• EUROPEAN PERSPECTIVES

    "Just Visiting"

    Limits on Infringement Claims Against Goods Just Passing Through

    Trade mark infringement laws cannot be used to stop parallel importers from holding trade marked goods in Member State customs warehouses, except where there is evidence that the goods will be released in the E.U.

    Such was the recommendation of Advocate-General Jacobs to the ECJ in May in Class International BV v Unilever NV and Others (Case C-405/03). If the ECJ follows this opinion, the ability of trade mark owners to act against parallel imports passing through the EEA which are destined for non-EEA markets, as opposed to sale in the EEA, will be severely fettered.

     

    The Facts

    The defendants were the owners of Benelux figurative trade marks for a striped length of toothpaste, sold under the brand name AQUAFRESH.

    The claimants had acquired and brought into the EEA, without the defendants’ consent, a container of genuine toothpaste bearing the marks from outside the EEA. The defendants had stored the goods in a customs warehouse in Rotterdam, a common procedure where an importer either intends to ship the goods onward to a non-EEA destination, or has not yet decided whether to sell them within the EEA. The customs warehouse procedure thus allows importers to avoid or delay the payment of import duties.

    The defendants successfully applied for the detention of the goods under Community rules prohibiting the entry of counterfeit and pirated goods. The claimants unsuccessfully applied for the release of the goods. On appeal, the Dutch court asked the ECJ to rule on, inter alia:

    • whether a trade mark owner may oppose the introduction without his consent of trade marked goods from outside the EEA, where those goods are merely in transit or being stored in customs warehouses, and
    • whether “use in the course of trade,” which was the exclusive preserve of the trade mark owner and a prerequisite for infringement, could include storage in a customs warehouse in such circumstances.

    Just Visiting?

    The Advocate-General focused on the meaning of “use in the course of trade” in assessing whether the holding of goods in E.U. customs warehouses could amount to an infringing act.

    He noted that the ECJ had previously held in Ansul that use is in the course of trade where it is outward-facing, with a view to commercial advantage. The exclusive right to use a registered trade mark in the course of trade was predicated on the need to protect the essential function of the trade mark, namely its ability to distinguish the goods of one trader from those of another. Consequently, the availability of infringement action against third parties must be limited to those situations where the use in question “affects or is liable to affect the functions of the trade mark,” and in particular its essential function of distinguishing.

    The Advocate-General considered that the essential distinguishing function of a mark would not be prejudiced by the transit through the EEA of genuine goods that are not put on the market there, or by the storage of such goods in EEA customs warehouses.

    The position would be different where the goods are actually released into free circulation within the EEA, at which point the trade mark owner could object that actual “importation” which amounted to infringing use in the course of trade had taken place.

    Likewise, if goods stored in a customs warehouse were identified as having a final destination within the EEA, the likelihood of their being released into free circulation there would no longer be speculative, and the Advocate-General considered that a trade mark owner could act against the parallel importer to prevent the delivery or release of the goods.

     

    Comment

    If the ECJ adopts the Advocate-General’s recommendations, it will become harder for trade mark owners to take advantage of “Fortress Europe” to stop parallel imports destined for onward transit to non-EEA destinations.

    The strict parallel import regime in the EEA will still work to trade mark owners’ advantage, but the benefits will be restricted to cases where the goods actually enter, or are expressly destined to enter, free circulation within the EEA. It will be much harder for trade mark owners to cut off parallel imports before they have the opportunity to find their way onto the EEA market, even where there is evidence that the goods are likely to enter the EEA market, unless that evidence is a clear statement of an intended final destination in the EEA.

    Until the position is clarified, trade mark owners should anticipate the need to prove that there is reason to believe that the goods in transit or customs storage are not just visiting or passing through, but will end up on the EEA market. Such action will not only require speed, but also proper preparation of evidence to show that the action is justified.

    The more information one is able to get from customs documents about the importer and his express intentions, the better. Do not overlook, however, the potential relevance of information on the proclivities and history of the importer and any stated onward buyer, whether in the EEA or otherwise. Although the Advocate-General seemed skeptical, in a borderline case a court may well be swayed by evidence that an intended purchaser has a history of putting such products on the market in the EEA. If an importer or buyer has done it before, the court may be more easily persuaded that it will do it again.