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1 February 2004

KERRY SPRING ECJ Decision

Conflict between trade mark registrants and third parties legitimately using descriptive indications for their goods or services has always existed and with the upcoming enlargement of the European Union, it is set to increase. The European Court of Justice in its decision of 7th January, 2004, in the case of Gerolsteiner Brunnen GmbH & Co. -v-Putsch GmbH (Case C-100/02), has clarified, somewhat, the limitations on the effect of trade mark registrations in relation to use by third parties of indications of geographical origin.

The Case

This was a case referred to the ECJ by the German Bundesgerichtshof in relation to a trade mark infringement action taken on the basis of German registrations for the mark GERRI, both in word and device forms, in respect of mineral water and other non¬alcoholic beverages. The action was taken in relation to the marketing of soft drinks in Germany with labels bearing the mark KERRY SPRING.The soft drinks are manufactured and bottled in County Kerry in Ireland, from a spring called the Kerry Spring, by Kerry Group plc, the large consumer food and beverages manufacturer based in Ireland, and distributed in Germany by Putsch GmbH. The Bundesgerichtshof was satisfied that there was a likelihood of aural confusion between the marks GERRI and KERRY, the evidence showing that consumers in Germany shortened the name in oral requests from KERRY SPRING to KERRY. However, it was uncertain as to whether the exclusion from infringement, where the later mark is an indication of geographical origin, would apply in this case. The main question posed was Does the protection afforded to indications of geographical origin apply where the sign at issue is used as a trade mark? In essence, the question put to the ECJ was: Does the exclusion from infringement extend to trade mark use, as opposed to merely descriptive use such as "this water comes from a spring in Kerry"? If so, must the fact that it is trade mark use be taken into account when considering if the use was in accordance with honest practices in industrial or commercial matters?

The Decision

The ECJ noted that the original draft of the Directive 89/104 set out that this protection was granted to indications of geographical origin provided that the sign was not used as a trade mark but that, in the final version, this was changed, in the interests of greater clarity, to circumstances where the use was in accordance with honest industrial or commercial practices. The ECJ went on to state that the expression "use as a trade mark" was not appropriate for determining the scope of the limitation. The purpose of this limitation was an attempt to reconcile trade mark rights with the interests of free movement of goods in the common market as discussed in the BMW case (Case C¬63/97). The provision does not distinguish between use of a sign as a trade mark and other types of use. To fall within the exclusion, it is sufficient that the sign is, in fact, an indication of geographical origin and the use is in accordance with honest practices. In this case, KERRY was the geographical origin of the water used in the manufacture of the soft drink, the place where it was bottled, and also the place where the producer is established. "Kerry Spring" is also one of the mineral waters recognised by Ireland for the purposes of a Directive concerning natural mineral waters. The test of whether the use was in accordance with honest practices is set out in the BMW Case. In substance, it is a duty to act fairly in relation to the legitimate interests of the trade mark owner.The ECJ did not comment on whether the fact that it was trade mark use is a factor which may be taken into account in this consideration.

However, the ECJ went beyond the scope of the questions and commented that the likelihood of aural confusion is not sufficient to conclude that the use is not in accordance with honest practices. Further, they stated that in a community of 15 member states with great linguistic diversity, there is already a substantial chance of some phonetic similarity existing between trade marks registered in one member state and indications of geographical origin from another member state. With the impending enlargement of the EU, the chances of such similarities occurring will increase. The only
guidance given to the national court, in assessing whether the use is in accordance with honest practices, was that an overall assessment of all of the relevant circumstances should be carried out. In the present case, this would include an assessment of the shape and labelling of the bottle to see if there was any unfair competition.

The Answer

The limitation on the effects of trade mark registrations in relation to use of indications of geographical origin will be disapplied only if the use is in not in accordance with honest practices in industrial or commercial matters. It is for the national court to carry out an overall assessment of all the circumstances of the particular case.

The Significance

The ECJ refused to be tempted to consolidate the rights of trade mark owners by excluding use as a trade mark from the protection for indications of geographical origin. However, the Court restricted its answer to the particular circumstances, i.e. where there is a likelihood of aural confusion between a word mark registered in one member state and an indication of geographical origin of a product originating from another member state. It did not clarify whether this reasoning would apply if the trade mark is registered and the geographical origin is located in the same member state. Similarly, it did not clarify what the position would be if the mark and the sign were identical or there existed a strong likelihood of visual confusion.

This decision does not prevent the owners of marks from taking action against businesses specifically set up in areas, the names of which coincide with their marks, to take advantage of their goodwill. In the present case, it is common practice in the industry to use the geographical origin to identify the goods, including as part of trade marks, but this may not be the case in other industries. Thus for example, a sneaker manufacturer who set up a factory in a town called Nike or Adidas could likely be prevented from using those geographical indications as trade marks, if it could be shown that this is not in accordance with honest practices. The issue of whether use of a geographical indication as a trade mark is an infringement will be determined according to whether the use of the sign is in line with the duty to act fairly in relation to the legitimate interests of the trade mark owner. As always, the question effectively comes down to the bona fides of the owner of the later mark.

The enlargement of the EU, with its 20 official languages, will indeed result in greater conflict than ever before in this area. This is not the last we have heard on this issue.

Readers may be interested to note that an opposition to a Community Trade Mark application for KERRY SPRING Device based on the mark GERRI was decided in favour of Kerry Group plc (Decision No. 0148-2002) and an appeal by Gerolsteiner Brunnen GmbH & Co. against this decision was dismissed (Decision No. R0275/2002-1). There is a further appeal by Gerolsteiner Brunnen GmbH & Co. pending before the Court of First Instance (Case No. T-131/03)

FRKelly

First published in Marques Newsletter Spring, 2004

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