The Intellectual Property Enterprise Court has ruled that a UK jewellery seller (JSC) is liable for trade mark infringement for selling links for charm bracelets made and sold by Nomination, an Italian jewellery business.
JSC's case was that Nomination had effectively consented to JSC's use of their trade marks, but this argument was unsuccessful. Whilst the Court agreed that Nomination had – by selling Nomination charm bracelets – thereby consented to the onward sale of links for those bracelets – the Court also decided that Nomination nonetheless had legitimate reasons to object to JSC's onward sale of links.
The case raises important practical points for brand owners in the luxury goods sector in protecting and enforcing their marks.
Background
Italian business Nomination makes and sells charm bracelets composed of individual links that can be detached and re-linked in any order. These include what they call "base" links, bearing the Nomination mark (registered as EU and international trade marks).
Nomination brought trade mark infringement proceedings against two UK based individuals trading under the name "JSC". JSC sell their own charm bracelets under the name "Daisy Charm" and also sell individual links for those bracelets. The case focused on JSC's sale of individual links for Nomination bracelets (although they did not sell Nomination bracelets themselves), which had been sourced from Nomination bracelets sold by authorised retailers in Italy and Germany. JSC sold the Nomination links alongside links for their Daisy Charm bracelets, in small plastic bags or blister packs.
JSC argued that Nomination was not entitled to prohibit use of its trade marks in relation to goods that had already been put on the market in the EU with its consent. In other words, Nomination had "exhausted" its trade mark rights.
Decision
There were two key legal issues for the Court to consider:
1) Did the sale of Nomination bracelets amount to consent to the onward sale of individual links?
The Court decided that it did. In particular, although Nomination claimed to have told its retailers not to disassemble bracelets and sell individual links, there was no contractual restriction to this effect. Further, when Nomination had in the past discovered that retailers were selling individual links, it had done nothing to try and stop them from doing so.
2) Even if there was consent, did Nomination have legitimate reasons to object to JSC's sale of individual links?
The Court rejected most of Nomination's arguments in relation to legitimate reasons including a) that JSC had failed to identify who had repackaged the goods and b) that repackaging the goods had placed the condition of the Nomination links at risk. Such arguments are routinely successful in trade mark cases involving pharmaceutical products, where it is important to be able to trace all stages of supply and where there is a clear risk that repackaging might damage the goods. The Court did not consider that these sorts of sensitivities attached to bracelets.
However, the Court agreed with Nomination that its bracelets were sold in an "elegantly designed cardboard box", presented in a "similarly elegant cardboard bag, closed by a ribbon" which would convey an image of luxury to purchasers. JSC, on the other hand, sold Nomination links in plastic bags. There was no question that this did not convey an impression of quality. Accordingly, JSC's sale of Nomination's products was likely to damage the reputation of the trade marks. The Court concluded that there was infringement and passing off.
Practical points to note
Brand owners faced with parallel imports should note that arguments that may be successful when dealing with repackaged pharmaceuticals might not have the same application in relation to luxury goods cases.
Nomination's one successful argument - that the Defendants' low quality packaging was likely to damage the reputation of the Nomination trade marks - was not without its own difficulties. There was evidence that one of its authorised retailers had been selling Nomination base links in a transparent plastic bag, clearly unhelpful to Nomination's argument that JSC's packaging was of a lower quality than their own (though ultimately this argument was successful).
Brand owners of luxury goods should be careful to ensure that brand guidelines and packaging guidelines are incorporated into contracts with authorised resellers and are enforced. They should also ensure that any restrictions on reselling goods in a different form (such as disassembled bracelets) are enforced.