Italy: The Budweiser Case - The Court Of Appeals Of Milan's Decision

Last Updated: 2 April 2001
Article by Luigi Mansani

Progress Of The Case

With the summons that was served on December 3, 1985, ANHEUSER-BUSCH, an American company with offices in St. Louis, in the United States of America, summoned before the Tribunal of Milan Budejovicky BUDVAR narodni podnik, averring that it is the largest beer producing company in the world; that the beer produced was branded with the trade mark "Budweiser" since 1876 and, from 1895, also with the abbreviation "Bud"; that also in Italy its own trademark, "Budweiser," had grown progressively in reputation since the nineteen forties; that the defendant, a Czech business that is owned by the state with offices in Ceské Budejovice, had started to sell on the Italian market a beer produced in the Czech Republic that was marked with the same and very well known "Budweiser" trademark of the plaintiff; that the Czech business had registered as "Apellations d'origine"1 in accordance with the Arrangement di Lisbona2 expressions including the words "Budweiser" and "Bud" respectively in 1967 and in 1975, after having registered the same words as international trademarks; that to the above mentioned expressions could not be accorded protection on Italian territory as "Appellations d'origine"; that the trademarks of the defendant containing the words "Budweiser" and "Bud" were null and void — because they lacked the requirements of a valid registration — or, in any case, were forfeited; that the behavior of the defendant firm created an artificial barrier to the importing of the beer of the same name that is produced by the plaintiff. All this having been said, plaintiff asked that the invalidity of the above mentioned trademarks of the defendant be established or, subordinately, that these same trademarks be declared forfeited because of non use; that protection in Italian territory could not be accorded to the cited registrations of 1967 and 1975 as "Appellations d'origine"; that, having declared that the use in Italy of the aforementioned trademarks by the defendant constituted unfair competition to the detriment of the plaintiff, the continued denounced behavior be forbidden, with orders to publish the judgement and to refund the costs of litigation.

BUDEJOVICKY BUDVAR narodni podink, appearing in court, asked the rejection of each unfavorable adversary claim and, as a counter claim, also asked the court find that the plaintiff had violated its own trademark rights and that expenses be awarded.

After joining to this litigation lawsuits No. 51/86 and 414/87, which have identical content and which are related to previous entries upon the docket of the same summons in expectation of its being served on the foreign defendant, and after having rejected an urgent relief request filed by the defendant, the tribunal, in decision No 12839 of November 27, 1997/November 26, 1998, held that protection on the basis of the Arrangement di Lisbona3 could not be accorded to expressions including the words "Budweiser" and "Bud"; that the trademarks in question were null for lack of the requisites that are needed for a valid registration, considering the prior use in Italy of the plaintiff's identical trademarks in the period preceding the registration of the same trademarks by the defendant, and considering the reputation achieved by the plaintiff’s trademarks; the Tribunal granted the petitions of the plaintiff while rejecting those of the defendant and ordered the defendant to refund the legal expenses.

