May 15, 2020
Kolster’s Partner Jani Kaulo has successfully represented the German ball bearing manufacturer Schaeffler Technologies in a counterfeit dispute before the Court of Justice of the European Union. The recent preliminary ruling strengthens the position of all trademark owners.
The Court of Justice of the European Union (CJEU) has issued a preliminary ruling on the role of private individuals acting as intermediaries in the counterfeits trade. The case concerns a trademark infringement claim made by the German ball bearing manufacturer Schaeffler Technologies back in 2011, in which a private individual acted as an intermediary in counterfeit trade passing through Finland. The individual received only alcohol and tobacco as a reward – but still infringed trademark rights.
The case and victory can be considered historic, as this is the first trademark dispute concerning counterfeit goods in Finland that has been granted leave to appeal up to the Supreme Court – and that has progressed to the CJEU. The Supreme Court wanted a preliminary ruling from the CJEU on the interpretation of the EU Trade Mark Directive.
“According to the ruling, a private individual who is not professionally engaged in commercial activities is also committing trademark infringement by receiving, releasing goods into free circulation in a member state or by storing counterfeit goods which are clearly not intended for private use”, says Kolster’s Partner Jani Kaulo, who represented Schaeffler.
The role of the CJEU is to ensure that EU law is interpreted and applied in the same way in all EU countries and that EU countries and its judiciaries comply with EU law. The preliminary ruling received on the eve of May Day will guide not only the final judgement of the Supreme Court later this year, but also the legal practice in all EU countries. Its significance is therefore very broad.
“In the future, private individuals used as transporters, intermediaries or storers of counterfeit goods for commercial use, i.e. ‘dummies’, will also be liable for compensation and damages for trademark infringement. The preliminary ruling can be considered a significant victory for trademark owners in the EU”, says IP Lawyer Maria Ojala on the practical implications.
An individual can infringe a trademark
The CJEU’s preliminary ruling (C-772/18) takes a stand on what constitutes an act within the meaning of Article 5(1) of the old EU Trade Marks Directive (Article 10(2) of the new Directive) for use of trademark in the course of trade so as to be considered an infringement of another’s right to the trademark.
The case concerns a batch of 150 INA ball bearings for use in engines, bridges and trams, for example. According to Kaulo and Ojala, the decisive factor in the CJEU’s decision was that these counterfeit goods were obviously not intended for private use.
“If this had been a small batch of t-shirts, for example, the ruling could have been different. The amount of benefit received by the private individual was not decisive in terms of the outcome. The activities could have been entirely gratuitous, and still the individual who dealt in counterfeit goods would have been considered to have used the trademark in the course of trade”, Kaulo analyses.
A trademark owner may therefore invoke the exclusive rights provided by a trademark even when the infringement is committed by a private individual who is not engaged in trade. Previously, according to the wording of the Directive, activities infringing trademark rights have been unequivocally prohibited only if the infringer is a trader or a private individual engaged in commercial activities. The CJEU pre-empted this potential loophole within the directive.
“It is now clear that private individuals in the supply chain of counterfeit goods for commercial use can also be held liable in the European Union for trademark infringement, even if they themselves are not engaged in trade”, Kaulo says.
Trade in counterfeit goods is one of the main means of funding their operations for terrorist and other criminal organisations, and Finland is a transit country for the shipping of counterfeit products to Russia.
“It is excellent that a preliminary ruling has been reached on a matter that is relevant to all global trademark owners, and which will shape the legal practice of the entire European Union and step up the fight against counterfeiting”, say Jani Kaulo and Maria Ojala, pleased with the CJEU’s decision.
A multi-stage journey from China via Finland to Russia
The case began when Finnish airport customs seized a batch of 150 counterfeit INA ball bearings in 2011.
The German manufacturer and trademark owner of INA ball bearings wanted the counterfeit products seized by customs to be destroyed so that they could not enter the free market. Poor quality counterfeits can cause serious property damage and personal injury when they break.
Customs nevertheless released the counterfeit goods to the private individual marked as the recipient, who stored the bearings at home. From there, they had been picked up in small batches and further transported to Russia. The individual who acted as an intermediary received tobacco and alcohol as a reward.
Schaeffler Technologies demanded that the individual acting as an intermediary in the supply chain be punished for an industrial property offense and convicted of trademark infringement. The Helsinki District Court dismissed the criminal charge on the grounds of lack of intent, but convicted the defendant of trademark infringement on the grounds of negligence. The defendant referred the judgement on trademark infringement as concerned compensation and damages to the Court of Appeal, which overturned the decision of the District Court.
Representing its client, Kolster sought leave to appeal to a higher instance against the ruling of the Helsinki Court of Appeal in May 2016. The Supreme Court granted leave to appeal in December 2017. The case continued in the Supreme Court until, in late 2018, the Supreme Court made a rare request for a preliminary ruling from the Court of Justice of the European Union.
After receiving the preliminary ruling, the Supreme Court will next deliver its judgement on the claims for compensation and damages.