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Thursday, 16 July 2009

End of the road for a great trade mark licence as Grüne Punkt loses again

The Court of Justice of the European Communities handed down its decision in Case C-385/07 P Der Grüne Punkt-Duales System Deutschland GmbH v European Commission, supported by Vfw AG, Landbell AG and BellandVision GmbH, nearly 26 months after the ruling of the Court of First Instance which this 198 paragraph decision upholds.

For those whose memory may not instantly recall the decision of 24 May 2007 or the facts that led to it, let the IPKat recap ...

The German government passed a law to reduce the impact of packaging waste on the environment. This law required manufacturers and distributors to take back and recover used sales packaging outside the public waste disposal system in one of two ways: (i) they could take back the used sales packaging free of charge at or near the point of sale and recover it ('self-management') or (ii) they could guarantee the regular collection of used sales packaging from the final consumer or in the vicinity of the final consumer (an 'exemption system').

Grüne Punkt was the only undertaking which operated a Germany-wide exemption system, although other undertakings did so regionally. By an agreement with contracting manufacturers and distributors it was provided that (i) those participating undertakings should affix Grüne Punkt's logo on all pieces of packaging that were notified as being capable of recovery under the system and intended for domestic consumption in Germany and (ii) a fee would be charged for all packaging bearing its logo. This fee, which served to cover the costs of collecting, sorting and recovering the packaging, was charged irrespective of whether the packaging was in fact recovered through Grüne Punkt's system, through some other exemption system or through a self-management solution.

The Commission ruled that Grüne Punkt had abused its dominant position in the market by requiring payment of a fee for the total quantity of packaging bearing its logo and put into circulation in Germany, even though there was evidence that other exemption systems or self-management solutions were used. In the Commission's opinion Grüne Punkt was exploiting its customers by (i) charging for services that were not provided and (ii) obstructing the entry on to the market of competitors, in the light of the costs related to the linked use of a system other than Grüne Punkt's. The Commission decision did not criticise the fact that Grüne Punkt's customers were required to affix its logo to each piece of packaging intended for domestic consumption, but it did object to the requirement of payment for the total quantity of packaging carrying that logo. In its view no fee could be required, despite the affixing of the Grüne Punkt logo, where the customer had shown it had fulfilled its obligations under domestic law through some other exemption system or self-management solution.

Grüne Punkt brought an action before the CFI to annul that decision, arguing that the decision was disproportionate in preventing it from levying a fee on each package bearing its logo. In any event, it claimed, the abuse could be remedied through the selective marking of packages to signify which exemption system or self-management solution they were intended for. The CFI dismissed the action. In its opinion
* the Commission's measures were not disproportionate. They only required Grüne Punkt not to charge a fee on the total amount of packaging marked with its logo where it was shown that some of that packaging had been taken back and recovered through another system.

* Competition between systems took place on the basis of the quantities of material to be recovered and not on the basis of predetermined quantities of packaging which fell exclusively, in particular by means of selective marking, within one or other of the systems used.

* The requirement that Grüne Punkt not charge a fee based on all packaging marked with its logo did not disproportionately impair its interests, since it was still remunerated for the service which it provided - the taking back and recovery of quantities of material entrusted to it by the manufacturers and distributors of packaging which participated in its system.

* Even if it were theoretically possible to affix the logo to packaging selectively, that solution was more expensive and difficult for manufacturers and distributors of packaging to implement than limiting Grüne Punkt's the remuneration to cover only the service actually provided by its system.

* For the Commission to accept the principle of selective marking would be akin to permitting Grüne Punkt to continue to abuse its dominant position: the costs related to selective marketing and the practical difficulties involved in its implementation were likely to dissuade Grüne Punkt customers from using any alternative system to take back and recover some or all of their packaging in Germany.
Today the Court of Justice dismissed all eight grounds of appeal, of which the second and fourth specifically addressed trade mark issues. Dismissing the second ground of appeal (distortion of the meaning of the trade mark agreement) the Court said:
"87 ... the object of the Trade Mark Agreement is to allow DSD’s contractual partners to be relieved of their obligation to collect and recover packaging which they notify to DSD. The agreement provides that undertakings participating in the DSD system must affix the DGP logo to all packaging notified to DSD and intended for domestic consumption in Germany.

88 It follows that the Trade Mark Agreement which DSD’s customers entered into concerns the affixing of the DGP logo to all packaging notified to DSD and intended for domestic consumption in Germany.

89 ... the abuse of a dominant position established by the Commission arises from the fact that the Trade Mark Agreement requires DSD’s customers to pay a fee in respect of all packaging notified to DSD, even where it is proved that some of it has been taken back and recovered through competing exemption systems or self-management solutions.

