Parallel import: trademark infringement, or not?
Friday, September 13, 2019
Parallel import involves trade in original products. However, because the products are intended for another market (and not for Europe), they are purchased at lower prices. These parallel imported goods are then offered for sale in Europe against lower prices and not through the official distribution channel. This is a major problem for many trademark owners.
Hennessy also sells its whisky through a self-selected distribution network in Europe. Of course, Hennessy does not want third parties to offer the whisky at considerable lower prices on the same market.
Therefore, Hennessy is suing parallel trader LB11 for trademark infringement. However, LB11 claims that it is selling original bottles that have been put on the market in Europe by Hennessy itself. LB11 now has to prove this. In order to do so, it has to show the entire chain of dealers, which – if all goes well – leads back to a dealer from the official Hennessy distribution network. Only then does LB11 prove that the bottles of whisky were ‘put on the market with Hennessy’s permission’. If this is the case, Hennessy’s trademark rights are ‘exhausted’. Without this proof, trademark infringement is assumed.
It is clear that a parallel trader does not want to reveal his source (the leak in the chain) – then his trade will dry up! How should the parallel trader deal with the inevitable ‘squeeze’, if he wants to defend himself against the accusation of trademark infringement?
The Hague Court of Appeal thought of something new in this respect: first, it classified the information relating to the supply chain as confidential information. Subsequently, the Court of Appeal established a ‘confidentiality club’, consisting of one employee of Hennessy and one lawyer representing Hennessy. Only these two persons have access to the confidential information. They can then verify whether the trademark rights have been exhausted or not. Of course, they may only use this information in relation to this procedure and may not share it with others. If the procedure requires them to share documents (e.g. with colleagues), all confidential information must be redacted. An enormous fine of up to € 3,000,000 has been imposed for violations.
This is the first time that the Court of Appeal has applied the relatively new article 1019ib of the Dutch Code of Civil Procedure. It is interesting to note that this provision was not written for IP procedures, but originates from the Directive on the protection of Trade Secrets. This practical, creative approach of the Court of Appeal is a step forward for both parties in this kind of parallel import cases.
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