Journal of Intellectual Property Law & Practice (2011) doi: 10.1093/jiplp/jpr054, first published online: 10 May 2011
Rothschilds Continuation Holdings AG and Rothschild España, S.A. v Rothschild Immobilien-Vermögensverwaltung und Treuhand, S.A., Decision of the Mallorca Commercial Registry, 11 March 2010
The Mallorca Commercial Registry has wound up a company for infringement of pre-existing intellectual property rights under a special provision of the Spanish Trade Mark Act.
Legal context
The Spanish Trade Marks Act (Ley 17/2001, de 7 de diciembre, de Marcas) establishes in its 17th Additional Provision that a company may be wound up if specific circumstances occur: where a judgment in trade mark infringement proceedings orders a change of company name and the change is not made within one year, the company shall be wound up for all legal effects and purposes, and the Registrar of Companies shall expunge it from the Register.
Facts
Rothschilds Continuation Holdings AG and Rothschild España, S.A. (Rothschild) initiated trade mark and unfair competition actions in 2004 against a Spanish company, Rothschild Immobilien-Vermögensverwaltung und Treuhand, S.A. (Rothschild Immobilien) and a shareholder-director, a German citizen surnamed ‘Rothschild’. The defendant company offered financial and real estate advisory services in Palma de Mallorca, Spain.
The parties to the proceedings reached a settlement before the end of the trial. The settlement agreement, which was approved by the Court, included the obligation on Rothschild Immobilien to amend its company name to remove the word ‘Rothschild’. The defendants complied with all the settlement obligations except the change of company name. After various attempts to resolve the problem amicably, Rothschild asked the Palma de Mallorca Commercial Court to enforce the settlement agreement by means of a court order. That order was granted in 2007 but, again, not complied with by the defendants.
Rothschild finally filed the settlement agreement approved by the Court in the ledger of Rothschild Immobilien at the Mallorca Commercial Registry. Following a year's inaction by the defendant company, the plaintiff asked the Commercial Registrar to wind up Rothschild Immobilien pursuant to the 17th Additional Provision.
The Commercial Registrar accepted Rothschild's petition and registered the winding up of Rothschild Immobilien on 11 March 2010.
Analysis
Lack of coordination between the Spanish Central Commercial Registry and the Spanish Patent and Trade Mark OfficeThe defendants would not have been able to offer services under the ROTHSCHILD trade mark due to the priority of the registered rights held by Rothschild. However, they used a loophole to incorporate a company whose name merely provided a pretext to offer services under the ROTHSCHILD mark.
The 14th Additional Provision of the Trade Mark Act sets forth that the registry bodies empowered to grant or verify company names shall refuse the name applied for if it coincides or may be confused with well-known and reputed trade marks or trade names (unless the holder of the trade mark or trade name so authorizes).
Nevertheless, current Spanish legislation does not set up any system of coordination between the Spanish Central Commercial Registry—which is the institution with powers to grant a company name—and the Spanish Patent and Trade Mark Office or any system allowing third parties to file oppositions against would-be company names.
Therefore, in the event that someone registers a company name infringing IP rights held by a third party, this can only be challenged at a later stage by pursuing court actions of IP infringement, invalidity of company names, or unfair competition.
In this context, the Spanish Directorate-General of Registries and Notaries—which is the public body supervising the Spanish Central Commercial Registry—has stated the following (Resolution dated 4 October 2001 [RJ 2002\719]):
The doctrine of this institution, after pointing out the evident conceptual and functional differences between the company name and the trade name—with the first being used to distinguish a legal subject party to legal relations and the holder of assets with a responsibility towards them, and the second being used in order to avoid the likelihood of confusion regarding entrepreneurial activities pursued in trade—has reiterated the expedience of greater coordination between corporate law and trade mark law to avoid the granting of company names coinciding with trade names or publicly well-known trade marks (cfr. resolutions dated 24/02/1999, 24/06/1999, 25/06/1999 and 10/06/2000) [as it is necessary] to avoid the confusion which said identity may engender in trade, even if there is no confusion between companies. Such coordination should prevent, in line with the prohibition set forth by article 7.3 of the Spanish Civil Code, the abuse of rights that would arise if the Spanish Central Commercial Registry's silence was exploited to adopt names socially related to an existing entity in a significant manner, names which may well be trade names with evident significance given that sometimes there is no clear distinction in trade between the entrepreneur as a legal entity and the entrepreneurial activity that it pursues.
