Wednesday, 14 March 2012

Court clips Red Bull's wings

Authors: Joel Smith, Rachel Montagnon, Anna Gibson (Herbert Smith)

Frisdranken Industrie Winters BV v Red Bull GmbH Case C–119/10, Court of Justice of the European Union, 15 December 2011

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps033, first published online: March 14, 2012

The Court of Justice of the European Union (ECJ) has held that a supply chain partner (SCP) who, under an order from a third party, merely executes a technical part of the production process, such as the filling of branded cans or containers, without having any interest in the external presentation or branding of the product, does not itself make ‘use’ of the sign as prohibited under Article 5 of the Trade Marks Directive (89/104).

Legal context

In late 2006, Red Bull sought an injunction against Winters in the Netherlands claiming that the service it provided infringed the world renowned RED BULL trade mark. At first instance, an injunction was granted against Winters by the District Court on the basis that the filling of cans bearing the BULLFIGHTER sign infringed Red Bull's trade mark rights. Red Bull and Winters appealed and cross appealed this decision to the Regional Court of Appeal, which upheld the decision but extended the injunction to both the PITBULL and LIVE WIRE marks, relying on the provisions of the Benelux Convention on Intellectual Property (Trade Marks and Designs) which corresponds to Article 5(1)(b) and (2) of the Directive.

Following a further appeal by Winters, the Netherlands Supreme Court decided to stay the proceedings and to refer various questions to the ECJ, namely whether the mere filling of packaging bearing potentially infringing trade marks constituted trade mark infringement under Article 5 of the Directive.

Facts

Red Bull produced and marketed an energizing drink under the world famous trade mark RED BULL. It obtained numerous international registrations for that trade mark, valid, inter alia, in the Benelux countries. Winters, a Dutch Company, was an undertaking which was mainly involved with the filling of cans with drinks produced by itself or by others. Smart Drinks Limited, a legal person under the law of the British Virgin Islands, was a competitor of Red Bull.

Winters filled cans on the instructions of Smart Drinks, who supplied Winters with empty cans all bearing various signs, decorations, and texts, including the signs BULLFIGHTER, PIT BULL, RED HORN, LONG HORN, and LIVE WIRE. Winters placed the filled cans at the disposal of Smart Drinks, which then exported them to countries outside the Benelux. Winters only performed filling services for Smart Drinks and did not send the filled cans to that company; nor did Winters deliver or sell the cans to third parties.

Analysis

In considering the questions referred, the ECJ considered that although it was clear that an SCP such as Winters operates in the course of trade when it fills cans under an order from another party, it does not follow, however, that the SCP itself ‘uses’ the signs displayed on the cans as prohibited under Article 5 of the Directive. In particular, the Court held that an SCP which merely fills, under an order from and on the instructions of another party, cans already bearing signs similar to trade marks and therefore merely executes a technical part of the production process of the final product without having any interest in the external presentation of those cans and the signs, does not itself ‘use’ those signs within the meaning of Article 5. Moreover, the Court noted that an SCP in Winters’ situation does not, on any view, use those signs ‘for goods or services’ which are identical with, or similar to, those for which the RED BULL trade mark was registered. In this regard, the Court noted that the service provided by Winters consisted of the filling of cans and that this service does not have any similarity with the product for which Red Bull's trade marks were registered.

The Court acknowledged that it had previously held (in UDV North America [2009] ECR I-1279; Google France and Google [2010] ECR I-2417; and L'Oreal and Others [2011] ECR I-0000), with regard to online service providers, that an ISP may infringe where it uses a sign corresponding to the trade mark of another person in order to promote goods which one of its customers is marketing with the assistance of that service, where that use is carried out in such a way as to establish a link between the sign and service. However, the filling of cans bearing signs similar to the trade marks is not, by its very nature, comparable to a service aimed at promoting the marketing of goods bearing those signs and does not imply, inter alia, the creation of a link between the signs and filling service. Rather, the business which carries out the filling is not apparent to the consumer, who would not make a connection between its services and those signs.

In addition, and contrary to concerns raised by both Red Bull and the European Commission, the ECJ dismissed the idea that its decision would permit the customer of an SCP to circumvent the protection offered to the proprietor under the Trade Marks Directive by dividing the production process and awarding different elements of the process to different SCPs to escape liability, as those services may still be attributed to the customer who could remain liable under the Directive.

A Dutch decision in August 2011 (Heineken NV v Olm Brouwerijen NV) may, however, strike a word of warning to SCPs as the Court in this case found an alternative way to hold a third party liable for the filling of branded containers. Heineken brought a claim of trade mark infringement against a small Dutch brewer, Olm, for the filling of Heineken casks (bearing the HEINEKEN mark) with Olm beer and the sale of such casks to wholesalers and independent retailers. Whilst, as might be expected, the sale of Heineken casks by Olm was held to infringe Heineken's trade mark, the filling of Heineken's casks did not. Instead Olm was found liable under the doctrine of ‘profiteran van wanprestatie’—benefiting as a third party from a breach of contract.

Practical significance

This decision is of relevance to the consumer and retail sectors, particularly food and drink brands, as SCPs which provide technical services to brand owners involving the use of trade marks, such as the filling of cans or containers, will not be liable for infringement under the Directive, if such use is not promotional use to end consumers. However, the finding that a trade mark proprietor cannot act against an SCP under the Directive does not allow the customer of such an SCP to circumvent the protection offered to the proprietor under the Directive (by dividing the production process between different SCPs) as those services may still be attributed to the customer who will remain liable.

Further, in light of the Dutch Heineken decision, trade mark owners may want to consider contractual arrangements to look for an angle to pursue SCPs which supply infringing third parties with services in the future, although trade mark rights will still be enforceable against the customers of those SCPs, which should ensure that infringing goods can be prevented from reaching the market.

1 comment:

  1. It should be added that the GA addressed an interesting point in this case, which has not been referred to by the CJEU:

    SCP may not be liable, however, they might be regarded as intermediaries (Art 11 Enforcement-Directive) and may therefore nonetheless be subject to injunctions (and this may be enough to draw defendants to the preferred court - this is one important reason to go for SCPs).

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