Austria: Proportionality in trade mark infringement proceedings

April 25, 2016

In this case, the plaintiff owns trade marks for perfumeries. It sells its perfumes through a selective distribution system, its partners being selected according to qualification criteria. By contract they are barred from selling these products outside the distribution system.

The defendant is a large well‐known distributor of original perfumeries at lower prices with 370 outlets across Austria. It is not part of the selective distribution system of the plaintiff. It has obtained the original perfumes since 1997 from an unnamed wholesaler within the European Economic Area (EEA) who guarantees the legality of the goods because he buys them from regular partners. The goods carry a code which enables the plaintiff to know to whom the goods were first sold without that being recognisable to the defendant.

A test buyer bought three perfumes carrying the trade marks of the plaintiff in February 2012 in an outlet of the defendant in Vienna – they were original goods. The producer could verify through the code that one of them was originally sold to Singapore. Other infringements neither past nor actual could not be ascertained.

At the lower instances, an injunction was granted forbidding the defendant to promote and/or sell perfumes under the specific trade marks of the plaintiff when these goods were not brought into commerce in the EEA by the plaintiff or with its consent. A far wider request for injunction was refused. It was requested to forbid the defendant from selling all perfumes under the trade marks of the plaintiff if the defendant is not part of the selective distribution system or if by the sales in its outlets the reputation of the marks would be impaired. The refusal of this request was straightforward since it is not illegal to sell legally obtained original goods outside a distribution system and there was no indication whatsoever that the reputation of the trade marks would be impaired by their sales in those outlets.

The requests for destruction of goods (Article 10 of the EU Enforcement Directive) and for publication of the verdictDirective) were likewise rejected. Article 10 (3) of the Enforcement Directive calls for proportionality in the case of corrective measures such as destruction of the goods. When only one case of infringement since 1997 was found which has to be seen as an oversight rather than a conscious infringement and the economic impact is negligible, the defendant does not know whether there are other infringing perfumes in his possession and the only infringing object has already been bought by the plaintiff then such a claim is disproportionate. In view of the singularity of the infringement and the injunction in place a publication of the verdict is not necessary to further deter the defendant and the public at large needs in this case not be informed to counteract past infringements (see number 27 of the reasoning for the Enforcement Directive). Only the request for information was further prosecuted before the Austrian Supreme Court as third instance.

The Supreme Court (case 4Ob 170/15a) found that the Austrian trade mark law and Article 8 (1) of the Enforcement Directive institute a right for information in case of infringement of IP rights. Therefore, this right is also given when the (only one) object of infringement is original but not commercialised in the EEA with the consent of the originator (illegal parallel importation). However, the second condition for such a claim is proportionality. Here the claim lacks proportionality. This criteria calls for a comprehensive weighing of the interests of the trade mark owner and the infringer. As usual, the interest of the right owner in the uncovering of the origin of the goods and their distribution channels and of the marketing channels are in opposition to the interest of the infringer to keep secret these channels. Here the interest of the infringer outweighs the interest of the trade mark owner.

The plaintiff has clearly an economic interest in uncovering the distribution channels by which the defendant obtained the original perfume. That interest is, however, to a great extent based on the possibility of the plaintiff to also stop delivery of legally marketable (because exhausted) original goods on the basis of the contractual obligations of its partners in the selective distribution system. The court has no doubt that the plaintiff would avail itself of this possibility thus leading to the danger of a market foreclosure. That alone is not a sufficient reason for negating the right for information. However, the weight of the interest of the right owner for disclosure of the channels of trade used is much more diminished than in a case of pirated goods or in a case of non‐existence of a contractual obligation not to sell outside the system.

But there are two further grounds which alone also would not suffice but are to be considered. The first is that the plaintiff does not necessarily need that information. It knows the first recipient of the goods in question. It can obligate it contractually not to sell into the EEA, to transfer this obligation to its customers and in case of a reimport to inform the originator about the recipient within the EEA. The second reason is that the defendant has no way to get knowledge about where the particular goods have first been marketed. These reasons count for the defendant in a weighing of interests. Furthermore, the defendant had no reason to distrust the information and guarantees of its wholesaler. It was a singular act of infringement. Without that the defendant, on the basis of this long positive experience and because it was not possible for it to get to know the place of the first marketing of the perfume, could have guessed the lack of exhaustion. It had also not been made plausible that the defendant "notoriously" reimports original products in the EEA.

Therefore, in this case the weighing of interest leads to the finding that a right for information would be disproportionate. To accept the right for information in this case would have overshooting effects since this leads to the danger that legally permissible sales of exhausted goods could be hindered. Under these conditions (cumulation of serious grounds) disproportionality has to be stated.