Classic Coach Company: clash of sequential rights in a brand and post-Brexit divergence in UK/EU law

The ECJ has ruled on the meaning of the Trade Mark Directive's 'earlier local right' defence to an infringement claim. The case is a reminder of the need for good long-term co-existence agreements where multiple parties are using conflicting brands and of the consequences of allowing others to use conflicting brands without objection. It also highlights a divergence between post-Brexit UK and EU trade mark law. 

What has happened? 

• The case concerned a situation where two parties had conflicting rights in the same name and there had been concurrent use for decades. It had the added spice of being an inter-generational dispute over a family's surname after the death of the business founders.
•  The claimant had sued the defendants for trade mark infringement, relying on a registered Benelux trade mark. The Trade Marks Directive (which harmonises national EU trade mark law) provides that a trade mark owner is not allowed to prohibit a third party from using an earlier right (recognised by the law of the member state in question) which applies only in a particular locality. 
•  The defendants were relying on this defence on the basis that they had an earlier unregistered right in the same name, but which arose only "in a particular locality" within the Benelux.
•  The issue was whether the defence was lost if the defendant's earlier unregistered right could no longer be invoked against the claimant to prevent the latter's use of its registered mark (eg because the owner of the earlier unregistered right had acquiesced to the use of the later registered mark). The ECJ ruled that the defence was not lost in this situation; it could still apply. 
•  A further twist was that the claimant owned an unregistered right that was even earlier than that of the defendant. The question was whether it mattered whether the claimant was able to rely on that even earlier right to prevent the defendant's use of its claimed earlier right. The ECJ ruled that it was a question of national law if the defendant's unregistered right could be valid in the face of the claimant's even earlier unregistered right. It concluded that it is at least possible under national law that the owner of an even earlier unregistered right has lost the ability (eg due to honest concurrent use or acquiescence) to stop use of a later unregistered right such that the later unregistered right can still be relied upon to provide an 'earlier local right' defence.
• The case is an important reminder of the need to have good long-term co-existence or brand demarcation agreements in place where multiple parties are using conflicting brands, including when family businesses start to fragment. It also highlights the consequences of allowing others to use conflicting brands without objection. In particular, do not expect much judicial sympathy when suing a very long-standing user of a mark that you have known about for decades even if you commenced use first. 
•  In the UK, the defence has different wording (despite the UK legislation supposedly implementing the Trade Marks Directive) and could apply very differently, especially in the even earlier right scenario above (see more below). Since the UK has left the EU, the decision is not binding on the UK courts or tribunals.

Want to know more? 

The background

The case concerns the use of the family name Meering. The facts are complex:

• From 1935, Jacob Meering drove coaches for his bus/coach transportation business called Amserfoort Bloei. From 1968 to 1977, his sons (presumably both having the surname "Meering"), continued to run Amserfoort Bloei (presumably after Jacob's death).
• In 1975, the claimant (one of the sons) set up a new (separate) coach business and started to use the name "Meering" as a brand. A couple of years' later, he left the Amserfoort Bloei business. This use of "Meering" by the claimant for his separate business from 1975 onwards can be considered the "senior" right. It is an unregistered right.
• About 12 years later, in 1991, the second son started to use the names "Willem Meering" or "W. Meering" somewhere on the coaches of the Amserfoort Bloei business, which he continued to run. After the second son's death, his two sons took over the Amserfoort Bloei business. They renamed it Classic Coach Company (CCC) but continued to use the name W. Meering somewhere on the coaches. CCC and the two living sons are the defendants in this action. This use (from 1991 onwards) of "Meering" can be considered the "middle" right. It is also an unregistered right.
• The claimant did nothing about the defendants' use for several years. However, in 2008, the claimant sought to register the name MEERING as a trade mark in the Benelux. This can be considered the "junior" right. It is registered.
• It took the claimant another seven years to sue the defendants for infringement based on the registered trade mark (the "junior" right).
• The defendants' defence was based on having an earlier right that applies only in a particular locality, relying on its "middle" right.
• The claimant's response was to assert its even earlier "senior" right as a basis for negating the defence.   
• The claimant won at first instance and lost on appeal. When the case came before the the Dutch Supreme Court, it referred two questions to the ECJ for a preliminary ruling. 

