Advocate General: SCHWEPPES and trade mark exhaustion

The sign SCHWEPPES is registered as a series of national trade marks in various EU member states. The trade mark rights were owned by Cadbury Schweppes for many years, until in 1999 it sold the rights in certain member states to Coca-Cola. Cadbury Schweppes retained ownership of the rights in the remaining member states. The Spanish national trade mark registrations for SCHWEPPES are owned by Schweppes International Ltd, an English subsidiary of the Schweppes holding company. The Spanish Schweppes subsidiary had an exclusive licence to exploit the marks in Spain.

In 2014 Schweppes commenced infringement proceedings against Red Paralela in Spain in relation to the importation from the UK and subsequent sale in Spain of bottles of tonic water bearing the SCHWEPPES trade mark. Schweppes alleged infringement on the basis that the bottles of tonic water were placed on the market by Coca-Cola in the UK and not Schweppes.

In its defence Red Paralela argues that Schweppes’ trade mark rights have been exhausted as a result of implied consent, because there is a legal and economic link between Coca-Cola and Schweppes arising from the common exploitation of the mark SCHWEPPES as a global brand.

Questions referred by the Spanish Court

The Commercial Court (No.8) of Barcelona referred four questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling. These questions essentially ask whether the licensee of the proprietor of a national trade mark (a Spanish national registration) is prevented from invoking the exclusive rights of the proprietor under the law of the member state in which the trade mark is registered (Spain), in order to object to the importation and marketing in that state (Spain) of goods bearing an identical trade mark which originate from a different member state (the UK), in a situation where the trade mark at issue was once owned by the group to which both the proprietor of the trade mark and its licensee belong (Schweppes), but which is now owned by a third party by virtue of an assignment (Coca-Cola).

Opinion of AG Mengozzi

The Advocate General considered that:

• As confirmed by the CJEU exhaustion of trade mark rights can occur when goods are put on the market by the trade mark proprietor or an entity economically linked to the proprietor;
• The above analysis also applies in situations in which use of the trade mark is under the unitary control of two distinct persons, for example, proprietors of national trade marks, who act together to exploit the trade mark. Where two or more proprietors of parallel trade marks reach an agreement to exercise joint control over the use of their respective signs (whether or not there is a common origin of the goods), the placing of the goods on the market in one member state should be regarded as having taken place with the consent of the proprietor of the national trade mark in the member state of importation, and the trade mark rights are therefore exhausted;
• In order for exhaustion to occur, the agreement between the trade mark proprietors should provide for the possibility of determining directly or indirectly the goods to which the trade mark may be affixed and of controlling their quality; and
• The burden of proof is on the parallel importer to establish such exhaustion by reference to the facts in each case.

In short

AG Mengozzi’s opinion will be welcomed by parallel importers. However, it remains to be seen whether the CJEU follows the AG’s opinion and even if it does, it is unclear how the national court in Spain will apply the decision.