European Union: A Debranding Debacle - EU Customs Warehousing And Trade Mark Rights

Last Updated: 7 September 2018
Article by Christopher Banister

The highest court in the EU (the CJEU) has made an interesting ruling — that the owner of a trade mark is entitled to prevent a third party from debranding its goods without consent in an EU customs warehouse, before applying a different mark and importing them into the European Economic Area (EEA).

What does this mean?

EU customs warehousing allows non-EU goods to be stored within the customs territory of the EU without being subject to import duties. Generally, the system is used to allow goods to smoothly transit through the EU for sale in non-EU countries. In this case, involving Mitsubishi forklift trucks, two importers were taking advantage of the system. They were bringing goods into a customs warehouse and then replacing Mitsubishi's branding with their own, before modifying the trucks to make them compliant with EU standards.

The reason why this case is important is that it means trade mark owners can rest easy, knowing that their exclusive rights may still be protected even if their marks are removed from goods by unauthorised third parties.

A debranding debacle

The two importers involved were Duma Forklifts NV (Duma) and G.S. International BVBA (GSI). After debranding the trucks, they would then import and market the trucks inside the EEA.

Mitsubishi wanted to stop these activities and used its trade mark rights to do so. At the time of the dispute, the rights given by a Community Trade Mark were governed by the Community Trade Mark Regulation (No 207/2009 as amended).

This generally gives the trade mark owner the right to prevent all third parties from using a similar or identical sign without consent. This includes:

  • affixing the sign to the goods or their packaging
  • offering the goods
  • putting the goods on the market
  • stocking the goods for the above purposes under the sign
  • importing or exporting the goods under the sign

However, the regulation also limits the EU trade mark owner's rights, if they consent to their goods being placed on the market inside the EEA. At this point, their rights are rendered 'exhausted'. This means that once goods go on sale somewhere in the EEA, the trade mark owner cannot prevent those goods being resold anywhere in the EU.

An important decision

In response to Mitsubishi's claim, Duma and GSI argued that they should be seen as the manufacturers of the forklift trucks, because they had modified them to be EU-compliant and were therefore entitled to debrand them and affix their own signs.

The reasoning and eventual decision of the court rested on the correct interpretation of the concept of 'use in the course of trade'.

The court recognised that, unlike in most cases, the goods did not bear the Mitsubishi marks when they were imported from the customs warehousing procedure into the EEA. It found that, at this stage, there were no trade mark rights to be exhausted and no 'use' of the marks in the course of trade.

The court recognised that, by removing the marks from the trucks prior to importation, Mitsubishi was being deprived of its essential right to control the first marketing of the trucks in the EEA. This adversely affected the various functions of the Mitsubishi marks, including the trade mark's essential function — to indicate the origin of the goods.

The key element of the decision is, however, the court's finding that the removal of Mitsubishi's marks and the affixing of Duma and GSI's own signs involved active conduct. This was done with a view to importing the trucks into the EEA and is therefore carried out in 'the course of trade' for economic advantage. The fact that this conduct took place under the customs warehousing procedure made no difference, since those operations were carried out with the view of making the trucks EU-compliant, so that they could then be imported and marketed in the EEA.

The court therefore held that Mitsubishi was entitled to prevent Duma and GSI's activities.

Key message

The key message to take from this case is that the courts do not look favourably upon any activity which seeks to deprive the trade mark owner of their exclusive trade mark rights. The courts will not excuse such activities, even where they are done under customs warehousing procedure, if it's clear that the goods are to be distributed in the EEA.

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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