• EUROPEAN PERSPECTIVES

    The Burden of Proof in Parallel Import Cases

    The circumstances under which a parallel importer can resist the disclosure of his source of imported products in the EU was recently considered by the European Court of Justice (Van Doren v Lifestyle Sports and Michael Orth). The case involved the trade mark Stüssy, which was owned by Stussy Inc. on a worldwide basis in respect of class 25 goods. In the EEA, Stussy operated an exclusive distributor system under which only one distributor operated in each (EEA) country and that distributor was contractually bound not to sell Stüssy goods to intermediaries for resale outside his contractual territory. Van Doren was the exclusive distributor in Germany.

    Lifestyle began selling original Stüssy products in Germany without permission. They were sued for trade mark infringement by Van Doren. The latter claimed that the Lifestyle imported goods had originally been put on the US market and that their distribution in Germany was unauthorised by the trade mark owner. Lifestyle contended that they had sourced the Stüssy clothing from within the EEA where they had been put on the market by the proprietor or with his consent.

    At first instance, the German Court found in favour of Van Doren. On appeal, however, this finding was reversed. The German Appeal Court decided that it was for Van Doren to establish that it was probable that the Lifestyle goods originated from imports which were put on the EEA market without the necessary consent.

    Van Doren appealed further to the Bundesgerichtshof who sought a ruling from the ECJ on the burden of proving where the trade-marked goods were first put on the market. The European Court ruled as follows:

    • The burden of proving that the trade mark owner’s right had been exhausted must, as a rule, rest with the parallel importer. This rule was consistent with Community law and the EU Trade Mark Harmonisation Directive.

    • However, in order to ensure the free movement of goods, that rule may, in some circumstances, need to be qualified. This would be the case where that rule would allow the trade mark owner to partition national markets and thereby assist in the maintenance of price differences which may exist between Member States. The risk of partitioning and maintaining price differences was particularly real where the trade mark owner used an exclusive distribution system to market his products in the EEA. In such situations, if the importer were required to provide evidence of his source (of imported goods), the trade mark owner could obstruct the marketing of the goods purchased and prevent the importer from obtaining future supplies from an exclusive distributor within the EEA (if this were indeed the source of the imported products).

    • Where a third party against whom proceedings have been brought succeeds in establishing that there is a real risk of partitioning of national markets if he himself bears the burden of proving that the goods were placed on the market in the EEA by the proprietor of the trade mark or with his consent, it is for the proprietor of the trade mark to establish that the products were initially placed on the market outside the EEA by him or with his consent. If such evidence is adduced, it is then for the third party to prove the consent of the trade mark proprietor to the subsequent marketing of the products in the EEA.

     

    Comment

    This ruling seems to tread a reasonable path between the conflicting interests of trade mark owners and parallel importers in the EEA. In the circumstances of the Stüssy case, if the burden of proof had continued to lie with the parallel importer, it would be very simple for the trade mark owner to identify the weak link in its distribution chain and to cut off supplies to that weak link and thereby the parallel importer.

    In the light of the ECJ’s comments, trade mark proprietors who operate an exclusive distribution system in the EEA would be wise to distinguish clearly on their labels/packaging between products that are first marketed in the EEA and products that are first released outside that economic area.

    Given modern methods of identifying products with serial numbers and barcodes, this should not be too onerous a burden, provided the trade mark proprietor keeps proper records of its product distribution.

    On the other hand, if a parallel importer wishes to run a defence, based on the above Stüssy case, he will need to show that the trade mark owner had an exclusive distribution system within the EEA and that he (the trade mark owner) is likely to use (abuse?) that system to inhibit the free movement of his product between EEA member states and thereby to maintain price differences between those states. If the importer can establish such a Stüssy defence, then the trade mark owner will be required to show that the imported product was first sold outside the EEA.

    Even with such a defence available, a sensible parallel importer will still need to seek clear evidence from his source that the product is genuine and that its first marketing took place within the EEA.