[RECONCILING INTELLECTUAL PROPERTY LAW AND THE FREE MOVEMENT OF GOODS]

[INDUSTRIAL PROPERTY - COUNTERFEITING - REDUCED BURDEN OF PROOF - PRELIMINARY ISSUE - FREE MOVEMENT OF GOODS]

🚨 In some very limited circumstances, the burden of proving the exhaustion of trademark rights does not rest exclusively on the defendant in an IP infringement action.

(CJEU 18 January 2024, Hewlett Packard Development Company LP v Senetic S.A., C-367/21)

⚖️ Hewlett Packard Development Company LP (‘Hewlett Packard’), the European Union ‘HP’ trademark owner, marketed computer equipment products via a selective distribution network.

Senetic S.A. (‘Senetic’), an unauthorised third party, introduced into Poland goods bearing the trademark owned by Hewlett Packard. It had previously purchased the products bearing the HP trademark from European sellers. The latter had assured Senetic that the marketing of those products in the domestic market would not infringe the trademark owner's exclusive rights. As a precautionary measure, Senetic also unsuccessfully sought confirmation on this point from Hewlett Packard's authorised distributors.

Hewlett Packard then brought an infringement action against Senetic in this respect.

In this context, the Warsaw Regional Court (Poland) requested a preliminary ruling from the Court of Justice of the European Union (‘the Court’) under Article 267 of the Treaty on the Functioning of the European Union (‘TFEU’).

⚠ In principle:

1. The registration of a European trademark confers on its owner an exclusive (but not absolute) right.

2. By way of exception, the owner's right conferred by the European trademark is said to have been exhausted when the goods have been imported or marketed in the internal market under that trademark, either by the owner or by a third party who has obtained the trademark owner's consent. In this case, the owner no longer has the right to prohibit or oppose the further marketing of the said goods on the internal market, unless he can show legitimate grounds.

3. In any event, the measures, procedures and remedies must be effective, proportionate and dissuasive (Directive 2004/48/EC).

With regard to the burden of proof, the Court has held that a balance must be struck between exclusive rights in intellectual property and the free movement of goods (Regulation (EC) No 207/2009, repealed and replaced by Regulation 2007/1001; Regulation 2017/1001; Articles 34 and 36 TFEU).

1. It is in principle compatible with European law that, under the national law of a Member State, the burden of proof lies with the party requesting the recognition of their diverse allegations before the courts.

2. Nevertheless, the requirements arising from the protection of the free movement of goods may justify that the allocation of the burden of proof of the exhaustion of rights be adjusted by the competent national court. That exception applies restrictively.

Considering the particularities of the case, namely the following:

1. the case concerned the exhaustion of the rights conferred by a European trademark in the context of an intellectual property infringement action against the company Senetic ;

2. Senetic derived its rights from the free movement of goods, one of the four freedoms of the European Union;

3. there was a risk that national markets would be partitioned, thereby maintaining price differences between Member States (Harman International Industries, 17 November 2022, C-175-21); and

4. Hewlett Packard operated a selective distribution system;

5. Hewlett Packard had an IT tool with a database listing copies of products identified by a serial number and their destination market. However, the products did not bear any markings enabling third parties to identify the market on which they were intended to be marketed. In other words, it was not possible for third parties to identify the market on which they were intended to be marketed;

placing the burden of proof on the defendant in an infringement action would be likely to create an unjustified obstacle to the free movement of goods.

Thus, the burden of proving that the right conferred by a European trademark has been exhausted does not rest exclusively on the defendant in the infringement action.

1. First, the trademark owner must show that he (or an authorised distributor) has placed the goods on the market outside the EU ;

2. Then, the defendant must establish that these same goods have been imported into the EU by the trademark owner or with his consent.

#European law #EU Directive #intellectual property #IP #evidence #prejudicial question #CJEU #selective distribution #SDS