Exercise No.

Read the attached sentence:

1 Select the forms of behaviour that can be described as unfair competition and those that constitute a violation of Trademark Law. 2 Decide whether there are forms of behaviour that affect both cases. 3 Decide on the connections between Trademark Law and Unfair Competition Law that affect the facts of the sentence. See the texts for both laws. 4 Examine whether there is a double sanction for the same forms of behaviour and, where appropriate, the reasons behind this.

Jurisprudence
Date: 22/06/2011 Marginal: 28079110012011100411 Jurisdiction: Civil Judge-Rapporteur: JOSE RAMON FERRANDIZ GABRIEL Origin: Supreme Court Resolution Type: Sentence Division: First Section: First Header: BRANDS. Full annulment of a brand registration for presenting its application in bad faith. Cassation/annulment concept and control. UNFAIR COMPETITION. Possible application of norms governing industrial property rights and unfair competition. Preference for the former if the aim is to protect subjective rights or entitlements over the intangible asset itself.

Text Heading
Proceeding: Cassation SENTENCE In the City of Madrid, on June 22nd, 2011. Before the First Division of the Supreme Court, consisting of the Honourable Magistrates listed on the side, is this appeal for cassation presented by Nordika's, SL, represented by the Solicitor, Jos Antonio Saura Saura, against the Sentence dictated on January 18th, 2008, by the Eighth Section of the Tribunal Court of Alicante which resolved the appeal lodged in its day and which the Mercantile Court Number One of Alicante, in its day, rejected. Appearing before said Court was the Solicitor, Angel Rojas Santos, representing the appellant, Nordika's, SL, and, representing Norteas, SL, the Solicitor, Jos Pedro Vila Rodrguez.

PLEAS OF FACT
FIRST. On October 31st, 2006, the Clerks Office in the Senior Court of Alicante registered the written request to lodge a lawsuit by the Solicitor, Jos Antonio Saura Saura, in due representation of Nordika's, S.L., against Norteas, S.L. Said request indicated Nordikas, SLs right to file said suit, arguing: That said company was founded in 1984 and dedicated to manufacturing and selling shoes, a product primarily identified in the market with the brand coinciding with the companys corporate name, Nordika's; that said company was, concretely, the titleholder of two mixed brands consisting of the word, Nordikas under a rectangle containing the letter N and a cross: one of these brands is registered nationally, with number 2337953 and requested on August 4th, 2000, to distinguish products consisting of non-orthopaedic shoes to be used at home product class 25 and another, EU Communityregistered brand, number 1801653, granted on October 9th, 2001, to distinguish these same products; that said brands are well-known in the market; and that Nordika's, SL was also the titleholder of an unregistered Community industrial model of household slippers, selling these in the market since the winter season of 2004. The claimants representative also indicated that the defendant, Norteas, SL, also manufactured and sold footwear but, concretely, that said company had copied its design and, in addition, had registered brands which could intentionally be confused with Nordikas brands. The brands registered by the defendant include Spanish brand number 2622759, mixed style, consisting of the word, "Nortea's" in a rectangle under the letter "N'", and granted to distinguish clothing made for women, men and children and shoes, and brand number 2591207, consisting of the word Norteas. The claimant argued that its design was duly protected by Regulation 6/2002 Articles 11, 3, 5, 6 and 19.2 despite the fact that it was no longer registered. In addition, the claimant declared that the use of registered brands by the defendant created the risk of confusing and associating its brands with the claimants. The latter also indicated that it had requested that the defendant cease in this matter.

