Trademark infringement, parallel imports and burden of proof: Converse succeeds before the Court of Milan

(Court of Milan – Enterprise Matters Specialized Section – Ruling No. 1409/2015)

The section of the Milan Court dealing with IP matters recently issued an interesting ruling in a trademark infringement and parallel import case.

The lawsuit had been filed by Converse Italia—the Italian branch and the exclusive licensee on Italy’s territory of the renowned American footwear maker—against an Italian retailer and its foreign suppliers, which the plaintiff claimed had marketed counterfeit Converse shoes along with original shoes whose placement on the European market had not been authorised by the right-holders. The plaintiff had obtained evidence of these alleged violations during a preliminary ex parte search at the premises of the main defendant.

The Court, in essence, upheld the plaintiff’s case. As for the sale of counterfeit footwear, the judges applied the Court of Cassation’s doctrine that the burden of proof borne by the plaintiff (trademark holder or licensee) shall be deemed satisfied when the latter gives evidence of the marketing by the defendant(s) of products bearing the trademarks in suit, while it is up to the defendant(s) to prove the originality of the product, providing evidence of a purchase from a legitimate source.

Such evidence has not been provided by the main defendant or by its suppliers. On the contrary, during the trial, evidence has emerged supporting the counterfeit claim, such as the fact that the year of manufacture stamped on the relevant shoes did not coincide with that of the actual production of the model in question.

With regard to the parallel import of original Converse footwear, the defendants’ main line of defence had been, as is typical in these litigations, the alleged exhaustion of the relevant trademark rights: under the exhaustion principle, goods put on the European Economic Area (formed by all the EU countries plus Iceland, Liechtenstein and Norway) by the proprietor or with their consent may be freely circulated by third parties within that market.

The Court, however, considered that the rules on the burden of proof in parallel import cases (in accordance with the European Court of Justice case law, in particular in the Van Doren and Zino Davidoff rulings) played once again against the defendants: while the plaintiff has in fact demonstrated, through the code numbers printed on the inner part of the shoe tongue, that the shoes in question originated in and were destined for the US market, the defendants have failed to prove that their entry into the EEA had taken place with the consent of the right-holders.

The Court accordingly issued an injunction against the defendants—setting a pecuniary penalty for its violation—ordered the recall from commerce of the infringing goods and assigned ownership of the same to the plaintiff, granting the latter the right to destroy the goods at the expense of the defendants.

The damages claims made for an interesting argument of their own. The main defendant had invoked good faith and absence of liability, claiming to have relied on its suppliers’ authenticity warranty, covering a considerable part of the infringing shipments. The Court, however, has taken the view that this stipulation was insufficient to exempt the defendant from liability, as retailers have a duty to verify that the goods they trade are legitimate. The Court also considered that the defendant was aware of the plaintiff’s role as exclusive licensee on Italy’s territory. A further indication of the lack of good faith, according to the Court, was represented by the difference between the retail price practised by the defendant and that practised by legitimate retailers at the same level of the distribution chain.

In setting the damages, the Court, at the request of the plaintiff, ordered recovery of the profits made as a result of the infringement, calculated with the assistance of a court expert witness. The Court also granted damages from trademark dilution, which it set at 1% of the costs incurred by the plaintiff for advertising. One of the third party defendants, who had signed an indemnification clause with the main defendant, has been ordered to indemnify the latter from damages, legal expenses and court fees, in proportion to its supply.