Combating illegal parallel imports of trademarked goods has been gaining importance as part of brand protection strategy for companies operating on the European market – however, the recent changes in EU jurisprudence in this area may prove to be quite a shakeup in terms of how this problem is approached in national civil proceedings of respective Member States.
Parallel imports and exhaustion of trademark rights
The general rule is exhaustion of trademark rights, regulated in Article 15(1) of the EUTM Regulation1. According to this provision, an EU trademark shall not entitle its proprietor to prohibit its use in relation to goods which have been put on the market in the European Economic Area (EEA) under that trademark by the proprietor or with his consent. A contrario, if certain goods have been put on the market by a party other than the trademark proprietor, and the consent of the proprietor to put them on the market is missing, the exhaustion of rights does not occur – thus the introduction of such goods on the market infringes the rights of the EUTM proprietor. The corresponding Polish regulation dealing with national trademarks, art. 155 of the Polish Industrial Property Law2, has essentially an identical effect.
In consequence, the key aspect of combating illegal parallel imports as a brand protection strategy is that it allows for taking off the market not only counterfeit goods, but also those goods which are genuine, but were introduced on the market without the trademark owner's approval. The legal provisions regulating parallel imports have an EEA-wide effect, so parallel imports will only be illegal if the questioned goods were imported from outside of this area. It is legal to sell goods purchased in one EEA member state in another EEA member state as in relation to such goods trademark rights have been exhausted once they were put on the EEA market for the first time.
A key aspect to be analyzed in a parallel import case is the consent of the trademark proprietor. It has long been agreed upon that such consent must be either express or implied, but it cannot be presumed (Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss [2001] ECR I-869 paras 46, 54 and 58). The jurisprudence has also been very clear that the burden of proof as to existence of trademark owner's consent lies with the trader who alleges that such consent existed (see Zino Davidoff and Levi Strauss, para 54). However, in some cases the burden of proof can be shifted from the defending trader to the trademark owner, i.e. when leaving the burden of proof with the trader would allow the trademark proprietor to partition national markets and thus would assist the maintenance of price differences which may exist between Member States (see Van Doren + Q, C‑244/00, EU: C:2003:204, paras 37 and 38, Schweppes, C‑291/16, EU: C:2017:990, paras 52 and 53, e.al.). The real risk of partitioning of national markets may occur in particular where the trademark proprietor markets his products in the EEA using an exclusive distribution system (see Van Doren, para 39).
Recent developments
This judicial landscape has been relatively stable for many years, however, in the recent past there was a rather significant shift in the approach of the CJEU, which – interestingly – is a consequence of two requests for a preliminary ruling coming from the District Court in Warsaw. The first request was the basis for the ruling of 17 November 2022, Harman International Industries Inc. v AB S.A., C‑175/21, EU: C:2022:895, and the second one for the ruling of 18 January 2024, Hewlett Packard Development Company LP v Senetic S.A., C‑367/21,EU: C:2024:61. Both rulings tackle the problem of shifting the burden of proof in parallel import cases in more detail than previous jurisprudence, and they also answer some crucial questions related to enforcement of decisions passed in such cases.
Harman International Industries case: protecting enforcement and restoring balance
In the Harman case, there were two main questions; the first was whether the operative part of a court decision may be formulated in general terms – which, in the context of the case, meant that the referring court wanted to know if it could issue a judgment which would refer to unspecified items covered by parallel imports only as "goods which have not been put on the market within the [EEA] by the right holder or with its consent", while particular goods would later be identified during enforcement proceedings.
To this question the CJEU gave an affirmative response, contingent on the defendant being afforded sufficient procedural guarantees at the enforcement stage (see Harman, paras 70, 71). The Court further stated that these guarantees seemed to be present in the Polish national procedure (see Harman, para 66), with which this author wholeheartedly agrees.
This aspect is crucial for the effective enforcement of a broader array of trademark-related decisions, beyond purely parallel import cases. It is almost always impossible to identify individual items (e.g. by serial numbers of particular products) which are infringing trademark proprietor's rights at the stage of filing a statement of claim or even passing the judgment, therefore the possibility to indicate such products only after the judgment has been rendered, e.g. when the goods are being seized, is an element without which enforcement may not be viable at all.
The second main question presented in the Harman case was related to shifting the burden of proof. In the context of the case, the referring court wanted to know whether it is necessary to shift the burden of proof from the trader to the trademark proprietor if without access to trademark proprietor's database it is not objectively possible for the trader to demonstrate that the products it purchased had been placed on the market in the EEA by the trademark proprietor or with its consent – even in a case where no exclusive distribution is established.
Advocate General weighs in
To this question the Court again gave an affirmative answer, provided that the adjudicating body finds, depending on the specific circumstances relating to the marketing of the products concerned, that the rule on the burden of proof would allow the trademark proprietor to partition national markets and thus would assist the maintenance of price differences between Member States (see Harman, para 72).
