Luxemburg, 21/11/2006 (Agence Europe) - In a judgment delivered on 9 November, the Second Chamber of the Court of Justice came down against Italian clothes manufacturer Diesel SpA, ruling that the holder of a trade mark cannot prevent the transit of goods through an EU Member State in which the mark enjoys protection, unless it is able to demonstrate a risk of these goods being placed on the market in the Member State of transit (case C-281/05, Montex Holdings versus Diesel SpA).
In 2000, Diesel SpA of Italy had a shipment of over 5,000 pairs of jeans bearing the Diesel mark, but belonging to Montex Holdings Ltd of Ireland, seized by German Customs. The shipment was transiting Germany en route from Poland to Ireland. Montex had registered the “Diesel” mark in Ireland in 1979, one year after the formation of Diesel SpA in Italy and long before its international expansion. After judgment was given against Montex at first and second instance in Germany, the company lodged an appeal with the Bundesgerichtshof (Federal German High Court), which decided to stay proceedings and refer preliminary questions on prohibiting the transit of the goods in question to the European Court of Justice.
In its ruling, the European Court of Justice (ECJ) considered that the theoretical risk of the goods finding their way onto the German market, rather than reach their final destination, was not sufficient “to allow the conclusion that the transit infringes the essential functions of the trade mark in Germany”. Since external transit, under Customs seals, does not constitute use of the mark in the course of trade within the meaning of Article 5, paragraph 1 of directive 89/104 on trade marks, the Court felt that Montex had not contravened this directive.
The tenacity of Diesel in this case may be considered less surprising if one takes into consideration the previous ambiguities in case law in this field. While the Court sometimes refused to acknowledge the risk of illegal marketing of goods in the transit country, as in the cases of the Commission versus France (C-23/99) and Class International (C-405/03), it ruled differently in Case C-383/98 Polo/Lauren. Carl De Meyer, an associate at Howrey LLP, Brussels, a law firm specialising in intellectual property, said that “transit” is in reality “legal fiction” and that goods under this system travel through one or more Member States before being exported without being subject to import duties or any other trade policy measures. There is a generally recognised risk in international trade, he says, that goods formally placed under the external transit prodedure may fraudulently enter the Community market, or otherwise put “may fall off a lorry”. This possibility also formed part of Diesel SpA's argument the Managing Director of Montex, Mel McMorrow, said that it was “impossible for (the items) to end up on the German market”, given that they were “under (Polish) customs bond”.
All, however, acknowledged the exceptional circumstances of the individual case. Montex was able to show that the jeans were, indeed, destined for Dublin, where it holds full rights to the trade mark in question. In such precise circumstances, the Court decided that the directive on trade marks was infringed “only if those goods are subject to the act of the third party while they are placed under the external transit procedure which necessarily entails their being put on the market of that Member State of transit”. What is more, under these conditions, the burden of proof rests with the holder of the mark. Diesel's argument rested more on possible risk than on the evidence of a fait accompli. That was why the Court ruled its argument invalid. According to Mr De Meyer, this decision does not mean a significant shift in case law, rather a “clarification of the law as it stands” and it is only applicable if proof is provided that the final destination of the goods was in an EU Member state where the holder of intellectual property rights cannot take advantage of his rights. Failing that, the Polo/Lauren ruling applies.
This does not mean the end of the story for Montex, however since the case has to go back to the German court. Mr McMorrow feels it is “highly likely” that the outcome will be in Montex's favour, but he prefers to remain “cautious”.
It will be for the court which referred the case to the ECJ to determine how the costs are to be shared. (cd)