20 Sept 2018
Highest EU Court Rules on Parallel Imports: De-branding and Re-branding of Imported Products Constitutes a Trademark Infringement
The dispute arose after Duma and GSI, two affiliated companies active in the forklift trucks sector (one having as its main activity the purchase and sale of forklift trucks and the other one specialising in the construction and repair of forklift trucks) proceeded to make parallel imports into the European Economic Area (“EEA”). The EEA comprises the whole of the EU, plus Norway, Iceland and Liechtenstein.
The imports were of forklift trucks bearing the Mitsubishi trademarks (the well-known three-pointed star design). Duma and GSI also brought into (and outside) the EEA forklift trucks on which signs identical to the Mitsubishi trademarks had been removed (de-branding) and which were replaced by Duma’s and GSI’s own signs (re-branding).
Mitsubishi and its authorised manufacturer and distributor in the EEA, MCFE, brought cease and desist proceedings before the Dutch-language Commercial Court of Brussels, which rejected their claims. Mitsubishi and MCFE appealed to the Court of Appeal of Brussels. Their claims were twofold. First, they sought the prohibition of the parallel importation of forklift trucks bearing the Mitsubishi trademark. Second, they argued that de-branding Mitsubishi forklift trucks without Mitsubishi’s consent infringed Mitsubishi’s rights as the owner of the trademark to control the entry onto the EEA market of the goods bearing the trademark. Such action also harmed – so they claimed – the essential function of the trademark which is to guarantee to consumers the origin of the product or service, as well as other functions of the mark, such as, in particular, that of guaranteeing the quality of the product, or those of communication, investment and advertising.
With respect to the parallel import into the EEA of forklift trucks bearing the Mitsubishi trademark, the Brussels appeals court sided with Mitsubishi and MCFE.
By contrast, as regards the trade in de-branded and re-branded forklift trucks, the appeals court stayed the proceedings and referred the matter to the ECJ (the EU’s highest court) as regards the interpretation of Article 5 of Directive 2008/95/EC on trademarks (the “Directive”) and Article 9 of Regulation 207/2009 on the European Union trademark (the “Regulation”). These Articles provide, in essence, that the owner of a trademark is entitled to prevent all third parties from using, in the course of trade and without its consent, either an identical sign to its trademark in relation to identical goods; or an identical or similar sign in relation to identical or similar goods provided that there is a likelihood of confusion. The appeals court asked if these Articles also cover the right to oppose a de-branding/re-branding where the goods are intended to be introduced on the EEA market for the first time. The appeals court furthermore sought to know whether the fact that the goods could still be identified by average consumers as originating from Mitsubishi would alter the answer to the previous question.
The ECJ first noted that Article 5 of the Directive and Article 9 of the Regulation must be interpreted identically since their content is identical. The ECJ also recalled that, to ensure protection of the rights conferred by a trademark, it is essential that its owner has the possibility to control the entry on the EEA market of all goods bearing that trademark. The ECJ added that the exclusive rights afforded by these provisions must enable the owner of a trademark to protect its specific interest and, in particular, ensure that the trademark fulfils its functions, i.e., that of guaranteeing the origin and quality of the product and those of investment and advertising.
In this respect, the ECJ observed that, because the debranded Mitsubishi forklift trucks did not bear the Mitsubishi trademark when entering the EEA market for the first time, Mitsubishi had been deprived of the benefit of its essential right to control the initial marketing in the EEA of its products.
The ECJ added that de-branding and re-branding goods before their first entry on the EEA market affected the functions of the trademark. First, such practices precluded Mitsubishi from being able to retain customers by virtue of the quality of its goods. Second, because the consumers will know the products before associating them with the relevant trademark, these practices substantially hinder the trademark owner’s efforts to acquire a reputation and to use that trademark to promote sales or as an instrument of commercial strategy. In addition, Mitsubishi had also been robbed of the possibility to obtain, by putting the goods on the EEA market first, the economic value of the product bearing that trademark and, therefore, of its investment.
Finally, the ECJ clarified that, since the Mitsubishi forklift trucks had been de-branded and re-branded with a view to importing them onto the EEA market, this practice could qualify as a “use in the course of trade” pursuant to Article 5 of the Directive and Article 9 of the Regulation.
On this basis, the ECJ held that, by de-branding and re-branding Mitsubishi’s forklift trucks, Duma and GSI had infringed Mitsubishi’s right to control the first entry on the EEA market of goods bearing its trademark and adversely affected the functions of Mitsubishi’s trademark. The ECJ concluded that Mitsubishi was therefore entitled, as owner of the trademark, to oppose such practices.
Lastly, the ECJ found that its ruling applied regardless of whether the goods could still be identified by relevant average consumers as originating from the trademark owner on the basis of their outward appearance and model.