Perfume, competition and an EU Court decision

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The European Court has ruled in Case C‑230/16 Coty Germany GmbH v Parfümerie Akzente GmbH. This case concerns the following:

Coty Germany sells luxury cosmetics in Germany. It markets certain brands in that sector via a selective distribution network, on the basis of a selective distribution contract also used by the undertakings affiliated to it. That contract is supplemented by various special contracts designed to organise that network.

Parfümerie Akzente has for many years distributed Coty Germany goods, as an authorised distributor, both at its brick-and-mortar locations and over the internet. Internet sales are carried out partly through its own online store and partly via the platform ‘amazon.de’.

It is apparent from the order for reference that, in its selective distribution contract, Coty Germany justifies its selective distribution system in the following terms: ‘the character of Coty Prestige’s brands requires selective distribution in order to support the luxury image of these brands’.

In this respect, as regards brick-and-mortar retail, the selective distribution contract provides that each of the distributor’s sales locations must be approved by Coty Germany, which implies compliance with a number of requirements, set out in Article 2 of that contract, relating to their environment, décor and furnishing.

In particular, in the words of Article 2(1)(3) of that contract, ‘the décor and furnishing of the sales location, the selection of goods, advertising and the sales presentation must highlight and promote the luxury character of Coty Prestige’s brands. Taken into account when evaluating this criterion are, in particular, the façade, interior décor, floor coverings, type of walls, ceilings and furniture, sales space and lighting, as well as an overall clean and orderly appearance’.

Article 2(1)(6) of the distribution contract states that ‘the signage for the sales location, including the name of the undertaking and any add-ons or company slogans, must not give the impression of a limited selection of goods, low-quality outfitting or inferior advice, and it must be mounted in such a way that it does not obscure the authorised retailer’s decorations and showrooms’.

Furthermore, the contractual framework linking the parties includes a supplemental agreement on internet sales which provides, in Article 1(3), that ‘the authorised retailer is not permitted to use a different name or to engage a third-party undertaking which has not been authorised’.

Following the entry into force of Regulation No 330/2010, Coty Germany revised the selective distribution network contracts as well as that supplemental agreement, by providing in the first subparagraph of Clause I(1) of that supplemental agreement that ‘the authorised retailer is entitled to offer and sell the products on the internet, provided, however, that that internet sales activity is conducted through an “electronic shop window” of the authorised store and the luxury character of the products is preserved’. In addition, Clause I(1)(3) of that supplemental agreement expressly prohibits the use of a different business name as well as the recognisable engagement of a third-party undertaking which is not an authorised retailer of Coty Prestige.

Parfümerie Akzente refused to sign the amendments to the selective distribution contract. Coty Germany brought an action before the national court of first instance, seeking an order prohibiting, in accordance with Clause I(1)(3), the defendant in the main proceedings from distributing products bearing the brand at issue via the platform ‘amazon.de’.

By judgment of 31 July 2014, that court dismissed that action on the ground that the contractual clause at issue was contrary to Paragraph 1 of the Gesetz gegen Wettbewerbsbeschränkungen (Law against restrictions of competition) or Article 101(1) TFEU. It found that the objective of maintaining a prestigious image of the mark could not, in accordance with the judgment of 13 October 2011, Pierre Fabre Dermo-Cosmétique (C‑439/09, EU:C:2011:649), justify the introduction of a selective distribution system which, by definition, restricted competition. That clause also constituted, in the view of that court, a hardcore restriction under Article 4(c) of Regulation No 330/2010.

Furthermore, the national court of first instance took the view that that clause did not meet the conditions for benefiting from an individual exemption either, since it had not been demonstrated that the general prohibition on internet sales via third-party platforms which it imposed resulted in efficiency gains of such a kind as to offset the disadvantages for competition that resulted from the restriction of the means of marketing. In any event, that court considered that such a general prohibition was unnecessary, since there were other means which were also appropriate but less restrictive of competition, such as the application of specific quality criteria for the third-party platforms.

Coty Germany brought an appeal against the judgment of the national court of first instance before the Oberlandesgericht Frankfurt am Main (Higher Regional Court, Frankfurt am Main, Germany). In that context, that court is uncertain as to whether the contractual arrangement existing between both parties to the dispute is lawful under EU competition law.

