Backaldrin Osterreich The Kornspitz Company GmbH v Pfahnl Backmittel GmbH (Court of Justice of the European Union)(Case C-406/12, March 6, 2014)
In a recent decision, the Court of Justice of the European Union (“ECJ”) determined that a trademark can be revoked with respect to an end product even if it serves as a source identifier among intermediary sellers, if it is not perceived by end consumers of the final product as an indication of origin, where the owner of the trademark did nothing to encourage the intermediary sellers to use its mark so that consumers would understand the term to be a registered trademark.
The case involved the mark KORNSPITZ for goods in Class 30, covering, inter alia, “flour and preparations made from cereals; bakery goods; baking agents, pastry confectionery, also prepared for baking; pre-formed dough . . . for the manufacture of pastry confectionery,” owned by Backaldrin Osterreich The Kornspitz Company GmbH (“Backaldrin”). Backaldrin used the mark for a baking mix, supplied to bakers who would use the mix to create bread rolls that were oblong in shape with a point at both ends. Backaldrin consented to use of the mark by the bakers to sell the rolls made from the baking mix.
Pfahnl, one of Backaldrin’s competitors, brought a revocation action on May 14, 2010, based on Article 12(2)(a) of Directive [2008/95], arguing that KORNSPITZ is viewed by end consumers as the common name for certain bread rolls with an oblong shape and pointed ends. It was not disputed that the bakers who purchased the baking mix were aware that KORNSPITZ was a registered trademark, but it appears the bakers did not generally inform their customers that KORNSPITZ was a registered trademark or that the rolls they sold were produced by using the KORNSPITZ baking mix.
On July 26, 2011, the Austrian Patent Court granted Pfahnl’s application for revocation of KORNSPITZ and Backaldrin appealed to the Austrian Supreme Patent and Trade Mark Court (“ASPTMC”). The ASPTMC determined that Backaldrin’s appeal should prevail with respect to raw and intermediate products (flour and preparations made from cereals, baking agents, pastry confectionery prepared for baking and pre-formed dough for the manufacture of pastry confectionery) but, with respect to the finished baked goods, sought clarification from the ECJ as to the effect, if any, of the fact that the goods of the registration are marketed to bakers and food distributors, while KORNSPITZ bread rolls are sold to the general public.
The ASPTMC sought a preliminary ruling from the ECJ to answer the following questions:
- Has a trade mark become ‘the common name [in the trade] for a product or service’ within the meaning of Article 12(2)(a) of Directive [2008/95], where
- although traders know that the mark constitutes an indication of origin they do not generally disclose this to [end users], and
- (inter alia) on those grounds, [end users] no longer understand the trade mark as an indication of origin but as the common name for goods or services in respect of which the trade mark is registered?
- Can the conduct of a proprietor be regarded as ‘inactivity’ for the purposes of Article 12(2)(a) of Directive 2008/95 simply if the proprietor of the trade mark remains inactive notwithstanding the fact that traders do not inform customers that the name is a registered trade mark?
- If, as a consequence of acts or inactivity of the proprietor, a trade mark has become the common name for [end users], but not in the trade, is that trade mark liable to be revoked if, and only if, end consumers have to use this name because there are no equivalent alternatives?’
The ECJ found, as to the first question, the KORNSPITZ mark would no longer serve as a source identifier for the finished bread roll product and could be subject to revocation with respect to that product. Relying on case C‑371/02 Björnekulla Fruktindustrier [2004] ECR I‑5791, the ECJ explained that to determine whether a mark has become the generic name for certain goods when intermediaries participate in their distribution, the relevant classes of consumers whose perceptions must be considered include all consumers or end users, as well as those in the trade who deal with the product commercially. While acknowledging that the bakers’ perception of the KORNSPITZ mark should be taken into account, the ECJ concluded that, in general, the perception of the end users will play a decisive role. Here, that bakers are aware that KORNSPITZ was a trademark does not preclude revocation with respect to the end product bread rolls.
The ECJ noted further that the loss of a mark’s distinctive character can form the basis of a revocation action only if such loss is due to the action or inaction of the trademark owner, and determined that an owner’s failure to take action to encourage sellers to act so as to inform their customers that KORNSPITZ was a registered trademark, could constitute such inaction. The ECJ explained that the relevant inactivity could encompass any omission “by which the proprietor of a trade mark shows that he is not sufficiently vigilant as regards the preservation of the distinctive character of his trade mark.”
Finally, the ECJ clarified that for a trademark be revoked, there is no prerequisite that it first be determined whether there are other names for a product for which the trademark has become the common name in trade.
The case is noteworthy, as it underscores the importance of a trademark owner to have mechanisms in place for its mark to be used properly at all stages of production, especially in the context of trademark licenses. The case has been referred back to the ASPTMC, which must now determine if Backaldrin did anything to encourage the bakers to use the KORNSPITZ mark in their transactions with customers. What may not be answered by this case is whether such a control mechanism could exist merely as a contractual obligation requiring use of the mark in a specific manner, or whether there must also be a mechanism for enforcing such obligations.