ALDI SÜD may not sell JOOP! and Calvin Klein perfumes

Owners of luxury trade marks have a strong interest in building and preserving the luxury and prestigious aura around their brands. To this end, they often choose to sell their goods through exclusive or selective distribution systems. If original goods are sold by third parties outside of the distribution system, one of the pressing questions for the trade mark owner is whether the sale of the exhausted goods (Art. 15(1) EUTMR) can be prevented because legitimate reasons under Art. 15(2) EUTMR exist.

This question was recently answered by the German Higher Regional Court of Düsseldorf with respect to the sale of JOOP! and Calvin Klein perfumes in the discount retail stores of ALDI SÜD.

Background

The plaintiff is part of the Coty group of companies (‘Coty’), which has produced and sold perfumes for over 100 years. Its portfolio includes perfumes from JOOP! and Calvin Klein.

Coty is the licensee of EU trade marks no. 79707 and no. 2786713 JOOP! both covering ‘perfumes’. It sells the perfumes under these brands through a selective distribution system.

The defendants are part of the ALDI SÜD group of companies (‘ALDI SÜD’), which operates discount retail stores. At the end of 2017, they acquired original JOOP! and Calvin Klein perfumes and sold them in their stores from December 2017 to October 2018. The perfumes were presented in drawer containers and glass cabinets, which also contained multimedia goods and were placed next to bargain bins.

In February 2018, ALDI SÜD advertised the perfumes in their weekly promotional brochure for Valentine’s Day.

Coty claimed that the presentation and advertising of the JOOP! and Calvin Klein perfumes tarnished the licensed trade marks’ reputation.

Coty sued ALDI SÜD before the District Court of Düsseldorf. The District Court rejected the action. It found that the perfumes were not luxury products, whose reputation could have been negatively affected by the presentation and advertising of ALDI SÜD.

Coty appealed to the Higher Regional Court of Düsseldorf (case 20 U 278/20).

The Higher Regional Court’s decision

The Higher Regional Court considered the specific presentation of the perfumes in the ALDI SÜD stores to be infringing but denied claims against the advertising in the weekly promotional brochure.

It was undisputed that the perfumes were original products placed on the market in the European Economic Area with Coty’s consent, meaning that Coty’s trade mark rights were, in principle, exhausted Art. 15(1) EUTMR.

The Higher Regional Court accepted Coty’s contention that the specific way of presentation in the stores constituted a legitimate reason to oppose the further sale and advertising of the perfumes (Art. 15(2) EUTMR). The judges referred to the CJEU decision in Parfums Christian Dior v Evora (C-337/95), which found that damage to the reputation of a trade mark can be a legitimate reason within the meaning of the provision. The assessment requires balancing the interest of the trade mark owner against damage to the mark’s reputation and the reseller's interest in reselling the goods. In case of prestigious and luxury goods, the reseller must prevent its advertising from affecting the value of the trade mark by detracting from the allure and prestigious image of the goods in question and from their aura of luxury.

Referring to the Copad judgment of the CJEU (C-59/08, discussed here), the Higher Regional Court found that the following aspects must be considered with respect to the sale of luxury goods in discount store:

• The nature of the luxury goods bearing the trade mark,
• The volumes sold and whether the licensee sells the goods to discount stores that are not part of the selective distribution network regularly or only occasionally,
• The nature of the goods normally marketed by the discount stores, and
• The marketing methods normally used in the discount store’s sector of activity.

The judges also found it important to assess the level of prestige that Coty’s licensed trade marks enjoyed. The owner of a very exclusive luxury brand might even object to the sale of the goods in discount stores altogether. For less prestigious trade marks, the specific circumstances of the marketing must be considered. The Court found that JOOP! and Calvin Klein enjoy a certain luxury aura, in particular because they are marketed through a selective distribution system.

ALDI SÜD’s argument that the perfumes are also sold in drug stores was unsuccessful. The Court found that the drugstores sell the perfumes in separate perfumery sections with other branded perfumes and the presentation was considerably different from that of ALDI SÜD.

The judges did not consider it decisive that Coty’s goods did not belong to the most expensive perfumes on the market. Medium-priced premium goods can also have a luxury aura.

Turning to the question whether the specific presentation by ALDI SÜD gave rise to legitimate reasons to oppose the sale, the Higher Regional Court considered that the perfumes were not perceived as being part of a promotion. Instead, they were sold from December 2017 through October 2018, only being advertised once in ALDI SÜD’s weekly promotional brochure for Valentine’s Day 2018. This created the impression that the perfumes were part of the normal assortment of ALDI SÜD stores and that Coty consented to this type of offering.

The presentation of the goods lacked any ‘exclusivity’ that would do justice to the repute of Coty’s licensed trade marks. The Court considered it to be detrimental to the reputation of the trade marks in and of itself that the perfumes were not offered in a separate department but were mixed with the normal assortment. In addition, the perfumes were not highlighted in any way vis-à-vis the other goods in the drawer containers and glass cabinets. Further, the presentation in glass cabinets is perceived by ALDI SÜD’s customers as protection against theft. The glass cabinets were also not particularly striking but rather matched the functional furnishing of the stores.

In balancing the interests, the Court found that Coty’s interest in preserving the luxury image of its perfumes clearly outweighed ALDI SÜD’s interest in selling the perfumes. ALDI SÜD’s customers do not expect such goods to be marketed in its stores, considering that its assortment largely consists of foodstuff. ALDI SÜD’s interest in improving its discounter image by selling prestigious brands must take a backseat against Coty’s interest to maintain the image of its trade marks.

The Higher Regional Court did not consider the advertising for the perfumes in ALDI SÜD’s weekly promotional brochure to be infringing. The perfumes were highlighted as gifts for Valentine’s Day and separated from other goods. The brochure also contained advertising for cosmetics mirrors and hair trimmer sets (presumably on the same page as the perfumes). They were deemed not to tarnish the trade marks’ reputation because they also concern body care.

Comment

The decision continues the case law of German courts, which frequently hold that in-store sales of luxury brands in discount stores constitute trade mark infringement. As the judgment shows, the required standard of presentation to preserve the prestigious appeal of the trade mark can be met only (if at all) in advertising and online stores with dedicated sections for luxury goods.