BUDEJOVICKY BUDVAR narodni podnik appealed the decision with summons notified on March 2 and 3 of 1999. The company stated that its own trademarks that were declared null and void by the Tribunal were in reality held valid by the same ANHEUSER-BUSCH in the two agreements of 1911 and 1939 that took place between the parties; that the purported prior use had taken place in violation of the commitment of 1939; that the rights of the appellant were derived from the registration of the Italian trademark; that the presence in Italy of Czech beer was set forth in the documents since the last years of the preceding century, except for a short interruption due to wars and political events; that their own trademarks were all previous to the registration of the "appellations d'origine"; that the German name "Budweis" had been established throughout Europe and in particular in Italy and defined the Bohemian area of origin of the old beer as well as the product manufactured in the area since 1265; that in 1924 the beer of the defendant was already present in the Italian territory and had won an award; that the product had always been sold in Italy, except for some interruptions in the periods corresponding to wars or military occupation; that the denominazione d'origine4 had been accorded in full conformity to what has been established by the Lisbon Accord; that in 1967 the trademarks of the appellant had been registered without objection by the O.M.P.I.5; that the term "Bud" represented a meaningful abbreviation in order to define the geographic region of origin; that the characteristics of their own beer were due essentially to the geographical domain in which it was produced, which is not reproducible elsewhere; that when ANHEUSER-BUSCH, in 1907, had requested the registration in the U.S.A. of the trademark "Budweiser", the Patent Office had refused the request because the expressions to be protected were in the public domain and could not constitute a trademark; that the correction of the ownership of the registrations that took place in 1992 had not entailed a change but had simply — at the weakening of the socialist economic regime and at Czechoslovakia's ceasing to be a sovereign nation — allowed other entities operating in the same field to derive benefit. It asked for the reversal of the judgement imposed, the rejection of the complaints of the counter party and, by way of a counterclaim, that it be declared that the use of the names "Budweiser" and "Bud" by the plaintiff violated the exclusive right of the appellant to use them.

Appearing in court, ANHEUSER-BUSCH asked for the rejection of the appeal, emphasizing its lack of foundation and, as a cross appeal, asked that it be acknowledged that the use by the counter-party of the words "Budweiser" and "Bud" or like expressions constituted an unfair competition practice to the detriment of the plaintiff appellee and that therefore the continuance of it must be prohibited, and that the expenses of the appeal be awarded.

In dependence of the production of documents by the two parties, the final pleas hearing was adjourned on December 1, 1999 and therefore was discussed at today's hearing before the court sitting as a panel. (October 10, 2000)

Reasons For The Decision

The appeal of the BUDEJOVICKY BUDVAR narodni podnik (which the parties abbreviated "B. B." ) is unfounded and must be rejected.

The appellant maintains in the first place that the counter-party ANHEUSER-BUSCH INC. (which the parties abbreviated "A. B."), by asking that the registrations of the appellations d'origine and of the trademarks of B. B., which are the subject of the lawsuit, be declared unallowable and null and void, intended to unjustly free the Italian market from the consolidated position acquired by the Czech business and by the existence of by now reputed trademarks (registered and regularly renewed) leading to the same, and that notwithstanding the recognition of the validity of these same trademarks by A. B. which derived from the agreements dating back to 1911 and to 1939 (whose text, with related translations, has been produced in the appellate proceeding by B. B., documents No. 54-b and No. 56). The denounced behavior by A. B. does not emerge however from the reading of such agreements. The same agreements in fact pertain to the regulation of the use of the "Budweiser" and "Bud" trademarks with regard only to the American continent and precisely to North America; they provide nothing for Europe and, in particular, no restriction on use is contemplated for the European Countries. These agreements were made before the registration of the trademark for which the plaintiff has asked and obtained the declaration of invalidity and also before the registration of the appellations d'origine that are in contention.

The appellant then maintains, from the historical- factual point of view, that he is — contrary to what has been established by the counter-party — the first user of the "Budweiser" trademark; that the renown of the Bohemian-Czech beer dates back to the Holy Roman Empire; that credit for the renown of the trademark cannot be given to the defendant-appellee; that sales of this beer that have been made at military outlets involved extraterritorial zones, as are the N.A.T.O.6 bases that are located in Italy, and, in any case, that the sales in the local markets that have sprung up next to the military bases had taken place in violation of the 1939 agreement and of the rights that arose to B. B. from the registration of the Italian trademark "Budweiser Cristal" which was originally filed with the application of May 22, 1940; that the Czech Budweiser beer was on the Italian market since the turn of the century and the interruptions of the sales coincided only with the duration of the Second World War, the duration of the uprising in Czechoslovakia which was contemporaneous with the Hungarian revolt and with the duration of the "Primavera di Praga7", and were therefore fully justified according to Article 42 of the Trademark Law; that, in substance, B.B. was already provided the irrefutable rights to the trademark when A. B. had begun to be introduced into the Italian market.

