Trade Names and Trademark Infringement Actions : LE MARQUIS

Disputes between trade names and trademarks reflect the complexity of trademark law and its implications for business operations. The Paris Court of Appeal examined the case of two Parisian hotels in a decision dated December 6, 2024, concluding that the continuous, peaceful, and public use of a trade name can bar an infringement action based on a subsequent trademark.

Trade Names and Trademarks: Can Coexisting Rights Prevail in Practice?

Two Parisian hotels were established a few years apart with nearly identical names. On one side, the hotel “Le Marquis” was founded in 2004 in the 15th arrondissement; on the other, the hotel “Marquis” was created in 2013 in the 8th arrondissement.

The parent company of the first establishment only registered several trademarks LE MARQUIS HOTEL and HOTEL MARQUIS in 2015. The owner of the second establishment registered several versions of the MARQUIS trademark in 2011 in Class 43 for accommodation and restaurant services.

Hostilities began in 2020 when the first-established hotel sent a cease-and-desist letter to its competitor. The latter responded by invoking the nullity of the trademarks registered in 2015 for violation of its prior trademarks. The Paris Court of Appeal issued an interesting decision on December 6, 2024.

The Fate of Later Trademarks

The fate of the later trademarks was straightforward: trademarks that are nearly identical to a prior trademark for identical services resulted in a logical annulment consistent with trademark law. The Court of Appeal rejected arguments based on unfair competition and parasitism invoked by the first hotel to escape the nullity of its trademarks.

This outcome is grounded in Article L.711-3 of the French Intellectual Property Code, which provides that a trademark cannot be validly registered if it infringes prior rights effective in France, particularly when it is identical or similar to an earlier registered trademark for identical or similar goods or services where there exists a likelihood of confusion in the minds of the public.

Trade Names as Prior Rights: Conditions and Requirements

The Paris Court of Appeal’s decision is particularly instructive regarding trademark infringement actions. The first hotel invoked the previous use of its trade name to defeat the infringement action and continue its operations. Dated evidence demonstrated continuous, public, and unequivocal use of the trade name.

This trade name constituted a prior right that barred the claims of the second-established company. Therefore, the first-established hotel had not committed infringement.

Article L.711-3, paragraph 4 of the French Intellectual Property Code specifically recognizes trade names as prior rights. It states that a trademark cannot be validly registered if it infringes “a trade name, a business sign or a domain name, whose scope is not merely local, if there exists a likelihood of confusion in the minds of the public.”

This provision is derived from European law, particularly Article 5(4)(b) of EU Directive 2015/2436, which harmonizes trademark protection across EU member states.

Geographic Scope Requirement

However, the trademarks registered by the hotel in the 8th arrondissement were not invalidated. Indeed, the trade name must have a scope that is not merely local, in accordance with Article L.711-3 of the French Intellectual Property Code. Since this point was not debated, the Court of Appeal did not rule on the geographic scope of the trade name.

Under French and European trademark law, trade names enjoy protection as prior rights only if their reputation extends beyond a purely local area. The requirement for non-local scope ensures that national trademark rights are not unduly restricted by purely localized commercial activities.

The Five-Year Acquiescence Rule: Forfeiture Through Tolerance

Finally, the forfeiture by tolerance of the trademarks for more than five years deprived the first-established hotel of the ability to invoke the nullity of the trademarks.

This principle is provided for in Article L.716-4-5 of the French Intellectual Property Code, which implements Article 9 of EU Directive 2015/2436.

Article 9(1) of Directive 2015/2436 provides: Where, in a Member State, the proprietor of an earlier trade mark has acquiesced, for a period of five successive years, in the use of a later trade mark registered in that Member State while being aware of such use, that proprietor shall no longer be entitled on the basis of the earlier trade mark to apply for a declaration that the later trade mark is invalid in respect of the goods or services for which the later trade mark has been used, unless registration of the later trade mark was applied for in bad faith.

Key Elements of Acquiescence

For acquiescence to apply, several conditions must be met:

1. Knowledge: The owner of the earlier right must be aware of both the registration and use of the later trademark
2. Duration: The tolerance must continue for five consecutive years
3. Continuous Use: The later trademark must be continuously used during this period
4. Good Faith: The later trademark must not have been applied for in bad faith
   

Important Distinction: Under recent European case law, the five-year period begins when the proprietor becomes aware of the use of the later trademark, not necessarily when they become aware of its registration. The rationale is that use affects the market, while registration does not.

