Parallel Imports and Registered Trade Marks
Introduction
A registered trade mark allows the owner to prevent third parties from using the trade mark in respect of the goods for which the trade mark is registered.
Thus, theoretically, a trade mark owner could divide up national markets within the EU, by allowing different third parties to distribute official 'trade marked' goods within different EU countries.
Article 7(1) of the Trade Marks Directive ("the Directive") seeks to avoid such a situation arising. This provides that a registered trade mark is not infringed by the use of the trade mark in one country (e.g. in the UK) in relation to goods which have already been put on the market elsewhere in the EU (e.g. in Italy) under that trade mark by the proprietor, or with his consent. The idea is to encourage parallel imports and the creation of a genuine single market for 'trade marked' goods within the EU.
There is an exception to this rule. Article 7(2) of the Directive provides that trade mark infringement proceedings can be brought "where there exists legitimate reasons for the proprietor to oppose further dealings in the goods (in particular, where the condition of the goods has been changed or impaired after they have been put on the market)."
In a recent case brought before the English Court of Appeal, the owner of the UK registered trade mark STONE ISLAND was attempting to prevent a parallel importer from importing genuine STONE ISLAND branded garments from Italy into the UK. The importer wanted to exploit the difference between the price of the garments when sold in Italy, as compared to their (higher) price when sold in the UK.
The owner claimed that it could rely on Article 7(2) of the Directive, because labels it had sewn into the garments when sold in Italy had been removed before the goods were imported and sold in the UK. The parallel importer claimed that the reason why the labels had been removed was because they bore codes from which the owner of the STONE ISLAND trade mark was able to ascertain the distributor or customer in Italy to whom the garments had originally been sold. The parallel importer claimed that if the owner was able to ascertain these details it would prevent any further parallel imports from arising, by no longer supplying garments to the Italian distributor or customer in issue.
The parallel importer alleged in its defence that the removal of the garment codes was legitimate and lawful. The codes gave effect to certain provisions in a distribution agreement between the owner of the STONE ISLAND registered trade mark and its exclusive UK distributor; whereby they had agreed that the latter was to have exclusivity of sales of STONE ISLAND branded garments in the UK. It was asserted that these provisions had as their object the prevention, restriction or distortion of competition within the EU, contrary to Article 81(1) of the EC Treaty Their aim was to "partition the EU market on a geographical basis" and this is not permitted under Article 81(1).
The Court of Appeal held that it was an "open question" as to whether the Defendant could rely, by way of a defence to registered trade mark infringement proceedings, on the fact that the trade mark owner had breached Article 81(1). The Court was not prepared to rule out the possibility that anti-competitive behaviour by a registered trade mark proprietor might mean that it could not enforce its registered trade mark rights against a parallel importer of genuine 'trade marked' goods. The proposition was an "unresolved issue" of Community law and was "sufficiently arguable."
The case will now proceed to trial later this year. It is possible that this issue of law may have to be resolved ultimately by the European Court of Justice ("ECJ"). Only the ECJ can say with finality whether EU competition law can affect the way in which registered trade mark rights may be enforced. Or, as Lord Justice Longmore put it, whether competition issues can be "used to muddy the water of.....a comparatively straightforward trade mark dispute."
Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
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