90 It is clear that the Court of First Instance did not distort that part of the evidence on the file.

91 ... the Court of First Instance correctly stated that ‘only the provisions of the Trade Mark Agreement concerning the fee are regarded as abusive in [the decision at issue] [and], thus, [the decision at issue] does not criticise the fact that … the [Trade Mark Agreement] requires the manufacturer or distributor wishing to use the DSD system to affix the [DGP logo] to each piece of notified packaging which is intended for domestic consumption’.

92 As regards, specifically, the extent of the licence granted under the Trade Mark Agreement, DSD has been unable to identify the passages of the judgment under appeal in which the Court of First Instance incorrectly referred to the scope of that licence. ..".
As to the fourth ground, infringement of Community trade mark law, the Court had this to say:
"125 As regards, next, the alleged failure by the Court of First Instance to have regard to Article 5 of Directive 89/104, ... by virtue of Article 5(1)(a), a registered trade mark confers on the proprietor exclusive rights therein, entitling the proprietor to prevent all third parties not having his consent from using in the course of trade any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered.

126 It follows that, by claiming that ... the Court of First Instance failed to have regard to the exclusive right to the use of the logo of which it is the proprietor and by invoking Article 5 of Directive 89/104 in that context, DSD is arguing that the Court of First Instance should have held that the decision at issue had unlawfully stopped it preventing third parties from using a sign which was identical with its logo. DSD placed considerable emphasis on this argument at the hearing and claimed that the result of the obligations laid down by the decision at issue and of their approval by the Court of First Instance is that the DGP logo has, in practice, become available to be used by all.

127 In order to respond to that line of argument, it is necessary to draw a distinction between the use of the DGP logo by DSD’s contractual partners and the possible use of that logo by other third parties.

128 As regards the use of the DGP logo by DSD’s contractual partners, it is apparent from the wording itself of Article 5 of Directive 89/104 that that provision does not cover circumstances in which a third party uses a trade mark with the consent of its proprietor. That is the case, in particular, where the proprietor has authorised its contractual partners to use its mark under the terms of a licence agreement.

129 It follows that DSD cannot validly rely on the exclusive right conferred on it by the DGP logo as regards the use of that logo by manufacturers and distributors who have entered into the Trade Mark Agreement with it. It is true that Article 8(2) of Directive 89/104 provides that a proprietor of a trade mark may invoke the rights conferred by that mark against a licensee who contravenes any of the terms in his licensing contract referred to in that provision. However,... in the present case, DSD itself set up a system which requires that the DGP logo be affixed to all packaging, even where some of the packaging is not taken back by the system. It is accordingly a matter of agreement between the parties that the use of the DGP logo on all packaging notified to DSD is required by the Trade Mark Agreement and is therefore compatible with it.

130 In so far as DSD argues that the measures imposed by the Commission have the effect that the use of the DGP logo by its licensees is, in part, to be free of charge, suffice it to note that the sole object and sole effect of the decision at issue is to prevent DSD from receiving payment for collection and recovery services where it is proved that they have not been provided by that company. Such measures are not incompatible with the rules laid down by Directive 89/104.

131 Furthermore, ... the possibility cannot be ruled out that the affixing of the DGP logo to packaging, whether part of the DSD system or not, may have a price which, even if it cannot represent the actual price of the collection and recovery service, should be able to be paid to DSD in consideration for the use of the mark alone.

132 As regards the possible use of the DGP logo by third parties other than DSD’s contractual partners, neither the decision at issue nor the judgment under appeal state that such use would be permitted under trade mark law. In that regard, the Court of First Instance correctly found ... that the obligations laid down by the decision at issue concerned only relations between DSD and ‘manufacturers and distributors of packaging which are either contractual partners of DSD in the context of the Trade Mark Agreement …, or holders of a licence to use the [DGP] mark in another Member State in the context of a take-back and recovery system using the logo corresponding to that mark …’.

133 Therefore, any use of the DGP logo by third parties other than DSD’s contractual partners is not a matter for which either the Commission or the Court of First Instance bear any responsibility. Moreover, there is nothing to prevent DSD from bringing proceedings against such third parties before the national courts having jurisdiction in that regard".
For those who like statistics, the word "logo" appeared in the judgment no fewer than 124 times and "trade mark" featured 86 times.

The IPKat notes that Grüne Punkt is owned by investment firm Kohlberg Kravis Roberts, who as modern financial alchemists had clearly done too good a job at turning rubbish into gold. Merpel notes that today's ruling is unlikely to make further ripples since the Commission's decision was implemented as long ago as 2001. This suggests that perhaps, in the legal profession too, there are some people who know how to turn unpromising material into gold.

1 comment:

Gerry Gavigan said...

Not a riposte so cheap as to draw parallels with rubbish, but I am curious to know the extent of the penumbra of this decision.

If I buy a computer today, it is very difficult to buy it with a piece of software that I have no intention of using, but am forced to pay for anyway.

There seem to be parallels and I wondered if legal minds could offer an opinion.

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