IP Report
Trademark Law

Surprising extension of trademark protection: The Court of Justice of theEuropean Union holds that “debranding” of imported original products istrademark infringement
Reported by Prof. Dr. Alexander von Mühlendahl, J.D., LL.M., Attorney-at-Law

In its judgment of 25 July 2018 inCase C-129/17, Mitsubishi Shoji Kaisha Ltd v. Duma Forklifts, the Courtof Justice of the European Union(CJEU) ruled that the removal of themark from imported original goods
and the application of marks of theimporter constitutes trademark infringement.

Facts and questions referred
The claimant, Mitsubishi, is the ownerof the Benelux and EU trademarks MITSUBISHI and the well-known three-pointed
star design. The defendants, Duma, andone of its affiliates, have purchased original Mitsubishi forklifts outside the EEA
and imported them into the EEA. In part,these were marketed under the Mitsubishi
brands. In part, they were transferred to thecustoms warehousing procedure, where all
the Mitsubishi trademarks were removed,
the necessary adaptations were made toconform to the standards applicable in theUnion, and labels and serial numbers werealso removed. Thereafter, the defendant'smarks were affixed to the forklifts. Subsequently, the forklifts were taken out of thecustoms warehousing procedure and weremarketed in the EU and the rest of the EEA.

Because of the marketing of the original
goods with the Mitsubishi trademarks onthem, the defendants were held by the Hofvan beroep te Brussel (Brussels Court ofAppeal) to have committed trademark
infringement. For the remaining cases - removal of the marks and new marking – thecourt stayed the proceedings and referred
the following questions to the CJEU for apreliminary ruling:(1)(a) Do Article 5 of Directive 2008/95
and Article 9 of Council Regulation No
207/2009 cover the right of the trade
mark proprietor to oppose the removal,
by a third party, without the consent of
the trade mark proprietor, of all signs
identical to the trade marks which had
been applied to the goods (debranding),
in the case where the goods concerned
have never previously been traded within
the EEA, such as goods placed in a customs warehouse, and where the removalby the third party occurs with a view toimporting or placing those goods on themarket within the EEA?
(b) Does it make any difference to theanswer to question (a) above whether theimportation of those goods or their placing
on the market within the EEA occurs under its own distinctive sign applied by thethird party (rebranding)?

Prof. Dr. Alexander von
Mühlendahl,J.D., LL.M.
Attorney-at-Law

BARDEHLE PAGENBERG
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Patentanwälte Rechtsanwälte
Prinzregentenplatz 781675 Munich
T +49.(0)89.928 05-0
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info@bardehle.dewww.bardehle.com
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IP ReportTrademark Law(2) Does it make any difference to theanswer to the first question whether thegoods thus imported or placed on themarket are, on the basis of their outward
appearance or model, still identified by
the relevant average consumer as originating from the trademark proprietor?

The Opinion of the Advocate GeneralIn his Opinion of 26 April 2018 Advocate
General M. Campos Sánchez-Bordona
proposed that the Court should conclude
that debranding and subsequent rebranding
do not constitute trademark infringement.
Since the goods are not yet in free circulation in the internal market, the case must
be assessed in the same way as the importation of goods whose marks were removed
abroad. The removal of trademarks cannot
be qualified as an act of "use" reserved forthe trademark owner. However, Member
States could apply their rules for the protection of fair competition to such practices.

The judgment of the ECJ
The CJEU deals with both questions together and answers them as follows:
Article 5 of Directive 2008/95/EC [...]
to approximate the laws of the Member States relating to trade marks andArticle 9 of Council Regulation (EC) No
207/2009 [...] on the European Union trade mark must be interpreted asmeaning that the proprietor of a mark is
entitled to oppose a third party, without its consent, removing all the signs
identical to that mark and affixing othersigns on products placed in the customs