The claimant also argued that the defendant carried out acts tantamount to unfair competition, specifically, acts foreseen in Articles 6, 11 and 12 in Law on Unfair Competition 3/1991, dated January 10th. The claimant alleged that it had suffered damages as a result of the illicit acts it attributed to the defendant, acts which were evident ex re ipsa, and that it had also had to assume costs for lodging said lawsuit. The claimant argued that it was entitled to compensation equivalent to one percent of the defendants sales revenue. The claimant detailed that the actions the lawsuit exercised were for the claimants violation of a non-registered Community model Article 19.2 in Regulation 6/2002, calling for the annulment of the defendants brands numbers 2622759, N's Norteas, and 2591207, Norteas, due to the risk of confusion Articles 6 and 8 in Law 17/2001, dated December 7th for registering said brands in bad faith Article 51.1.b) in the same Law; violating the claimants brands Articles 34, 40 and 41 in Law 17/2001, dated December 7th; and for committing acts of unfair competition Articles 5, 6, 11 and 12 in Law 3/1991, dated January 10th. In the lawsuits prayer for relief, the claimants legal representative requested from the Court of First Instance, a sentence: A) Declaring: 1. That Nortea's, S.L. has violated Nordikas, S.L.s rights over a non-registered Community design by manufacturing and selling a model with identical characteristics; 2. that Nortea's, S.L. has acted in bad faith with a behaviour which could be qualified as acts of confusion, association, imitation, and exploitation of anothers reputation to sell household slippers which are a poor copy of my clients designs; 3. that the defendants use of the brand "Nortea's" violates my clients exclusive rights over its Nordika's brands duly referenced in the prior presentation of our lawsuit; 4. that the Spanish brand and graphics number 2622759, NS Nortea's, and brand number 2591207, Norteas, both of which belong to the defendant, should be annulled ex officio in the Spanish Office of Patents and Brands (OEPM); 5. that the defendants use of the corporate name, Norteas, S.L., violates the claimants rights over its brands by using said corporate name as an element of association and confusion with the brands and commercial name of Nordika's, S.L.; and 6. that entering into this lawsuit as described in the above points has caused the claimant general damages and financial loss which must be compensated in all cases. B) The defendant must be ordered to: 1. Immediately cease all manufacturing activity, delivery onto the market, commercialisation, promotion, advertising, distribution and, in general, the industrial and commercial exploitation of its household slippers object of this lawsuit and any others whose design may lead to their confusion with the claimants non-registered Community design;

2. remove from the market and destroy, at its expense, its household slippers and any others which represent essential and confusing copies of the slippers referred to in the condemnatory conviction number 1, including any items in stock in its own warehouses or facilities or those of any third-parties held there at the defendants request. This shall also apply to any and all corresponding brochures, catalogues and other Publicity aimed at promoting or selling said slippers, even if they include other brands, models, or items, and also destroying, at its expense, any moulds and machinery specifically used for said slippers manufacture; 3. cease using the name Nortea's both as a brand or corporate name, whether alone or jointly with other words, and to duly deliver to this Solicitor any catalogues, brochures, business cards and other media advertising the Nortea's name, whether alone or jointly with other words; 4. even modify the entry corresponding to its corporate name, Nortea's, S.L., in the Mercantile Registry within a period of fifteen days as of the date the final judgement is issued, excluding from said name any reference to the word, Norteas, and any other which might be associated to or confused with the well-known brand, Nordikas; 5. pay the claimant compensation which shall be determined through this suit for violating its industrial property rights as well as for its use of the name, Nortea's. According to the Law on Brands, said compensation must include: The damages suffered (damnun emergens) consisting of the extra-judicial actions and proceedings with the Spanish Office of Patents and Brands (OEPM) carried out by the Industrial and Intellectual Property Consulting firm, Abril Abogados, an amount totalling one thousand, five hundred and twenty-five euros (1,525), VAT not included, and all lost income (lucrum cessans): in accordance with Article 43.2 (Benefits obtained by the defendant through illicit activity) and 43.5 both in the Law on Brands, this compensation would correspond to 1% of the defendants sales revenue from the time the latter began its illicit activity and until the final decision is issued, though the resulting amount is subject to increase in the proportion deemed appropriate given the awareness regarding the Nordikas brand and the claimants reputation as stipulated in Article 43.3 in the Law on Brands; 6. publish, at its expense, the decision issued in these proceedings in two newspapers offering national coverage and two offering regional coverage; 7. pay for all legal proceeding costs; and 8. be subject to and duly bound by the preceding declarations and sentences". SECOND. The lawsuit was assigned to the Mercantile Court of Alicante, Community Brand and Community Drawings and Models Court, Number 1, which accepted it for consideration according to the rules governing lawsuits, and assigned it case number 503/2006. The defendant was duly summoned and did appear, represented by the

