In a recent ruling the Irish High Court resolved a 30 plus year trade mark dispute between Italian fashion manufacturer Diesel SPA ("Diesel Italy") and Monaghan-based Irish jeans manufacturer Montex Holdings Ltd ("Diesel Ireland") concerning the rights to the trade mark DIESEL in Ireland for jeans.

This decision is particularly noteworthy as it offers further clarification from the courts regarding the notion of "dishonest" or "bad faith" trade mark applications. This clarification is especially valuable since neither Irish nor EU trade mark legislation explicitly defines the concept of bad faith by a trade mark applicant.

In cases involving bad faith, the courts typically assess the "intention" of the applicant and/or user at the time of filing and/or introducing the trade mark into the market to determine whether bad faith exists.

Bad faith can manifest in various scenarios, and in this specific case, an Irish business was found to have acted in bad faith when it intentionally replicated a foreign third-party mark without a reasonable explanation for its branding choices. This was done to capitalize on the international advertising and marketing efforts of the foreign third party before entering the Irish market.

This dispute was so old it was decided under the Trade Mark Act 1963, which predates the current Irish Trade Mark Act 1996. The current Act includes section 8(4) which explicitly provides for a bad faith ground for refusal of registration. Since the 1963 Act lacks such a provision, the question of bad faith was addressed indirectly in this High Court decision. 

Background

In 1977, Diesel Italy filed an Italian trade application mark for the mark DIESEL, which covered jeans and clothing. By 1978, Diesel Italy had begun selling clothing across continental Europe, entered the UK market in 1979, and commenced sales in Ireland in 1982. Diesel Italy has consistently been recognized as a high-quality, premium clothing brand, notably renowned for its distinctive jeans.

Sometime between 1979 and 1980, Montex Textiles Ltd (the predecessor in title to Diesel Ireland) started marketing jeans under the brand name DIESEL in Ireland. However, Montex Textiles Ltd later went into receivership and was acquired by Diesel Ireland in 1988.

In 1992, Diesel Ireland applied for an Irish trade mark for DIESEL, which covered jeans. This application faced opposition from Diesel Italy. 

Subsequently, in 1994, Diesel Italy itself sought to register its own Irish trade mark for DIESEL, which also covered jeans. Diesel Ireland opposed this application.

While the opposition proceedings against Diesel Ireland's application were ongoing, the proceedings against Diesel Italy's application were temporarily suspended.

Diesel Ireland's Application

In 1998, the Controller of Patents, Designs and Trademarks ("Controller") ruled in favour of Diesel Italy's opposition against the Diesel Ireland application. The Controller was of the opinion that Diesel Ireland was unable to rule out possible deception and confusion and therefore rejected the application. On appeal, the High Court found that Diesel Ireland's use and attempt to register the DIESEL mark lacked good faith, despite Diesel Ireland being the initial user of the mark in this jurisdiction and upheld the opposition. 

Diesel Italy contended that the adoption of the trade mark was not done in good faith, suggesting that subsequent use could not be considered bona fide either. They highlighted evidence submitted by Diesel Ireland implying an attempt to capitalize on the international reputation of Diesel Italy. Moreover, Diesel Ireland's statement that ownership of a trade mark hinges on first use rather than origination could be interpreted as an acknowledgment that they were aware they did not create the mark themselves. This was significant as it suggests Diesel Ireland may have knowingly adopted the mark in bad faith. 

A crucial aspect of these proceedings was Diesel Ireland's failure to provide a satisfactory explanation or refutation after Diesel Italy alleged bad faith. Notably, Diesel Ireland did not adequately explain how it independently arrived at the name DIESEL for jeans. It was observed that DIESEL was an uncommon brand name for jeans, making it unlikely that Diesel Ireland coincidentally began selling jeans under the DIESEL brand name just one or two years after Diesel Italy launched it in Europe.

Diesel Ireland's attempts to appeal this decision to the High Court in 2000 and later to the Supreme Court in 2001 were unsuccessful.

Following the conclusion of these proceedings, the focus shifted to Diesel Italy's opposition.

In 2006, the parties were also engaged in an ECJ case concerning a trade mark owner's ability to prohibit the transit of goods based on trade mark rights in the EU, but which was not relevant to the Irish proceedings which focused on bad faith.

