The Market Court: A Mark with a Reputation? Yes. Infringement or Unfair Business Practice? No.

HKS­can Fin­land Oy (HKScan) is a Finnish food manufacturer. The company specializes in meat foods and products. HKScan has many trademarks and a European Union trademark (EUTM) 005379061, registered in 2007, is one of them. The mark is registered in classes 5, 29, 30, 31, 32, 35 and 39.

EUTM no. 005379061.

Ver­de­ner Keks- und Waf­fel­fab­rik Hans Frei­tag GmbH & Co. KG (Hans Frei­tag) is a German company specialized in bakery products. The company has a EUTM 011473031, registered in 2013 and in classes 29 and 30.

EUTM no. 011473031.

In 2015, HKScan launched trade mark infringement proceedings against Hans Freitag in the Market Court. 

HKScan requested that the court:

1. confirms that the EUTM 005379061 has a reputation in Finland since 2010 or not later than 2013 and primarily for groceries and secondarily for meat products.
2. (i) primarily, confirms that Hans Freitag is guilty of trademark infringement and prohibits the company from using its trademark in Finland for groceries. The court should impose a conditional fine of 200 000 euros to reinforce the order; and
(ii) secondarily, confirms that Hans Freitag is guilty of unfair business practice and prohibits the company from taking advantage of the goodwill of the HKScan's mark and from causing detriment to the mark. The court should impose a conditional fine of 200 000 euros to reinforce the order.
3. orders Hans Frei­tag to pay reasonable compensation to HKS­can, in total 77 250 euros.
4. orders Hans Frei­tag to pay damages to HKS­can, in total 100 000 euros.
5. orders Hans Frei­tag to pay HKScan's legal fees, in total 98 643,03 euros plus legal interest.

The Market Court issued its decision 355/16 on 15 June 2016. 

In its decision, the court assesses first whether the HKScan's seal trademark has a reputation in Finland. Then it assesses whether the Hans Freitag's trademark use is infringing. If the court does not find any infringement, it still has to assess whether Hans Freitag is guilty of unfair business practice according to the Unfair Business Practices Act (1061/1978).

Does HKScan's seal trademark have a reputation in Finland?

The court stated that the concept of a trademark with a reputation is based on European Union legislation and on the rulings of the Court of Justice (CJ). The court referred to a CJ decision C-375/97 General Motors (paras 26 and 27) where CJ ruled that:

"The degree of knowledge required must be considered to be reached when the earlier mark is known by a significant part of the public concerned by the products or services covered by that trade mark. In examining whether this condition is fulfilled, the national court must take into consideration all the relevant facts of the case, in particular the market share held by the trade mark, the intensity, geographical extent and duration of its use, and the size of the investment made by the undertaking in promoting it."  

HKScan provided evidence that it had used the HK seal trademark since 2007. The company also provided evidence that it had used somewhat similar round trademarks since 1960's. Those marks also had the letter combination HK. The court stated that the current seal trademark does not benefit directly from the duration and extent of use of the earlier marks, but the letter combination HK has been in use since 1960's and that can have some effect when one assesses the reputation of the current HK seal mark.

According to the court, HKScan has put significant financial efforts (millions of euros per year) in order to market its products, mainly meat products. The HK seal trademark has been very visible in that intensive marketing and the marketing has covered the whole Finland.

HKScan also provided a market survey. According to the market survey, 94,8 percent of the respondents connected the HK seal trademark with HKScan from a list that had 14 different manufacturers. Therefore, the prompted (or aided) awareness was very high. The court acknowledged this survey but also stated that the survey question itself aided the respondents to choose HKScan from the list, because the company name and the trademark both have the letter combination HK in them. The court also paid attention to the fact that the market survey had been done in March 2014. The court found this problematic because, according to HKScan, the HK seal trademark has had a reputation in Finland since 2010 or not later than 2013. The court continued by stating that the significance of the survey can not be very high when one assesses the reputation of the mark in 2010 because the mark has been in use for a relatively short period of time. Therefore, the market survey has much more significance in providing that there has been a reputation in 2013. 

The court concluded that the HK seal trademark has had a reputation in Finland since 2013, despite the fact that the market survey had some debilitating factors. The court specified that the reputation of the mark is only regarding meat products, not in general.

