Facts

In a February 7 2017 judgment, the Brussels Court of Appeal ordered two parallel traders to pay provisional compensation of €3 million to the Mitsubishi Corporation for illegally importing hundreds of Mitsubishi forklift trucks (Figure 1), which had been on the Asian market, into the European Economic Area via parallel trade routes.

Figure 1

The Brussels Court of Appeal held that the parallel traders had failed to provide conclusive evidence that Mitsubishi, the proprietor of the Benelux and EU trademarks, had consented to the parallel trade. The court recalled that, according to well-established case law, a plea for the exhaustion of trademark rights constitutes a plea in defence for a third party against which the trademark owner has brought an action, so that the conditions for such exhaustion must, as a rule, be proved by the third party that relies on it. This requirement applies, in particular, to the consent of the trademark owner to prevent third parties from importing goods bearing its trademark into the European Economic Area, which is tantamount to the proprietor's renunciation of its exclusive right. Such consent must be expressed so that an intention to renounce those rights is unequivocally demonstrated, which is normally gathered from an express statement of consent. However, in exceptional cases, it is conceivable that consent may be inferred from facts and circumstances that occur before, simultaneously with or subsequent to the placing of the goods on the market outside the European Economic Area, which – in the national court's view – unequivocally demonstrates that the proprietor has renounced its rights.(1)

Decision

The Brussels Court of Appeal ruled that the evidence provided by the parallel traders was circumstantial at best. This applied to the declarations from independent traders supplying the parallel traders, which alleged that companies within the Mitsubishi group had been aware of and tolerated the parallel trade. While these declarations lacked objectivity because they emanated from interested parties, the court added that any possible consent of other companies that were part of the same group as the trademark owner, which remained unproved, was not tantamount to the latter providing consent. Thus, the court rejected the theory of 'economic unity', meaning that consent to market goods into the European Economic Area cannot be inferred from a situation where the parallel trader has acquired the goods from a company economically linked to the trademark owner. Further, the defence amounted to a plea for unrestricted parallel trade, whereas consent must relate to each individual item of the product for which exhaustion is pleaded.(2) The judgment underlined the exceptional character of the acceptance of implied consent.

Interestingly, and more importantly, the Brussels Court of Appeal also dealt with the question of whether parallel traders are entitled to remove all trademarks, a practice known as 'debranding', (Figure 2) if such removal is performed to place the debranded trucks on European Economic Area markets. Questions arose about whether such debranding, if it occurs outside the European Economic Area or in a private customs warehouse located therein, could amount to a type of use within the European Economic Area that would infringe the trademark and which the proprietor of an EU or national trademark would have the right to prevent.

Figure 2

ECJ referral

The Brussels Court of Appeal referred the following questions to the European Court of Justice (ECJ) for a preliminary ruling:

"1.A) Do Article 5 of Directive 2008/95/EC and Article 9 of (EC) Regulation 207/2009 of the Council dated 26 February 2009 on the Community trademark (codified version) confer upon a trademark proprietor the right to prevent a third party from removing, without the trademark proprietor's consent, all signs affixed to the goods and identical to the trademark (debranding), when the goods have never before been put on the market in the European Economic Area, such as goods placed in a customs warehouse, if such removal is made for the purposes of importing or the putting on the market of these goods into the European Economic Area?

1.B) Does it make a difference for the answer to be given to the first question A) whether or not the importing or the putting on the market of these goods into the EEA is done under a proper distinctive sign affixed by that third party (rebranding)?

2. Does it make a difference for the answer to be given to the first question whether or not those goods are – by their appearance or model – still identified by the relevant class of persons as originating from the trademark proprietor?"

Although the ECJ had already briefly touched on the issue of debranding, those rulings were made in cases where the owner of the mark consented to the trademarked product's marketing in the European Economic Area and the debranding (or rebranding) occurred afterwards. Thus, the right to control further marketing of the product had already been exhausted. In Viking Gas v Kosan Gas (Case C-46/10), which dealt with the refilling of composite gas bottles, the ECJ seemed to accept that a re-filler was entitled to rebrand (or co-brand) empty bottles for which trademark rights had been exhausted. In its judgment in l'Oréal v eBay (Case C-324/09), which had been delivered only two days earlier, the ECJ held that reselling luxury perfumes without their original packaging (and trademarks) was likely to affect the trademark's function of indicating the origin, as the mark was denied its essential function: to guarantee that the goods which it designates are supplied under the control of a single undertaking that is responsible for their quality. For second-hand goods, therefore, the matter is far from clear cut.

However, in this case, the specific issue was that the parallel traders had removed the trademark outside the European Union's scope of protection of trademarks, such as in third countries or private customs warehouses. It will be interesting to see whether:

  • the ECJ extends the trademark rights to those territories, thus safeguarding the proprietor's right to control the first European Economic Area marketing of branded goods; or
  • they will remain out of reach.

The case (C-129/17) is likely to be heard in 2018.

For further information on this topic please contact Jeroen Muyldermans or Paul Maeyaert at ALTIUS by telephone (+32 2 426 1414) or email (jeroen.muyldermans@altius.com or paul.maeyaert@altius.com). The ALTIUS website can be accessed at www.altius.com.

Endnotes

(1) See Zino Davidoff and Levi Strauss, Paragraph 41 et seq, joined cases C-414/99 to C-416/99 and Van Doren & Lifestyle Sports, Paragraph 35, Case C-244/00.

(2) Sebago v GB-Unic, Paragraph 19, Case C-173/98.

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