same pattern) demonstrate that the filing and registration of the contested EUTM was part of an unlawful strategy to ‘rescue’ Greek trademarks, including the trade mark ‘ELLO’, which were assets of K. in fraudum creditoris.

·  When the EUTM proprietor filed the contested EUTM, it had colluded with K., which was the cancellation applicants’ debtor, with the sole aim of creating the impression that the ‘ELLO’ trademark was a new trademark owned by a different entity. By such conduct, it had diminished K.’s assets and effectively put an obstacle to the cancellation applicants in having their monetary claims satisfied. In conclusion, the Cancellation Division found the EUTM proprietor to have been acting in bad faith.

 

 

In the case R 1298/2020-4, by the decision of 23 June 2021, the EUIPO Board of Appeal upheld the decision of the Cancellation Division.

               In the assessment of bad faith, it is stated that the contested EUTM was filed in bad faith, a key part of a coordinated strategy to remove a number of high value Greek trademarks, including the trademark ‘ELLO’  from the assets of K. after assuring the registration of equivalent trade mark rights by way of EUTMs (consisting of the same signs or composite signs including those earlier signs, covering the same goods and valid also in Greece), in a dishonest scheme designed to transfer value out of the latter company.

                The dishonest plan was to effectively export the K. company’s valuable Greek trade mark rights into the form of EUTMs, and to dispose of the original Greek rights, draining the company of value before applying for insolvency, and also avoiding that the administrator to repay creditors by way of the sale of these valuable Greek trade mark rights. The EUTM proprietor filed the application for registration 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, in order to transfer the valuable trade mark rights out of jurisdiction and thus prevent the creditors from laying their hands on these valuable rights originally owned and developed by K. for decades. 

 

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Case number 000032421, Cancellation No. 32 421 C (Revocation)

 

On 30/01/2019, the applicant S. E. P. SA filed against V.F.N. S.p.A., in bankruptcy, an application for revocation in EUTM of trademark registered on 20/04/2005, for services in Class 35,38,41,42.

 

The applicant argued that the mark has not been put to genuine use in the last five years for the services listed, in 2013 was declared invalid and that the sign subsequently has been used for goods other than registered services.

In its observations, the proprietor claims that, in the relevant period, the trademark was used with its consent by A. S.r.l., as per the licensing agreement concluded on 11/01/2013. The proprietor explained that in 2018, the Fallement Section of the Court of Monza authorized the liquidator of the bankruptcy estate of V.F.N S.p. A. to grant the contested EU trademark exclusive use by licensing, and that on 17/01/2019 there was the auctioneering of the mark. However, while the preparatory activities for drafting the licensing contract ongoing, several circumstances led to the bankruptcy proceedings brought before the Monza Court and suspension of the award of the trademark.

In its application, the liquidator observed that the only offer received had been brought by a company, which, owing to its name ‘IMCO 1972 S.r.l.’, could increase the confusion existing on the trademark and its use, but also that they were companies with likely links with the VV Italia S.r.l., which had failed to fulfil its previous obligations under an auction of 18/12/2013, aspects taken in consideration by the General Court of Monza. The proprietor therefore claims that the complex litigations linked to these auctions in the years 2017 and 2018 are legitimate reasons for non - use of the trademark.

 

EUIPO’s Cancellation Division, by the Decision on 31 January 2020, established that the proprietor has not demonstrated genuine use of the contested EU trademark for the services for which it is registered, admitted the application for revocation and the contested European Union trademark was revoked in its entirety.

As grounds for decision it was explained that, pursuant to Article 58(1)(a) EUTMR, the rights of the Community trade mark holder shall be lost if, within a continuous period of five years, the trade mark has not been put to genuine use in the Union in connection with the goods or services in respect of which it is registered, and there are no proper reasons for non -use. According to relevant jurisprudence, for its use to be genuine, the trademark must be used in the market for the goods or services protected and the use must not be symbolic. In revocation proceedings that rely on lack of use, the burden of proof falls to the proprietor of the contested trademark.

 

In this case, the contested EU trademark was registered on 20/04/2005. The application for revocation was filed on 30/01/2019. Consequently, the contested trademark had been registered for more than five years. The proprietor had to demonstrate genuine use of the trademark between 30/01/2014 and 29/01/2019. In this respect, in the absence of any proof that could demonstrate that the contested EUTM has been used for the relevant services, the conclusion of a licensing contract involving the sign in question is not in itself sufficient to demonstrate the genuine use of the trademark on the market.