Solicitor, Alicia Carratala Baez who, in due representation, responded to the lawsuit. In said written response, the defendants representative alleged, in summary and insofar as related to the decision regarding this suit, that the claimant had unsuccessfully requested that the term Nordika's be registered as a brand and corporate name as it could be confused with the primary brand Nrdica which already existed. In addition, the defendants representative argued that the difference between the brands in this suit were notably different both visually and conceptually, thus denying the possible risk of confusion and association between them. Said representative also denied the existence of acts indicating unfair competition and justification for the compensation sought by the claimant. In the prayer for relief, the Norteas, S.L. representative urged the Mercantile Court of Alicante, Number 1, to dismiss the suit in full and to order the claimant to pay all associated costs.

THIRD. After carrying out the initial hearing, the trial and evidence gathering, a proposal accepted by the Court, the Mercantile Court of Alicante, Number 1, duly dictated its decision on July 11th, 2007, with the following dispositive part: Determination. That, after deeming that the lawsuit presented by Nordika's, SL against Norteas, SL, was grounded in part, I hereby declare: a) That Norteas, SL violates the exclusive right of Nordika's over its unregistered Community model for household slippers, specifically, Nordikas Dinamik model, by manufacturing and selling slippers as stipulated in the eighth legal argument in said decision (drawing included), and I hereby order Norteas, SL to: a) Be subject to and duly bound by the decision above; b) remove and destroy, at its expense, the slippers manufactured and advertising materials under the terms established in the thirtieth legal argument in the decision; d) compensate Nordika's with a sum of five hundred and eighty-nine euros and sixty-six cents (589.66) for damages and one percent of revenue earned by the defendant through the slippers incorporating the protected model according to that established in the thirtieth legal argument; e) publish this decision in the newspaper, El Mundo, with national coverage, also in the terms stipulated in the thirtieth legal argument. The defendant is absolved of all other accusations. Each party shall pay the cost of its own representation, and they shall pay half of the shared costs each.

FOURTH. The sentence dictated by the Mercantile Court of Alicante, Number One on July 11th, 2007, was appealed by the claimant, Nordika's, S.L.

After duly presenting said appeal, it was elevated to the Provincial Court of Alicante which ceded it to the Eighth Section, The Community Brand and Community Drawings and Models Court. The latter processed said appeal and issued its decision on January 18th, 2008, with the following dispositive part: We hereby determine: We dismiss the appeal against the sentence dictated by the Court of Community Brand and Community Drawings and Models, Number 1, on July 11th, 2007, regarding the actions from which this Case stems, we duly confirm said legal sentence, and expressly order the appellant to pay all costs of this appeal. FIFTH. Nordika's, S.L.s legal representative prepared and presented an appeal for cassation against the sentence dictated by the Eighth Section of the Provincial Court of Alicantes sentence dated January 18th, 2008. In its decision dictated March 13th 2008, said Appeals Court raised the appeal to the Supreme Courts First Section which issued its decision on July 7th, 2009: "1. To admit the appeal for cassation presented by Nordika's, S.L., against the sentence dictated on January 18th, 2008, by the Provincial Court of Alicante (Eighth Section, Court of Community Brands) in appeal case 578/c-21/07 stemming from the decisions regarding lawsuit number 503/06 by the Court of Community Brand and Community Drawings and Models, Number One; 2. to present a written copy of the formalised appeal for cassation presented, with its attached documents, to the appealed party which has twenty days to present its opposition in writing at the Clerks Office during this period. SIXTH. The appeal for cassation presented by Nordika's, S.L.s legal representatives against the sentence dictated by the Eighth Section of the Provincial Court of Alicante dated January 18th, 2008, consists of a single motive in which the appellant, based on Article 477 in the Law on Civil Suits, Section 2, Ordinal 3, denounces: A. The violation of Article 7 in the Civil Code and jurisprudence regarding the concept of bad faith, and Article 51, Section 1, Letter B in the Law 17/2001, dated December 7th.

B. The violation of Article 6, Section 1, Letter B, Article 8 and Article 52, Section 1, in the Law 17/2001, dated December 7th.

