Art. 7 (1) of Directive 2008/95/CE of the European Parliament and of the Council of October 22,2008 on the Harmonization of national laws of member countries relating to trademarks , recorded as Exhaustion of trademark right states that:
the trade mark right 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.
The European Court of Justice intervened on the interpretation of this rule and with judgement of December 20, 2017 (Case C-291/16) solved the preliminary issue on the controversy between SCHWEPPES SA, a Spanish company, vs the Red Paralela SL and the Red Paralela BCN SL (after jointly as: Red Paralela).
In particular, SCHWEPPES SA initiated infringement proceedings against Red Paralelawas Spanish trademarks SCHWEPPES in respect of the Spanish trademarks on the ground that the defendants imported and distributed in Spain bottles of tonic water coming from the UK bearing the SCHWEEPES trademark.
The applicant maintains that that marketing in Spain is unlawful, given that those bottles were placed on the market not by itself or with its consent but by Coca-Cola.
Red Paralela, in its defence, contended that the trademark rights resulting from tacit consent, in so far as concerns the Schweppes goods originating in Member States of the European Union where Coca-Cola is the proprietor of the parallel trademarks, have been exhausted.
In addition, Red Paralela considered that there are undeniable economic and legal links between Schweppes International Ltd and Coca-Cola in their joint exploitation of the sign SCHWEEPES as a universal trademark.
In the 90’s Cadbury SCHWEPPES (who at that time was the proprietor of the all the SCHWEPPES trademarks registered in the European economic area) gave part of the well-known trademarks of tonic water – among which those registered in the UK – to Coca-Cola.
The other trademarks – after a number of acquisitions and restructurings – went under the proprietorship of Schweppes International Ltd that granted SCHWEPPES the exclusive licence over the Spanish trademarks.
The referring court – considering the circumstances of the dispute in the main proceedings clearly different from those in the cases giving rise to the case-law of the Court regarding the exhaustion of trademark rights – suspended the proceeding waiting for the judgement of the European Judge on the application of Article 7 (1) of the Directive 2008/95/CE on this case.
The Court of Justice, before which the dispute had been brought – taking into account that the essential function of the trademark is safeguarding the identity of origin of the trademarked product to the consumer – maintained that having SCHWEPPES International promoted a global image of the trademark SCHWEPPES and having had commercial and economic relations with Coca-Cola (to coordinate a trademark strategy aimed at strengthening the image of the sign a single trademark), it could not oppose to the importation of bottles of tonic water bearing the trademark SCHWEPPES originating from the UK.
Briefly, the Court maintained, the principle related to the exhaustion of the trademark rights shall be interpreted as:
precluding the proprietor of a national trade mark from opposing the import of identical goods bearing the same mark originating in another Member State in which that mark, which initially belonged to that proprietor, is now owned by a third party which has acquired the rights thereto by assignment, when, following that assignment,
– the proprietor, either acting alone or maintaining its coordinated trade mark strategy with that third party, has actively and deliberately continued to promote the appearance or image of a single global trade mark, thereby generating or increasing confusion on the part of the public concerned as to the commercial origin of goods bearing that mark,
– there exist economic links between the proprietor and that third party, inasmuch as they coordinate their commercial policies or reach an agreement in order to exercise joint control over the use of the trade mark, so that it is possible for them to determine, directly or indirectly, the goods to which the trade mark is affixed and to control the quality of those goods.