The First Hall of the Civil Court presided over by Mr Justice Mark Chetcuti, on February 14, 2012, in the case “Dr James Muscat Azzopardi on behalf of Watches & Style Group Ltd, FM Holdings Ltd, and Classic Group Ltd vs Herbert Azzopardi and Herbies’ Jewellery Ltd”, held, among other things, that exclusive distribution agreements were not binding upon third parties. A trader was permitted to re-sell genuine products, which were acquired lawfully from another distributor in the EU. At issue was whether the companies having an exclusive distributor agreement could prohibit others from parallel importing of the fashionable Ice-Watch.
The facts in this case were as follows:
The court said that exclusive distribution agreements entered into by applicant companies were not binding upon third parties in this case
Watches and Style Group Ltd and FM Holdings Limited entered into an exclusive distribution agreement with TKS SA of Belgium, the sole owner of the trade mark Ice-Watch, to obtain the exclusive use of the trade mark Ice-Watch, as well the exclusive rights of distribution of Ice-Watch watches.
Ice-Watch was registered as a trade mark in all countries in Europe.
Classic Group Ltd acquired rights as sub-distributor.
To be appointed exclusive distributor a number of conditions had to be met: allegedly to protect the reputation of the Ice-Watch brand name.
It resulted that Herbies Jewellery Ltd purchased a stock of authentic Ice-Watch items from a third party in Malta who, on his part, had acquired these watches from a French company within the EU.
The three companies – Watches and Style Group Ltd, FM Holdings and Classic Jewellers – claimed that their rights were infringed and that they suffered damages as exclusive distributors of these watches.
Faced with this situation they proceded by filing legal action against Herbert Azzopardi personally and Herbies’ Jewellery, requesting the court:
• to prohibit Herbies Jewellery from violating their intellectual property rights;
• to prohibit Herbies from using the word Ice-Watch as well as any distinctive signs or designs containing the words Ice-watch;
• to order the seizure of these watches;
• to give a full account to the court and to give such other order to publicise its decision. The court was asked to give a provisional decision to safeguard their rights.
In reply, Herbert Azzopardi disputed being the legitimate defendant in his personal capacity.
Herbies Jewellery contested the claims on the merits. It was submitted in defence that:
• the watches were original and that they were acquired legitimately in Malta;
• any agreement between the applicant companies was not binding upon third parties;
• under Maltase and EU law, in accordance with the free market principle parallel;
• trading was legal.
On February 14, 2012, the First Hall of the Civil Court gave judgement by dismissing all claims made by applicant companies, and by accepting Herbies Jewellery defence. Herbert Azzopardi was freed from the proceedings.
The following reasons were given for the court’s decision.
• There was no doubt that the watches purchased by Herbies Jewellery were authentic, and had original guarantees.
Reference was made to case law.
In “Dr P. Manduca vs F. Bezzina Weltinger” (PA) dated December 16, 2004, it was held that, once a product was placed on the market, the trade mark owner could not stop parallel trading; (also EA) in “La Rosa vs Borg” dated March 5, 1956 and “Gauci Maistre noe vs Mizzi noe” dated January 31, 2003. This principle was accepted in “Stefan Ltd vs Save on Discount Stores Ltd” dated April 28, ,1998 where it (CA) was held that even if an owner had exclusive use of a mark, this did not mean that an owner could prohibit others from acquiring and re-selling genuine products.
The authors Bently and Sherman in Intellectual Property (Oxford write
“…The trade mark owner can therefore prevent competitors from taking unfair advantage of the status and reputation of the trade mark by selling products illegally bearing the mark. However, once the goods are placed on the market with the proprietor’s consent, the trade mark has done its job. As such, the ‘specific subject matter’ of the trade mark is exhausted. Exhaustion means that trade mark rights cannot be used to prevent further trade in the goods. This is subject to the proviso that the owner of the mark may be able to control further use of the mark where that use implicates some other aspect of the specific subject matter protected by the trade mark right.”
The court considered the case “C-400/09 and C207/210 Orifarm A/S et and Paranova Danmark A/S et vs Merck Sharp and Dorsma Corp” on July 28, 2011, which permitted a trader to re-package products.
“It thus follows from settled case-law, in particular the judgement which the referring court asks the Court to interpret, that the proprietor of a trade mark may not legitimately oppose the further marketing of a pharmaceutical product bearing his trade mark which has been re-packaged by an importer who has reaffixed the mark if:
• it is shown that such opposition would contribute to artificial partitioning of the markets between member states, in particular because the repackaging is necessary for marketing the product in the member state of import;
• it is shown that the repackaging cannot affect the original condition of the product inside the packaging;
• the new packaging clearly indicates that repackage of the product and the name of the manufacturer;
• the presentation of the repackaged product is not liable to damage the reputation of the trade mark and its proprietor, which implies in particular that the packaging must not be defective, of poor quality, or untidy; and
• the importer gives notice to the proprietor of the trade mark before putting the repackaged product on sale, and supplies him, on request with a specimen of the repackaged product (see, inter alia, Hoffmann-La Roche, paragraph 14; Bristol-Myers Squibb and Others, paragraph 79; MPA Pharma, paragraph 50; Boehringer Ingelheim and Others paragraph 21, and Case C-276/05 The Wellcome Foundations (2008) ECR 1-10479, paragraph 23).
“As regards the condition at the issue in the main proceedings that the new packaging must indicate clearly the repackager of the product, that requirement is justified by the trade mark proprietor’s interest in the consumer or end user not being led to believe that the proprietor is responsible for the repackaging. (See Bristol-Myers Squibb and Others, paragraph 70 and MPA Pharma, paragraph 42.)”
Reference was made to case-law relating to the sale of luxury/prestigious brand products Christian Dior vs Evora (ECR 1-6013 1997).
The court will consider whether a trader was damaging the brand name of a luxury product. This would occur if in advertising goods bearing the mark, the trade mark was placed in a context which seriously detracted from the image which the trade mark owner had succeeded in creating around his or her trade mark.
The court said that it was up to applicant companies to show that the product in question was a luxury/prestigious product. This was not done in the circumstances, pointed the court.
The court was not convinced that Ice-Watch was an exclusive brand, nor did it result that Herbies Jewellery prejudiced the brand name in the way it re-sold these products.
The court was of the opinion that these watches were targeting youths, as fashionable accessories and not as a high-end product. The guarantee granted by Herbies Jewellery was also acceptable.
Consumers did not suffer by purchasing products from Herbies Jewellery.
Herbies Jewellery were responsible to consumers under the guarantee for any damage and/or defects in the products.
The court said that exclusive distribution agreements entered into by applicant companies were not binding upon third parties in this case.
Once the products sold by Herbies Jewellery were therefore genuine and were acquired legally from another distributor in the EU, according to article 12 (1) of Chapter 416 (as well under article 7 (1) of EU Directrive 2008/95EC) “a trademark shall not entitle the proprietor to prohibit its use in relation to goods bearing that trade mark which have been put on the market by the proprietor or with his consent”.
Dr Grech Orr is a partner at Ganado & Associates.