The ECJ recently had to decide a case (ECJ decision of 20.12.2017 – C-291/16 (Schweppes SA/Red Paralela SL, inter alia), in which the consent required for the exhaustion of rights originated not from the owner of the trademark in dispute (the national Spanish trademark “Schweppes”), but from the owner of the national UK trademark “Schweppes”. The ECJ judgement is published in GRUR 2018, 191.
The decision of the ECJ concerned a reference for a preliminary ruling from the Commercial Court of Barcelona, Spain. The claimant in the infringement proceedings before the Commercial Court was Schweppes SA, which based its claim on the Spanish trademark “Schweppes”. The owner of the Spanish trademark “Schweppes” is Orangina Schweppes Holding BV, which had granted the claimant an exclusive licence to the Spanish trademark “Schweppes”. Orangina Schweppes Holding had, already in 1999, transferred several identical national “Schweppes” trademarks in Europe, including the trademark registered in the United Kingdom, to Coca-Cola Industries.
Schweppes SA then asserted a claim against a parallel importer, which purchased bottles with the mark “Schweppes Tonic Water” in the United Kingdom (owner of the national trademark: Coca-Cola Industries), imported them to Spain (owner of the Spanish trademark: Orangina Schweppes Holding) and sold them there, on the grounds of infringement of the national Spanish trademark.
The defendant raised a plea of exhaustion of the trademark rights for the national Spanish trademark. Since the relevant provisions under the national trademark law of the EU member states originate from the EU Trademark Directive, the Barcelona Commercial Court submitted the question to the ECJ in a reference for a preliminary ruling, asking whether, in the particular case, the exhaustion of rights from the national trademark in the United Kingdom (owner: Coca-Cola Industries) could also be effective with respect to the national Spanish parallel trademark (owner: Orangina Schweppes Holding). The ECJ decided in the proceedings that exhaustion of rights could be invoked against legally independent owners of parallel trademarks if such owners, through coordination of their trademark strategy or their business strategy, either promote a uniform overall appearance and image for the trademark or jointly determine the products to which it is attached.
Since the ECJ also summarised its earlier case law on the exhaustion of rights under trademark law in its decision, it is worth recapitulating the effect of exhaustion in the event of different and legally independent owners of individual national trademarks within the EU more generally:
The point of departure for exhaustion is the provision in Article 15 of the Trademark Directive as revised (2015/2436/EU), which has been implemented as national trademark law by the EU member states. According to this provision, a trademark does not entitle its proprietor to prohibit its use in relation to goods which have been put on the market in the EU or the EEA by the proprietor or with the proprietor’s consent. The rights arising from a national trademark (e.g. national German trademark) are therefore also exhausted when the products bearing that trademark are put on the market in another European country (e.g. Austria) for the first time by the proprietor or with the proprietor’s consent. In principle, the exhaustion of rights in a national trademark is therefore not limited to the first use in the corresponding country.
The consent of the proprietor to a third party’s placement of the goods on the market is deemed to be given if a licence for manufacturing and distribution or a simple distribution licence has been granted. However, in these situations the consent must also directly relate to placement on the market within the EEA (Ströbele/Hacker/Thiering, MarkenG, 12th edition, s 24 recital 33). Indeed, in the case of pure contract manufacturing or a pure production licence there is often no consent by the proprietor of the trademark to the placement of the products on the market (contrary to the agreement) by the manufacturer or the licensee (BGH GRUR 2011, 820 – Kuchenbesteck-Set, Nr. 18).
As the ECJ summarises in the present ruling, it is equivalent to the placing of the product on the market by the proprietor himself, if another group company (parent/subsidiary/affiliate) or another commercially affiliated company has brought the products bearing the trademark to the market in a member state of the EEA for the first time (established case law since: EuGH GRUR 1994, 614 – Ideal Standard II). This is intended to prevent the practice, through the skilful allocation of national trademarks between group companies or commercially affiliated companies, of shielding the different national markets within the EU from each other with the aid of national trademark rights and thus maintaining price differences.
