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On December 20, 2017, the Second Chamber of the Court of Justice of the European Union (CJEU) ruled that, under European Union (EU) legislation regarding trademarks, and more specifically, as stipulated in article 7 of Directive 2008/95/CE to approximate the laws of the Member States relating to trademarks (the “Directive”), entitled “Exhaustion of the rights conferred by a trademark,” the Spanish company Schweppes S.A. could oppose the importation into Spain of Schweppes-branded bottles from the United Kingdom (UK).

The CJEU ruled on a preliminary issue submitted by the Commercial Court No. 8 of Barcelona in 2016, regarding the interpretation of article 7 in the context of a dispute between, on the one hand, Schweppes S.A, a Spanish company owned by Schweppes International, which holds the exclusive right to use the Schweppes trademark in Spain; and on the other hand, Red Paralela, S.L. and Red Paralela BCN, S.L., (jointly, “Red Paralela”), concerning the latter companies’ import into Spain of Schweppes-branded bottles of tonic water from the UK, whose owner is Coca-Cola/Atlantic Industries (“Coca-Cola”).

At the core of the dispute is the interpretation held by Schweppes S.A. that it is unlawful to market these bottles in Spain, since they are not manufactured and placed on the market by Schweppes S.A. or with its consent, but by Coca-Cola, which, it argues, has no legal or economic link with the Orangina Schweppes group. It also considers that they are two different products because although they have the same trademark, the beverage formulation and the bottling are different. It submitted that, in view of the identical nature of the signs and goods in question, consumers are in no position to distinguish the commercial origin of those bottles.

Red Paralela defended itself in the infringement proceedings, asserting that (i) there are legal and economic links between the two companies in their joint exploitation of the “Schweppes” sign as a universal trademark, and (ii) the trademark rights resulting from tacit consent, in so far as concerns the goods bearing the trademark “Schweppes” originating in Member States of the EU where Coca-Cola is the proprietor of that trademark, have been exhausted.  It maintains that although Schweppes S.A. and Schweppes International promoted a single global image of the “Schweppes” trademark even after its division, they distorted the function of the trademark that they use in Spain as an indication of origin. Thus, they lost the right to oppose parallel imports into Spain of products legally bearing an identical trademark, marketed by Coca-Cola in another EU Member State.

In its recent judgment, the CJEU declared that article 7 of the Directive must be interpreted in the sense that it precludes the proprietor of a national trademark from opposing the import of identical goods bearing the same mark originating in another Member State in which that mark, which initially belonged to that proprietor, is now owned by a third party that has acquired the rights by assignment—as in this particular case—, when, following that assignment, the proprietor has “actively and deliberately continued to promote the appearance or image of a single global trademark,” thus generating or increasing confusion on the part of the public concerned as to the commercial origin of goods bearing that mark, or when “there are economic links between the proprietor and the third party.”

Following this line of interpretation, the CJEU concluded that Schweppes S.A can oppose the marketing in Spain of tonic water that has been produced by Coca-Cola in the UK, unless there is proof that a single global trademark has been actively and deliberately promoted, or that there are links between both groups in terms of a sole control over the Schweppes trademark. According to the CJEU, sole control would exist if it were established that Coca Cola and Schweppes jointly manage the Schweppes trademark, in the sense that they coordinate their commercial policies or had reached an agreement to exercise joint control over the use of the trademark, so that it is possible for them to determine, directly or indirectly, the goods to which that trademark is affixed and to control the quality of those goods.

It is now for the Commercial Court of Barcelona to decide whether or not the image of a single global trademark was created and whether legal and economic links exist. The Court will consider all the relevant factors of the case to determine subsequently if the alleged “exhaustion of rights conferred by a trademark” exists or not. We will keep you informed through our blog on which direction the case takes.

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