June 18, 2019

June 18, 2019

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June 17, 2019

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Court Confirms Additional Tools for Trademark Owners to Protect Their Brand Where They Operate a Selective Distribution System in the EU

A recent decision by the Court of Milan found that a trade mark owner who had consented to products being sold in the European Economic Area (EEA), but only through authorised retailers, could make a claim for trade mark infringement where the product was sold by an unauthorised retailer. This case highlights the effectiveness of implementing a selective distribution system for product manufacturers looking for new ways to protect their brand

Background

Landoll S.r.L, an Italian manufacturer of professional cosmetics bearing the trade marks NASHI and NASHI ARGAN, sells its products through a selective distribution system. Essentially, retailers are only authorised to sell Landoll’s products if they meet certain criteria such as that the products must be applied by trained beauty professionals. Landoll successfully obtained a preliminary injunction to stop a retailer who had not been authorised under these criteria making sales via its website and via a third party online marketplace

Trade Mark Rights and Selective Distribution

The principle of exhaustion provides that a trade mark owner may not oppose the further commercialisation of goods that bear their trade mark and are distributed in the EEA with their consent, unless there are “legitimate reasons” to do so. The retailer argued that, under this principle, it was entitled to sell the NASHI products in the EEA

The Court of Milan found, applying the Coty judgment of the Court of Justice of the EU, that Landoll had implemented a legitimate selective distribution system, limiting the distribution of its products to authorised dealers in order to safeguard the brand of its products. It also found that the retailer’s actions resulted in actual harm to the NASHI brands. On this basis, the court found that there was a “legitimate reason” preventing the operation of the exhaustion principle

Outcome

The Court ordered withdrawal of the products from the market along with an order for publication of the injunction on the reseller’s website for 30 days. As this was a preliminary injunction decision, there is no final decision on the matter as yet. However, this judgment will be persuasive for other courts applying EU trade mark law and we expect the reasoning to be followed in similar actions

The decision is good news for trade mark holders who already have a selective distribution system in place, as it establishes that such holders may use their IP rights to limit unauthorised sales as well as through competition law. For trade mark holders who do not operate such a distribution model, this case provides a clear illustration as to why they should consider whether changes to their models may be appropriate in order to ensure their branded products are adequately protected.

Copyright 2019 K & L Gates

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About this Author

Jennifer P.M. Marsh IP Lawyer KLGates
Partner

Jennifer Marsh is partner in the firm's London office. She concentrates her practice on all aspects of EU and UK competition law and commercial agreements. 

Ms. Marsh’s work covers merger control, including making submissions to the European Commission in Brussels and coordinating merger filings globally; advising on litigating competition law issues before the English courts, including two appeals before the Court of Appeal; advising on distribution strategies throughout Europe, including online resale policies, marketplace strategies and selective distribution;...

+44.(0)20.7360.8223
Gabriela R. Da Costa, Senior Associate, KL Gates
Senior Associate

Gabriela da Costa is a senior associate in K&L Gates’s London office where she is a member of the antitrust, competition & trade regulation practice group. 

Gabriela advises clients on a wide range of competition matters, including restrictive practices and agreements, abuses of dominance, merger control, procurement and state aid. Gabriela has extensive experience in advising manufacturers in a variety of sectors, including leading consumer electronics, sports and fashion brands, on designing and implementing effective distribution policies and agreements across Europe. Gabriela also regularly develops tailored compliance programmes and delivers training to clients on their competition law obligations. 

+44.(0)20.7360.8115
Serena Totino, KL Gates Law Firm, London, Intellectual Property Attorney
Associate

Serena Totino is an associate in the firm’s London office, where she is a member of the IP Procurement and Portfolio Management practice group. Ms. Totino manages the trademark and design portfolio of international companies, advising clients on infringements, invalidation actions and international filing strategies. In addition, she has experience in negotiating and drafting IP related agreements and has worked on a range of copyright and domain name matters.

44020-7360-8145