Selling products without the consent of the trade mark owner. What are the risks?
In international trade, every step in the use of a trademark must be based on the express consent of the owner. Failure to do so may result in even original goods being subject to illegal distribution.
TheCourt of Appeal of Lithuania has confirmed that Greita upė UAB illegally distributed Chupa Chups carbonated beverages made in South Korea because it did not have the trademark owner - the Italian company Perfetti Van Melle s.p.a. - with the consent of the other party. The court banned the further sale of such products on the EU market and awarded damages of €20,000.
The Court found that the South Korean producer had been granted a licence to supply beverages to the European Union only through three clearly named companies. "The drinks were not purchased by Greita rivers from these official suppliers, but from a Latvian company which was not authorised to sell Chupa Chups drinks for the EU market. Moreover, the packaging with Korean inscriptions confirmed that the product was intended for the South Korean market only. These circumstances mean that the goods appeared on the EU market without the authorisation of the rightful owner, which qualifies as an infringement of intellectual property rights.
The Lithuanian company defended itself by arguing that the goods had been purchased from a third party operating in the European Union, Top Food SIA, and that, in its view, the claimant should have brought all claims for infringement of the trade mark proprietor's rights against the third party, and not against the respondent.Otherwise, a precedent would be established where the final purchaser of the goods would be required to prove the previous chain of acquisition of the goods back to their manufacturer, notwithstanding the fact that the goods were acquired after they had already entered the European Union market.Therefore, in the view of the company's representatives, the defendant's acquisition of the goods was lawful and not in breach of the legal requirements.
However, the courts were not persuaded by such arguments and ultimately held that the mere fact that the defendant acquired the goods at issue from a Latvian company did not constitute a basis for finding that the applicant's rights as the proprietor of the trade marks had lapsed.The mere placing on the market of goods bearing the relevant trade mark in the European Union (EEA) must not be construed as extinguishing (exhausting) the applicant's rights in the trade mark registered and protected in its name.
"This case is a classic example of how a misunderstanding of the legality of a supply chain can lead to significant legal consequences. The mere fact that the goods were purchased legally does not in any way mean that the owner of the trademark loses all his rights to the trademark," says Mantas Baigys, an attorney at law at AVOCAD .
According to the lawyer, it was not for the trader to prove that the soft drinks bearing the trademarks 'CHUPA CHUPS' had been purchased on the European Union market, but that they had been placed on the market in the Member States of the European Union with the applicant's consent.
Key lessons for business
Legal analysis - Before importing products, it is necessary to assess whether the marketing of certain products under specific trademarks will infringe the intellectual property rights of that owner. Failure to do so may result in the cessation of all trade, the destruction of all products and the payment of all material and non-material damages to the owner of that trade mark.
Drafting the contract properly - Record all verbal confirmations by the distributor in a written agreement on the ownership of the intellectual property, and remember to include clauses on liability in the event of a counterfactual.
Proper legal prevention will avoid unpleasant, time-consuming and costly litigation, which can lead not only to negative financial consequences, but also to reputational damage to the business itself, without the consent of the trademark owner.