On the contrary, it is considered that A. B. has furnished adequate proof of the alleged prior use. The opposing evidences offered by B. B. show instead a use dating back in time, but not equally meaningful and continuing as that of the counter-party, and therefore not such as to entail the acquisition of the rights to a trademark that was still not registered.

The intense advertising campaign in magazines and newspapers of notoriously high and world wide circulation, which are known and read in Europe and also in Italy, which A. B. has demonstrated, is in fact indicative, on the one hand, of a secure reputation of the trademark of this last company and of the product from the same brand dating back to at least the nineteen thirties, i.e. to a period preceding the first registration by B. B. of its own trademark No.62359/260390 (application of March 22, 1940). The use in advertising is in fact without a doubt suited for giving notoriety to the trademark and for concretizing a prior use of the trademark such as to exclude the novelty of the other: what counts is the awareness that the public has of the trademark and of the product that it indicates, and that there is no likelihood of confusion with the trademark used by another firm for an equal or similar product.

In addition, a trademark that is well known because it is widely used and renowned excludes novelty even if it is a trade mark that has not been used in the national territory. Reference is made on the subject in Article 6-bis of the Convenzione di Unione di Parigi (Stockholm text of July 14, 1967)8, according to which the registration must be refused or invalidated and the use of a trademark forbidden if it can be confused with a "well-known" foreign trademark that is used for identical or similar products.

Overall, the quantities of beer labeled with the trademark in question that were sold in Italy by A. B. even before the registration of the trademark by B. B. turn out to be — as it emerges from the prospects respectively filed by the parties — significantly superior with respect to those quantities sold in the national territory by the latter company, which turns out to have sold, in some periods greater then the three year period indicated in Article 42 of the trade mark law, irrelevant quantities, while in other periods it has remained completely absent from the Italian market (by its own admission) albeit remaining however (as documents No. 2 and document No. 32 that were submitted by A. B. at this appeal level do substantiate) present on the foreign markets. It is this last circumstance that removes the basis for the objection of the appellant with regard to justification of the interruptions because of reasons beyond its control. Thus, the existence of the circumstance that is provided by the article to which reference was just now made as a condition that is impedimental to the lapse of the vaunted right, cannot be considered to have been shown by B. B., who had the burden of proof.

The appellant continues by disputing the arguments of A. B. and the justification by the Tribunal concerning the appellations d'origine.

Even such dispute is however unfounded because, in the opinion of this panel, it is decisive the relief that in this case the "milieu géographique9" vaunted by B. B. does not exist.

The premise of this protection is that the denominazioni d'origine serve to distinguish a product whose qualities and characteristics are due "exclusively or essentially" to the geographic area and include natural and human factors. Although admitting that the water, the hops, the barley, and the malt of Bohemia, which is used by B. B. for the production of its own beer, are of excellent quality and have special characteristics, as it was recognized by the same "naturalized American Sons of Bohemia" who, while vaunting — as in document No. 10 of B. B. — the characteristics of their land of origin, have, since 1892, exalted its natural products as well as the taste, the color, and the appearance of the Bohemian beer, this does not mean that that taste, that color, and that appearance of the beer produced in Bohemia derives only from a complex of environmental conditions (climate, land, etc) that are not repeatable in another place and that are determining factors, and from the summation of work and production techniques that cannot be implemented or are not equally valid in different settings. That is, this does not mean that natural or human factors are so closely associated to the environment that they turn out to be inescapable because these factors have such an influence on the product that they render it absolutely unique and unable to be produced elsewhere.

