UK: Van Doren + Q GmbH v Lifestyle Sports + sportswear Handelsgesellschaft mbH
Trade marks: the burden of proof in parallel imports cases – exhausted logic?

The combined effect of the Silhouette, Sebago and Zino Davidoff/Levi Strauss cases is that a trade mark owner’s right to prohibit use of his mark in relation to particular goods is only exhausted when he has put those goods onto the market, or expressly or impliedly consented to their sale by a third party, in the EEA. But who carries the burden of proof to demonstrate that consent was (or was not) given to the sale of goods in the EEA? Is it for the parallel importer to show consent, or for the trade mark owner to prove its absence? The ECJ tackled this difficult question giving its judgment yesterday in the van Doren case.

Background

Van Doren was the exclusive German distributor of STUSSY, Inc., the Californian owner of the trade mark "STÜSSY". It brought proceedings against the defendant Lifestyle for selling goods bearing the STÜSSY trade mark in Germany. Van Doren alleged that those goods were first put on the market in the USA, and the trade mark owner had not consented to their distribution in Germany. The defendant argued that the trade mark rights had been exhausted because the goods were sourced in the EEA, where they were put on the market by the trade mark owner or with his consent. Under German law, exhaustion operates as a defence to trade mark infringement and as such most be proved by the defendant parallel importer.

The Bundesgerichtshof asked the ECJ whether this national rule was consistent with Articles 28 and 30 EC Treaty. Advocate General Stix-Hackl had outlined the difficulties in her Opinion published in June last year; whilst the defendant parallel importer may be able to name his suppliers, he will not be able to compel them to disclose their sources. Moreover, even if the defendant parallel trader was able to provide the relevant evidence, in so doing he would reveal his supply source, enabling the trade mark owner to identify the gap within his distribution system, and in all likelihood block the defendant parallel importer’s legitimate sources. If the burden of proof lies with the parallel importer, the trade mark owner could exploit the alleged infringer’s dilemma to strengthen his market position.

The ECJ decision

The Advocate General concluded that where a national rule places the entire burden of proving exhaustion on parallel importers there is "an unjustifiable, at least potential, impairment of the free movement of goods" and proposed that the burden of proof should be shared. She suggested that marking the goods clearly with an indication of their market and obliging the trade mark owner to prove that there are no gaps in his distribution system within the EEA, were possible approaches to finding the correct balance.

The ECJ considered that the German rule of evidence requiring the parallel importer to demonstrate that the goods were marketed in the EEA by the trade mark owner (or with his consent) is consistent with Community law. However, Articles 28 and 30 require qualification of the rule where it would allow the trade mark owner to partition national markets. If the parallel importer can establish that there is "a real risk" of market partitioning if he bears the burden of proof, the burden shifts to the trade mark owner. If the trade mark owner can adduce evidence to establish that the goods were placed on the market outside the EEA by him or with his consent, the parallel importer must prove consent of the trade mark owner to the subsequent marketing of the goods within the EEA.

Comment

The ECJ decision begs as many questions as it appears to answer. How does a parallel importer show that there is a real risk of "market partitioning" in order to shift the burden of proof to the trade mark owner? Is it sufficient for the parallel importer simply to show that the trade mark owner has an exclusive distribution system in operation within the EEA? What sort of evidence does the trade mark owner have to adduce to shift the burden back to the parallel importer?

The ECJ decision does not address these difficulties. The Advocate General had proposed that the trade mark owner mark the goods clearly with an indication of their intended market, and/or prove that there are no gaps in his distribution system within the EEA. The ECJ does not comment on these suggestions. Whilst it is difficult to see how the latter suggestion would work in practice, marking the goods (and possibly the subsequent removal of such markings by a third party) might well prove to be sufficient to shift the burden of proof back to the parallel importer. It is therefore more advisable now than ever for trade mark owners to mark their goods with an indication of their intended market to counter "grey" imports. As for the parallel importers, even if they are in a position to name their supplier’s suppliers, their dilemma will be how much information to produce to the trade mark owner for fear of losing their immediate sources of supply.

Article by Joel Smith and Naomi Gross

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