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How to Prove Bad Faith

Updated: Jul 27, 2021

A recent decision of the English High Court provides additional insight into the meaning of “bad faith" in a trademark context and the evidence required to support such a finding. [2021] EWHC 719 (Ch)

The Facts

Apple Inc. has used the phrase “One More Thing” at launches of Apple products since 1998. The well-known Chairman and founder of Apple, Steve Jobs, would reach what would seem to be the end of his keynote address at an industry event chosen for an important announcement, turn as if to leave the stage, and then turn back with the words 'but there's one more thing.' In 1998 the first 'one more thing' was the return of Apple to profitability. In later years, the 'one more thing' would often be a new Apple product. The tradition appears to have lapsed on Steve Jobs' death in 2011 but was revived by his successor Tim Cook in 2015 for the launch of the Apple Watch.

Swatch is a well-known manufacturer of watches based in Switzerland. There appears to be a long-running trademark dispute between Swatch and Apple about the marks 'I-WATCH' and 'I-SWATCH.' The dispute predated the present dispute.

Swatch filed international registrations, which designated the U K for the trademarks SWATCH ONE MORE THING and ONE MORE THING for use in association with a wide range of goods, including watches and consumer electronic products.

Apple opposed the application on grounds based on the use and associated goodwill that Apple had acquired in the phrase ONE MORE THING. In addition, it was alleged the application was made in bad faith regarding Swatch's knowledge of Apple's reputation in the phrase, the circumstances in which the marks were applied, and Swatch's likely intentions in relation to the use of the marks.

Regarding the first ground of opposition, the Hearing Officer rejected the objection. While he accepted that a non-trivial (though relatively small) number of people in the United Kingdom would have known of Apple's usage of the phrase ONE MORE THING, he did not consider this would turn what is a common phrase in English usage into a 'distinguishing sign' indicating the trade origin of Apple's goods or services.

He also found that the public would not be deceived by using the phrase by Swatch in relation to the goods within the scope of the Applications. At worst, he thought, some people aware of Apple's usage might 'wonder' whether Swatch's use of the phrase had some connection with Apple, but this was not enough to pass off.

Regarding the second ground of opposition, the Hearing Officer noted that Swatch had failed to present evidence about its actual intentions and done nothing to displace the prima facie case which he had held to exist.

The Hearing Officer concluded that filing of applications supported a potential parodying form of use (which could not only poke fun at but may also denigrate Apple) against a competitor and rival with which it was at loggerheads would, prima facie, be considered by experienced men in the field to fall short of the standards of acceptable commercial behaviour. The marks being used as part of a parody of another trader is also difficult to reconcile with the use of the marks in accordance with their essential function of indicating the commercial source of the goods. In reaching this finding, he accepted that there was nothing wrong with parody as such. It is an important part of free speech. However, there is a difference between parody in commercial communications and registering trademarks consisting of parodies of a rival's marketing signs. Using the trademark registration system to obtain exclusive rights to such signs goes far beyond what is necessary to engage in legitimate parody. Moreover, the applicant's attempt to secure an exclusive right to engage in this form of commercial parody would exclude Apple's commercial use, which was objectionable.

The Appeal

Swatch appealed from the dismissal of its applications to the High Court. The Judge said that the 'bad faith' objection to the registration of trademarks had defied any straightforward definition, either by the UK Courts or by the CJEU. However, it was clear that it involves considering the state of mind of the applicant and, in particular, their intentions regarding the application. It also requires an assessment of those intentions against certain norms, in particular (i) what would be considered honest and fair behaviour by a business and (ii) the proper purpose of obtaining trademark protection (to protect a mark used to distinguish goods and services from those of other traders).

The case law has also established that a person is presumed to have acted in good faith unless the contrary is proved. An allegation of bad faith is a serious allegation that must be distinctly proved. The standard of proof is on the balance of probabilities, but cogent evidence is required due to the seriousness of the allegation. It is not enough to prove facts also consistent with good faith.

The Judge disagreed with the Hearing Officer that a prima facie case of intention to parody Apple followed from the applications upsetting Apple. Nor did the Judge consider that a prima facie case of intention to parody Apple was otherwise established by the evidence.

More specifically

a) While the Hearing Officer was entitled to be unimpressed by the failure of Swatch to explain its intentions, having been accused of an intention to put the mark to parodic use, this proved nothing. Moreover, Swatch had also been accused of intending to deceive the public, an allegation which the Hearing Officer had no difficulty in rejecting.

b) There was no evidence that Swatch had made a practice of parodic advertising in the past against any party, let alone Apple.

c) It was not clear how the suggested parodic use of the mark would be effective when, on the Hearing Officer's findings, it was only associated with Apple by only a few people.

d) There may be cases where a mark is inherently offensively parodic, so any use of it must inevitably transgress honest business practices and unfairly undermine the interests of the subject of the parody. However, where the mark itself is not offensive, it is hard to see how the mere prospect it might be put to some parodic use which overstepped the mark, provides a ground for refusal based on bad faith. This is because (i) the filing of the Application is equally consistent with the proprietor acting in good faith, so a finding of bad faith would contravene the presumption previously set out and (ii) the Court would be essentially engaging in speculation.

Comment

This decision provides a useful summary concerning the U.K. law relating to bad faith. The lesson to be learned is that the evidence supporting the allegation of “bad faith” must be clear and not speculative.

If you have questions, please get in touch with me at mckeown@gsnh.com.


John McKeown

Goldman Sloan Nash & Haber LLP

480 University Avenue, Suite 1600

Toronto, Ontario M5G 1V2

Direct Line: (416) 597-3371

Fax: (416) 597-3370

These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.

A version of this article originally appeared in the Lawyer’s Daily published by LexisNexis Canada Inc.

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