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Thursday, 10 December 2015

Brussels Court of Appeal: no exhaustion of trade mark rights if title is retained

Counsel to Xerox Tanguy de Haan brings to our attention an interesting case from Belgium. On 20th October 2015, the Brussels Court of Appeal ruled, in essence, that trade mark rights are not exhausted if the trade mark owner retains the title of goods put at the disposal of the end user.
Xerox Corp and Xerox NV, a European subsidiary of Xerox Corp, brought an action against Impro Europe BVBA, a Belgian subsidiary of the US Impro Corp. Impro Europe sells surplus toner, developer, drums, fusers, staples and all other related consumables for printers, copiers, fax machines and digital duplicators. It trades "genuine and compatible supplies from manufacturers such as Hewlett Packard (HP), Xerox, Ricoh, Konica Minolta, Kyocera Mita, Lexmark, Canon, Epson, Brother, and many others".


The dispute centered on consumables such as toner cartridges for XEROX copiers that were sold by Xerox NV only under a maintenance agreement. When buying certain copying machines, the end user has to enter into a maintenance agreement with Xerox NV. Under the maintenance agreement, he or she can only order consumables based on the meter reading of the specific machine being the object of the maintenance agreement. According to the maintenance agreement, the consumable remains the property of Xerox NV until consumed. Excess goods should be returned to Xerox NV. But, this is the kicker, while the end users are contractually obliged to return the goods, they are not compensated for doing so (and have fully paid them when obtaining possession). Consumables sold under maintenance agreements can be distinguished from consumables sold outside maintenance agreements because they bear the sign "metered" and the trade marks "PagePack" and "eClick". The action only concerned such goods.

Given that they were not compensated for the return of unused toner cartridges to Xerox NV, it is no wonder some end users sold their surplus stock to Impro Europe, which claimed that any trade mark rights Xerox may have had were exhausted.

The Brussels Court of Appeal first reminded the parties that the burden of proof that the goods had been placed on the EU market with the trade mark owner's consent lay with the alleged infringer, i.e., Impro Europe. Only when the alleged infringed could show that there existed a real risk that national markets are partitioned if it must prove that the goods were placed on the market in the EEA by the trade mark owner or with its consent does the burden shift back to the trade mark owner (with reference to C-244/00 - van Doren + Q). The mere existence of an exclusive distribution system to market the trade marked goods did not automatically result in a shift of the burden of proof. Impro Europe had failed to prove that there was a real risk that national markets were partitioned.
The Court then held, without much ado, that goods supplied under a maintenance agreement and remaining in the sole property of Xerox NV until their use were not "put on the market" with the consent of the trade mark owner in the sense of art. 13(1) Community Trade Mark Directive, and if they are traded by third parties, this happens without Xerox's consent. It issued a pan-European injunction against Impro Europe and ordered it to surrender its profits.
Given the CJEU's decision in the "perfume tester" case (Coty vs. Simex, see KatPost), the decision of the Brussel's court may not come as such a surprise, and trade mark owners will certainly rejoice (and lawyers be re-drafting maintenance agreements...). It should be noted, however, that other national courts may see the issue differently. The German Bundesgerichtshof, in a "perfume tester" case that was decided before Coty vs. Simex, held that the fact that the trade mark owner retained ownership of the testers and supplied them for a specific purpose only and not for re-sale did not bar exhaustion of trade mark rights. For the Bundesgerichtshof, the relevant question was whether the commercial value of the goods was realized with the consent of the trade mark owner, and that was the case for a perfume tester that was used up when used for the intended purpose (I ZR 63/04). It appears to this Kat that using and depleting a toner cartridge similarly realizes its commercial value. I would not be too surprised if we saw a referral to the CJEU for some guidance on this in the forseeable future.

Another interesting tidbit is that the Court explicitly notes in its decision of 20 October 2015 that "for the sale of consumables without maintenance services, Xerox applies the same harmonized identical price throughout Europe" (emphasis in original). It does not say anything explicit about the prices for consumables sold (oops, "put at disposal but retaining title") within the framework of a maintenance agreement. May we conclude, e contrario, that these goods are sold at different prices in different markets? If so, does the whole set-up not have a whiff of market partitioning, or is this Kat's nose too sensitive?

2 comments:

THE US anon said...

Just a thought, but is not the whole concept of "sham licence" the mere idea that "title" is retained (in name only)....?

Is that not the type of letter-following-but-spirit-breaking thing we want to NOT do...?

Anonymous said...

It seems to me that the maintenance agreement was dodgy in the first place, which is why it has some curious consequences. I recall someone commenting before, in respect of Microsoft's licensing policy, that "forcing people to pay for something they're not getting is almost the definition of an abuse of market dominance". Here the customer has to pay for the spares but doesn't get to keep, or indeed own, them. Would this also be an example of abuse of market dominance? Could any competition law experts comment?

(UK Anon)

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