On the other hand, as the ECJ points out in its decision, the function of the trademark as an exclusive right would be jeopardised if proprietors of parallel national trademarks who had no legal or commercial relationship with one another could not oppose the import of goods bearing their trademarks, merely because the exhaustion of the national trademark of another proprietor had occurred. According to ECJ case law, According to the case law of the ECJ, even the fact that the (identical) trademarks originally belonged to the same proprietor does not change this principle, irrespective of whether the division of the marks was based on a sovereign measure (such as expropriation) or a contractual transfer. . The fact of common origin of the different national trademarks is therefore not sufficient for a plea of exhaustion (established case law since: ECJ GRUR Int. 1990, 960 – HAG GF).
In the above decision dated 20 December 2017, the ECJ thus makes an important exception to this judicial practice: under certain circumstances, the exhaustion of rights in a national trademark – belonging to a company that is not legally or commercially affiliated – can also lead to the exhaustion of the rights in other identical national trademarks belonging to another company. The peculiarity of the matter in question, which was decisive for the ruling, was the fact that Orangina Schweppes Holding and Coca-Cola Industries coordinated their appearance for the “Schweppes” trademark within the EU. Furthermore, they jointly established which drinks and products should bear the “Schweppes” trademark and should be allowed to be brought onto the market in the EU. From the perspective of the user, a tonic water with the “Schweppes” trademark produced by Coca-Cola Industries was, at first sight and in terms of taste, indistinguishable from a tonic water with the “Schweppes” trademark produced by Orangina Schweppes Holding. The ECJ saw this agreement between the trademark proprietors as the effective abandonment of one of the main functions of a trademark, namely, the function as indication of origin since the relevant public would already be confused about the commercial origin of the goods through this coordination by the trademark proprietors themselves.
Therefore, the ECJ concluded that a trademark proprietor, which has itself compromised the function as indication of origin of its trademark, can no longer take legal action against third parties by arguing that they have caused confusion of origin, on account of a situation that the proprietor itself has created.
For such products the ECJ thus affirms a Europe-wide exhaustion of rights for all identical national trademarks, even where they belong to legally independent and unaffiliated trademark proprietors, if such proprietors actively and deliberately coordinate their trademark strategy in order to achieve a uniform overall appearance or image for the trademark or if such proprietors coordinate their business strategy such that they jointly determine which products the trademarks should be attached to.
Finally, the ECJ gave its opinion on the question of who should set out and prove the conditions for the extension of the exhaustion effect through the coordination of different trademark proprietors.
In principle, the burden of proof for demonstrating that the requirements for the exhaustion of rights are met falls on whoever seeks to rely on the exhaustion. According to the established ECJ case law, however, there is an exception to this principle where there are exclusive or selective distribution agreements since the allocation of the burden of proof could otherwise enable the trademark proprietor to partition the national markets. By naming the sources of supply by the potential infringer (as proof of the exhaustion), the trademark proprietor would immediately “plug the gap” and again close off the distribution system to outsiders. The ECJ similarly saw the requirement for a corresponding adjustment of the burden of proof in the present case. It is thus up to the proprietor of the national mark to set out and, if necessary, prove, that there is no coordination of trademark or business strategy between itself and the proprietors of the other national trademarks. The ECJ ordered the defendant, who had sought to rely on the exhaustion of rights, to first present all indications for the existence of economic ties and the joint coordination of trademark strategy by the trademark proprietors. In other words, a simple random assertion by the defendant will not be sufficient in the future.
Conclusion: even though the decision concerned an exceptional case, it does extend the possibility of relying successfully on pleading exhaustion of rights. For marketing reasons, trademarks are often supposed to be presented and marketed consistently in a uniform manner throughout a uniform market such as the EU, even if individual national companies or individual national trademarks have been sold to third parties. Where such coordination takes place within the EU, following a division of national trademarks, it must be taken into consideration that, as soon as a product with the relevant trademark is placed on the market, all the rights in the other national parallel trademarks belonging to legally independent proprietors will be exhausted.