In the same paragraph the Court made a reference to the opinion of the Advocate General, affirming his view. As the judgment is rather enigmatic on this aspect, it's worth quoting the referred part of the opinion in full, since it allows a much more robust interpretation of the crucial aspect of parallel import-related proceedings:
If no exclusive distribution is found to exist, the modification of the traditional rules of evidence could be allowed in proceedings for infringement of an exclusive trade mark, depending on the specific circumstances in which the goods are marketed. If there is no indication on the goods of where they were first put on the market, the court – having determined that there are no practical remedies that can overcome that evidentiary problem – will modify the burden of proof in accordance with the abovementioned principle of effective judicial protection (Opinion of Advocate General Pitruzzella delivered on 16 June 2022(1), Case C‑175/21, Harman International Industries, Inc. v AB SA, EU: C:2022:481, para 90).
It seems important to note that the Advocate General makes it clear that, in his opinion, the burden of proof may be modified in the circumstances described, but only if it is determined that there are no practical remedies that can overcome the evidentiary problem that the defendant may have (i.e. the defendant was unable to obtain the information needed to determine whether the product in question was intended by the proprietor of the EU trademark to be put on the EEA market – see Harman, Opinion of AG Pitruzella, para 86).
In further paragraphs of the opinion, Attorney General Pitruzella goes on to say that The investigation to be carried out by the national court will seek to verify that the defendant is not in a situation of 'probatio diabolica', because the factual elements that can demonstrate the exhaustion of the trade mark right are completely outside its sphere of influence and knowledge (Harman, Opinion of AG Pitruzella, para 91) and that just because it is difficult for the defendant to obtain information from its supplier, that cannot be the only factor justifying the modified burden of proof (Harman, Opinion of AG Pitruzella, para 92). According to the opinion, in the absence of established exclusive distribution system, shifting the burden of proof should only be considered if it is impossible in practice for the defendant to provide evidence for their claim that disputed goods were put on the market with trademark proprietor's consent (see Harman, Opinion of AG Pitruzella, para 93).
This author is of the opinion that, due to the reference present in the Harman judgment, it is crucial to consider the opinion of the Attorney General rendered in the same case as further guidance in assessing the conditions which should be met before the burden of proof is shifted, in the absence of an established exclusive distribution system.
Hewlett Packard case: a step too far?
In the Hewlett Packard ruling, the CJEU faced comparable questions, and in its reasoning it relied heavily on its earlier Harman judgment. However, important novel elements were part of the circumstances of the case – among them was the finding of the referring court that the defendant had obtained assurances from its suppliers that disputed goods can be legally marketed within the EEA, and that the proprietor of that trade mark refused to carry out verification of the market on which those goods were intended to be marketed at the defendant's request. Those circumstances proved to be important in allowing the court to decide whether the burden of proof should be shifted.
The answer given by the CJEU lists a number of conditions which are to be met to allow adjusting the burden of proof (see Hewlett Packard, paras 61, 67). This may occur if the goods that bear the trademark:
- do not bear any marking enabling third parties to identify the market on which they are intended to be marketed;
- are distributed through a selective (not exclusive) distribution network whose members may resell them only to other members of that network or to end users;
- were purchased by the defendant after having obtained an assurance from the sellers that they could be marketed legally within the EEA; and
- the proprietor of that trade mark refuses to carry out verification of the intended market at the purchaser's request.
The number of conditions, which need to be fulfilled jointly to justify shifting the burden of proof, may suggest that the ruling is quite case-specific and thus would only have a limited impact on the market practice. However, many businesses which are interested in combating parallel imports do use selective distribution networks, while nearly none of them use any sort of markings that would allow a third party to identify the market where particular goods were intended to be marketed. At the same time, it seems safe to assume that most suppliers, including dishonest ones, would assure their customers that the goods they are selling are perfectly legal and may be marketed within the EEA.
This underlines the importance of the final condition, which is the refusal of the trademark proprietor to conduct verification to confirm on which market the goods in question were intended to be distributed. If the proprietor wishes the burden of proof to remain with the purchaser of the goods, they should carefully respond to each request from sellers who wish to verify whether the goods they possess can be legally marketed within the EEA. At the same time it's hard not to see that if the trademark proprietor becomes effectively obliged to fulfill each such request, he may become overburdened with unnecessary administrative work.
Conclusion
Taking all of the above into account, it seems that while recent new judgments in the area of parallel imports may not have brought revolutionary changes, they will certainly have a significant influence on business practices and brand protection strategies. While certain elements of the Harman judgment may be regarded as restoring the balance between trademark proprietors and defendants in parallel import cases, the related Hewlett Packard ruling seems to push this balance even more in favor of the defendants.
In this author's view, when it comes to decisions regarding shifting the burden of proof, the test proposed in the Harman ruling, and specifically in the opinion of the Advocate General Pitruzella, seems more balanced and reasonable, and in line with the reality of conducting business activity within the European Union.
With rulings inevitably approaching in both national cases underlying the recent CJEU judgments, we may soon see how the theory provided by the Court is put into practice.
Footnotes
1. Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark [2017] OJ L154/1.
2. Ustawa z dnia 30 czerwca 2000 r. - Prawo własności przemysłowej, Dz.U.2023.0.1170.
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