Intellectual property practice frequently encounters situations in which a distributor registers a trademark in its own name without the supplier’s consent, someone registers a well-known sign before a foreign brand enters the Serbian market (in order to sell it later or to block market entry, so-called trademark squatting), a former business partner or employee files a trademark application in their own name contrary to what was agreed, or an application covers a broad list of goods with no intention of use, only to block competitors.

Does the principle whoever files first, owns the mark apply in such cases, or are there corrective mechanisms that prevent bad faith conduct by the applicant? The Law on Trademarks provides for an action contesting a trademark where the application was filed contrary to the principle of good faith and fair dealing, or where it breached a statutory or contractual obligation. However, the Law neither defines nor gives any closer guidance on what constitutes a bad faith trademark application.

What Is a Bad Faith Trademark Filing?

The starting point is the principle of good faith and fair dealing, to which the Law refers and which is one of the fundamental principles of the law of obligations. Bad faith is a subjective category, as it concerns what the applicant knew and intended. Since intention cannot be proven directly, it is established from objective circumstances, and the relevant moment is the filing date. The burden of proof lies with the party alleging bad faith, i.e. the claimant.

In Lindt (judgment C-529/07 of 11 June 2009), the Court of Justice of the EU held that bad faith must be assessed in light of all the circumstances at the time of filing. Three circumstances are assessed in particular: first, whether the applicant knew or must have known that a third party was using an identical or similar sign for identical or similar goods; second, whether the applicant intended to prevent that party from continuing to use the sign; and finally, the degree of legal protection enjoyed by the third party’s sign and by the sign applied for. Knowledge may even be presumed, but it is not sufficient in itself; it must be accompanied by a dishonest intention. As we will see, Serbian courts require the same two elements: knowledge and an intention contrary to the principle of good faith and fair dealing.

Subsequent case law of the Court of Justice of the EU has further developed the concept of a bad faith filing. According to the judgments in Koton (C-104/18 P of 12 September 2019) and Sky v SkyKick (C-371/18 of 29 January 2020), an application is made in bad faith where it is apparent from relevant and consistent indicia that the applicant did not intend to engage fairly in competition but rather, contrary to honest commercial practices, to undermine the interests of third parties or to obtain an exclusive right for purposes unrelated to the functions of a trademark, in particular the function of indicating origin. Bad faith does not require a likelihood of confusion, nor does it require the third party to use the sign for identical or similar goods. On the other hand, the fact that the applicant did not intend to use the mark for all the goods covered is not in itself bad faith; bad faith exists only if the aim was to harm others.

In European practice, bad faith is usually inferred from a combination of circumstances, the most common being: a prior business or personal relationship between the parties (distribution, agency, negotiations, employment, a joint project); identity of the signs, particularly where a fanciful or unusual element has been copied, making coincidence unlikely; the absence of own use and of any commercial logic behind the application; the timing of the filing, for example immediately after the end of cooperation or before the owner’s announced market entry; an offer to sell or license the mark to the injured party, or a demand for payment; and a pattern of conduct, where the same person files applications for several third-party marks.

Bad Faith Is Not a Ground for Refusal or Invalidity Before the Intellectual Property Office

The current Law on Trademarks of the Republic of Serbia has applied since 1 February 2020 and has not been amended since. Bad faith is not listed among the absolute or relative grounds for refusal. A trademark can only be declared invalid if the statutory conditions for protection were not met at the time of registration, so in administrative proceedings bad faith as such is a ground neither for refusing an application nor for invalidating a mark. Bad faith therefore cannot be invoked as a standalone ground either in an opposition or in an application for a declaration of invalidity.

Action Contesting a Trademark: The Court Can Transfer the Mark to the Injured Party

Where an application was filed contrary to the principle of good faith and fair dealing, a person whose legal interest has thereby been infringed may bring an action asking the court to declare them the applicant or the trademark owner. The same applies where the application breached a statutory or contractual obligation, for example a prohibition in a distribution agreement.

The following rules are important in practice:

• The Law on Trademarks sets no time limit for this action, unlike the action brought by the user of a well-known sign, which must be filed within five years of the mark’s entry in the register.
• Once the judgment becomes final, the court delivers it to the Intellectual Property Office, which enters the claimant in the register as the trademark owner.
• Rights acquired by third parties from the bad faith owner, such as a licence, cease on the date the new owner is entered in the register.
• If the bad faith owner sues the injured party for trademark infringement, the court must stay those proceedings until a final decision on the action contesting the trademark.
• The action may be filed while the application proceedings are still pending, in parallel with an opposition, because good faith is decided by the court, not by the Office (decision of the Commercial Court of Appeal 9 Pž 7019/21 of 26 August 2021).

The difficulty is that Serbian courts do not apply the same threshold for proving bad faith. In judgment Rev 14769/24 of 5 September 2024, the Supreme Court required the claimant to prove that, through long-standing use of its sign, it had acquired a certain degree of market presence and recognition in Serbia. In addition, the claimant had to prove that the defendant knew or must have known that an identical or similar sign belonged to the claimant, and that it filed the application with an intention contrary to the principle of good faith and fair dealing. In that case, the claimant had used the sign for two years in Belgrade and five years in the US, but the court found that the restaurant’s location and the number of social media followers did not prove sufficient recognition. Similarly, in judgment Prev 478/19 of 18 March 2021, the Supreme Court of Cassation held that bad faith cannot be inferred merely from earlier use of the sign. Both decisions were rendered under the previous law, whose provision on this action was identical to the one in the current Law.

The Commercial Court of Appeal, on the other hand, inferred bad faith from the circumstances of the business relationship in judgment 9 Pž 3646/21 of 9 February 2022. The defendant knew that the claimant was selling products under that sign in Serbia through a distributor and did not use the sign itself, so the court concluded that the aim was to prevent the claimant from using it.

Critical View: Transfer Instead of Cancellation

Success in the litigation transfers the mark to the claimant, but does not remove it from the register. Inconsistent court decisions in this area are a particular challenge for practitioners. If the claimant must prove that its sign is recognised on the Serbian market, the action for bad faith becomes almost identical to the protection of a well-known mark. The approach of the Commercial Court of Appeal, which infers bad faith from knowledge of a third party’s sign and the absence of own use, is closer to the position taken by the Court of Justice of the EU in Lindt. In our view, this approach should become the rule.

Registering Before Market Entry Costs Less Than Litigation

The mark should be filed in Serbia before entering the market or before appointing a distributor. The distribution agreement should expressly prohibit the distributor from registering the sign in its own name, since a breach of a contractual obligation in itself provides grounds for an action. The opposition period is only three months, so published applications should be monitored regularly. It is particularly advisable to keep evidence of use of the sign, and of the other party’s knowledge of it, from the first day of cooperation.

Where a contested application has already been filed, an opposition and a court action can be brought at the same time. The choice between them, an application for a declaration of invalidity and a request for transfer depends on whether the injured party wishes to take over the mark or to have it removed altogether.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.