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Insight

Parallel Importing around Europe can be exhausting

27/09/2017
In the case of Schweppes SA v Red Paralela SL, the Advocate General has proposed criteria to determine whether Schweppes SA can oppose the importation into and/or marketing in Spain of SCHWEPPES branded goods coming from the UK, where that mark is owned by the Coca-Cola group.

In the case of Schweppes SA v Red Paralela SL and Red Paralela BCN SL (C-291/16), the Advocate General has proposed criteria to determine whether Schweppes SA (the Spanish subsidiary of the Orangina Schweppes group), can oppose the importation into and/or marketing in Spain of SCHWEPPES branded goods coming from the UK, where that mark is owned by the Coca-Cola group. 

The case concerns the rules on parallel importation and trade mark exhaustion. 

Background 

Schweppes International Ltd is the owner of the Spanish trade mark SCHWEPPES and Schweppes SA has an exclusive right to use the mark in Spain. In the UK, the Coca-Cola group is the owner of the UK SCHWEPPES trade mark. Red Paralela is a beverage wholesaler and distributor based in the Barcelona province of Catalonia, Spain.

In 2014, Schweppes SA brought infringement proceedings against Red Paralela for importing and marketing in Spain bottles of tonic water from the UK bearing the SCHWEPPES trade mark.

The Barcelona Commercial Court referred a series of questions to the CJEU to ascertain whether or not EU law precludes Schweppes SA from invoking the exclusive right that it enjoys under Spanish law to oppose the importation into and/or marketing in Spain of SCHWEPPES branded goods which come from the UK.

Advocate General's opinion

On 12 September 2017, Advocate General (AG) Mengozzi delivered his opinion on the principles and criteria for assessing trade mark exhaustion, looking at the specific factual situation concerning the SCHWEPPES trade marks. In brief, he considered that:

  • If the owner of the trade mark in the importing state and the owner in the exporting state are the same, or economically linked,  trade mark exhaustion applies.

  • The relationship that exists between owners of parallel trade marks which have reached an agreement on the common management of their signs is not comparable to the relationship between a licensor and its licensees, or between a manufacturer and its distributors, or between companies which are part of the same group. It is the unitary control over the trade mark that results from all these relationships, not the formal aspects of the relationships, which triggers exhaustion.

  • Owners of parallel trade marks which arise from the fragmentation of a single mark resulting from a territorially limited assignment of that mark may be regarded as ‘economically linked’, for the purposes of the application of the principle of exhaustion, when they coordinate their commercial policies with a view to exercising joint control of the use of their respective marks.

  • For there to be an exhaustion of rights, such conditions can be deemed to have been met only if the unitary control over the trade mark allows the entities which exercise that control the possibility of determining directly or indirectly the goods to which the trade mark may be affixed and controlling their quality.

  • The burden of proof is on the parallel importer to establish the economic link between the owners of the parallel marks. It will then be for the trade mark owner to prove it has not reached any agreement with and is not collaborating with the trade mark owner in the exporting state to bring the mark under unitary control. 

Comment

The AG's opinion, though not binding on the CJEU, provides a new insight into the principles of trade mark exhaustion, particularly his definition of "economically linked" - that this may apply when the parties co-ordinate their commercial policies with a view to exercising joint control over use of the marks.

The opinion appears to favour the parallel importer, Red Paralela, although the burden will be on it to show the requisite level of coordination between the marks. However, this does not mean that the CJEU will follow the opinion, and even if it does, it will then fall to the national court to determine from all the evidence.

What is safe to say is that this dispute is far from over and will continue to fizz for sometime!

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