CJEU rules brand owners can prevent de-branded parallel imports

27 November 2018

The CJEU has held that the proprietor of a mark may take action against parallel importers of their products who remove all signs identical to their mark and replace them with other signs, without the consent of the trademark owner and with a view to importing and trading the products for the first time in the EEA.

Mitsubishi Shoji Kaisha Ltd, Mitsubishi Caterpillar Forklift Europe BV v Duma Forklifts NV, G.S. International BVBA Case C‑129/17 ECLI:EU:C:2018:594

In what may be considered a surprising result, the CJEU has held that a trademark owner may take action against parallel importers of their products even where they remove all signs identical to their mark and replace them with other signs, without the consent of the trademark owner and with a view to importing and trading the products for the first time in the EEA.

Background of the Mitsubishi case

This case concerned Mitsubishi ('Mitsubishi') and Mitsubishi Caterpillar Forklift Europe BV ('MCFE'), who brought proceedings in Belgium against Duma Forklifts NV ('Duma') and G.S. International BVBA ('GSI').

Mitsubishi is the owner of four MITSUBISHI trademarks (two EU marks and two Benelux marks) ('Mitsubishi Marks'). MCFE is exclusively authorised to manufacture and place on the market in the EEA forklift trucks supplied under the Mitsubishi Marks.

Duma is a worldwide purchaser and seller of new and second-hand forklift trucks and is affiliated with GSI, which constructs and repairs forklift trucks that it imports and exports.

Duma and GSI claimed to have been acquiring, since 2009, from another company within the Mitsubishi group, forklift trucks which it has brought into EEA territory. Duma and GSI would place the trucks under a customs warehousing procedure, and then remove all the signs identical to the Mitsubishi Marks from the trucks and affix their own signs, replace the identification plates and serial numbers and modify the trucks so that they were compliant with EU standards. These modified forklift trucks would then be imported into the EEA and marketed within and outside the EEA.

Mitsubishi brought proceedings to prevent this. The Brussels Court of Appeal made a reference to the CJEU for a preliminary opinion on whether the replacement of the Mitsubishi trademarks amounted to a use that the proprietor of the Mitsubishi EU trademark registration could rely upon in order to prevent importation and marketing of the modified forklift trucks in the EU.

The Court's decision

The CJEU acknowledged the distinction between this case and previous cases regarding parallel imports. Earlier decisions concerned circumstances where the goods were already affixed with the marks at issue before being imported into and marketed in the EEA. Also, other earlier decisions involved circumstances where third parties used identical or similar signs to the marks at issue. Whilst these facts did not appear to be present in this case, the CJEU made the following observations:

In order to ensure the protection of the rights conferred by a mark, it is essential that the proprietor of the mark registered in one or more Member States could control the first placing of goods bearing that mark on the market in the EEA.

Removal of the signs identical to the mark and affixing new signs on the goods, with a view to first placing them on the market in the EEA adversely affected the functions of the mark.

Any act by a third party preventing the proprietor of a registered mark in one or more Member States from exercising his right to control the first placing of goods bearing that mark on the market in the EEA by its very nature undermined the essential function of the trademark.

The cumulative effect of the above points meant that the circumvention of the proprietor's right to prevent the importation of those goods bearing its mark was contrary to the objective of ensuring undistorted competition.

The CJEU also indicated that if the relevant average consumer can nevertheless identify the goods as originating from the trademark proprietor, on the basis of their outward appearance or model, this is likely to accentuate the effects of such harm.

The CJEU noted that the removal of the signs identical to the mark and the affixing of new signs on the goods precluded the trademark proprietor from being able to retain customers by virtue of the quality of its goods and affected the functions of investment in and advertising of the mark. The CJEU continued to state that this was likely to impede the proprietor's use of that mark, in order to acquire a reputation likely to attract and retain consumers, and to serve as a factor in sales promotion or as an instrument of commercial strategy. Furthermore, the CJEU stated that such actions deprived the proprietor of the possibility of obtaining, by putting the goods on the EEA market first, the economic value of the product bearing that mark.

Finally, the CJEU held that an operation consisting, on the part of the third party, of removing signs identical to the trademark in order to affix its own signs, involved active conduct on the part of that third party, which, since it was done with a view to importing those goods into the EEA and marketing them there and was therefore carried out in the exercise of a commercial activity for economic advantage, would be regarded as use in the course of trade.

As a result, the CJEU held that the proprietor of a mark can prevent an unauthorised third party removing the signs identical to that mark and affixing other signs on the products placed in the customs warehouse with a view to importing them or trading them in the EEA, where they have not yet been marketed.

Commentary and takeaways

The CJEU has provided what will be seen as welcome guidance on the interpretation of the European trademarks legislation. The court noted that an objective of this legislation is to ensure undistorted competition. While this is not set out in terms in the relevant provisions, it is reflected in recital 2 of EU Trade Marks Regulation and indicated perhaps by the inclusion of the words "inter alia" in before the list of prohibited acts in Article 9(2).

Brand owners may take comfort from the CJEU's willingness to use its "purposive construction" of the EU trademark legislation to favour their brand protection strategies. There will be many people who will consider this judgment to go too far; time will tell how it is applied in cases seeking to interpret this decision, especially in jurisdictions with no unfair competition regime, such as the UK, where this broader interpretation will feel more unusual.

Originally published in The Licensing Journal in October 2018.

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