The European Court of Justice (ECJ) has recently delivered its ruling in respect of a preliminary reference regarding exhaustion of trade mark rights in the Schweppes case. The ruling can be found here.

Exhaustion of Rights

In general terms, if the proprietor of a trade mark places goods bearing that trade mark on the market in the EEA/EU, or if they are placed on the market with his consent, then the doctrine of exhaustion of rights may apply. The owner will not be entitled to object to the circulation of those goods within the EEA/EU. In the Schweppes case the ECJ provided further guidance on the circumstances that will lead to a proprietor exhausting their rights.

The Background

Cadbury Schweppes held national trade marks for a word mark and logo mark for 'Schweppes' in each of the Member States of the EU and EEA. It did not hold a European Union trade mark for those marks. Cadbury Schweppes assigned some, but not all, of those national trade marks to Coca-Cola/Atlantic Industries. The remainder of the national marks continued to be held by Cadbury Schweppes and now belong to Schweppes International Limited ("Schweppes").

In 2014, Schweppes issued proceedings in Spain against Red Paralela ("Red") on the basis that Red had imported tonic water from the UK bearing the Schweppes trade mark which infringed Schweppes' Spanish trade marks. Schweppes made the argument that it has not placed those bottles of tonic water on the market, nor had they been placed on the market with their consent. It argued that those bottles had been placed on the market by Coca-Cola who had no economic or legal connection with the Schweppes' group.

Red submitted that the trade mark rights had been exhausted and that there were undeniable legal and economic links between Coca-Cola and Schweppes in their joint exploitation of the Schweppes' trade mark.

In respect of this "legal and economic" link the Court noted a number of facts including the following:

  • Schweppes had continued to promote a global image of the Schweppes trade mark;
  • Coca-Cola contributed to maintaining that global trade mark image;
  • The global image is the cause of confusion in Spain as to the commercial origin of the goods;
  • Schweppes' main website links to local websites including that of the UK which is managed by Coca-Cola;
  • Schweppes promotes Schweppes' goods in the UK; and
  • Schweppes is the proprietor of the Schweppes' trade mark in the Netherlands but it is exploited by Coca-Cola.

The Ruling

The ECJ held that the proprietor of a national trade mark is precluded from opposing the import of goods bearing the same mark originating in another Member State, in circumstances where:

  1. the trade mark was originally owned by that proprietor; and
  2. that proprietor then assigned the trade mark to a third party; and
  3. the original proprietor has actively and deliberately continued to promote the appearance of a single global trade mark (which causes confusion as to the origin of the goods); or
  4. there are economic links between the proprietor and the third party (to whom the trade mark was assigned) to the extent that they coordinate their commercial policies or exercise joint control over the use of the trade mark and control the quality of the goods.

This judgment provides very helpful guidance as to the exhaustion of rights in circumstances where an assignor of a mark maintains a level of control in respect of a trade mark it has assigned and where it coordinates its marketing efforts with the assignee. This ruling should be borne in mind when parties are entering into agreements or assignments covering different territories within the EU/EEA.