The law and the questions referred 

Article 6(2) of Directive 2008/95 (now Article 14(3) of Directive 2015/2436) (the Trade Marks Directive) both read:

"The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade, an earlier right which only applies in a particular locality if that right is recognised by the laws of the Member State in question and within the limits of the territory in which it is recognised."

There has long been doubt about the application of this provision, particularly where there are multiple conflicting earlier rights. 

The Dutch Supreme Court's questions were:

• For the purposes of determining whether there is an "earlier right" of a third party as referred to in Article 6(2): is it sufficient that, prior to the filing of the trade mark, that third party had made use in the course of trade of a right which is recognised by the laws of the Member State in question; or is there a requirement that that third party, on the basis of that earlier right, under the applicable national legislature, is entitled to prohibit the use of the trade mark by the trade mark holder?
• In answering Question 1, is it also relevant whether the trade mark holder has an even earlier right (recognised by the laws of the Member State in question) in relation to the sign registered as a trade mark and, if so, is it relevant whether the trade mark holder may, on the basis of that even earlier recognised right, prohibit the use by the third party of the alleged "earlier right"? 

In the context of the case facts:

• The first question is essentially: does CCC (one of the defendants) lose its Article 6(2) defence based on its "middle" right if it cannot rely on that right to stop the claimant's use of its "junior" right? As it was, CCC could not stop such use because Article 9(2) of the Trade Marks Directive applied. That creates a statutory acquiescence defence which can be relied on by the owner of a registered trade mark that has been registered and used for more than five years. It applies where the owner of an earlier right has known of that use and registration and yet done nothing about it (see Acquiescence: a quick guide). The fact that the defendants had not challenged the "junior" 2008 registration and its use by the claimant in reliance on its "middle" 1991 earlier unregistered right meant that they had acquiesced and could now not stop that use.
• The second question is essentially: does it matter that the claimant owned a "senior" 1975 right and, if so, whether or not it could rely on that "senior" right to stop the use of "Willem Meering" and "W. Meering" by the defendants?  

The ECJ's ruling

Q1: Does CCC (one of the defendants) lose its defence based on its "middle" right if it cannot rely on that right to stop the claimant's use of its "junior" right?

The ECJ answered this question in the negative. There is no requirement for the owner of the claimed earlier right that is relying on it as a defence to be entitled to stop the registered trade mark proprietor from using its mark. For Article 6(2) to be interpreted otherwise "would deprive that provision of all practical effect".  This interpretation means that the defendants here should be able to rely on the defence (so long as their "middle" 1991 unregistered right is valid), even if they cannot stop the claimant's use due to acquiescence. 

Q2: Does it matter that the claimant owned a "senior" 1975 right and, if so, whether or not it could rely on that "senior" right to stop the use of "Willem Meering" and "W. Meering" by the defendants?  

This question was answered in the affirmative: the existence of a "senior" right is relevant. However, Article 6(2) does not regulate for conflicts between two earlier unregistered rights. The court considered that it is for national law to decide if the "senior" right can be relied on to stop use of the "middle" right and perhaps thereby render the "middle" right invalid such that it cannot provide an Article 6(2) defence. It concluded that it is at least possible under national law that the owner of a "senior" right has lost the ability (eg due to honest concurrent use, estoppel or acquiescence) to stop use of a "middle" right such that the "middle" right can still be relied upon to provide an Article 6(2) defence. Indeed, in this case, such lost ability seems very likely due to the 30-year period of honest concurrent use. 

The ECJ justified its answers as striking a balance between the interests of the proprietor of the registered trade mark to safeguard its essential function and the interests of other economic operators in having signs capable of denoting their goods and services. It took the view that Article 6(2) needs to be regarded as a more flexible limitation to the rights conferred by a registered trade mark and that it is not akin to the provisions for opposing or cancelling the same registered right based on earlier unregistered rights. 

