Introduction

Luxury watchmaking brands like Rolex, Patek Philippe and Audemars Piguet have a history of vigorously enforcing their IP rights and have contributed to the creation of a lot of important IP case law in Europe and beyond. This case, which is a first of its kind in Sweden, concerns a new trend in the watchmaking industry, whereby third parties customize or personalize watches (“modding”), and the interesting trademark issues this practice raises.

Background

The customization of watches by third parties has grown significantly in recent years. In a short amount of time, a market has been created for owners of high-end timepieces to customize their watches by adding features and changing appearances in order to create unique works of art. The customization process, whereby a third party works on the watch and markets and sells the resulting modified watch, including sometimes by removing and re-applying the original trademark and adding features not on the original model, raises several intellectual property questions, including questions about trademark consumption as well as questions regarding private use vs. commercial use (cf. C-206/01 Arsenal Football Club). These questions are often discussed in IP circles under the rubric of sustainability, upcycling and the right to repair.

The apparent commercial success of this trend in the high-end watch segment has recently led to a proliferation of companies that has started to offer similar customization and personalization services also for watches from mid-market brands.

In this case, Swiss watchmaker Tissot sued a Swedish defendant, which sold Tissot watches directly to the customer and offered customized versions of the watches, whereby the defendant personalized the watch according to a number of different concepts and delivered the finished watch to the customer.

Tissot argued that that the trademark rights in the watches had not been consumed, and that the defendant’s actions constituted trademark infringement (under Article 15.1 of the Trademark Regulation) in Tissot’s EU trademark. Tissot also argued that even if the defendant had bought the watches on the EU market, the third-party customization process damaged the watches and constituted reason for Tissot to object to the future marketing and commercialization of the products (under Article 15.2 of the Trademark Regulation).

The defendant mounted a two-pronged defense:

  • First, the customization service it offered customers was an extension of the customer’s private use of the Tissot watch they had bought and did thus not constitute trademark use or infringement.
  • Secondly, the defendant claimed to have had bought the watches on the EU market whereby the trademark rights in the watches had been consumed. The defendant also took the position that the customization process did not damage the watches and did not give Tissot the right to object to the future commercialization and marketing of the products.

Decision

The court found that the defendant had sold Tissot watches through its e-commerce website, and as an integrated part of the sales process the customer could decide to customize the watch according to a number of pre-determined themes, created by the defendant. This was thus not a case where customers first had bought Tissot watches on the market and subsequently used the defendant’s services to customize the watch. The customization service offered the defendant was thus not private in nature and the defendant’s use of the Tissot trademark in this context constituted trademark use. Thus fell the defendant’s first line of defense.

As to the question of trademark consumption, the court reiterated that it followed from the practice of the CJEU that the defendant had the burden of proof that the exclusive trademark rights in these watches had been exhausted (C-291/16 Schweppes, p. 52). The court thus found that it was up to the defendant alone to prove that the watches had been put on the market in the EU by Tissot. Interestingly, the court did not discuss the more nuanced view of the issue of burden of proof for consumption of trademark rights, issued by the CJEU in C-367/21 Hewlett Packard a mere two months earlier. This was likely an oversight, but in fairness to the court, the facts of that case were different from this case in several aspects.

The court took what arguably constituted a stern view of the evidence invoked by the defendant and concluded that it failed to show that the exclusive trademark rights in these watches had been exhausted. The invoices and receipts invoked by the defendant indicated, among other things, the place of purchase, model and number of watches purchased by the defendant, but not any information (e.g. serial number) that could make it possible to link a specific invoice or receipt to a specifically sold Tissot watch. Thus also fell the defendant’s second and final line of defense.

The court also obiter confirmed that – even if the defendant had been able to show that it had bought the watches on the open market - Tissot retained the right under Article 15.2 of the Trademark Regulation to object to the further marketing of the customized Tissot watches in this case. The court reached this conclusion based on a finding of  passing-off and the customers getting the impression that there was a commercial relationship between Tissot and the defendant, which damaged the functions of the trademark right. It should be mentioned here that many third-party watch customization companies are careful to make clear on their websites that there is no commercial relationship between the customizer and the watchmaker. Likely an expensive oversight by the defendant in this case.

The court thus granted the watchmaker’s claims and awarded substantial damages.

Comment

This case raises interesting trademark questions, as well as evidentiary questions about the burden of proof for consumption of trademark rights, that are particularly timely in the context of recent discussions in IP circles about sustainability and the right to repair.

On a sidenote, this decision was issued just weeks after a similar case was decided by the Swiss Supreme Court in litigation between Rolex and an un-named Swiss defendant (but widely reported to be the high-end customization pioneer Artisans de Geneve). In this case, Rolex argued that the defendant’s customization work, which required it to remove and then reapply Rolex trademarks on the dials alongside the atelier’s own trademark, constituted trademark infringement.

The Swiss Supreme Court – much like the Swedish court - made an important distinction between the private and commercial uses of trademarks, that is between:

  • the atelier’s supply of watch customization services to private individuals who brough their privately-owned Rolex watches to the atelier and wished to have them customized according to specific instructions; and
  • the atelier selling customized Rolexes to its customers on a larger scale.

Based on the facts of that case, and in contrast to the outcome of the Swedish case, the atelier’s customization work was found to be allowed under the first private use scenario.

Taken together, the Swiss and Swedish decisions likely point the way forward for the watch customization industry in Europe.