In its recent judgment concerning the interpretation of Article 97 of Council Regulation (EC) No. 207/2009 on the European Union trade mark (which primarily establishes the jurisdiction of courts of the Member State in whose territory the defendant has its domicile or establishment), the ECJ has chosen a wider interpretation that could, in the future, widen the scope of the so-called “forum shopping”. Simply put, the term forum shopping means a situation in which actions can be bought in several countries, and the plaintiff chooses the jurisdiction he considers to be the most advantageous, whether in terms of substantive or procedural aspects. However, this system sometimes leads to abuses.
Hummel Holding A/S, a Danish manufacturer of sports goods and clothing, filed an action for a trade mark infringement against a US-based company, Nike Inc., and its Dutch subsidiary, Nike Retail BV, with the (German) Higher Regional Court in Düsseldorf. The reason for the action was Hummel Holding’s allegation that some of Nike’s products had infringed the plaintiff’s trade marks, with most of the infringement being committed in Germany. However, the German subsidiary of Nike, Nike Deutschland GmbH, was not a party to the proceedings at all, because it does not deliver any goods to final customers, but only supports the parent company in promoting and implementing contracts.
By the action, the plaintiff sought a ban on imports and exports to be imposed on Nike Inc. in the territory of the EU, and on Nike Retail BV in the territory of Germany. The District Court, however, dismissed the action on the merits, and the Court of Appeal subsequently referred the following question to the ECJ for a preliminary ruling:
“Under which circumstances is a legally distinct second-tier subsidiary, with its seat in an EU Member State, of an undertaking that itself has no seat in the European Union to be considered as an “establishment” of that undertaking within the meaning of Article 97 of Regulation No. 207/2009?”
The European Court of Justice has ruled that a domicile should be interpreted broadly, in the sense that a company with its seat in an EU member state that is a subsidiary of a parent entity that has no seat in the European Union, is an ‘establishment’ of such parent company if the following two conditions are met: the subsidiary must be a centre of operations which, in the Member State where it is located, has a certain real and stable presence from which its business activities are pursued, and at the same time such centre must, on a permanent basis, act as a detached workplace of its parent company. Since, in the present case, both conditions were met, Nike may be sued in Germany, although its German subsidiary is not a party to the proceedings.