Stopping the Acquiescence Period

Critical Practice Point: Simply sending cease-and-desist letters is insufficient to stop the acquiescence period from running. To interrupt acquiescence, the trademark owner must file administrative proceedings (such as an opposition or cancellation action), or initiate court proceedings for infringement.

The action must be taken within the five-year period. In the Paris Court of Appeal’s decision, four years of litigation elapsed, illustrating the practical difficulties in navigating this rule.

Once acquiescence is established, it results in:

• Permanent loss of the right to seek invalidation of the later trademark
• Inability to prohibit use of the later trademark in infringement proceedings
• Forced coexistence between the trademarks
  

However, Article 9(3) of Directive 2015/2436 provides reciprocity: the proprietor of the later trademark also cannot oppose use of the earlier right, creating a mutual tolerance situation.

Final Outcome: Coexistence After Four Years of Litigation

Ultimately, the trademarks were invalidated but there was no prohibition on the use of the trade name. The two Marquis hotels are called to coexist. Their legal battle ended in a draw after four years of proceedings!

This demonstrates three fundamental aspects of trademark law:

1. The importance of registering a trademark before launching business activities
2. The need for comprehensive prior rights searches extending to trade names, corporate names, and domain names
3. The critical importance of trademark monitoring to enable swift action
   

Comparative Perspectives: U.S. Trademark Law

While this case involves French law implementing EU directives, similar principles exist in U.S. trademark law.

Prior Use Defense in the United States

Under U.S. law, trademark rights are based on the principle of “first-in-time, highest-in-right.” A defendant who can prove they used a mark first in commerce can defeat an infringement claim, even against a registered trademark.

Under the Lanham Act (15 U.S.C. § 1115), while federal registration creates a presumption of validity and nationwide priority, this presumption can be rebutted by evidence of prior use in a specific geographic area.

Key Differences from EU Law:

• U.S. law recognizes both registered rights and common law rights based on use
• Prior users may retain rights in their geographic territory even after later nationwide registration by another party
• The U.S. system does not have a formal “acquiescence” rule with a specific five-year period, but applies the equitable doctrines of laches and acquiescence

Elements of Acquiescence Defense in U.S. Law

In the United States, an acquiescence defense typically requires three elements:

1. The plaintiff (trademark owner) provided assurances that the defendant could use the mark
2. The defendant relied on such assurances
3. The defendant would experience undue prejudice if now required to cease use

Important Note: Unlike EU law’s automatic five-year rule, U.S. acquiescence requires active conduct by the plaintiff that amounts to assurance or consent, not merely passive tolerance.

Best Practices

For Trademark Owners

1. Register early: File trademark applications before market launch whenever possible
2. Conduct comprehensive searches: Include trade names, corporate names, and domain names in clearance searches
3. Monitor actively: Implement trademark watch services to detect conflicting filings and use
4. Act promptly: Take substantive action (not just warning letters) within five years of becoming aware of conflicting use
5. Consider geographic scope: Ensure trade names have more than local significance if relying on them as prior rights

For New Market Entrants

6. Clear comprehensively: Search not only trademark registers but also trade name databases and commercial directories
7. Document good faith: Maintain records of clearance searches and good faith efforts
8. Act defensively: If facing opposition, gather evidence of the opponent’s tolerance or acquiescence
9. Consider coexistence agreements: Negotiate territorial or product-based coexistence where appropriate

Conclusion

The evolution of trademark law under European jurisprudence validates the importance of actual use as a trademark in business operations for any sign whose protection is sought.

The Paris Court of Appeal’s decision serves as a reminder that trademark protection requires vigilance and timely action. The doctrine of acquiescence, derived from EU Directive 2015/2436 and implemented through Article L.716-4-5 of the French Intellectual Property Code, penalizes inaction.

For businesses operating internationally, understanding these nuances across different jurisdictions is essential for effective brand protection.

Stéphane Bellec, Attorney, Partner Cabinet De Baecque Bellec

Intellectual property attorney

sbellec@debaecque-avocats.com

Tél. + 33 (0) 1 53 29 90 00