In those circumstances, the Oberlandesgericht Frankfurt am Main (Higher Regional Court, Frankfurt am Main) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Do selective distribution systems that have as their aim the distribution of luxury goods and primarily serve to ensure a “luxury image” for the goods constitute an aspect of competition that is compatible with Article 101(1) TFEU?

(2) Does it constitute an aspect of competition that is compatible with Article 101(1) TFEU if the members of a selective distribution system operating at the retail level of trade are prohibited generally from engaging third-party undertakings discernible to the public to handle internet sales, irrespective of whether the manufacturer’s legitimate quality standards are contravened in the specific case?

(3) Is Article 4(b) of Regulation No 330/2010 to be interpreted as meaning that a prohibition of engaging third-party undertakings discernible to the public to handle internet sales that is imposed on the members of a selective distribution system operating at the retail level of trade constitutes a restriction of the retailer’s customer group “by object”?

(4)  Is Article 4(c) of Regulation No 330/2010 to be interpreted as meaning that a prohibition of engaging third-party undertakings discernible to the public to handle internet sales that is imposed on the members of a selective distribution system operating at the retail level of trade constitutes a restriction of passive sales to end users “by object”?’

The Court decision is:

1. Article 101(1) TFEU must be interpreted as meaning that a selective distribution system for luxury goods designed, primarily, to preserve the luxury image of those goods complies with that provision to the extent that resellers are chosen on the basis of objective criteria of a qualitative nature that are laid down uniformly for all potential resellers and applied in a non-discriminatory fashion and that the criteria laid down do not go beyond what is necessary.

2.  Article 101(1) TFEU must be interpreted as not precluding a contractual clause, such as that at issue in the main proceedings, which prohibits authorised distributors in a selective distribution system for luxury goods designed, primarily, to preserve the luxury image of those goods from using, in a discernible manner, third-party platforms for the internet sale of the contract goods, on condition that that clause has the objective of preserving the luxury image of those goods, that it is laid down uniformly and not applied in a discriminatory fashion, and that it is proportionate in the light of the objective pursued, these being matters to be determined by the referring court.

3.  Article 4 of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, the prohibition imposed on the members of a selective distribution system for luxury goods, which operate as distributors at the retail level of trade, of making use, in a discernible manner, of third-party undertakings for internet sales does not constitute a restriction of customers, within the meaning of Article 4(b) of that regulation, or a restriction of passive sales to end users, within the meaning of Article 4(c) of that regulation.

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Apple won a trademark case against Xiaomi

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The EU General Court issued a decision on a case between Apple and the Chinese technology company Xiaomi which tried to register an EU trademark MI PAD.

Against this mark, an opposition was filed based on earlier Apple’s trademarks iPad.

EUIPO took a decision that there is a sufficient similarity between both signs bearing in mind the fact that the only difference is the initial letter M in the Xiaomi’s mark which, however, is not sufficient to overcome the possible consumer confusion.

The General Court upheld this conclusion and dismissed the Xiaomi’s appeal.

Source: WIPR.

Argentina and Moldova join TMview

1EUIPO reports about the accession of Argentina and Moldova to the TM View database for trademarks. In that way the participating offices become 62 giving access to approximately 48 million trademarks around the world.

More information here.

Geoblocking in EU – new rules coming soon

brexit-1497067_960_720The European Parliament, the Council, and the Commission have come to an understanding on the legislation regarding the so-called geoblocking identified by many people as unfair.  According to the statement, the new rules will prohibit geoblocking in three main cases:

· The sale of goods without physical delivery. Example: A Belgian customer wishes to buy a refrigerator and finds the best deal on a German website. The customer will be entitled to order the product and collect it at the trader’s premises or organise delivery himself to his home.

· The sale of electronically supplied services. Example: A Bulgarian consumer wishes to buy hosting services for her website from a Spanish company. She will now have access to the service, can register and buy this service without having to pay additional fees compared to a Spanish consumer.

