Martina Schuster April 23 2012 Federal Court rules on burden of proof and exhaustion of trademark rights Klinkert Rechtsanwälte PartGmbB | Intellectual Property - Germany Martina Schuster Intellectual Property IntroductionExhaustion of trademark rightsPlacement of original goods on EEA marketIntroductionIf there is a dispute as to whether a dealer has supplied original goods bearing a trademark or counterfeit products, the dealer must prove that it has distributed original goods. However, the proprietor of the mark that is alleging infringement must at least provide some basic information that supports its claim. This issue was determined by the Federal Court in two major decisions,(1) which related to allegedly counterfeit Converse shoes and parallel imports. The court also clarified that – insofar as a case involves original goods bearing a mark – the dealer must prove that the goods were placed on the EEA market by the proprietor of the mark or at least with its consent.In these two cases, the First Civil Division of the court – which has jurisdiction over trademark-related matters, among other things – ruled on the question of burden of proof. Both judgments examined whether the manufacturer had distributed original or counterfeit products and, insofar as original products were involved, whether the proprietor of the trademark had placed the products on the EEA market.Exhaustion of trademark rightsUS company Converse Inc produces the Converse All Star 'Chuck Taylor' trainer. Converse Inc owns the CONVERSE trademark. The defendant in this first case is a sports shoe sales company, which supplied numerous retail buying groups with Converse shoes. In September 2008 a consumer market in Solingen, Germany, offered shoes supplied by the defendant that carried the plaintiff's trademark. The plaintiff alleged that these shoes were counterfeit and sought an injunction. However, the defendant argued that the shoes it supplied were placed on the EEA market with the plaintiff's consent. Therefore, it argued that the trademark rights were exhausted.The Stuttgart Regional Court granted injunctive relief, but the Stuttgart Higher Court of Appeal dismissed the claim. The Federal Court vacated the judgment and remanded the case back to the appellate court.The Federal Court stated that the defendant used a sign, in the course of trade, which was identical to the trademark in relation to goods which were identical to those for which the trademark was protected, as provided under Section 14(2)(i) of the Trademark Act. According to the court, this would suffice to constitute a trademark infringement, unless the case dealt with original products that had been placed on the EEA market by or with the consent of the proprietor. However, this could not clearly be ascertained in the given case. The court determined that the defendant usually bears the burden of proving that the relevant goods are original. However, the proprietor of the trademark which is alleging infringement, must provide some basic facts to establish that the products are counterfeit. The court stated that the plaintiff had complied with this obligation.Further, the court stated that the defendant also bore the burden of proving that the products had been placed on the EEA market by the plaintiff or with its consent, and thus that trademark rights were exhausted under Section 24 of the Trademark Act.However, the court held that this burden of proof is unsuitable for cases in which the proprietor has created a specific distribution system in order to prevent parallel imports, where an actual risk of market foreclosure is constituted by the fact that the supplier must disclose the chain of distribution. In such a case, the court held, the proprietor of the trademark could influence the distribution partner to stop supplying dealers which were excluded from the distribution system. However, the court found that no risk of market foreclosure existed based on either contractual agreements or on the actual behaviour of the plaintiff.Since it remained unclear whether the case involved original products bearing the mark and whether these products had been placed on the EEA market by the proprietor or with its consent, the court remanded the case to the lower appellate court.Placement of original goods on EEA marketIn the second case (I ZR 137/10), the plaintiff was the exclusive distributor of Converse Inc in Germany, Austria and Switzerland. The defendant belonged to one of the largest worldwide trading groups. In August 2006, January and August 2007 and January 2008, the defendant sold original Converse trainers in its consumer market.The plaintiff argued that Converse Inc had originally placed the shoes on the US market. However, the defendant argued that Converse Inc had placed the shoes on the EEA market.The regional court granted injunctive relief. The defendant appealed, but was unsuccessful. The Federal Court affirmed the regional court's judgment.The Federal Court stated that the defendant, in the course of trade, had used a sign that was identical to the trademark in relation to goods which were identical to those for which the trademark was protected, as provided under Section 14(2)(i) of the Trademark Act.The court determined that the defendant bore the burden of proving that original products bearing the mark had been placed on the EEA market. For the court this approach was suitable, since there was no actual risk of a market foreclosure.The defendant clearly demonstrated that the products had been supplied by a Slovenian distribution partner of the proprietor of the mark. The defendant also unambiguously showed that this distribution partner had left the distribution system prior to the defendant's purchase of the Converse shoes.Thus, the court concluded that the trademark proprietor had no opportunity to influence the future distribution behaviour of the former distribution partner and thus foreclose the markets of the member states against each other.Since the defendant had not produced suitable evidence to show that the Slovenian distribution partner had indeed received the products at issue from the proprietor of the mark, the court ruled that no exhaustion of trademark rights could be assumed.For further information on this topic please contact Martina Schuster at Klinkert Zindel Partner by telephone (+49 69 972 65 600), fax (+49 69 972 65 6099) or email ([email protected]).Endnotes(1) March 15 2012, I ZR 52/10 and I ZR 137/10.