C. The violation of Article 34, Section 2, in the Law 17/2001, dated December 7th, Article 9, Section 1, and Articles 14 and 16 in Council Regulation (EC) number 40/94, dated December 20th, 1993. D. The incorrect interpretation of procedural doctrine and the principle of legal certainty. E. The violation of Articles 5, 6, 11 and 12 in Law 3/1991, dated January 10th, on unfair competition. SEVENTH. Exercising the right to respond, the Solicitor, Jos Pedro Vila Rodrguez, in due representation of Norteas, S.L., contested this appeal, requesting that it be dismissed as it was groundless. EIGHTH. As not all the parties requested a public hearing, May 25th, 2011, was set as the day for the Court to vote and issue its judgement, as occurred on said date. The Honourable Jos Ramn Ferrndiz Gabriel has served as JudgeRapporteur.

Legal Grounds
FIRST. Both instances have determined that the defendant, Norteas, SL, has violated the rights of Nordika's, SL, the claimant, over an unregistered Community model consisting of the design for wool slippers in accordance with Article 19, Section 2, in Council Regulation (EC) number 6/2002, dated December 12th, 2001, on community drawings and models. However, both the Court of First Instance as well as the Provincial Court dismissed the other allegations Nordika's, SL presented in its lawsuit against Norteas, SL, specifically: 1. Requesting the annulment of the Spanish brand registered by the

defendant, brand number 2622759 a mixed brand, combining the letters N's, the word, Nortea's, and a rectangular figure. Said brand had been granted to differentiate the claimants shoes, amongst other products. The claimants motives were twofold: a) Norteas, SL had requested to register the brand in bad faith and, as such, Article 51, Section 1, Letter B in Law 17/2001, dated December 7th applied; and b) the existence of said image generated the risk of confusion with two of the claimants priority brands one national brand, mixed and consisting of the combination between the capitalised letter N, a rectangle and the word, Nordika's, granted with number 2337953 to identify class-25 products, and another Community brand with the same design to differentiate an identical type of product, arguing that Article 6, Section 1, Letter B, and Articles 8 and 52, Section 1, in the same Law 17/2001 applied. 2. Arguing that the defendant violated the claimants two brands described above by using its own brand, also described above, in accordance with Article 34, Section 2, Letter B, and Articles 40 and 41, all within the Law on Brands. And, 3. Declaring the defendant guilty of and condemning the defendant for having carried out illicit acts as described in Articles 5, 6, 11 and 12 in Law 3/1991, dated January 10th, on unfair competition. The sentence regarding the appeal was then further appealed for cassation by the claimant, the ultimate aim being for all the other allegations to be upheld. This appeal consists of a single motive, though divided into five parts. For greater clarity, we shall treat them as if they had been presented as independent motives.

SECOND. In the first motive in Nordikas, SLs appeal for cassation, it argues that Article 7 in the Civil Code, as interpreted in jurisprudence, and Article 51, Section 1, Letter B in Law 17/2001, dated December 7th, on brands, have been violated. It alleges that the Appeals Court incorrectly interpreted said legal stipulations and that it seemed contradictory to affirm that the defendant intentionally copied the Community model slippers for which the claimant was the titleholder and then denying that the defendant had acted in bad faith when it requested to register the national mixed brand 2622759, Nortea's, to differentiate the violating products, as said image had previously been the claimants and that the defendant presented its request shortly after deciding to sell the imitated slippers. The claimant added that the similarities in the image registered by the defendant and which currently belong to the latter were evidence of an attempt to generate, in this respect as well, the possible risk of error whether by confusion or association, amongst consumers and, at the same time, an attempt to take advantage of the reputation of the claimants products. In reference to the cause for total annulment foreseen in Article 51, Section 1, Letter B in Law 17/2001, the Appeals Court confirmed the appealed decision and used three different arguments to dismiss the appeal: a) The inexistence of a risk of confusion, something it had already argued when deciding on the issue of relative annulment based on Article 52, Section 1, with respect to Article 6, Section 1, Letter B in Law 17/2001; b) the brand the claimant had owned had expired due to not renewing said brand later registered legally by the defendant; and c) the determination that the Community model had been violated and the illegality of the copy of the claimants slipper design. I. Before examining the motive, we should remember that, presented as such, as signalled in Sentences 1264/2001, dated December 28th, 1211/2002, dated December 16th, 827/2003, dated September 17th, 409/2006, dated April 6th, and 462/2009, dated June 30th, amongst many others, the affirmation or negation of good faith is, in terms of an extraordinary appeal for annulment, an issue of fact whose determination pertains to the Courts of First Instance. However, it also implies, based on duly proven evidence, the use of an indeterminate legal concept in which the conduct in question has to be subsumed by means of an operation which can be subject to appellate review.

