Chinese IP Law Updates
February 9, 2018

Exhaustion of the rights conferred by a trademark

Schweppes SA v Red Paralela SL, Red Paralela BCN SL

Source Materials

JUDGMENT OF THE COURT (Second Chamber) 20?December 2017 In Case C?291/16

Concerned Parties

Plaintiff: Schweppes SA

Defendant: Red Paralela SL, Red Paralela BCN SL (Red Paralela)

Case Overview

In a request for a preliminary ruling – a special procedure exercised before the Court of Justice of the European Union (CJEU), which enables national courts to ask CJEU about the validity or interpretation of the European Union (EU) law – Commercial Court No?8, in Barcelona, Spain, presented a case, which concerns the exhaustion of the trademark “Schweppes”. The sign in question is known globally and registered in many countries. It is not only registered as a European Union trademark, but it is also registered in every single EU Member State and the European Economic Area (EEA). In addition, those nationally registered trademarks are alike. Originally, all the “Schweppes” trademarks registered in the EEA (the parallel trademarks) belonged to one company. After several acquisitions, restructurings, and licences granted, the outcome was as follows: identical trademarks in Spain and in the UK were exploited by different entities, which were?also?producing the tonic water separately.

In the infringement proceedings started by Schweppes against Red Paralela regarding parallel trademarks registered in Spain, plaintiff argued that the defendants had imported and distributed in Spain tonic water, manufactured in the UK, bearing Schweppes trademark. In the plaintiff’s opinion this was unlawful because those bottles of tonic water were produced and marketed not by Schweppes or with it consent, but by another entity, which as plaintiff argues, has no economic or legal connection with the parent company group. Therefore, given that the goods and signs are identical, consumers are unable to distinguish the commercial origin of the tonic water, i.e. whether it is from the UK or Spain.

The defendants Red Paralela claimed that the trademark rights have been exhausted. In addition, they argued that legal and economic connections between the entities involved in the proceeding in their mutual utilization of the ‘Schweppes’ sign as a worldwide trademark are unquestionable.

Inevitably, the most important legal provision in this case is Article?7(1) of DIRECTIVE 2008/95/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22 October 2008 to approximate the laws of the Member States relating to trade marks. Entitled ‘Exhaustion of the rightsconferred by a trade mark’, it provides: “The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.”

Court’s Opinions

Link to the original court Judgment:?,T,F&num=C-291/16&td=ALL

CJEU held that Article 7(1) of Directive 2008/95 does not allow the national trademark owner to oppose importation of identical goods with identical trademark that previously, in another EU country, was owned by him/her, but now belongs to a different entity in two specific cases. Firstly, when after the assignment of the trademark, he/she continues to enhance the reputation of the trademark, alone or with third parties (which also deepens the confusion among the relevant public). Secondly, when after the trademark assignment, there are economic connections between the trademark owner and the third party (which leads to control the use of the trademark, goods and their quality).

HFL Comments

While the case is truly rooted in the EU law, especially regarding the free movement rule and intertwined exhaustion of the rights rule, some general remarks can be made.

  • When administering your IP rights portfolio, regardless of what it is consisted of, one must be very careful. Very often big commercial enterprises, in order to optimize tax policies, or expand their businesses to new markets, in consequence of acquiring or selling assets or in relation to many othe revents that lead to the reshaping of the companies’ structure, fiddle with their IP rights, sometimes with detrimental results. Whether granting a licence, creating a joint venture or commercializing IP rights in any way, some exceptional precautions must be taken, with special consideration to future business plans, i.e. future markets, the degree of control over other companies, which exploit the same trademarks, regional laws, connection to the IP rights and the prevailing parallel import doctrine.
  • Trademark right is very powerful, but it has many dimensions. In the case at hand, the shared care of a trademark, a very valuable asset for each party, created a unique situation.Should the different parties not care together about the trademark and cooperate in maintaining it, maybe they could oppose import of the same goods bearing the same trademark but owned by another entity.

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