The issue of exhaustion of rights conferred by a trade mark in the context of the fragmentation of parallel rights with the same origin, which was supposed to be closed by the judgment of the EC on the IHT INTERNATIONALE in 1994, is back. A request for a preliminary ruling concerning the interpretation of article 7 (1) of Directive 2008/95/EC on trademarks has been recently brought before the Commercial Court of Barcelona Nº8.
In substance, the trademark “SCHWEPPES” is owned both by Coca-Cola and the ORANGINA SCHWEPPES HOLDING BV (belonging to the Japanese company SUNTORY). In 1999, CADBURY SCHWEPPES sold the rights of the trademark in 13 EU State Members to Coca-Cola. In 2009 SUNTORY acquired CADBURY SCHWEPPES, and thus the trademark rights in 18 EU State Members.
In May 2014 the Spanish Company SCHWEPPES, S.A. (subsidiary of UK company SCHWEPPES INTERNATIONAL LTD.) brought an action against the Spanish beverage distribution company RED PARALELA BCN, S.L. based on the following:
1) SCHWEPPES, S.A. is the sole distributor of SCHWEPPES in Spain.
2) RED PARALELA was importing bottles of tonic water of the brand SCHWEPPES.
3) SCHWEPPES, S.A. claims that said actions are unlawful inasmuch as the bottles were placed in the market without its consent, but by Coca-Cola in another member state of the EU. Therefore, consumers are unable to identify the commercial origin of the products.
4) RED PARALELA argues exhaustion of the trademarks rights since the products have their origin in countries of the EU where Coca-Cola is the trademark owner, thus involving tacit consent. They also argue that the existence of economic links between Coca-Cola and SCHWEPPES INTERNATIONAL LTD are common exploitations of a common trademark.
The Commercial Court of Barcelona has addressed a number of questions to the European Court of Justice, basically to determine whether it is compatible with art. 36 of the TFEU and 7 (1) of Directive 2008/95 and art. 15 (1) of Directive 2015/2436 for a trademark holder in more than one Member State to prevent the parallel import of goods coming from another Member State which bear the same trademark and is owned by a third party.
In other words, can SCHWEPPES legitimately block the importation of the tonic water bottled and imported from the UK, where the trademark is owned by Coca-Cola?
The Advocate General Mengozzi issued his non-binding opinion on the 12th of September 2017, arguing as follows:
a) The ECJ judgment of 22/06/94 concerning the case IHT INTERNATIONALE, held that in the case of voluntary fragmentation of trademarks, the assignor’s acceptance of the weakening of the distinctive function of the trademark which resulted from the division of the rights originally held cannot entail the assignor’s renunciation of the exclusive right to oppose the importation into its territory of goods marketed by the assignee in another Member State of the EEA. Thus, the principle of exhaustion of rights could not apply when the assignment of rights was given, since at that time, the goods were not placed on the market, and consistently, one basic requirement for applying that principle is not met.
b) That said, the Commission argues that the principle of exhaustion of rights conferred by a trademark may also occur when the manufacture and marketing of the goods bearing identical parallel trademarks is carried out as a part of a unitary policy and commercial strategy by the proprietors of said trademarks. This opinion is endorsed by the Advocate General. The point is whether there are “economic links” or not between the person which holds the trademark rights in the importing State and the person that has put the trademarked goods into circulation in the exporting country or whether they are the same person.
By “economic links” it is understood that a relation between parties exists involving a unitary control over the trademark, this includes cases where the use of the mark is subject to the joint control of two distinct persons, both in the importing State and the exporting State, each of which are owners of rights recognised nationally. If there is a unitary control, then national laws cannot be relied upon in order to restrict the movement of goods at issue.
c) The “unitary control” is regarded as the centre which is responsible for the strategic decision concerning the supply of goods, even if it is shared by different companies, both proprietors of parallel trademarks, by exercising joint control over the use of their respective trademarks. But again, we find that there are no rules of evidence to prove the existence of such circumstances, and what is more, the Advocate General points out that the burden of proof (prima facie on the shoulders of the parallel importer) can be reversed by the Court in certain cases.
In conclusion, it will be left to the national court to analyse the circumstances and request any appropriate documents from the parties, including the assignment agreement to conclude whether there is a unitary control over the trademark and thus, whether the conditions for exhaustion of the right of the proprietor of the trademark in the importing country have been met.
Eduardo Vilá
Vilá Abogados
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22nd of September 2017
