• Keep on Trucking: Goods in Transit Held Not to Infringe

    Can an E.U. national trade mark owner stop the transit through his country of third-party goods bearing his mark, when the goods are bound for another state where he has no rights? The answer is both “yes” and “no”: everything turns on the facts. The ECJ re-examined the relevant factors recently in Montex Holdings Ltd. v. Diesel SpA (Case C-281/05).

     

    Head Out on the Highway

    Montex had jeans produced for it in Poland under the DIESEL brand and shipped them by road to Ireland, where they were sold. The trucks carrying the goods passed through various E.U. countries including Germany. The goods were protected against removal in transit by a customs seal affixed in Poland.

    Diesel owned a German registered trade mark for DIESEL. It objected that the transit of the goods through Germany infringed its trade mark because there was a risk that some of the goods might find their way onto the German market. The German courts upheld this view. On appeal by Montex, the Bundesgerichtshof asked the ECJ for guidance on:

    • whether a registered mark confers a right to prohibit the transit of goods bearing the sign;

    • whether it is relevant that the sign is not protected in the country of destination; and

    • whether it matters if the goods are produced lawfully or unlawfully in the country of origin, or whether the goods came from within or outside the Community.

     

    ECJ Clears the Way

    The ECJ’s reply was succinct. There could, it held, be no infringement by virtue of goods merely passing through a member state if the goods are not in free circulation there.

    The Court reasoned that unless the goods are actually on the market in a member state, or are likely to be placed on the market there, they cannot interfere with the right of the proprietor of the mark to control the initial marketing of goods bearing the mark in that territory. In the absence of such interference or likely interference, merely passing through does not infringe the specific subject matter of the mark.

    In support, the Court referred to its earlier judgment on similar facts in Class International (Case C-405/03 [2005] ECR I-8735). In that case, goods had been transited through the Netherlands under the external customs procedure. Under that procedure, the goods were not to be placed in free circulation until they reached the country of destination, and were treated as not having entered the E.U., nor become liable to import duties, until then. In that case, the ECJ held that goods are in “free circulation” in a member state of transit only if they are placed on the market in that member state, or are subject to the act of a third party which necessarily entails their being put on the market in that member state.

    The Court in Montex confirmed that a mere speculative risk that goods might somehow end up on the market in the country of transit is not enough to “necessarily entail” their being put on the market there.

    It further confirmed that whether the goods were manufactured lawfully in the country of origin, whether the brand owner has rights in the country of destination, and whether the goods came from within or outside the Community are all irrelevant. It is only free circulation, or likely free circulation, in the member state of transit that counts.

     

    Comment

    This judgment is admirably clear. That two German courts reached a different conclusion shows, too, that it was needed.

    Where there is no harm or likely harm, the intervention of a court is arguably unnecessary. The courts are normally prepared to infer harm or likely harm in a case of trade mark infringement. However, at the far-flung periphery of trade mark law there are cases where the risk of harm is so de minimis that the courts may feel reluctant to interfere. Montex was such a case. The risk of goods finding their way onto the German market was entirely speculative in circumstances where the goods were passing through under a customs procedure that prevented their being put into circulation before reaching Ireland. Diesel’s German rights could not be affected.

    A decision to the contrary would have done more harm than good. Its wide-ranging ramifications would have forced owners of goods being shipped across the Community to plan their route according to ownership of local rights in countries where there was no intention to sell. Such a result would not only have been impractical, but also unfairly disruptive to trade. No doubt the ECJ will have been conscious of this, too.

    The result would probably have been different if the earlier trade mark had been a CTM, since Montex intended to place the goods on the market in the Community, and Diesel would legitimately have anticipated damage to its rights. A system that already affords cost-effective trade mark protection in 27 countries needs little more to promote it. However, the ability to stop goods in transit in one member state, before they reach the market in another, is yet another good reason to file CTMs.

    As for cases where rights are national and goods are just passing through, however, importers can keep on trucking.