Small cars, big trouble reloaded

Not too long ago, this Kat discussed here the German Supreme Court judgment DACHSER, confirming that model toys of real-life cars and buildings do not, in principle, infringe the word and figurative trade marks for the real-life products. Volkswagen tried to convince the courts of the opposite by enforcing a three-dimensional trade mark for its Bulli model and was successful before the Higher Regional Court of Hamburg. Now the German Supreme Court has given its ruling on the appeal (VW Bulli, case I ZR 23/23).

Background

Volkswagens owns the three-dimensional German trade mark no. 30627911 for the famous ‘Bulli’ (officially ‘VW T1’):

 

It was registered in 2006 inter alia for ‘motor vehicles’ in class 12 and ‘model cars’ in class 28. The Bulli was first sold in 1950 and is still present on the streets (at least in Germany).

The defendant manufactured and sold high-priced model cars, in particular for collectors and advertising clients. It used to have a license agreement with Volkswagen and sold model cars such as the following:

Their packaging showed the following statement up until the end of 2012, when the defendant terminated the license agreement:

 

The defendant continued selling, inter alia, the following model cars without a license and without the statement depicted above.

Volkswagen sued the defendant for trade mark infringement. The defendant requested Volkswagen to furnish evidence of use of its 3D trade mark. The District Court of Hamburg dismissed the action.

The Higher Regional Court of Hamburg granted Volkswagen’s claims. It found that the defendant’s models would create a likelihood of confusion and take unfair advantage of Volkswagen’s 3D trade mark for ‘motor vehicles’. The defendant appealed to the German Supreme Court.

The German Supreme Court’s decision

The German Supreme Court annulled the decision and remitted the case back to the Higher Regional Court.

Genuine use

The German Supreme Court already took issue with the finding of the lower court that Volkswagen had established genuine use of its trade mark for ‘motor vehicles’ and ‘model cars’.

The Court did not resolve the question whether the relevant period to prove use under the German implementation provision of Art. 17 Trade Mark Directive is the five years prior to the filing of the claim or five years prior to the service of the claim on the defendant. Both dates were rather close together and they covered March/April 2011 to March/April 2016.

The judges objected to the lower court's finding that the shape of the Bulli was used a trade mark. In order to establish genuine use it is necessary that the relevant public perceived the shape as an indication of the commercial origin. This is problematic when the trade mark and the goods are identical. Only if the relevant consumers recognize the shape not merely as the shape of the goods but also as an indication of origin genuine use is proven.

According to settled case law, consumers normally perceive the shape of goods as functional or aesthetic but not as an indication of the commercial origin. Even a peculiar form will rather be attributed to a function or aesthetic appeal of the product than to the intention of indicating the commercial origin. When a 3D trade mark consisting of the shape of the goods is combined with word or figurative marks, it must be assessed whether the shape constitutes an indication of origin in itself.

With respect to genuine use for ‘motor vehicles’, Volkswagen had not been selling any of the original Bullis anymore but only spare parts. In light of the Ferrari judgment (cases C-720/18 and C-721/18, IPKat here) of the Court of Justice of the EU (‘CJEU’) the lower court considered that the use for spare parts of a product can constitute use for the product itself. The German Supreme Court held that this only applies if the trade mark has been used for the spare parts. The lower court’s judgment did not contain a finding that Volkswagen had been using the 3D trade mark in question for spare parts.

Turning to ‘model cars’ the Court found that the lower court’s decision did not sufficiently explain why the shape of the model cars sold by Volkswagen or licensees, respectively, would be perceived as an indication of the commercial origin. The mere identical use of the shape was not considered sufficient to establish such a perception of the relevant public, especially because the packaging contained further indications, inter alia the VW logo, "Premium ClassiXXs", "VW T1 Bus" and "Officially licensed by Volkswagen".

For these reasons, the German Supreme Court annulled the Higher Regional Court’s judgment and remitted the case back.

Guidance for new decision

The judges provided the lower court with guidance for their new decision:

1. If the lower court concludes again that Volkswagen had established genuine use, it will have to consider that the contested goods are not directed at the general public but, rather, at collectors and advertising clients. The defendant’s high-priced goods cannot be equated with merchandising articles targeting the general public. Therefore, surveys conducted by Volkswagen among the general public in order to show confusion cannot be deemed decisive.

2. As regards a likelihood of confusion, the Higher Regional Court will have to determine whether the defendant’s trade mark for the model cars on the packaging plays an important role because of the longstanding tradition of the sale of real-life replicas by car model manufacturers in Germany. This tradition could have resulted in the defendant’s trade mark obtaining a reputation, which is independent of the reputation of Volkswagen’s trade mark. In this respect, it could also be relevant that the specialised public pays more attention to the defendant’s trade mark than the general public to toys or merchandising articles.

3. With respect to claims based on a trade mark with a reputation, the German Supreme Court referred to its case law according to which there may be due cause for a defendant taking advantage of a claimant’s well-known word or figurative mark. Replicating a real-life car as a model necessitates applying the trade marks used on the actual vehicle. This is not objectionable and constitutes due cause if the trade mark is not used in a promotional way that goes beyond the mere use as a representation of the original vehicle.

4. The Court found that aforementioned principles also apply to 3D trade marks and that they are in line with the CJEU’s case law, in particular with the L'Oréal and Others decision (case C-487/07). The defendant’s use of Volkswagen’s trade marks did not amount to ‘free-riding’ or ‘parasitism’ as mentioned by the CJEU (e.g. in L'Oréal and Others at para. 41). A model of a real-life car requires the reproduction of the original manufacturer’s trade marks. Otherwise, it would not be a model car. Further, the defendant did not enter and compete with Volkswagen on the market for the original cars but was instead on a separate market. On the market for model cars, the reputation of the model car manufacturer may also play an important role.

Comment

The decision shows that it may not only be difficult to obtain registration of a non-traditional trade mark but that its genuine use and enforcement present their own challenges. It all revolves around the question whether the sign is actually perceived as an indication of the commercial origin and not just as a mere decorative or functional element of the product.