Is there an infringement?

HKScan argued that Hans Freitag has infringed its exclusive rights provided in Article 9(1)(c) of the Community trademark Regulation No 207/2009:

1. A Community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: 
(c) any sign which is identical with, or similar to, the Community trade mark in relation to goods or services which are not similar to those for which the Community trade mark is registered, where the latter has a reputation in the Community and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the Community trade mark.

The court started its analysis by referring to the case-law of CJ. CJ has ruled, in essence, that it is sufficient for the degree of similarity between the mark with a reputation and the other sign to have the effect that the relevant section of the public establishes a link between the sign and the mark. No likelihood of confusion is required between them on the part of the relevant section of the public (see C-408/01 Adi­das Be­ne­lux, para 31).

The existence of the link mentioned above must be assessed globally, taking into account all factors relevant to the circumstances of the case. According to C-252/07 In­tel (para 42), those factors include:

- The degree of similarity between the conflicting marks, in particular visual, aural or conceptual similarity (see C-408/01 Adi­das Be­ne­lux, para 28). 

- the nature of the goods or services for which the conflicting marks were registered, including the degree of closeness or dissimilarity between those goods or services, and the relevant section of the public; 

- the strength of the earlier mark's reputation; 

- the degree of the earlier mark's distinctive character, whether inherent or acquired through use; 

- the existence of the likelihood of confusion on the part of the public.

So the court had to assess first whether there is a similarity link between the HK seal trademark and the hf trademark. If such link exists, the court has to then asses whether the use of the hf trademark without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the HK seal trademark (see C-487/07 L'Oréal, paras 37-38).

The conflicting marks both have seal elements and a letter combination in the middle. Thus, the visual similarity is somewhat high on the part of the relevant section of the public, even though there are some differences, such as the vertical ribbon element in the hf trademark, the text elements circling the logo and the circle and wing element in the HK seal trademark above the letter combination HK. However, this visual similarity, according to the court, is primarily caused by the shapes and colors that are typically used in different seals or quality stamps regarding different groceries. 

After this, the court assessed the aural similarity. The HK seal trademark has a letter combination 'HK', which is pronounced as 'hookoo' among the relevant Finnish public. On the other hand, the hf trademark has several text elements for the public to pronounce and only the letter combination 'hf' is similar to the 'HK'. Therefore, there is a minimal degree of aural similarity.

The court was not so impressed with the conceptual similarity either. The court stated that the letter combinations 'HK' and 'hf' do not have any meanings as such, even though part of the relevant public understands that the letter combination 'HK' stands for 'Helsingin kauppiaat' ('Helsinki Merchants'). Furthermore, the public understands that the text element 'HANS FREI­TAG' refers to a person and the meaning of the German text element 'Keks- und Waf­fel­bäc­ke­rei' can be also understood because of the knowledge of Swedish language among the relevant Finnish public.

Since the seal shapes and colors are fairly typical in trademarks representing grocery products, the court considered that the text elements 'HK', 'hf' and 'HANS FREITAG' are the dominant components of the conflicting marks. There is a minimal degree of similarity in this regard.

The court then compared the goods and stated that the bakery products are not, per se, similar to meat products, but they are both groceries and have in general the same distribution channel, the same relevant public and the same purpose of use. Therefore, the goods are fairly identical.

Even though the HK seal trademark has a reputation in Finland and it is distinctive, the court concluded, based on the analysis above, that the relevant section of the public does not establish a link between the conflicting marks. Therefore, there were no need to assess the remaining requirements (detriment to the distinctive character of the mark, detriment to the repute of that mark and unfair advantage taken of the distinctive character or the repute of that mark).

Unfair business practice (reputation parasitism)?

HKScan argued that Hans Freitag has, by using the hf trademark, created an association between the mark and the HK seal trademark and therefore has taken undue advantage of the goodwill of the HK seal trademark. HKScan referred to section 1 paragraph 1 of the Unfair Business Practices Act. According to that rule, good business practice may not be violated nor may practices that are otherwise unfair to other entrepreneurs be used in business. 

It has been ruled in the Finnish case-law that the section 1 paragraph 1 of the Unfair Business Practices Act prohibits anyone from taking undue advantage of another's goodwill (in trademarks, products, business concepts etc). This is also known as 'reputation parasitism' ('maineen norkkiminen' in Finnish).