The documentation of B. B. on this point is not only rebutted by the corresponding documentation of A. B., but also contradicts, first of all, the whole drift of the document of 1892 to which reference has just now been made - and to which B. B. makes reference in order to corroborate its own thesis - in which, in fact, it is averred that the American product is not inferior in features to the genuine Bohemian product. And this is, then, contradicted by document No. 3. — about which specific objections have not been made by B. B. — which was filed in this appeal by A. B and from whose text it is shown that B. B. itself recognizes the possibility of producing its own beer abroad, according to the statement of its sales manager Robert Chrt that, while at first a large warehouse had been constructed because of the fact that the Budvar beer would be produced only in Ceske Budejovice, "now we are thinking of licensing production abroad". All of this means that the quality and the characteristics of the beer of B. B. are not believed — not even by the producers — to be necessarily and exclusively connected to the original place of production and that, in substance, the characteristics of the raw materials used in Bohemia and the organoleptic properties of the Bohemian beer can be found or reproduced elsewhere.

To such considerations, which show the fault in the prerequisite itself of the protection of the denominazione d'origine of the appellant and are therefore in themselves already decisive, two further objective and meaningful facts about the impossibility of the protection should be added. The first objective fact, which, according to what is averred and explained by the appellant himself, is that neither "BUDWEIS" nor "BUDWEISER" nor "BUD" represent the name of a geographical locality. The first is a German translation of the Czech locality where the beer is being produced; the second is an adjective that is made out of the first, and the third is the related abbreviation. The second objective fact is that, as it was correctly pointed out and emphasized at length by the Tribunal, although a de facto change in the ownership of the international registration of the above mentioned appellations d'origine took place in 1992, as such ownership was first identified in the state industry called BUDEJOVICKY BUDVAR narodni podnik and then instead in the "Organizations qui, dans la région, s'occupent de la production des produits mentionnés"10, the procedure provided by Article 5/4 of the regulation for the implementation of the Arrangement di Lisbona which has been in force from January 1, 1977 has not been adopted, and a new international registration according to the provisions of Article 5 of the Arrangement11 has not been provided for.

The first fact indicates that the terms in question are not the name of the country of origin, of the region, or of the locality where the beer of B. B. is being produced, which is a different locality, this locality being in fact Ceske Budejovice. But not even at the moment of the registration did such terms indicate the locality of production of the Beer of B. B., considering that, as properly revealed by A. B., in Czechoslovakia there existed at that time a constitutional prohibition of the use of the German language. Considering the lack of similarity to the name of the locality, it therefore cannot be logically maintained that the terms that are the subject of the registration perform a descriptive function of the place of production.

At the de facto change of ownership of the registrations, there is, on the one hand, an indeterminacy of ownership, considering that "the Organizations" that are concerned with the production of the product in question are not specifically identifiable as natural or legal persons — as is required by Article 5/1 of the Arrangement — as it was instead the state industry which previously owned the registration.

From the failure to implement — in the execution of such a de facto change (both because it is considered a simple correction, and because it is considered a change) — the procedure of Article 5 of the Arrangement, followed the real impossibility of competent bodies — who deal with the national community of the member country of the Arrangement before they deal with the individual interests of the producers (as was properly observed by the Tribunal) — to exercise their right to refuse the protection accorded to (or also to) individuals different from the single original owner.

The conclusion to which the Tribunal has come about the impossibility for the appellations d'origine in question to enjoy the protection in the state and about the non-existence of the rights vaunted by B. B. concerning the above mentioned trademarks as void because of the lack of originality must therefore be decisively upheld.

Passing therefore to the cross appeal of A. B. only the petition dealing with prohibition of the use by B. B. of the trademarks "BUDWEISER" and "BUD," on which there has not been any specific pronouncement of the Tribunal, can be granted.

