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Ferrari race ahead after encouraging judgement from the CJEU


30th Nov 2020

The Court of Justice of the European Union (“the CJEU”) has recently issued a judgement concerning the genuine use of Ferrari’s German TESTAROSSA trade mark registrations. This judgement was a positive outcome for Ferrari, and is particularly beneficial to owners of legacy and heritage brands.

The Testarossa is a sports car produced by Ferrari between 1984 and 1996. Over seven thousand cars were sold under the mark, making it one of the most mass-produced road cars manufactured by Ferrari. Ferrari SpA (“Ferrari”) have protected the TESTAROSSA mark in Germany with a number of registrations, including a German designation of an International Registration for “land vehicles … and parts thereof”, and a German national registration for “apparatus for locomotion by land, air or water, in particular motor cars and parts thereof”.

In 2014 Ferrari opposed an EUTM application for the mark TESTA ROSSA filed by an individual named Kurt Hesse, kicking off a dispute that has now been running for six years and has escalated into numerous cross-oppositions and cancellation actions before the German courts and the EUIPO. Amongst this web of legal proceedings, Hesse had applied to revoke Ferrari’s two German registrations mentioned above on the grounds that the TESTAROSSA mark had not been genuinely used for the registered goods in Germany in the preceding five years.

The first instance decisions before the Regional Court of Dusseldorf went against Ferrari and the court ordered the cancellation of the two registrations. Ferrari appealed both decisions up to the Higher Regional Court of Dusseldorf, where it was decided that it would be necessary for the CJEU to provide clarity on a number of points of EU law concerning the genuine use of trade marks.

Under EU law, a trade mark registered in a member state is liable to be revoked if it has not been put to ‘genuine use’ in that member state, in respect of the goods and services for which it registered, for a continuous period of five years.

Ferrari had provided evidence that it sold a sports car under the mark TESTROSSA in the 80s and 90s, and that in the relevant five year period (2011-2016) it had sold replacement parts and accessories for the Testarossa sports car, and also re-sold second hand Testarossa sports cars after having inspected and approved the vehicles.

These facts led the Higher Regional Court of Dusseldorf to refer a number of questions to the CJEU. We are going to look at the three questions of most relevance to brand owners faced with the task of proving genuine use of a trade mark.

Does the sale of second hand goods constitute ‘genuine use’ of a trade mark?

The concept of ‘genuine use’ refers to use of a trade mark in order to guarantee the origin of goods and to create and maintain a market for these goods. By this definition, the resale of second hand goods by third parties unconnected to the original source of the goods cannot constitute ‘genuine use’ of the trade mark. In these circumstances, the mark was genuinely used by the trade mark owner when they first marketed the goods. Any subsequent use by third parties is not genuine and cannot maintain the registration.

In Ferrari’s case, the evidence showed that it had inspected and resold Testarossa sports cars. These goods had already been released onto the market by the trade mark owner in the 80s and 90s, and then within the relevant time period were sold again by the trade mark owner as second hand goods bearing the same TESTAROSSA mark. Ferrari argued that the re-selling of second hand goods constituted a ‘renewed commitment’ to the vehicle concerned, which was supported by the fact that the sports cars were inspected and approved before being resold.

The court of first instance had tied the issue of Ferrari’s use of TESTAROSSA on second hand goods to the issue of the exhaustion of Ferrari’s rights in the mark. After the goods bearing the TESTAROSSA mark have been released onto the market, Ferrari’s rights were ‘exhausted’ and it could no longer prohibit the resale of those goods. The court of first instance found that acts which Ferrari cannot prohibit third parties from doing (i.e. re-selling its branded goods) should not be able to maintain the TESTAROSSA registrations when carried out by Ferrari itself.

The CJEU dismissed this line of reasoning. Just because Ferrari’s rights in the TESTAROSSA mark are exhausted and it cannot prevent third parties from selling second hand Testarossa sports cars, this does not mean that Ferrari cannot use its TESTAROSSA mark for these same goods. The CJEU held that when it is the trade mark owner themselves who are re-selling goods second hand, the trade mark is in fact being used to identify the origin of the goods, and therefore this constitutes genuine use.

Is use of a mark in relation to the sale of replacement parts for specific goods sufficient to maintain a registration for the goods themselves?

The CJEU answered this question with reference to established case law, and confirmed that a trade mark can be genuinely used even when it not being used in relation to the actual goods themselves.