The ECJ was unimpressed by an argument referring to the background papers (or travaux preparatoire) to the Trade Marks Directive. These revealed that, when it was first drafted, there had been a proposal for Article 6(2) to include the words "even though that [earlier] right may no longer be invoked against the later registered trade mark." The ECJ ruled that the fact that these words were never adopted did not alter the interpretation of the provision (ie it did not mean that the ECJ could not now interpret the provision as if these words were present). 

In answering the questions, the ECJ unusually chose not to have an Advocate General's opinion. That suggests it found the decision straightforward. There was also no hearing, instead there were written submissions from the parties, the EU Commission and the Polish government.  INTA reported that it had also made an intervention as an Amicus Curiae. However, there is no mention of this in the ECJ's judgment. If its submission was properly made, then not to have that mentioned in the judgment is very regrettable. Organisations like INTA and MARQUES have Amicus committees of experienced and dedicated trade mark professionals who voluntarily prepare learned papers intended to assist the court.  Their interventions are only made when the issues at stake are considered sufficiently important or complex to merit such intervention. Their efforts should be acknowledged and, ideally, welcomed by the judges more than they sometimes appear to be.

What does the decision mean for you?

• It is a reminder to avoid, if possible, having multiple parties using 'your' brand, even if you all share a common history and the concurrent use is the consequence of that history.
• If it must happen, put a suitable and future-proof agreement in place that captures how, for how long, where and on what the name can be used and that looks ahead as far as possible. For example, in the context of use of a family surname, it needs to allow for the existence of ever more descendants and might remain relevant for many decades to come.
• If intervening rights arise or there is conflicting use of the mark, do not do nothing without having taken local law advice on the implications of such inaction (acquiescence, estoppel, honest concurrent use etc). In particular, do not expect much judicial sympathy when suing a very long-standing user of a mark that you have known about for decades even if you commenced use first. 

A post-Brexit UK post-script

For those in the UK, the ECJ judgment does not have direct effect (being post-Brexit) but it may be persuasive insofar as the same 'earlier local right' defence is enshrined in UK law.  It is, but the wording differs. That also makes this judgment of questionable influence in the UK as a result.  

Section 11(3) of the UK Trade Marks Act 1994 reads as below. The words highlighted reveal the differences with Article 6(2) (and Article 14(3) now) of the Trade Marks Directive.

A registered trade mark is not infringed by the use in the course of trade in a particular locality of an earlier right which applies only in that locality. For this purpose an “earlier right” means an unregistered trade mark or other sign continuously used in relation to goods or services by a person or a predecessor in title of his from a date prior to whichever is the earlier of:

• the use of the first-mentioned trade mark in relation to those goods or services by the proprietor or a predecessor in title of his, or
• the registration of the first-mentioned trade mark in respect of those goods or services in the name of the proprietor or a predecessor in title of his;

and an earlier right shall be regarded as applying in a locality if, or to the extent that, its use in that locality is protected by virtue of any rule of law (in particular, the law of passing off).

Two points arise in particular:

• The requirement that the user of the earlier local right must have "continuously used" their mark since their use first started means the defence is necessarily narrower than that in the Directive. Someone that had ceased use of the mark then restarted, perhaps shortly before being sued, could not rely on the defence in the UK even if their first period of use was on such a scale (locally) that they could challenge the later "junior" registered mark owner's use or registration relying on passing off and their residual goodwill.
• The section 11(3)(a) wording was prescient. It anticipated the scenario in this ECJ case and provides an answer, albeit not one consistent with the Directive and the ECJ judgment. In the UK, the defence would not have been available to the defendants asserting their "middle" right. This is because their local right, arising from use starting in 1991, was not "earlier". It had not been used from a date prior to both the claimant's registration and its first use. That started in 1975. That is not to say the defendants would have had no defence in the UK. They mostly likely could plead at least honest concurrent use. However, they would not have the benefit of the earlier local right defence that Article 6(2)/14(3) provides and which looks set to apply when the case goes back to the Dutch court. 

So, do not assume that a UK case with the same facts would have the same outcome. This is the legacy of past imperfect harmonisation. As a consequence of Brexit, that misalignment will not now be cured by the UK courts interpreting the UK Act so as to implement the Directive. We will likely see more of these UK divergences as time goes on. Some may seem small and nuanced, but to the equivalent of the Meering family in the UK, it could have material consequences