 

Pursuant to Article 58(1)(a) EUTMR, the proprietor of a EU trademark may prove that there are proper reasons for non-use, circumstances beyond its control. From this point of view, the financial difficulties encountered by a company are not considered to be legitimate reasons for non -use, as these types of difficulties constitute a natural part of its management. In addition, the interests of a failed company are taken care of by the bankruptcy practitioner and therefore there is no absolute inability to use the mark. As example, in this case, in insolvency proceedings, national authorities have consented to the possibility of granting others the use of the sign through competitive procedures, as contracts of licensing.

 

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Case number 000032421, Cancellation No. 32 421 C (Revocation)

 

On 30/01/2019, the applicant S. E. P. SA filed against V.F.N. S.p.A., in bankruptcy, an application for revocation in EUTM of trademark registered on 20/04/2005, for services in Class 35,38,41,42.

 

The applicant argued that the mark has not been put to genuine use in the last five years for the services listed, in 2013 was declared invalid and that the sign subsequently has been used for goods other than registered services.

In its observations, the proprietor claims that, in the relevant period, the trademark was used with its consent by A. S.r.l., as per the licensing agreement concluded on 11/01/2013. The proprietor explained that in 2018, the Fallement Section of the Court of Monza authorized the liquidator of the bankruptcy estate of V.F.N S.p. A. to grant the contested EU trademark exclusive use by licensing, and that on 17/01/2019 there was the auctioneering of the mark. However, while the preparatory activities for drafting the licensing contract ongoing, several circumstances led to the bankruptcy proceedings brought before the Monza Court and suspension of the award of the trademark.

In its application, the liquidator observed that the only offer received had been brought by a company, which, owing to its name ‘IMCO 1972 S.r.l.’, could increase the confusion existing on the trademark and its use, but also that they were companies with likely links with the VV Italia S.r.l., which had failed to fulfil its previous obligations under an auction of 18/12/2013, aspects taken in consideration by the General Court of Monza. The proprietor therefore claims that the complex litigations linked to these auctions in the years 2017 and 2018 are legitimate reasons for non - use of the trademark.

 

EUIPO’s Cancellation Division, by the Decision on 31 January 2020, established that the proprietor has not demonstrated genuine use of the contested EU trademark for the services for which it is registered, admitted the application for revocation and the contested European Union trademark was revoked in its entirety.

As grounds for decision it was explained that, pursuant to Article 58(1)(a) EUTMR, the rights of the Community trade mark holder shall be lost if, within a continuous period of five years, the trade mark has not been put to genuine use in the Union in connection with the goods or services in respect of which it is registered, and there are no proper reasons for non -use. According to relevant jurisprudence, for its use to be genuine, the trademark must be used in the market for the goods or services protected and the use must not be symbolic. In revocation proceedings that rely on lack of use, the burden of proof falls to the proprietor of the contested trademark.

 

In this case, the contested EU trademark was registered on 20/04/2005. The application for revocation was filed on 30/01/2019. Consequently, the contested trademark had been registered for more than five years. The proprietor had to demonstrate genuine use of the trademark between 30/01/2014 and 29/01/2019. In this respect, in the absence of any proof that could demonstrate that the contested EUTM has been used for the relevant services, the conclusion of a licensing contract involving the sign in question is not in itself sufficient to demonstrate the genuine use of the trademark on the market.

 

Pursuant to Article 58(1)(a) EUTMR, the proprietor of a EU trademark may prove that there are proper reasons for non-use, circumstances beyond its control. From this point of view, the financial difficulties encountered by a company are not considered to be legitimate reasons for non -use, as these types of difficulties constitute a natural part of its management. In addition, the interests of a failed company are taken care of by the bankruptcy practitioner and therefore there is no absolute inability to use the mark. As example, in this case, in insolvency proceedings, national authorities have consented to the possibility of granting others the use of the sign through competitive procedures, as contracts of licensing.

 

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“Treatment of intellectual property rights - trademarks - in cross-border insolvency. Protection and harmonisation through supranational statutory mechanisms and EUIPO best practices”

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