In this respect, Sentence 278/2010, dated May 13th, specified that the appreciation of bad faith, from the perspective of determining matters of fact, corresponds to evaluating evidence. However, the legal meaning of said facts, once demonstrated, are part of a legal technical trial which cassation allows to be re-evaluated. In accordance with the above, then, the facts declared to be proven in the diverse instances have to be respected during the appeals, while their classification under the concept of good faith can be revised in said appeal. II. This distinction between fact-based judgements, ruled by the norms governing evidence assessment and value-based judgements, based on what has been demonstrated and which allow us to confirm the relation between the factual assumption in question with the wording in the applicable norm, also affects the affirmation or negation of the risk of confusion as highlighted in Sentences 717/2006, dated July 7th, 1230/2008, dated January 15th, 2009, and 119/2010, dated March 18th, amongst many others. THIRD. The merely optional norm for EU Member States included in Letter D, Section 2, Article 3 in Council Directive 89/104/EEC has been incorporated in Article 51, Section 1, Letter B in Law 17/2001, dated December 7th which describes that a cause for the absolute annulment of a brand registration is if the registering party has acted in bad faith. The sanction for violating the good faith principle serves as an escape valve for the system, allowing us to evaluate the behaviour of the party requesting that a brand be registered, though not in light of the rest of the legislation on brands but comparing it from an objective perspective with the model of behaviour which, in the concrete situation evaluated, can be socially required. At this level, good faith refers to a standard or archetype, as pointed out in Sentences 760/2010, dated November 23rd and 462/2009, dated June 30th, the latter in relation with Article 3, Section 2, Law 32/1988, dated November 10th. However, we cannot eschew the subjective dimension in which good faith is identified with a psychological state related to ignorance or mistaken belief which, like all errors, has to be pardonable to be able to take it into consideration.

One of the typical manifestations of having acted in bad faith in this area is when a party attempts to register a brand to appear to have an inexistent connection between the products that the brand identifies or will identify and those of another party which are distinguished by another name, the aim of having the first partys image resemble the second partys to obtain the favour of consumers, taking undue advantage of the seconds reputation. That said, the proven facts described in the appealed sentence justify applying the sanction of absolute annulment in question for the brand referred to in this motive. In effect, it has been proven that Norteas, SL requested the mentioned registration which, as presented, was a mixed brand which had belonged to Nordika's, SL, until its expiry due to not renewing it with the clear and proven purpose to use it to specifically identify a type of slipper in a legal declaration deemed firm and representing a copy as per Section 2, Article 19 in Council Regulation (EC) number 6/2002, dated December 12th, 2001 of the model used by the claimant to manufacture its products and which has an irrefutable presence in the market in which it distinguishes itself with the mixed brands, both national and Community, numbers 2337953 and 1801653 of which it is the titleholder. In this context, the demonstrated imitation of the claimants products and the identification of the violating slippers with a brand that had pertained to the claimant multiply the significance of the existing similarities between one and another brand, fundamentally due to their similar mixed compositions, the importance given to the letter N and the use of the apostrophe to designate the Anglo-Saxon possessive case. Though the effect of this tinges the request to register the brand with a component of bad faith in the sense of archetypical behaviour based on prior knowledge of the priority brands, its affirmation is not incompatible with the negation by the Courts of First Instance regarding the concurrence of the risk of confusion and, as such, the violation of the corresponding prohibition established in Article 6, Section 1, Letter B, in relation to Article 52, Section 1, both included in Law 17/2001.

