New ruling from the European Court of Justice reinforces trademark holder rights in the distribution sector

31 August 2009

The COURT OF JUSTICE’S RULING (First chamber) of April 23, 2009 confirms preceding case law which grants trademark holders the power to control sales made outside their distribution channels which may damage their image or trademark.

This time, the ECJ examined a matter in which there was a licensing agreement and third parties who did not enter into this agreement made sales and marketed products at a knockdown price. The ruling upholds that the national judge has the obligation to study, in light of the circumstances of each case, if the marketing of the luxury trademark products undertaken by said third parties caused any damages to the reputation of the trademark.

The court upheld that in the case of luxury product marketing by the licensed dealer undertaken with the approval of the trademark holder, the latter can only oppose resale of these products in the event that it is determined that said resale causes damages to the trademark reputation.

Furthermore, the court concludes that the trademark holder can invoke the rights granted thereby against a licensee who violates a clause of the licensing agreement that prohibits, for reasons of trademark prestige, the sale of products such as those in question to liquidators, as long as said violation damages the prestigious aura and image which confer a sense of luxury to said products.

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