E-News No.45

E-News No.45

Bad faith appropriation of a competitor’s name range by Tougane Loumeau (GIDE LOYRETTE NOUEL – France)

VFP France v. Nicopure Labs LLC, Paris Court of Appeal, 18 December 2015, No.2015/09682

This case is an interesting illustrative example of a situation where a newcomer undertakes to ride on the coattails of an established operator, by appropriating names that are already used by that operator without being covered by trademark protection. The case shows a difference in the remedies available depending on whether the trademarks at stake are French or Community trademarks (soon to be called European Union Trademarks).

US-based company Nicopure Labs LLC is a manufacturer of electronic smoking products which are marketed under the brand Halo. The Halo e-liquids come under 25 flavors which all bear different names, such as Prime, Turkish, Captain Jack, Tribeca… In 2014, French company VFP France, which had started selling e-liquids in France under the brand Nova in 2013, filed for 12 French trademarks corresponding to those names, such trademarks serving as priority bases for the filing of Community trademarks.

Nicopure Labs sued VFP on the basis of Article L712-6 of the French Intellectual Property Code, which provides that when a trademark has been registered in fraud of someone’s rights or by violating a legal or contractual obligation, any person who regards itself as entitled to the trademark, may claim for its ownership before the courts.

Both the First Instance Court and the Court of Appeal accepted the claim as regards the French trademarks but rejected it as regards the Community trademark applications.

They held that VFP was aware that the Halo products had been marketed since 2010 in France. Indeed, in 2013, VFP’s manager had written to Nicopure to inform them of his intention to open an electronic cigarettes shop in France and of his desire to market the Halo products. He had been sent a form to fill-in but had never returned it. The courts held that the registration as trademarks of the Halo names was made by the newly created VFP with the bad faith intention to hinder its competitor’s development by capturing the latter’s financial investments.

Finding that the conditions of Article L712-6 were fulfilled, the courts ordered the transfer of the French trademarks. Contrary to what the First Instance Court had ruled, the Court of Appeal held that such transfer is deemed to take effect retroactively as of the filing date. This did not however allow Novapure to claim retroactively for infringement of the transferred trademarks since at the date it launched its action, Novapure was not the owner yet.

As regards the Community trademarks, the courts held such transfer to be impossible since the EU Regulation governing the Community Trademark does not contain a provision equivalent to Article L712-6, enabling a trademark to be transferred to the rightful owner. The latter may only initiate cancellation actions against the fraudulently registered trademarks, based on the “bad faith” invalidity ground.

Contrary to the findings of the court of first instance, the Court of Appeal held VFP guilty of separate unfair competition dealings. It held that copying without any technical need, 12 of the Halo names, for identical products sold for several years on the same market, shows the will of VFP to ride on Novapure’s coattails at lower cost. This intention l to attach itself to Novapure is reinforced by the facts that VFP chose the range name “American Beauty” which is reminiscent of Novapure’s origins and that, on the English version of its website, VFP had chosen the same titles for each flavor category: Tobacco, Gourmet and Menthol. VFP was therefore held guilty, under unfair competition and parasitism charges.