Also according to Article 15 of the ICC Code on Advertising Practice, marketing communications should not in any way take undue advantage of another firm's, individual's or institution's goodwill in its name, brands or other intellectual property, or take advantage of the goodwill earned by other marketing campaigns without prior consent.

The court stated that there are two requirements for reputation parasitism. Firstly, the alleged victim mark of the reputation parasitism has to be well-known in the market and have a reputation. Secondly, there has to be an association between the conflicting marks and the one who has created the association is aiming to exploit the goodwill of the other mark. The court added that the reputation parasitism does not require, per se, that the conduct misleads the average consumer about the commercial origin of the product.

The court found earlier that the HK seal trademark has a reputation in Finland since 2013. Therefore it has, according to the court, the goodwill that the assessment of the reputation parasitism requires. 

Now the court had to assess whether Hans Freitag has, while using the hf trademark, created an association between the hf trademark and the HK seal trademark among the reasonably well-informed and reasonably observant and circumspect average consumers.

The court referred to its analysis above regarding the absence of the similarity link between the conflicting marks and ruled that an average consumer would not associate the hf trademark with the HK seal trademark. Interestingly enough, HKScan had provided evidence that it has sometimes used the HK seal trademark with a blue ribbon element, but the court did not change its stance. Therefore, Hans Freitag has not taken undue advantage of the goodwill of the HK seal trademark.

The action was dismissed.

The Market Court: Cider Spirit Verlados is an Evocation of Protected GI Calvados

When is a product name an illegal evocation of a protected geographical indication (GI) of spirit drinks? This question is the core of the decision 307/16 issued by the Market Court on 31 May 2016.

Background

Viiniverla Oy (Viiniverla) started manufacturing and marketing cider spirits named 'Verlados' in 2001. Viiniverla is located in Verla village in Southern Finland. 

In 2012, European Commission requested a clarification from the Finnish authorities relating to the use of the name 'Verlados'. The Commission had received a complaint relating to an alleged misuse of the French GI 'Calvados'. 

A GI, in accordance with Article 15 of Regulation No 110/2008, is an indication which identifies a spirit drink as originating in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristic of that spirit drink is essentially attributable to its geographical origin.

The Finnish Authorities replied in 2013 and stated that the name 'Verlados' refers to the place where it is being manufactured, the village of Verla and the Verla winery. The Finnish Authorities also stated that the two names have only one syllable in common ('dos') and therefore the 'Verlados' is not evocative from the protected GI 'Calvados'. The Finnish authorities referred to an old decision of the Court of Justice (CJ) in which CJ ruled that there is a clear evocation if the term used to designate the product at issue ends in the same two syllables and contains the same number of syllables as the protected name (Consorzio per la tutela del formaggio Gorgonzola, C‑87/97). 

The Commission was not impressed and stated that the 'Verlados' is an illegal evocation of the GI 'Calvados' in accordance with Article 16(b) of the Regulation. It also threatened to open infringement proceedings against Finland if that interpretation was not accepted.

The Article 16(b) is worded as follows:

Without prejudice to Article 10, the geographical indications registered in Annex III shall be protected against:

         (b) any misuse, imitation or evocation, even if the true origin of the product is indicated or the geographical indication is used in translation or accompanied by an expression such as “like”, “type”, “style”, “made”, “flavour” or any other similar term

According to Annex III to the Regulation, 'Calvados' is registered in the category of products No 10 'Cider spirit and perry spirit', country of origin being France.

In November 2013, Sosiaali- ja terveysalan lupa- ja valvontavirasto (National Supervisory Authority for Welfare and Health) issued a decision where it prohibited Viiniverla Oy (Viiniverla) from marketing a drink named 'Verlados' as from 1 February 2014. The decision was based under section 49 paragraph 2 of Alcohol Act (1143/1994). According to that rule, the Authority can prohibit advertising or other marketing or sales promotion measure of alcoholic beverages if the labelling and other presentation of those beverages are not in compliance with the provisions and regulations issued.

The Market Court and a request for a preliminary ruling

Viiniverla appealed to the Market Court and claimed that the use of the name 'Verlados' does not infringe EU law on the protection of geographical indications.