Once the prior use of A. B. is ascertained in Italy and the nullity because of lack of originality of the trademarks of the defendant is declared, in granting the plaintiff's petition it is necessary to prohibit B. B. from using the trademark, according to what is expressly provided by Article 10 of the trademark law, which forbids the use of a trademark that is already in fact used or already registered after the related registration has been declared void. It is in fact obvious, as A. B. properly maintains, that if — after the declaration of nullity in favor of the prior user — the trademark continues to be used, it is a tort on the part of whomever continues to use it. Therefore it is reasonable to believe that the injunction is a consequence of the declaration of the nullity of the trademark because of the preceding use by others, as it is with that injunction that the prohibition that is decreed by law is implemented. The appealed decision should therefore be completed with the injunction to B. B. from using the trademark that was declared null and void by the Tribunal.

With regard instead to the denounced unfair competition practice, the cross appellant has no objection to the premise posed by the Tribunal for the justification of the rejection of the related claim, i.e. to the fact that such claim had been proposed by A. B. on the presumption of the use that the defendant would have made in the national territory of its trademarks, null and void because of the lack of the conditions for a valid registration. A. B. criticizes instead the consequent affirmation of the lower court judges, that is, that "The trademark infringement exhausts the consequences of the behavior. But if it can be true that such a principle is not always valid, as it is possible to sum the trademark infringement and unfair competition actions (with the consequent possibility of according both the special protection and the general protection in accordance with Article 2598 of the Civil Code) when, even in relation to the same factual situation, the prerequisites of each recur, it is however true that in the case in point, on the one hand, the presentation of the plaintiff leaves no room for other residual protection profiles, and, in another sense, it is true, even from the point of view of the penalties, that in the case in point there was no additional need, considering that - in dependence of what was just now noted on the subject of the injunction - once the nullity is declared because of the lack of novelty of a trade mark, whoever continues to use the trademark commits a tort that is in itself subject to sanctions.

For all the reasons given, having rejected the main appeal and in the partial granting of the cross appeal, the appealed judgement must be confirmed and completed with the injunction to B. B. from continuing to use the trade marks that have been declared null.

The predominate and substantial loss by B. B. of the lawsuit entails that also the expenses of this appellate level must be totally charged against them. Such expenses, in consideration of the value of the suit and of the trial activity that took place, come to a total of 21,282,500 lire of which 2,782,500 lire are for costs, 2,500,500 are for fees and 16,000,000 are for lawyers fees.

For This Reason

The Court of Appeal of Milan, ruling finally on the appeal filed by BUDEJOVICKY BUDVAR narodni podnik against ANHEUSER BUSCH INC. against the judgement of the Tribunal of Milan No.12839 of November 27, 1997/November 26, 1998 and having disregarded every other petition, exception, and deduction of the parties;

rejects the principal appeal;

rejects the cross appeal relative to the complaint of unfair competition practices, sustaining it with regard to the request for injunction;

confirms accordingly the judgement appealed and, in addition to same, prohibits B. B. from continuing to use the trademarks declared null and orders B. B. to refund to A. B. even the expenses of this appeal, which expenses come to a total of 21,282,500 lire, of which 2,782,500 are for costs, 2,500,000 lire are for fees, and 16,000,000 are for lawyers fees.

So adjudged in Milan, on November 10, 2000.

Footnotes

  1. Name of Origin
  2. Lisbon Convention
  3. Lisbon Convention
  4. Appellation of origin
  5. Organizzazione Mondiale della Proprietà Intelletuale World Organization of Intellectual Property
  6. North Atlantic Treaty Organization
  7. Prague Spring. This is a piece of black humor inspired by the Soviet claim that their invasion was in response to a letter of invitation calling for "Fraternal Assistance" to protect socialism in Czechoslovakia. The soviets showed up in tanks.
  8. This is the Paris Convention of March 20, 1983 which was revised on various dates in Burssels, Washington, London and Stockholm. The last revision was in Stockholm on July 14, 1967. It is the text of this revision, specifically 6-bis, to which the Judge is referring.
  9. Geographic surroundings
  10. "Organizations that, in the region, deal with the production of the mentioned products."
  11. The Lisbon Agreement

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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