The Court of Appeal in Brussels has recently ruled on a case regarding the exhaustion of trade mark rights and in particular on who has to prove exhaustion.
On 29 July 2011, Bacardi & Company Limited (Bacardi) initiated proceedings against Alcimex NV (Alcimex), a distributor of alcoholic beverages in Belgium. Bacardi discovered that Alcimex was distributing Bacardi branded bottles of rum in Belgium without its consent and claimed that this infringing its Benelux and EU trade marks.
At first instance, Alcimex challenged Bacardi's infringement claims before the Dutch-speaking Court of Commerce of Brussels by claiming that trade mark rights in the distributed branded goods were exhausted and that, consequently, Bacardi's permission was no longer required.
Alcimex based its defence on articles 13(1) Council Regulation 207/2009 and 2.23(3) BCIP which state that a trade mark holder cannot oppose the use of a trade mark in relation to goods which have been put on the market by the trade mark owner or with his consent.
In other words, Alcimex claimed that if the branded bottles it was distributing had been put on the market by Bacardi, or at least with its permission, Bacardi had lost its right to control further distribution and resale of those bottles and could no longer invoke its trade mark protection in relation to them.
The Court of Commerce rejected Alcimex' exhaustion argument on the basis of a lack of proof and followed Bacardi in its reasoning that Alcimex had infringed its rights.
Alcimex appealed the decision.
Alcimex argued that the burden of proof in relation to the exhaustion of the goods lies with Bacardi.
Furthermore, Alcimex argued that in order to prove that the trade mark rights here were not exhausted, Bacardi had to establish that:
The Court of Appeal in Brussels did not follow Alcimex' arguments.
The Court first stated that the question of the burden of the proof is governed by article 870 of the Belgian Judicial Code, which provides that each party must provide proof of its claim. It further underlined that the general Belgian rules regarding the burden of proof are in line with articles 5 and 7 of the Trade Marks Directive.
The Court acknowledged that, following the case-law of the CJEU, the burden of proof for exhaustion can be only reversed under certain circumstances. For example, if the alleged infringer can demonstrate that the application of the general rules regarding the burden of proof would create a real risk of partitioning the national markets (CJEU, 20 November 2001, Joined Cases C-414/99, Zeno Davidoff S.A. / A&G Imports Ltd., Levi Strauss (UK) Ltd. / Tesco Stores Ltd. et alii –  ECR I-8691).
The Court found that Alcimex did not provide any substantial facts or circumstances nor written agreements to substantiate the claim that the local markets would be partitioned nor that Bacardi was discouraging export sales.
Therefore, the Court concluded that there was no reason to deviate from the general rules of burden of proof and that, as a result, Bacardi only needed to demonstrate that:
It is then up to Alcimex to provide proof that it had Bacardi's prior consent to use the trade marks and thus distribute branded goods in the EEA or that the trade mark protection was exhausted.
The Court found that Alcimex did not provide proof of the exhaustion of Bacardi's rights. It then found that Alcimex' defence that it had not wrongfully "imported" the branded goods into the EEA by claiming that the products were obtained from Dutch and Belgian distributors was not sufficient.
Alcimex' defense failed.
In this judgement, the Court gave a clear confirmation of the rules regarding the burden of proof in relation to the exhaustion of trade mark rights.
The party that invokes the rules of exhaustion as a defence, will have the burden of proof, unless he is able to show that there is an actual risk that local markets are deemed to be partitioned by applying the general rules in which case a reversed burden of proof is justifiable.
If no proof of exhaustion can be provided, the infringing party will have to demonstrate it had prior consent of the trade mark rights holder for any use.