The IP Court of Milan on trademark protection and selective distribution networks
By order of 18 December, in proceedings with docket no. 44211/2018, the IP Court of Milan provided a clear summary of the principles governing the protection of trademarks vis-à-vis retailers alien to the selective distribution network of the trademark owners.
The dispute was initiated by the manufacturerof the luxury Nashi and Nashi Argan branded cosmetics, which are retailed exclusively through a selective distribution network for use on the end customer only by properly trained personnel. The claimant acted against a retailer of its products that did not belong to its distribution network offering the cosmetics on its website and on Amazon. According to the claimant, this constituted a violation of its trademarks. The retailer, on the other hand, considered that its commercialisation was legitimate in light of the exhaustion of the claimant’s trademark rights, since it purchased the original products from Italian third-party distributors of the same.
Based on the exhaustion doctrine, as is known, the trademark owner cannot oppose the further marketing of products put on the market in the EU with their consent, unless legitimate reasons for opposing exist. According to the case law, such legitimate reasons exist, amongst others, in case of prejudice to a trademark’s origin function and to the reputation of the trademark itself. According to the claimant, such prejudices existed in the case in question, since the marketing carried out by the defendant:
could lead to the mistaken belief that the defendant belonged to the petitioner’s selective distribution network;
took place: via a “generalist” online trading platform where no luxury products are sold; towards an indiscriminate and undifferentiated public instead of only to consumers undergoing treatment by professionals; without the necessary assistance from adequately trained personnel who had previously examined the needs of the end consumer; and with presentation methods that were mediocre and far from the image of luxury and care of the products.
In the order in question, the Judge granted the petitioner’s claims, recalling among other things the decision of the EU Court of Justice in case C-230/16 (Coty Germany), which we discussed here on this blog. In particular, the Judge stated that “the evidence submitted by the petitioner confirms that its trademarks and products are renowned and belong to a segment of prestige and luxury“, and that the selective distribution system of such products is legitimate. In fact, “it is also aimed at ensuring, through the professional preparation of the authorised retailers – or through adequate training activities – the appropriate use of the products in relation to the needs of the end customers, thus contributing to the need to safeguard the image and the prestige of the products“. Furthermore, “the qualitative criteria established and used by the claimant in the selection of the authorised retailers are completely consistent with the intent to safeguard the luxury image of the products in question, are established without distinctions and applied in a non-discriminatory and proportionate way, taking into account the aim pursued“.
Having specified the above, the Judge alsoconfirmed the existence of an actual prejudice to the image of luxury andprestige of the Nashi and Nashi Argan branded products, considering “the methods of presentation of the productsin question by the defendant on both e-commerce platforms and on its website, whichshow the flat assimilation to any generic product of the sector, even of lowerquality. To this must be added the fact that the defendant in no way guaranteesa specific professionalism in the use of these products“.
The Judge therefore concluded “that the offer for sale of such products by the defendant in the ways described cannot be considered legitimate, as in this case the rule of the exhaustion of the rights of the trademark holder does not apply, and that therefore such conduct amounts to infringement of the petitioner’s trademark rights pursuant to Article 20(a) IP Code“. Consequently, the Judge enjoined the defendant from further marketing the products and using the trademarks (with a penalty of € 100 for each additional product marketed or offered for sale), ordered the withdrawal of the products from the market within three days (with a penalty of € 1,000 for every day of delay in complying), condemned the defendant to pay the legal fees and ordered the publication of the order for 30 days on the homepage of the defendant’s website