Irish trade mark ruling provides lessons on brand ownership

The ruling, which favoured Diesel S.P.A. (Diesel Italy) in its dispute with Montex Holdings Limited (Montex), is the latest in a 30-year saga. As a result of the judgment, the Italian company is entitled to register the trade marks “Diesel” (word) and “Diesel & Logo” (“Device Mark”) in respect of clothing, footwear and headgear in Ireland. Mr Justice Cregan held that Montex had not provided credible evidence of its bona fide ownership of the Diesel mark.

Background

The dispute, which originates from a 1992 Irish trade mark filing for the word mark Diesel, spans 30 years. The dispute was considered with reference to the Trade Mark Act 1963 (the 1963 Act) as the legislation that superseded it, the Trade Mark Act 1996, was enacted on 1 July 1996, after the event giving rise to the dispute.

Diesel Italy is a world-renowned producer of jeans under the Diesel brand. It first began to sell its goods under the brand name in 1978, selling its jeans in Ireland in 1982. Montex first began to manufacture jeans in Ireland under the name Diesel in late 1979/early 1980.

On 18 September 1992, Montex applied to register the Diesel mark in Ireland. Diesel Italy subsequently applied, on 11 January 1994, to register the trade marks, Diesel and Device Mark. Both parties issued opposition proceedings against the other’s trade mark application. Montex was unsuccessful in its trade mark application, which ultimately ended up before the Supreme Court.

The current decision concerns Diesel Italy’s appeal of the 2012 decision of the Controller of Patents, Designs and Trade Marks (the Controller), who upheld Montex’s opposition and refused to register Diesel Italy’s marks. That decision was made on the basis that Diesel Italy was not the proprietor of the trade mark; and that the application failed to meet the requirements of section 19 of the 1963 Act. Section 19 of the 1963 Act prohibits registration of a trade mark where it is likely to deceive or cause confusion or would be contrary to law or morality, or any scandalous design.

Central issues

Mr Justice Cregan considered that there were three central issues to be addressed:

• who the owner of the mark “Diesel” was – Diesel Italy or Montex?;
• whether any registration of Diesel Italy’s mark is likely to cause confusion under section 19 of the 1963 Act; and
• whether the court should exercise its discretion to refuse a registration under section 25 of the 1963 Act.

Good faith ownership

Whilst the judge accepted Montex’s evidence that it acquired the trade mark on foot of a receivership sale, he did not believe that Montex had a bona fide ownership claim. Mr Justice Cregan was critical of the fact that Montex never refuted, in any of its evidence filed before the Irish Patents Office, Diesel Italy’s allegations that the adoption of the mark “Diesel” by Montex could not be classified as honest. It followed, the judge reasoned, that any use made of Diesel by Montex or its alleged predecessor in title was not bona fide.

According to evidence submitted by Patrick McKenna, a director of Montex, the inspiration for the Diesel sign was said to come from a Texaco filling station adjacent to its factory. As the creator of the brand was deceased and could not be cross-examined, this part of the evidence was rejected by Mr Justice Cregan as it offended the rule against hearsay. The judge also discounted the McKenna’s remaining evidence because of the lapse of time between the events and his written and oral evidence. He noted that McKenna’s version of events was neither corroborated by any witnesses of Montex nor was there any documentary evidence to support his claim. He further noted discrepancies in McKenna’s claim of the date of first sale when compared to the evidence of other witnesses.

Mr Justice Cregan agreed with Diesel Italy that the coincidence of similar use of the name Diesel was so improbable as to be extremely unlikely. Ultimately, the judge held on the balance of probabilities that Montex had copied the Diesel Italy mark and had acted dishonestly.

Montex had also submitted that it is the owner of the mark because it was the company which first used the mark in Ireland. It further submitted that bad faith does not arise in relation to ownership except in limited cases such as an employee/employer relationship. Dismissing this argument, Mr Justice Cregan held that use of the mark “Diesel” by Montex amounts to an appropriation of the property of Diesel Italy by Montex.

The issue of confusion

Where there is simultaneous use of two identical trade marks, the judge held it was likely to deceive and/or cause confusion under section 19 of the 1963 Act. Furthermore, he stated that Montex could not rely on its dishonest, wrongful and/or unlawful acts of copying to argue that there would be confusion or deception in the marketplace when it was the cause of that deception.

Considering the foregoing, the judge held that an injunction should be granted to restrain the unlawful use by Montex of the Diesel mark as this would remove all risk of confusion and/or deception.

Exercise of discretion

The court was of the view that there were no grounds on which it should exercise its discretion to refuse registration of the trade marks by Diesel Italy.

Summary

The court held that Diesel Italy was the owner and proprietor of the mark “Diesel” and was therefore entitled to register “Diesel” as a trade mark in Ireland.

Lessons for other brand owners

Given what is at stake in this case, it is likely that the judgment will be appealed. Nonetheless, the decision does provide the following lessons which should be at the forefront of all brand owners’ minds:

• First, document the branding process rigorously. Although not a specific issue in this case, a brand owner should be able to provide evidence demonstrating ownership of its intellectual property rights, particularly any artwork relating to its logo;
• Second, register trade marks in a timely manner. While it is possible to rely on unregistered rights in Ireland, the threshold to prove unregistered rights is arduous;
• Third, ensure that trade marks are validly assigned or licensed. All assignment contracts and licences should be recorded and saved;
• Fourth, proactively assert your trade marks against potential infringements.

A version of this article was first published by Lexology.