Anticipate your divorce (continued): CJEU considers existence of economic link between parties

This article first appeared on WTR Daily, part of World Trademark Review, in May 2020. For further information, please go to www.worldtrademarkreview.com.

  • Gugler France sough a declaration of invalidity of the mark GUGLER, owned by Gugler GmbH
  • The CJEU confirmed that the economic link between the parties when the application for registration of the mark was filed precluded any finding that there was a likelihood of confusion
  • Companies composed of various entities must establish a comprehensive brand and trademark policy to anticipate possible conflicts

 

On 23 April 2020 the Court of Justice of the European Union (CJEU) issued its decision in Gugler France SA v Gugler (Case C‑736/18 P).

Background

Gugler France filed an application for a declaration of invalidity of the trademark GUGLER, owned by Gugler GmbH and registered on 25 August 2003. It based this claim on its rights in its company name as, under French law, this is an enforceable right against a contested mark. The claim was accepted by the Cancellation Division and the Board of Appeal of the European Union Intellectual Property Office.

Gugler GmbH filed an appeal before the General Court, which annulled the decision. The court considered that, as an economic link existed between the parties, this precluded a finding of a risk of confusion. Gugler France filed an appeal against this decision.

Appeal to the CJEU

Gugler France raised one ground of appeal, alleging infringement of Articles 8(1)(b) and (4) of Regulation 207/2009 and of Article L/711-4 of the

French Intellectual Property Code. Gugler France based its appeal on two main arguments.

Firstly, Gugler France considered that the General Court had been incorrect in finding that there was an economic link between the parties. In coming to this conclusion, the General Court had primarily taken the following elements into consideration:

the products were manufactured by Gugler GmbH and distributed by Gugler France; and Gugler GmbH owned shares in Gugler France.

According to Gugler France, the appreciation of an economic link must be carried out on the basis of the link between the party having priority rights and the proprietor of the contested mark, the former having control over the products manufactured by the latter. Gugler France indicated that it had no control over the products manufactured by Gugler GmbH and, therefore, the finding by the General Court that the products were manufactured by a single entity was incorrect.

Secondly, Gugler France alleged that the General Court had been wrong in its appreciation of the relationship between itself and Gugler GmbH. Gugler France pointed out that, at the date of the trademark application for GUGLER, it did not distribute Gugler GmbH’s products, but only products under its own name, in the same way that it sold third-party products. Thus, at that date, there was no economic link between the two companies.

CJEU decision

The CJEU reviewed the business structure of the two entities and highlighted that Gugler France distributed Gugler GmbH products under the contested mark. Moreover, the CJEU indicated that the notion of ‘economic link’, within the meaning of Directive 2008/95, refers to a substantive – rather than formal – criterion. For an economic link to be established, there is no need for formal contractual links to exist between the parties, as  a global economic organisation is sufficient to establish such a link.

In the present case, although the parties were two distinct entities having no control over one another, they originated from a common group structure and applied the same quality requirements and commercial policy. Consequently, consumers would logically believe that there was an economic link between the parties. Therefore, the CJEU confirmed the absence of a risk of confusion.

Comment

This decision is of particular importance to companies composed of various entities that act independently, especially in different countries.  Such companies must establish a comprehensive brand and trademark policy to anticipate possible conflicts between the different entities. This can take the form of a variety of agreements, such as a licencing agreement that clearly sets out the rights and obligations of the parties concerned.