warehouse, as in the main proceedings,
with a view to importing them or tradingthem in the EEA where they have never
yet been marketed.
In support of its reasoning, the Court relies
on its well-known case-law on the functionsof trademarks (function of origin, quality
function, advertising function, investment
function). These functions would be impaired if the trademark owner did not retain
the right to use his trademarks when firstplacing his goods on the market. Moreover,the defendants' actions are incompatible
with the objective of trademark protection
to ensure “undistorted competition”. The
relevant considerations of the judgment areset out in paragraphs 44, 46, and 47:
44 As regards the function of the indication of origin, it suffices to recall that,in paragraph 48 of the judgment of 16July 2015, TOP Logistics and Others(C‑379/14, EU:C:2015:497), the Court has
already held that any act by a third party
preventing the proprietor of a registeredtrade mark in one or more Member
States from exercising his right to control
the first placing of goods bearing thatmark on the market in the EEA, by itsvery nature undermines that essentialfunction of the trade mark.
46 Moreover, the removal of the signs
identical to the mark and the affixingof new signs on the goods precludes thetrade mark proprietor from being able toretain customers by virtue of the qualityof its goods and affects the functions ofinvestment and advertising of the markwhere, as in the present case, the productin question is not still marketed under
the trade mark of the proprietor on that2IP Report
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market by him or with his consent. The
fact that the trade mark proprietor’s
goods are placed on the market before
that proprietor has placed them on thatmarket bearing that trade mark, with theresult that consumers will know those
goods before being able to associate themwith that trade mark, is likely substantially to impede the use of that mark,by the proprietor, in order to acquire a
reputation likely to attract and retain
consumers, and to serve as a factor insales promotion or as an instrument ofcommercial strategy. In addition, suchactions deprive the proprietor of the possibility of obtaining, by putting the goodson the EEA market first, the economic
value of the product bearing that markand, therefore, of its investment.
47 Thirdly, by infringing the trade markproprietor’s right to control the firstplacing of goods bearing that mark on
the market in the EEA and by adversely
affecting the functions of the mark, theremoval of the signs identical to the markand affixing of new signs on the goods
by a third party, without the consent of
the proprietor, with a view to importing
into or placing those goods on the market
in the EEA and with the aim of circumventing the proprietor’s right to prohibit
the importation of those goods bearing
its mark, is contrary to the objective ofensuring undistorted competition.
The outcome does not depend upon whether
or not customers recognize the debranded
Mitsubishi forklifts, because of their appearance, as Mitsubishi products: “In thatregard, it must be observed that, while
the essential function of the mark may beharmed irrespective of that fact, that fact

is likely to accentuate the effects of suchharm” (para. 45).
The term “use” should be interpreted broadly: the removal of the marks in order to affix
its own marks constitutes an “active conduct” by the defendant, “which, since it isdone with a view to importing those goods
into the EEA and marketing them there andis therefore carried out in the exercise of acommercial activity for economic advantage, within the meaning of the case-law[...], may be regarded as a use in the courseof trade” (para. 48).
It was irrelevant that the removal of themarks was carried out under the customs
warehousing procedure because the goods
were released for free circulation in theEEA, and, following the amendment ofthe EUTM and the insertion of Article 9(4) EUTMR on trademark infringements
to cover acts of transit, acts such as thosein the present case constitute trade markinfringement even before the goods arereleased for free circulation in the EEA(para. 50).

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Remarks

In many countries inside and outside theEU, trademark removal or suppression isnot considered a trademark infringement.
In these jurisdictions, neither the removal
itself nor the subsequent placing on themarket of the goods without the removed
mark is an act of "use" of the trademark. In
his Opinion, the Advocate General draws
attention to the legal situation in Germany
and the United Kingdom. In France, brandsuppression is expressly regulated as infringement.
Therefore, it is a true sensation that theCourt of Justice in the present judgment,disregarding the Opinion of the Advocate
General, classifies the removal as a trademark infringement.
The Court sees no difficulty qualifying thebrand removal as "use". The prevention of
the advantages that the trademark ownerhas from placing goods on the market under
his mark constitutes an impairment of thefunction of origin and of the quality, advertising and investment function. Interestingly, the Court for the first time gives a moredetailed explanation of these functions(para. 34 to 37). While previously thesefunctions were invoked in double-identity
situations and the protection of marks withreputation, they here make their reappearance in relation to conduct affecting themark of the proprietor itself.
No specific answer is given to the second
part of the first question, namely whether
trademark infringement depends on thedefendants affixing their own mark after
the debranding. However, it is clear fromthe Court's reasoning that that fact is notdecisive – the debranding is the essential
interference that the proprietor can prevent.
It is worth noting that the Court does
not even mention its case-law on parallel
imports of medicinal products in intra-EEA
trade. As is well-known, the Court does notconsider the practice of debranding of medicines already on the market and their rebranding in the context of parallel imports
as exhaustion or covered by an exception
to exhaustion, but directly applies Article
34, 36 TFEU to allow such manipulation inappropriate cases (see e.g. judgment of 12
October 1999, Case C-379/97, Pharmacia &Upjohn v. Paranova).
This raises the question whether the Mitsubishi judgment covers only the specificfacts of the case, that is the importation oforiginal products and the removal of theirtrademarks prior to their placing on themarket in the EEA (the trademark proprietor can always prohibit the marketingof original products imported from third
countries under their original trademarks),
or also applies to debranding (with ourwithout rebranding) of goods already infree circulation, i.e. to goods placed on themarket in the EEA by the proprietor or withhis consent. In any case, according to theMitsubishi judgment, trademark infringement in these cases cannot be denied onthe grounds that there would be no "use".
Thus, the decision would seem to depend
on whether such practices may affect thefunctions of the trade mark. In many cases
this will probably have to be answered in
the affirmative. The trademark proprietor’s

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ability to benefit from the goodwill of hisbrand will be affected if third parties would
have the unlimited opportunity to remove
the brand from original products and thenre-sell them as "no names" or with theirown brands.
In the absence of clarity, we will have towait for further case law and perhaps additional references to the Court of Justice.

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