· The sale of services provided in a specific physical location. Example: An Italian family can buy a trip directly to an amusement park in France without being redirected to an Italian website.

The Regulation does not impose an obligation to sell and does not harmonise prices. It does, however, address discrimination in access to goods and services in cases where it cannot be objectively justified (e.g. by VAT obligations or different legal requirements).

The new rules will come directly into force after nine months from the publication in the EU Official Journal, to allow in particular small traders to adapt.

For more information here.

Copying works on cloud – a European court decision

cloud-computing-1990405_960_720The European court has ruled in case C‑265/16 VCAST Limited v RTI SpA. The case concerns the following:

VCAST is a company incorporated under UK law which makes available to its customers via the Internet a video recording system, in storage space within the cloud, for terrestrial programmes of Italian television organisations, among which are those of RTI.

It is apparent from the order for reference that, in practice, the user selects a programme on the VCAST website, which includes all the programming from the television channels covered by the service provided by that company. The user can specify either a certain programme or a time slot. The system operated by VCAST then picks up the television signal using its own antennas and records the time slot for the selected programme in the cloud data storage space indicated by the user. That storage space is purchased by the user from another provider.

VCAST brought proceedings against RTI before the specialised chamber for company law of the Tribunale di Torino (District Court, Turin, Italy), seeking a declaration of the lawfulness of its activity.

In the course of proceedings, by an order for reference of 30 October 2015, that court upheld in part the application for interim measures submitted by RTI and prohibited VCAST, in essence, from pursuing its activity.

Taking the view that the resolution of the case in the main proceedings depended in part on the interpretation of EU law, in particular on Article 5(2)(b) of Directive 2001/29, the Tribunale di Torino (District Court, Turin) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

(1) Are national rules prohibiting a commercial undertaking from providing private individuals with so-called cloud computing services for the remote video recording of private copies of works protected by copyright, by means of that commercial undertaking’s active involvement in the recording, without the rightholder’s consent, compatible with EU law, in particular with Article 5(2)(b) of Directive 2001/29 (as well as Directive 2000/31 and the founding Treaty)?

(2)      Are national rules which allow a commercial undertaking to provide private individuals with so-called cloud computing services for the remote video recording of private copies of works protected by copyright, even where the active involvement of that commercial undertaking in the recording is entailed, and even without the rightholder’s consent, against a flat-rate compensation in favour of the rightholder, in essence subjecting the services to a compulsory licensing system, compatible with EU law, in particular with Article 5(2)(b) of Directive 2001/29 (as well as Directive 2000/31 and the founding Treaty)?’

The Court decision:

Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society, in particular Article 5(2)(b) thereof, must be interpreted as precluding national legislation which permits a commercial undertaking to provide private individuals with a cloud service for the remote recording of private copies of works protected by copyright, by means of a computer system, by actively involving itself in the recording, without the rightholder’s consent.

Michelangelo’s David can’t be used for commercial purposes – a court decision in Italy

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Eleonora Rosati published an interesting article about a lawsuit in Italy concerning the use of the image of Michelangelo’s David for commercial purposes. The Florence Court of First Instance prohibited such use by a travel agency based on the Italian Cultural Heritage Code which provides that the authority which administers a cultural good has the right to allow its reproduction, subject to an application and the payment of a royalty set by the authority itself, with the sole exception of reproductions of work for non-profit purposes.

Taking into account that Michelangelo’s David is a cultural good and the fact that the use at hand has a commercial effect the Court issued an injunction against the travel agency.

More information can be found here.

EZMIX can’t be a European trademark – an EU Court decision

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The European Court has ruled in Case T‑771/16, Toontrack Music AB v EUIPO which concerns an attempt by a Swedish company to register a European trademark ‘EZMIX’ for classes 9, 15, 42.

The Office refused this application on absolute grounds, lack of distinctiveness and descriptiveness. The grounds for this conclusion were the fact that EZ is a shortened word for Easy and MIX means mixing music.

The Court upheld this decision. The fact that easy can have different meanings is not sufficient to overcome the collision with the absolute grounds. The reason for this is that it is sufficient only one of the meaning to lack a distinctive character in light of the relevant goods or services so as the sign to be refused.