This interpretation was supported by the Spanish Supreme Court, which considered it to be ‘an abuse of rights to use a company name outside the limits of its adequate and licit use’ (Judgment of 28 September 2000 [RJ 2000\8128]). Thus it has been deemed essential to change the company name in the event of conflict between company names and trade marks to avoid the likely confusion that would otherwise be caused among consumers.
A similar case was analysed by the 15th Section of the Barcelona Provincial Court (Judgment of 16 February 2000, AC 2000\534), involving the consulting firm McKinsey & Company. McKinsey sued a Spanish company, McKinsey División España, S.L. whose corporate purpose included the provision of consultancy services, pursuing delinquent accounts, and carrying out bureaucratic procedures, and which advertised itself as ‘the American firm’. McKinsey División España, S.L. was ordered to (i) change its company name; (ii) stop using McKinsey trade marks; (iii) publish the whole judgment in La Vanguadia and El Periódico de Catalunya (the two major Catalan newspapers); and (iv) pay all litigation costs. Similarly, the defendants had incorporated the company to offer services under the McKinsey trade marks which were protected by McKinsey & Company, Inc. and McKinsey & Company, S.L.
Even a certain Spanish listed company has recently been put on the spot by a legal challenge. Affirma Consultores, S.L., a consulting firm, initiated actions against the Spanish real estate company Afirma Grupo Inmobiliario, S.A. (BMAD: QBT) regarding the use of the term ‘Afirma’. The Community Trade Mark Court of Alicante (Decision of 25 February 2010, La Ley 21386/2010) held that ‘Affirma’ and ‘Afirma’ might create a similar perception among consumers and therefore granted a preliminary injunction in favour of the claimant—which was the holder of prior Community trade marks. The Court ordered the defendant to (i) cease its use of the term ‘Afirma’ in its company name, and (ii) register the invalidity claim against that trade mark with the Spanish Patent and Trade Mark Office. As a result, the defendant eventually changed its company name to Quabit Inmobiliaria, S.A.
Limitations to the exclusive rights of trade marksUnder Article 37 (a) of the Trade Mark Act, and provided that the use made respects honest practice in industrial or commercial matters, the right to a trade mark will not entitle the right holder to prohibit a third party from using its own name or address in the course of its business.
It was thought for some time that this name limitation applied only to natural persons—indeed this notion was supported by the joint declaration of the Council of the European Union and the Commission of the European Communities (recorded in the minutes of the Council when Directive 89/104 was adopted) and also by leading Spanish commentators (eg C Fernández Nóvoa, Tratado sobre Derecho de Marcas, Madrid, 2004, 456–458). However, both the Court of Justice of the European Union (Cases C-245/02 Anheuser-Busch v Budějovický Budvar [2004] and C-17/06 Céline SARL v Céline SA [2007]) and the Spanish Supreme Court (Judgment of 2 March 2009 [RJ 2009\2789]) have interpreted the provision in the sense that it is not, in fact, limited to the names of natural persons.
Be that as it may, in Rothschild's view Article 37(a) of the Trade Mark Act would not apply in this case as Rothschild Immobilien failed to act in accordance with honest practices. Reasons included the following: (i) it failed to show due care by conducting a search of registered ROTHSCHILD trade marks before starting operations; (ii) it acted in bad faith using only the part of the name that coincided with the well-known trade mark registered by Rothschild; (iii) its services fell within the same category as those of Rothschild (class 36 relating to both real estate and financial services); (iv) it sought to confuse the public and profit from a third party's reputation; and (v) the ROTHSCHILD mark was illegitimately used both as a trade mark and as trade name to identify its products and services in the market, in actions categorized as unfair competition.
Practical significance
De lege ferenda, it would be desirable to see a system of coordination between the Spanish Central Commercial Registry and the Spanish Patent and Trade Mark Office in order to prevent the registration of company names that infringe pre-existing IP rights.
Meanwhile, the Spanish legal system offers a powerful remedy—the winding-up of companies. This is significant not only as it is a corporate remedy for an IP issue, but also because to our knowledge it is unique to Spain.
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