ECJ confirms trade mark holder’s liability for damages for seizing goods Imported in EU

In a remarkable case with an unfortunate outcome for the trade mark holder, the Court of Justice of the European Union (“ECJ”) confirmed that a party has the right to claim damages on the basis of a judgment of another Member State’s national court, even if this judgment misapplied EU law (C-681/13, 16 July 2015, Diageo Brands BV v Simiramida). The rule that had been applied incorrectly related to the exhaustion of trade marks.

In 2008, more than 12,000 bottles Johnnie Walker whisky imported from Georgia to Bulgaria by a Bulgarian based company (“Simiramida”) without the consent of the owner of the trade mark (“Diageo”) were seized. Simiramida then obtained the revocation of the seizure and the appeal by Diageo was dismissed. As a consequence, the bottles of whisky were released. Diageo initiated a procedure on the merits to determine whether its intellectual property right had been infringed. Surprisingly, implying the principle of international exhaustion, the Sofia Court dismissed Diageo’s action and held that Diageo’s trade mark rights had already been exhausted. Diageo decided not to appeal the decision of the Sofia City Court.  

Later, Simiramida initiated proceedings against Diageo in the Netherlands in which it claimed compensation for the seizure which had been declared “unlawful”. Diageo countered by arguing that the Bulgarian judgment should not be recognised in the Netherlands. It contended that the Bulgarian judgment had manifestly misapplied EU law which does not accept the international exhaustion of trade mark rules (C-355/96, 16 July 1998, Silhouette International v Hartlauer Handelsgesellschaft). It is only if the goods are placed inside the EEA with the consent of the holder of the trade mark that trade mark rights can be exhausted in the EEA. Eventually, the case came in front of the Supreme Court of the Netherlands which referred it to the ECJ for a preliminary ruling.

At issue was whether the public policy ground for refusal contained in Article 34(1) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels I Regulation”) also applied if the original judgment of the court of the Member State was manifestly contrary to EU law, and if that fact had been recognised by the court before which recognition was sought. The Brussels I Regulation is predicated on the mutual trust that should exist between the courts of EU Member States to facilitate the free movement of judgments. Nevertheless, Articles 34 and 35 set out a number of conditions under which recognition of judgments can be refused.

In the case at hand, the ECJ was asked whether the recognition of the Bulgarian judgment could be refused for reasons of public policy. The ECJ answered in the negative and held that recognition of a judgment of another Member State can be refused only in case of a manifest breach of an essential rule of law or fundamental right in the EU legal order or in the legal order in which the enforcement is sought.

The ECJ added that a party should exhaust all legal remedies available to it under the national law of the Member State where a judgment is issued before relying on Article 34(1) of the Brussels I Regulation, except if specific circumstances make this too difficult or impossible.

In addition, the ECJ confirmed that Simiramida was, under Article 14 of the IP Enforcement Directive 2004/48, entitled to compensation for the legal costs associated with the successful defence against the seizure.

This case would not seem to do justice to trade mark owners. The ECJ ruling shows the importance of exhausting all legal remedies available in the country in which a judgment was given before relying on Article 34(1) of the Brussels I Regulation. This is because the highest court of a Member State has the obligation to refer a request for a preliminary ruling to the ECJ when doubts persist over the interpretation of EU law. In this regard, it is likely that a possible judgment from the Bulgarian Supreme Court would have benefited from the reference of a question to the highest European court.