CJEU considers exclusive distribution agreement between infringers sufficient for joint jurisdiction

Determining the competent court for trade mark and design infringement proceedings in the EU is rather straightforward if there is only one defendant. Art. 125 EUTMR and Art. 82 CDR provide a jurisdiction cascade (explained here) depending on where the defendant and plaintiff are based.

If there are several defendants, which are domiciled in different EU Member States, the question whether they can be sued before the same court is answered by Art. 8(1) Brussels I recast:

A person domiciled in a Member State may also be sued:

(1) where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

In its recent judgment in Beverage City Polska (C-832/21), the Court of Justice of the European Union (CJEU) had the opportunity to shed further light on the interpretation of this provision in a case concerning trade mark infringement by two independent companies based – respectively – in Poland and Germany, which were connected by an exclusive distribution agreement.

Background

The plaintiff, Advance Magazine Publishers (‘AMP’), publishes the famous Vogue magazines and owns various EU trade marks protecting ‘VOGUE’ inter alia for ‘printed matter’ in class 16.

The first and second defendants, Beverage City Polska (‘BCP’) and its managing director, are domiciled in Poland. BCP manufactures, advertises and distributes an energy drink under the name ‘Diamant Vogue’. It sells the energy drinks to consumers in Poland.

The drinks are sold in Germany by the third defendant, Beverage City & Lifestyle (‘BCL’), under an exclusive distribution agreement with BCP. There is no corporate connection between BCP and BCL, i.e. they are independent undertakings. BCL and its managing director (the fourth defendant) are domiciled in Germany.

AMP sued all four defendants for infringement of its EU trade marks ‘VOGUE’ in Germany before the District Court of Düsseldorf. AMP requested a pan-EU injunction. BCP and its managing director challenged the court’s international jurisdiction.

The District Court upheld the action and based its international jurisdiction concerning BCP and its managing director on Art. 8(1) Brussels I recast. BCP and its managing director appealed to the Higher Regional Court of Düsseldorf.

The Higher Regional Court was unsure whether the exclusive distribution agreement between BPC and BCL was sufficient to satisfy the condition of Art. 8(1) Brussels I recast. The court thus sought the CJEU’s guidance on this point. 

The CJEU’s response

The CJEU agreed with the District Court and held that Art. 8(1) Brussels I recast

must be interpreted as meaning that a number of defendants, domiciled in different Member States, may be sued in the courts for the place where one of them is domiciled […] where they are each accused of having committed a materially identical infringement of that trade mark and they are connected by an exclusive distribution agreement.

In order for judgments to be regarded as irreconcilable within the meaning of Art. 8(1) Brussels I recast, a potential divergence in the outcome is not sufficient: the divergence must also arise in the context of the same situation of fact and law.

Regarding the criterion ‘same situation of law’, the CJEU referred to its Nintendo decision (C‑24/16 and C‑25/16, discussed here), in which it held that this condition is fulfilled where claims are based on a Community design right because it has effect throughout the EU. The Court held that the same applies to EU trade marks.

Turning to the question whether the case concerned ‘the same situation of fact’, the CJEU pointed to the purpose of Art. 8(1) Brussels I recast, which is to minimise the possibility of concurrent proceedings and to avoid irreconcilable outcomes if cases are decided separately. This provision must be interpreted restrictively because it derogates from the general principle that jurisdiction is based on the defendant’s domicile.

Particularly relevant for the interpretation of ‘the same situation of fact’ is whether the defendants are accused of the same acts of infringement with respect to the same goods. In this respect, the relationship between the acts of infringement is more important than the organisational or capital connections between the defendants. Therefore, particular attention must be paid to the nature of the contractual relationship between the customer and the supplier.

The CJEU found that an exclusive contractual relationship between BCP and BCL may make it more foreseeable that the acts of infringement may constitute ‘the same situation of fact’. The Court also took into account that BCP and BCL sold the goods through two websites, which referenced each other and whose domains both belonged to one of the defendants. This showed a close cooperation between the parties and demonstrated the foreseeability of liability.

The CJEU concluded that a finding that the claims are directed against different actors who have each contributed to the same infringement of an EU trade mark in a chain of infringements may give grounds for finding that the condition relating to the existence of the same situation of fact is satisfied.

Comment

The CJEU decided only a particular situation, where the supplier and reseller are connected by an exclusive distribution agreement and joint online marketing. The latter did not seem to have been a decisive factor for the Court given that the official response cited above only refers to the exclusive distribution agreement.

The contractual situation between a supplier and a reseller are often not obvious and many countries (including Germany) do not have any form of discovery. Thus, a trade mark owner might not know if the infringers are connected by an exclusive distribution agreement.

This begs the question: Is a simple sales contract sufficient to establish ‘the same situation of fact’? Whether or not there is exclusivity in the sales agreement, both companies sell the same infringing products. The exclusive distribution agreement (and the joint online marketing) may be relevant for determining whether the defendants are jointly liable for the infringement but not for the infringement as such. If both sell the same goods under the same trade mark, it seems difficult to argue that the facts are different just because they are not connected by an exclusive distribution agreement. It is also difficult to conceive of a situation where diverging judgments would be justified because there is no exclusivity.

Therefore, it stands to reason that Art. 8(1) Brussels I recast should also be applied to simple sales contracts. Of course, this might conflict with one of the fundamental principles of international jurisdiction: foreseeability of the competent court (e.g. Recital 16 Brussels I recast). However, if a manufacturer sells its products to a reseller in another EU Member State, it is conceivable that infringement claims are asserted against that reseller and that the plaintiff has a strong interest in having the infringement action be decided by one court and not two. Further, due to the broad interpretation of 125(5) EUTMR in AMS Neve (discussed here), a foreign company selling products to a particular EU Member State can be sued for infringements in this Member State. Thus, the manufacturer cannot expect only to be sued in the Member State courts of its domicile.

Picture is by Nishant Aneja and used under the licensing terms of Pexels.