European Court of Justice: De-branding (and re-branding) protected by EU trademark law

1. Factual background

The case involved, on the one hand, Duma – a Belgian company specialised in the worldwide purchase and sale of new and second hand forklift trucks – and GSI – an affiliate of Duma active in the construction and repair of forklift trucks, and, on the other hand, Mitsubishi and Mitsubishi Caterpillar Forklift Europe BV ("MCFE"), an undertaking to which Mitsubishi had granted the exclusive right to manufacture and sell forklift trucks supplied under the Mitsubishi mark within the European Economic Area ("EEA").

Without Mitsubishi's consent, Duma and GSI had acquired forklift trucks from an undertaking outside of the EEA. They placed the trucks on a customs warehousing procedure prior to importing them into the EEA. Duma and GSI removed all signs identical to the Mitsubishi marks from the trucks; they made modifications to ensure compliance with EU standards; they replaced the identification plates and serial numbers and attached their own signs. Finally, they placed the trucks onto the EEA market.

Mitsubishi and MCFE tried to obtain an injunction against Duma and GSI before the Belgian courts. They claimed that Duma and GSI had infringed the right of the proprietor of the mark to control the first placing on the market in the EEA of the goods bearing the mark involved and had harmed the mark’s functions of indicating origin and quality, as well as the functions of investment and advertising.

The Dutch-speaking commercial court of Brussels rejected their claims. On appeal, the Brussels court of appeal decided to refer two questions to the ECJ.

2. Legal background

The questions before the Court pertained to the meaning of Article 5(1) of Directive 2008/95 (the "EU Trade Marks Directive") and Article 9(1) of Regulation 207/2009 (the "EU Trade Marks Regulation"). Both provisions confer certain exclusive rights with regard to the use of signs to the trademark holder which aim to protect the interests of the holder.  

The Brussels court of appeal asked the following questions to the ECJ:

1) a. Do Article 5 of Directive 2008/95 and Article 9 of Council Regulation No 207/2009 cover the right of the trade mark proprietor to oppose the removal, by a third party, without the consent of the trade mark proprietor, of all signs identical to the trademarks which had been applied to the goods (debranding), in the case where the goods concerned have never previously been traded within the EEA, such as goods placed in a customs warehouse, and where the removal by the third party occurs with a view to importing or placing those goods on the market within the EEA?

b. Does it make any difference to the answer to question (a) above whether the importation of those goods or their placing on the market within the EEA occurs under its own distinctive sign applied by the third party (rebranding)? 

2)  Does it make any difference to the answer to the first question whether the goods thus imported or placed on the market are, on the basis of their outward appearance or model, still identified by the relevant average consumer as originating from the trade-mark proprietor?’

3. Opinion of the AG

On 26 April 2018, the AG had invited the Court to rule that the removal of a trademark under the circumstances of the case at hand could not be considered "use" of that trademark in the course of trade and that therefore the questions related to the issue of de-branding and re-branding fall outside of the scope of EU law. To make this argument, the AG engaged in a comparative analysis of UK, German and French law. He noted that UK and German courts have considered that de-branding does not constitute a use of a trademark, and that the French legislator has enacted a statute expressly prohibiting de-branding – the premise being in all three jurisdictions that de-branding is not considered a "use" in the meaning of the EU trademark rules.

As a consequence, Member State law and not EU law governs the issues of de-branding and re-branding, which the AG refers to as forms of "non-use." However, he added that different types of remedy might be available under EU law to act against de-branding than those provided by EU trademark law. In that regard, the AG pointed out that, in certain circumstances, de-branding could be considered a form of unfair commercial conduct, as it might mislead customers.

The Commission disagreed with the AG and submitted to the Court that de-branding ought to be seen as a form of trademark use.

4. The Judgment

The ECJ disagreed with the AG's assessment. It held that the proprietor of a mark is entitled to oppose a third party, without its consent, removing all the signs identical to the mark and affixing other signs on the products placed in the customs warehouse, as in the main proceedings, with a view to importing them or trading them in the EEA where they have never yet been marketed.

The Court reasoned as follows:

1. the removal of signs identical to the mark prevents the goods for which that mark is registered from bearing that mark the first time that they are placed on the market in the EEA and, hence, deprives the proprietor of that trade mark of the benefit of the essential right to control the initial marketing in the EEA of the goods bearing that mark;
2. the removal of the signs identical to the mark and the affixing of new signs on the goods with the view of placing the goods onto the EEA market for the first time adversely affects the indication of origin, investment and advertising functions of the mark;
3. the removal of the signs identical to the mark and affixing of new signs onto the goods by a third party, without the consent of the proprietor, with the view of placing the goods onto the EEA market for the first time, and with the aim of circumventing the proprietor’s right to prohibit the importation of those goods bearing its mark, is contrary to the objective of ensuring undistorted competition;
4. the removal of signs identical to the trade mark in order to affix its own signs, involves active conduct on the part of that third party, which, since it is carried out in the exercise of a commercial activity for economic advantage, may be regarded as a "use in the course of trade" in the meaning of the abovementioned provisions of the EU Trademark Directive and Regulation.

5. Observations

The judgment of the Court should be welcomed by trademark holders, since the Court's interpretation of the provisions involved bolsters the protection of trademark holders and broadens the scope of the notion of "use in the course of trade."

However, in certain respects the decision unfortunately remains overly case-specific:

• Despite the clear distinction drawn by the Brussels court of appeal between the issues of de-branding and re-branding, the ECJ ruled on the situation whereby a sign is removed in order to affix a new sign on the goods (i.e. a combination of de-branding and re-branding). By doing so, the Court forgoes an opportunity to create legal certainty on the question of whether a case of mere de-branding, without subsequent re-branding, could also be considered a "use" in the meaning of EU trademark law. The reasoning of the Court suggests that it would, however, since the arguments the Court advanced apply as much to mere de-branding as they do to a combination of de- and re-branding. Likewise, in light of the way in which the referring court had formulated its questions, the fact that the ECJ did not expressly reject the argument that mere de-branding constitutes "use" can arguably be understood as an endorsement of that argument.
• The Court also seems to limit its decision to situations in which goods bearing a trade mark are put on the EEA market for the first time. However, the same issue arises when goods are already marketed in the EEA. Indeed, the removal of the signs identical to the mark and the affixing of new signs might still affect the functions of the mark, notwithstanding the prior marketing of the goods in the EEA. Even if the goods are already marketed in the EEA, consumers are indeed just as likely to be misled about the origin of the goods, and trademark holders are just as likely to be impeded from acquiring a reputation that would allow them to attract and retain consumers, and that would serve as a factor in sales promotion or as an instrument of commercial strategy.
• More generally, the Court gives four reasons to explain why de-branding and subsequently re-branding would constitute an infringement under trademark law. However, it is not clear whether these arguments are cumulative or whether each one of them separately justifies the qualification of such activities as trademark infringements. In our opinion, the latter position is the correct one and the Court's reasoning should be interpreted as overabundant.

Considering the above, it remains to be seen how national courts – and firstly so the Brussels court of appeal – will apply the ECJ's judgment. In any event, it is likely that the questions surrounding the issue of de-and re-branding will remain with us for some time to come.