For all the above, this motive has to be allowed. FOURTH. Allowing this first motive makes it unnecessary to examine two others: The second, in which the appellant aims to have the same registration declared annulled, though this time for violating the prohibition established in Article 6, Section 1, Letter B, related to Article 52, Section 1, both in Law 17/2001, dated December 7th the norms indicated as those that have been violated. And the fourth motive in which, without identifying the specific rule violated a fact sufficient in itself to dismiss this motive, the appellant aims in order to annul the entry in the registry that the appellants own acts not be given any importance. FIFTH. In the third motive in the appellants appeal for cassation, Nordika's, SL denounces the violation of Article 34, Section 2, in Law 17/2001, dated December 7th, on brands, with respect to Sections 1 in Articles 9, 14 and 16 in Council Regulation (EC) 40/94, dated December 20th, 1993, on Community brands. The appellant affirms that the Appeals Court did not correctly address the issue in its proceedings as it did not take into account the overall impression the defendants brand had on its primary target. At the same time, the appellant also maintains that the Court of First Instance had broadened the requirements excessively for the appellant to prove the risk it was denouncing. SIXTH. The legislation on brands and design and others not mentioned in this motive protect subjective rights over the corresponding immaterial goods, goods endowed with exclusive power and erga omnes (above all others) reach. Legislation on unfair competition does not have that mission but to serve as an instrument to guide behaviours in the market. It is true that imitating a product or its image which serves to differentiate it from others can upset the correct functioning of the laws of supply and demand by generating possible risk of mistakes amongst consumers about the business origin of said product and, consequently, mar the decision of the person deciding to purchase it. It can also imply taking advantage of the efforts a competitor has made to achieve its reputation.

However, it is also true that the connection between norms may justify that those which typify certain concurrent acts enter into effect when the invasion of the objective ambit regarding the exclusive power recognised to the titleholder of a right over an especially protected immaterial good results in a violation of the rules governing the market. That notwithstanding, for this the alleged behaviour or the resulting consequences of those actions cannot be the same as those considered for the protection of the repeated subjective rights. If both are the same, the applicable legislation is, exclusively, the one which is specifically aimed at protecting those rights. That similarity occurs in the case the appeal refers to, a fact the Appeals Court correctly assessed in its sentence. This motive is found to be groundless. NINTH. The acceptance of part of the appeal for cassation determines that a special determination regarding costs is not warranted in accordance with Articles 394 and 398 in the Law on Civil Proceedings. The claimants appeal should have been deemed founded, also in part. For this reason, the same decision fulfils this with respect to the costs caused by this appeal. For all that presented herein, on behalf of His Majesty, the King, and for the authority conferred upon us by the Spanish people and their Constitution,

Decision
We declare, first, that the appeal for cassation presented by Nordika's, SL, against the decision dictated by the Provincial Court of Alicante, Eighth Section, on January 18th, 2008, is grounded in part. As a result, we hereby annul said sentence and, in its place, decide favourably in part for the appeal for cassation presented by Nordika's, SL against the decision of the Mercantile Court of Alicante, Number One, dated July 11th, 2007, and declare that the Spanish brand number 2622759 granted to Norteas, SL is hereby annulled. We maintain without change the rest of the decisions contained in said resolution.

As regards the costs of the appeal and cassation, no condemnatory decision is warranted. We order that that included in the third section of Article sixty-one in Law 17/2001, dated December 7th, on brands, be fulfilled. We order that the corresponding certification be issued and sent to the mentioned Court, returning the forwarded decision and appealed case originally sent. As such, by virtue of this, our sentence, which will be included in the LEGISLATIVE ARCHIVE, issuing for this effect however many copies are needed, we hereby do so pronounce, order and sign. Jess Corbal Fernndez Jos Ramn Ferrandiz Gabriel Antonio Salas Carceller Encarnacin Roca Trias Signed and sealed.

PUBLICATION. The above sentence was read and published by the Honourable Jos Ramn Ferrandiz Gabriel, Judge-Rapporteur in these decisions, celebrated in a Public Hearing in the First Division of the Supreme Court held today. As Secretary of said hearing, I do so attest.

This text originated form the Spanish Judiciarys Documentation Centre (CENDOJ). Its content corresponds in full to the document in CENDOJs archives.