Registration of trademarks known abroad is not per se "bad faith" in Germany - Consequences for foreign trademark owners

Under German trademark law, a trademark registration may be declared invalid if it can be shown that the trademark owner acted in “bad faith” at the time the trademark application was filed. However, the term “bad faith” is not defined in the German Trademark Act, so there is some uncertainty as to whether the registration of a trademark that is used and known abroad but not registered in Germany constitutes “bad faith.”

Decision of the Regional Court of Munich

“Bad faith” cases are relatively rare; however, in a decision handed down on June 1, 2021, the Munich Regional Court had to address the question of whether the registration of trademarks known abroad constitutes “bad faith.”

Facts of the case

The confectionery manufacturer FERRERO had filed a lawsuit and asserted its rights to the trademarks “Butterfinger” and “Baby Ruth.” According to the plaintiff, the trademarks “Butterfinger” and “Baby Ruth” are well known in the United States because Nestlé—from which the plaintiff acquired parts of the U.S. confectionery business in 2018—sold chocolate bars under these trademarks. The defendant German company, which operates primarily in the beverage sector, is the owner of the German trademarks for the signs “Butterfinger” and “Baby Ruth,” including for “chocolate products.” The defendant also sold “Butterfinger” chocolate bars in Germany in packaging that was nearly identical to the bar offered by Nestlé in the United States at the time.

FERRERO sought an injunction against the sale of “Butterfinger” chocolate bars and requested the revocation of the German trademark registrations for “Butterfinger” and “Baby Ruth” on the grounds of bad faith. FERRERO argued that the sole purpose of the registrations was to create a potentially lucrative threat against it in order to subsequently sell the trademarks for the highest possible profit. The defendant argued that the requirements for a bad-faith application were not met, since he did not register the trademarks with the intention of obstructing FERRERO, but always demonstrated his own intention to use the trademarks.

The ruling of the Munich Regional Court

The Regional Court of Munich ruled that the requirements for a trademark application filed in bad faith were not met. One of the reasons for this was that the defendant had used at least the trademark “Butterfinger” for chocolate bars, which could indicate that he did not intend to obstruct FERRERO at the time of the application. Furthermore, Nestlé itself had held trademark rights for the signs “Butterfinger” and “Baby Ruth” in Germany in the past, but had not used them since at least the end of 2010. The court rejected the requests for revocation and prohibited only the sale of a “Butterfinger” chocolate bar in a presentation comparable to the U.S. “original.”

Assessment and recommendation

The decision of the Munich Regional Court is not yet final and may be overturned. It appears possible that bad faith can be inferred in this case. The genuine use of a trademark may, in principle, serve as an indication that there is no intent to block or obstruct. However, if the product is sold in packaging that is nearly identical to the foreign original, it seems clear that the reputation of the (foreign) trademark is being deliberately exploited.

Regardless of the outcome of an appeal, the decision of the Munich Regional Court clearly demonstrates how important it is for trademark owners to also secure the relevant foreign markets by filing trademark applications. A well-known trademark is not (always) sufficient for protection abroad. Furthermore, proceedings based on bad faith are always difficult and costly. The applicant’s intent at the time of filing is a subjective factor and difficult for third parties to prove. However, the party seeking revocation on grounds of bad faith bears the burden of proof. Timely trademark filings in the most important foreign markets are not only the safest approach but, in most cases, also the much more cost-effective option.