[Guest post] Horological IP and the customization of watches

The IPKat has received and is pleased to publish a guest contribution by Katfriend Hans Eriksson (Westerberg & Partners) that discusses the rights conferred by trade mark law in the context of horology. Here’s what Hans writes:

Horological IP and the customization of watches

by Hans Eriksson

The world of high-end watchmaking is a good case study for the importance of intellectual property (IP) rights.

• Many leading watchhouses are built on groundbreaking patented inventions, like Abraham-Louis Breguet’s tourbillion, Hans Wilsdorf’s waterproof oyster seal or Richard Mille’s tonneau-shaped timepieces [see here].
• In addition to being works of scientific achievement, many luxury timepieces are artistic wonders with innovative designs, like some of the reportedly 100 000 (!) watch designs created by Gerald Genta, including the Patek Philippe Nautilus, the Audemars Piguet Royal Oak or Genta’s famously playful line of Disney-themed watches (not to be confused with your own first plastic Mickey Mouse wristwatch, which likely has a considerably lower second-hand value).
• Brands like Rolex, Patek Philippe and Audemars Piguet hold rich trade mark and design portfolios and enforce their rights vigorously.
  
  

Horology is however a market steeped in history with its own unwritten rules and customs. It is famously a market where supply and demand is meticulously controlled by the big watchmakers and consciously kept misaligned. It is not enough for you to simply have the money to buy your long sought grail watch from the likes of F.P. Journe, Vacheron Constantin or A. Lange & Söhne at list price - you first have to qualify for the privilege and often have wait many years for the opportunity, or else brave the second-hand market with volatile and exorbitant prices.

Since the basic features of a mechanical wristwatch are more or less always the same (with a case, crown, bezel and dial with moving hands, on a strap) the variations between models are often objectively speaking subtle and market-wide trends are clearly discernable. This has created a market where the distinction between inspiration (homage=good) and copying (theft=bad) is sometimes difficult to apply. In a recent article see here), writer Anthony Traina expresses it aptly: “The problem with these types of watches has never been inspiration, but when imitation poses as inspiration.” Put another way, the unwritten rules and customs of the horological world also impacts how and when rightsholders in the field enforce their IP rights.

A recent trend in this field is the customization or personalization of luxury timepieces, or “modding”. Companies like Artisans de Geneve and Blaken have created a market for the rich and famous to customize their Rolex and Patek Phillipe watches in order to create unique works of art, by modifying the original watches in different ways, exemplified well by Artisans de Geneve’s Cool Hand Luke collaboration with US filmmaker Spike Lee which is a heavily modified Rolex Daytona (see here). These companies’ pioneering success has recently led to a proliferation of companies that offer similar customization and personalization services, also for watches from more mid-market brands.

The customization process, whereby a third party works on the watch and markets and sells the resulting modified watch, including by removing and/or re-applying the original trade mark and adding features not on the original model, raises several IP questions, including questions about trade mark consumption as well as private use vs. commercial use (under European trade mark law, see C-206/01, Arsenal Football Club Plc v Matthew Reed, EU:C:2002:651) and fair use of trade marks (under US law). These questions are often discussed in IP circles under the heading of sustainability, upcycling, and the right to repair (see IPKat posts here, here, and here).

This Katfriend was recently reminded of the thin line between inspiration and IP infringement, and the peculiarities of enforcing IP rights in the world of high horology, when a number of US and European decisions in trade mark infringement cases between watchmakers and companies that customize watches came across his desk. Though different in their details, these cases elucidate this issue from different perspectives:

• In January 2024, Rolex was successful in a US trade mark infringement case against BeckerTime before the United States Court of Appeals for the Fifth Circuit. BeckerTime’s business was to customize old Rolexes with new materials, including by adding diamonds and aftermarket bezels that are not found on Rolexes, and to market the modified watches as “Genuine Rolex”. BeckerTime’s argument that its customization work was allowed under the so-called misnomer exception in Champion Spark Plug Co. v. Sanders (1947) did not succeed and BeckerTime’s modified timepieces was found to infringe Rolex trade mark rights. This decision followed the Second Circuit’s earlier decision in Hamilton International Ltd v. Vortic LLC (2021), where a refurbisher of old Hamilton pocket watches found itself on the right side of the law and did not infringe Hamilton’s trade mark rights since there was no likelihood of confusion.

• February 2024, a trade mark infringement case was decided by the Swiss Supreme Court in litigation between Rolex and an un-named Swiss defendant (but widely reported to be the aforementioned atelier Artisans de Geneve) [see here]. In this case, Rolex argued that the defendant’s customization work, which required it to remove and then re-apply Rolex trade marks on the dials alongside the atelier’s own trade mark, amounted to trade mark infringement. In contrast with the US cases reported above, the Swiss Supreme Court made an important distinction between the private and commercial uses of trade marks, that is between:
  
  1) the atelier’s supply of watch customization services to private individuals who brough their privately-owned Rolex watches to the atelier and wished to have them customized according to specific instructions; and
  
  2) the atelier selling customized Rolexes to its customers on a larger scale.
  
  The atelier’s customization work was found to be allowed under the first private use scenario but not under the second.
  
  
• On March 4, 2024, the Swedish first instance Patent and Market Court handled similar questions in case PMT 8939-23 between watchmaker Tissot and Swedish company IFL Watches. In this case, the Swedish company sold Tissot watches directly to the customer, the customer could decide to have the watch customized whereby the Swedish company customized the watch according to a number of different concepts and delivered the finished watch to the customer (that is akin to the second scenario in the Swiss litigation above).
  
  The Swedish court did not accept the defendant’s argument that its customization work constituted an extension or part of the customer’s private use of the watch and therefore did not constitute trade mark use and infringement. The court pointed out that the customization procedure was an integrated part of the customer’s purchase of the watch and could not be compared to for example an engraver providing engraving services on a watch which was brought into the shop by a customer. In line with the Swiss decision above, there thus seems to be an important distinction under European trade mark law between carrying out customization work on timepieces (or other products) provided to the craftsman by customers (i.e. for private use) and selling customized watches directly to customers on a larger scale.
  
  As to the issue of trade mark consumption under Article 15(1) in Directive (EU) 2015/2436 (the EU Trade Mark Directive), the Swedish court stressed that the defendant had the burden of proof to prove that the Tissot watches had been put on the market in the EU by the trade mark owner. Based on the evidence in the case, the court found that the defendant had not been able to show that the watches had been put on the EU market by the trade mark holder. This Katfriend notes that a somewhat more nuanced view of the issue of burden of proof for consumption of trade mark rights was recently set out by the Court of Justice of the European Union in C-367/21, Hewlett Packard Development Company LP v Senetic S.A., EU:C:2024:61 (see IPKat post here) but the facts of that case was different from this case in many aspects.
  
  The court also obiter confirmed that Tissot had the right under Article 15(2) of the EU Trade Mark Directive to object to the further marketing of the customized Tissot watches, even if the trade mark rights in the watches had in fact been consumed. The court reached this conclusion based on a finding of passing-off and the customers getting the impression that there was a commercial relationship between Tissot and IFL Watches.

These cases all raise interesting questions of trade mark law that are particularly timely in the context of recent discussions in IP circles about sustainability and the right to repair. The same questions can of course be discussed from the perspective of copyright and other IP rights, which ensures many more interesting enforcement cases in the world of horology in the years to come.