Diesel Italy's Application

In 2012, the Controller upheld the opposition against the Diesel Italy application. During these proceedings, new evidence was submitted from Pat McKenna, a Director of Diesel Ireland, regarding the origin of the DIESEL trade mark, which had not been presented in earlier proceedings.

According to Pat McKenna's evidence, the inspiration for the name came from a petrol station situated in front of the Montex Textiles Ltd manufacturing facility, where the deceased Mr Gene McKenna noticed a red and white sign for DIESEL.

Diesel Italy appealed the Controller's decision to uphold an opposition against their marks to the High Court. However, this case faced delays as Diesel Italy sought to introduce new evidence on appeal. The request to present new evidence was reviewed by the High Court in 2016, the Court of Appeal in 2018 and later by the Supreme Court in 2020, with the Supreme Court ultimately preventing Diesel Italy from submitting additional evidence.

On appeal, the High Court overturned the 2012 decision of the Controller, affirming Diesel Italy as the rightful owner of the DIESEL mark. 

Regarding Pat McKenna's evidence, the High Court deemed the Gene McKenna evidence hearsay and the other evidence lacking in credibility. The evidence was filed by way of statutory declaration that retold the story of how a Gene McKenna who worked for the predecessor, first came up with the name from observing a petrol station sign outside of the Montex Textiles Factory in 1978.

Several factors contributed to this assessment, including the fact the evidence concerned a statement that a deceased man purportedly made 26 years prior to it being filed (2004), the absence of corroboration from other witnesses who had provided evidence in previous proceedings, the lack of supporting documentation, contradictions with previous evidence presented by another individual regarding the date of first use of the mark, and Pat McKenna's assertion of never having seen the Diesel Italy mark despite the ongoing legal dispute between his company and Diesel Italy, a claim that was concluded to have strained credibility.

Considering Diesel Italy's trade mark registration in Italy in 1977 and the subsequent launch of its products throughout Europe in 1978, coupled with Diesel Ireland's failure to offer a plausible explanation for adopting the DIESEL name, the High Court concluded that Diesel Ireland's actions amounted to dishonest copying of the DIESEL mark, conducted with the aim of benefitting from and appropriating the goodwill generated by Diesel Italy's international marketing and sale of its jeans. 

The High Court ruled that Diesel Italy was entitled to register the DIESEL trade mark and issued an injunction against Diesel Ireland, prohibiting its use of the DIESEL trade mark in connection with jean products.

Comment

Overall, we view this decision as a positive development providing further clarity on the evolving concept of bad faith trade marks. Given that bad faith is not explicitly defined the guidance provided by the High Court is invaluable.

This ruling is particularly beneficial for foreign businesses. It serves as a reminder for Irish local businesses to be cautious and vigilant against drawing inspiration from or copying a foreign business's trade mark simply because that business is not currently operating in the Irish market. This caution is especially relevant in the digital age of 2024, where advertising and marketing efforts have a global reach thanks to the internet. Regardless of an international brand's operational and logistical capabilities, the ability to advertise and establish brand awareness in a new market has never been more accessible. 

However, this accessibility also brings inherent risks, as third parties may exploit the opportunity to unlawfully use or seek to register a foreign brand it before the brand owner enters the Irish market. This decision serves as a clear warning to unlawful imitators, highlighting the risks associated with such anticompetitive behaviour.

While this decision is welcome for foreign trade marks owners, it is also a stark reminder of the importance of registering trade marks promptly. Diesel Italy entered the Irish market over a decade before attempting to register its trade mark, which occurred only after Diesel Ireland filed its application. During the period between Diesel Italy entering the Irish market and filing its trade mark application, Diesel Ireland traded without objection, suggesting a lack of market monitoring and enforcement by Diesel Italy. Timely registration before Diesel Ireland's application may have prevented this costly and uncertain 30 year legal battle. Proactive trade mark registration and monitoring are essential for companies operating in multiple jurisdictions to prevent such conflicts and protect their brand identity. 

Finally, while this case does not set down a legal test for assessing bad faith adoption of trade marks, at the very least, it emphasizes the importance of brand owners properly documenting their brand creation process. Where there is an allegation that a trade mark was adopted in bad faith, at the very least, to rebut this, the alleged must be able to show the process it went through in coming up with and adopting the mark.

It will be intriguing to see whether Diesel Ireland tries to appeal this decision or merely accepts the injunction and undergoes rebranding, considering it has been operating its business for over 40 years.