The Market Court felt obliged to request a preliminary ruling and referred three questions to CJ. CJ answered those questions in its decision C 75/15, 21 January 2016.

(1) When assessing where there has been an “evocation” within the meaning of Article 16(b) of Regulation [No 110/2008], should reference be made to an average consumer who is reasonably well informed and reasonably observant and circumspect?

The Article 16(b) does not mention the concept of consumer. However, CJ has ruled in its earlier decisions that, for the purpose of finding the existence of an 'evocation', it is for the national court to verify, in addition to the inclusion of part of a protected name in the term used to designate the product at issue, that when the consumer is confronted with the name of the product, the image triggered in his mind is that of the product whose designation is protected. 

CJ continued by ruling that the purpose of the Regulation is to protect, inter alia, the attainment of a high level of consumer protection. Therefore it is necessary, as the established case-law relating to consumer protection states, to take into account of the presumed expectation of the average consumer, who is reasonably well informed and reasonably observant and circumspect.

CJ then emphasized that the concept of 'consumer' covers European consumers and not merely consumers of the Member State in which the product giving rise to the evocation of the protected geographical indication is manufactured.

(2) When assessing whether to prohibit the use of the name Verlados used to market nationally a spirit drink distilled from apples in order to protect the geographical indication “Calvados”, what importance should be given to the following facts in the interpretation of the concept of “evocation” in Article 16(b) of Regulation No 110/2008 and the application of that regulation: 

(a) the first part of the name Verlados, Verla, is a village in Finland whose name may be recognised by Finnish consumers;
(b) the first part of the name Verlados, Verla, refers to the producer of Verlados, Viiniverla Oy;
(c) Verlados is a local product produced in Verla village of which a few hundred litres on average are sold each year in the winery’s own restaurant and a limited amount by order from the State-owned alcohol business referred to in the Law on alcohol;
(d) the words Verlados and Calvados have only one syllable in common (“dos”) out of three, although the last four letters (“ados”) of the words, that is, half of the total number of letter in each word, are identical?

CJ stated, in essence, that the facts a, b and c are irrelevant. 

CJ ruled, as it is stated in its own case-law, that it has to be considered whether the products are similar and the sales names are phonetically and visually identical. Furthermore, any evidence that may show that such a relationship is not fortuitous must be taken into account.

With regard to the fact c, CJ ruled that it is irrelevant that ‘Verlados’ is a local product and mostly sold locally because the Regulation applies, in accordance with Article 1(2), to all spirit drinks placed on the market in the European Union.

With regard to the fact d, CJ specified that the referring court must take into account the fact that 'Verlados' and 'Calvados' both contain eight letters, the last four of which are identical, and the same number of syllables, and that they share the suffix ‘dos’, which confers on them a certain visual and phonetic similarity.

(3) If there is considered to be an “evocation” within the meaning of Article 16(b) of Regulation No 110/2008, may the use of the name Verlados nevertheless be authorised on one of the grounds mentioned above or on other grounds, such as that Finnish consumers at least are unlikely to imagine that Verlados is produced in France?

CJ concluded by stating that the wording of Article 16(b) clearly protects GI's from any kind of evocation, even in the absence of any likelihood of confusion. Therefore, the use of the name 'Verlados' can not be authorised if the referring court finds that there is evocation within the meaning of Article 16(b). 

The Market Court issued its decision on 31 May. 

The Market Court stated that the name 'Verlados' is used in Finland for products similar to those with the protected GI 'Calvados' and that those products have objective characteristics in common, and they are consumed, from the point of view of the relevant public, on occasions which are largely identical. 

The court then followed the CJ's guidance and affirmed that there was a clear visual and phonetic similarity between the names.

As for any evidence that may show that such a relationship is not fortuitous, the court stated that Viiniverla had mentioned that it had used an expression "aroma distillation similar to calvados", which shows that the company was very aware of a product named 'Calvados'. Moreover, the suffix 'dos' does not have any specific meaning in the Finnish language. 

Therefore, the court ruled that when the average European consumer, reasonably well informed and reasonably observant and circumspect, is confronted with the name 'Verlados' for spirit drinks the image triggered in his mind is 'Calvados', a protected GI. 

The court dismissed the appeal by Viiniverla.