Assuming that the original registered goods are already on the market, the CJEU held that the following uses of a trade mark constitute genuine use in respect of those goods:

  • offering replacement parts under the mark that are integral to the structure of the registered goods
  • offering goods and services under the mark that are directly connected to the registered goods
  • offering goods and services under the mark that are intended to meet the needs of consumers of the registered goods

In this instance, Ferrari’s registrations covered ‘vehicles’ and ‘replacement parts’. This judgement confirms that sufficient evidence of use in relation to ‘replacement parts’ will be able to maintain the registrations not only for the parts themselves, but the vehicle for which they are an integral component of.

Although this judgement supports Ferrari’s case, its TESTAROSSA registrations are not safe just yet. The evidence filed shows that for the years 2011-2016 Ferrari’s turnover in relation to replacement parts for Testarossa sports cars was only €17,000. It will be up to the referring court to decide if this level of sales is enough to constitute Ferrari maintaining a market for its goods within the huge German automotive sector. Though in reaching its decision, the referring court will have to take into account that fact that only 7,000 of these vehicles exist in the world.

Is evidence of use of a mark on ‘very high-priced luxury sports cars’ sufficient to maintain a registration for “land vehicles”?

Where a mark is registered for a broad category of goods or services that is capable of being divided into independent sub-categories, the owner is required to prove use of its mark in all sub-categories. If it fails to do so, the registration will be revoked for the sub-categories of goods or services for which genuine use has not been shown.

On the other hand, when a mark is registered for a category of goods or services that is narrowly defined such that it is not possible to make any significant divisions, evidence of use for just some goods or services in that category are sufficient to maintain a registration for the entire category.

The question that must be answered is whether a consumer who wishes to purchase goods in the category covered by the registration will associate all goods in that category with that mark. Take ‘pasta’, for example. If you are familiar with a particular brand of fusilli and then saw the same mark used on a packet of tagliatelle, you would naturally assume that they have the same origin. This is because there are no significant subdivisions in ‘pasta’.

A finding that consumers associate all goods in a given category with a particular mark cannot be excluded on the basis that the category includes goods in different market sectors and spanning various price ranges. This is because the trade mark owner has a legitimate interest to expand its offering into those sectors and price points.

The criteria to determine if the goods shown in evidence are an independent sub-category of the registered goods is whether they have a different purpose and intended use. If certain goods have more than one purpose it would be unjust to determine that they form an independent sub-category by looking at one of many purposes in isolation.

On this note, the CJEU remarked that while sports cars can be used for motor sports, they can equally be used for road transport like any other car. ‘Sports cars’ is therefore not an independent sub-category of ‘cars’. The same can be said of ‘luxury cars’ and ‘very high priced cars’.

Overall, the CJEU held that when use has been shown in relation to goods falling into a particular category, the mark must be considered to have been genuinely used for the whole registered category unless it is apparent from the facts and evidence that the relevant consumer would perceive the goods shown in evidence as a sub-category of the registered goods.

While the CJEU’s judgement is in Ferrari’s favour, it will be for the referring court to apply the judgement to the facts at hand and decide if the sports cars of Ferrari’s evidence will be considered by the relevant public as an independent sub-category of the registered goods, which in one instance is the broadly defined “land vehicles”.

Comment

This case has now been sent back to Higher Regional Court of Dusseldorf for a decision. The CJEU’s judgement confirms that, in principle, evidence of approved second hand sales and the offering of replacement parts does constitute genuine use. However, revocation actions are highly fact specific and the final outcome will depend on the evidence in play.

In light of the CJEU’s judgement, it appears that Ferrari have a better chance of walking away with more of their registrations intact that it once seemed. We expect this optimism will be shared by other automotive brands, particularly those with a long list of classic cars that may have been out of production for decades, but enjoy a significant following of enthusiasts, and a strong market for second hand sales and model-specific component parts.

This judgement provides valuable clarity on the preservation of trade mark registrations for goods which are no longer new on the market. This is positive for trade mark owners in general, and particularly relevant to owners of heritage brands. While these brands may offer goods bearing long established trade marks, there is often a circulation of older branded goods on the market that goes on without their involvement.

We may see brand owners taking steps to exert some control over these second hand markets, for example, by offering ‘approved-used’ cars or ‘certified-authentic’ pre-owned watches or other fashion goods as the circular economy grows. Following the reasoning of this judgement, evidence of these second hand sales would be relevant.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.

Author
Rob McLaughlin
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