Background

On 27 June 2024, the UK Intellectual Property Office (UKIPO) issued a decision (under case reference O/0611/24) for a trade mark opposition case in which the opponent (Netflix Studios, LLC) had claimed the applicant (Zheng Shu) had filed a trade mark application in bad faith and contrary to the law of passing off.

The mark in question was for the sign “Thinkingcaphellfireclub”, filed by Zheng Shu on 10 June 2022 in relation to toys and games.  It was opposed by Netflix on 1 September 2022.

The trade marks THINKING CAP and HELLFIRE CLUB originate from Netflix’s hugely successful series “Stranger Things”.

On 27 May 2022, Netflix released Part One of Season Four of “Stranger Things”, with Part Two being released on 1 July 2022.

In the fourth season, the THINKING CAP and HELLFIRE CLUB signs were introduced, whereby a main character in the series was seen regularly wearing a THINKING CAP baseball cap such as that depicted below:

The term HELLFIRE CLUB was the name of a “Dungeons & Dragons” club that a number of the main characters attended in the series.

HELLFIRE CLUB was also the title of the first episode of Season Four.

A HELLFIRE CLUB T-shirt, as worn by the members of the “Dungeons & Dragons” club in the series became a popular piece of merchandise for Netflix following the release of the fourth season.

Following the success of Season Four, the opponent partnered with a number of retailers, such as HMV and Walmart, to sell merchandise, including toys, all bearing the THINKING CAP and HELLFIRE CLUB signs.

What is Bad Faith?

In trade mark law, the concept of bad faith relates to a dishonest intention or other sinister motive on the part of the applicant.

At its heart it involves conduct which departs from accepted standards of ethical behaviour or honest commercial and business practices.

Examples of applications filed in bad faith could be:

• Trade mark squatting (acquiring trade marks not to use but to sell back, or licence, to the legitimate brand owners).
• Filing trade marks not for the applicant’s own trade mark use but merely for the purpose of creating conflict or blocking others.
• Intentionally seeking to mislead the public.

It is important to note that it does not constitute bad faith by simply applying to register a trade mark that is identical or similar to another party’s; instead, there must be evidence of a dishonest act or intention on the part of the applicant.

The presumption of good faith means that a trade mark application is considered to have been made in good faith until it is proven otherwise.

Bad faith is notoriously difficult to prove because it usually comes down to the applicant’s state of mind at the date when an application is filed and the burden of evidence to prove this falls on the attacking party.

What is Passing Off?

Passing off occurs when a business misleads (deceives) customers into believing its goods or services are those of another business, so as to benefit from the repute and goodwill the other business enjoys under the same or similar mark.

As a result of this, misrepresentation and damage could or does occur.

The Opponent’s Arguments for Passing Off

In this trade mark opposition case, Netflix argued that in view of the success of the “Stranger Things” series and the widespread use of the title of the series, as well as the marks and signs accruing from the series in connection with a wide variety of products including toys, they had acquired substantial goodwill and reputation in such marks and signs, including in the signs THINKING CAP and HELLFIRE CLUB.

Therefore, as a result of this acquired goodwill and reputation, use of the applied-for mark would have been a misrepresentation to the public in that the applicant’s goods would be misconstrued to be connected with the Netflix business and properly licensed.

It was pointed out that given the timing of the application, which was filed less than two weeks following the release of the first part of Season Four of the Stranger Things series, the applied-for mark must have been chosen because of the use of the THINKING CAP and HELLFIRE CLUB signs in the Stranger Things series and with the intention that consumers would make a connection between the goods bearing the applicant’s mark and the Netflix series.

As a consequence of this misrepresentation, Netflix argued there would be damage to its reputation, dilution or erosion of goodwill and reputation, and also loss of opportunity for Netflix to expand or licence the marks as merchandised items.

The Opponent’s Arguments for Bad Faith

Netflix argued that Mr Shu must have known about the existence of the signs THINKING CAP and HELLFIRE CLUB made famous by the “Stranger Things” series and that he would have been  aware substantial goodwill and reputation would have accumulated in those signs from the broader “Stranger Things” series.

Further, they argued that the applicant’s sole purpose was to “free ride” on the substantial goodwill and reputation of the signs THINKING CAP and HELLFIRE CLUB and to take advantage of the same by misrepresenting to the relevant public, who could conceivably deduce that the applicant’s goods were economically-connected with the Netflix and the Stranger Things series.

Lastly, Netflix argued that registration or use of the applied-for mark without licence or authorisation would constitute an act of bad faith because it would be tantamount to conduct that would depart from the accepted principles of ethical behaviour or honest commercial and business practices.

The Applicant’s Defence

In his defence, Mr Shu submitted (somewhat weakly) that consumers in China cannot access TV series such as “Stranger Things” due to network restrictions there against external Western websites, including Netflix,

He also claimed that because he was domiciled in China he did not know about “Netflix” nor marks emanating from the “Stranger Things” series.

The Decision

In respect of passing off, the Netflix case did not succeed.

Their evidence was considered to be deficient by the Hearing Officer – primarily because it had not been dated correctly.

Further, Netflix failed to prove it had goodwill associated with the signs THINKING CAP and HELLFIRE CLUB prior to the “relevant date”, which in this case was the date the application had been filed by Zheng Shu.

The Hearing Officer considered that Netflix could not possibly have built up this goodwill in the two weeks after the release of Season Four and before the date the application was filed.

The opposition succeeded, however, on the grounds of bad faith.

The Hearing Officer considered that, although the words in the applied-for mark were conjoined as“Thinkingcaphellfireclub”, the elements “THINKING CAP” and “HELLFIRE CLUB” were easily discernable within the mark.

In other words, it was quite obvious what the applicant was trying to do.

In addition to this, the applicant had sought registration for classic “merchandising” goods such as toys, masks, dolls and puppets. All of these products could be manifested from fictional  characters appearing in the “Stranger Things” series.

The Hearing Officer considered that, given the popularity of the “Stranger Things” series, the signs THINKING CAP and HELL FIRE CLUB would have been associated with this series prior to the relevant date and that they were not terms the applicant could have innocently invented.

Crucially, no evidence had been submitted by Mr Shu to prove that the “Stranger Things” series could not be accessed in China, or that he had been living in China at the time he filed the application.

In short, there was no innocent explanation for the applicant’s conduct.

The Hearing Officer concluded that the applicant’s attempt to register the mark was based on an illegitimate intention of commercial purposes, with conduct intended to deceive the public by selling unlicensed merchandise and thereby unfairly taking advantage of Netflix’s intellectual property rights.

The application was duly rejected.

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