AMS Neve v Heritage Audio: option to choose court 'sounds' great for trade mark owners

The Court of Justice of the European Union ("CJEU") has confirmed that when a seller of goods, who is established in one Member State, sells infringing goods bearing an European Union ("EU") trade mark specifically targeting customers in another Member State, the action can be brought under Article 97(5) of the European Trade Mark Regulation No 207/2009 (the "Regulation"), relating to the international jurisdiction provisions, in the court of the Member State in which the targeted customers reside. [1]

Background

In October 2015, the Claimants – Barnett Waddingham Trustees, Mark Crabtree and AMS Neve – issued a claim in the Intellectual Property Enterprise Court ("IPEC") in London against the Defendants – Heritage Audio SL and Pedro Rodríguez Arribas – alleging that the Defendants had advertised and offered for sale to UK consumers, via a website based in Spain, audio equipment bearing a sign identical or similar to EU trade marks belonging or exclusively licensed to the Claimants, in breach of Article 9 of the Regulation.

The Defendants challenged the jurisdiction of the IPEC to hear the claim under Article 97 of the Regulation. In particular:

• Article 97(1) states that proceedings "shall be brought in the courts of the Member State in which the defendant is domiciled", which would unarguably confer jurisdiction on the Spanish courts.
• However, Article 97(5) states that an action "may also be brought in the courts of the Member State in which the act of infringement has been committed".
• Article 98(1)(a) states that "a [EU] trade mark court whose jurisdiction is based on Article 97(1)... shall have jurisdiction in respect of... acts of infringement committed or threatened within the territory of any of the Member States".
• In contrast, Article 98(2) states that "a [EU] trade mark court whose jurisdiction is based on Article 97(5) shall have jurisdiction only in respect of acts committed or threatened within the territory of the Member State in which that court is situated".

The Claimants argued that the infringing acts had been committed in the UK, making reference to the facts that the advertisements were in English, the website listed UK-based distributors and orders from the UK were accepted. Conversely, the Defendants argued that they had not advertised or made sales themselves in the UK and had never appointed a UK distributor. Further, the Defendants contended that, by the time period covered by the infringement action, their website content was obsolete and ought not be considered. As the Defendants' operated the website exclusively from Spain, they argued that no offence had been committed in the UK to give jurisdiction to the IPEC.

In October 2016, the IPEC concluded that it lacked jurisdiction to hear the infringement action insofar as the action was based on the EU trade mark at issue, finding that both Article 97(1) and Article 97(5) of the Regulation conferred jurisdiction on the Spanish courts. In respect of Article 97(5), the IPEC held that the infringing act would be committed in the territory where "the third party decided to place that advertising" and "took steps to effect that decision", meaning jurisdiction was solely conferred on the Spanish courts in respect of the EU trade mark issues.

Following the Claimants' appeal, the Court of Appeal sought clarification from the CJEU on the interpretation of Article 97(5). The questions referred focused on whether the location of customers or the location where the decision to advertise was taken and enacted, determines which EU trade mark court should have jurisdiction regarding the alleged infringement.

What did the CJEU decide?

The CJEU emphasised that whilst the provisions of Article 97 should not allow a potential claimant to bring simultaneous actions based on paragraphs (1) and (5) with reference to the same acts of infringement, they are intended to give options as to which Community court in which a claim may be issued.

The CJEU further highlighted that infringement actions involving the same parties and the same sign but which relate to different territories, will constitute different subject matters. As a result, such cases are not subject to the lis pendens rules and the courts of the various Member States will not be at risk of delivering 'contradictory judgments' pursuant to recital 17 of the Regulation.

When bringing an action, a potential claimant must bear in mind that, in accordance with Article 98 of the Regulation:

• where a claimant chooses to bring a claim on the basis of Article 97(1) (the place where the defendant is domiciled), the relevant EU trade mark court will have jurisdiction in respect of acts of infringement committed or threatened throughout all Member States.
• if a claimant chooses to bring a claim in an EU trade mark court given jurisdiction under Article 97(5) (the place where the damage is caused), it will only have jurisdiction in respect of acts committed or threatened within the territory of that single Member State.

Regarding interpretation of Article 97(5), the CJEU concluded that, where the alleged acts of infringement consist of advertisements and offers for sale displayed electronically, the relevant EU trade mark court must be able to determine that those acts were committed in the territory where the targeted consumers to whom that advertising and offers were directed, are located – even if the alleged infringer (and his equipment facilitating the alleged infringement) is located elsewhere.

What does this mean for proprietors and infringers?

This decision represents a logical development in the rules for clarifying the boundaries of territorial jurisdiction under the Regulation and safeguards the effectiveness of Article 97(5). It shows judicial regard for legislative intention by interpreting Article 97(5) in a manner that maintains its structure and honours its purpose for allowing alternate fora.

The main message to be taken from this CJEU decision is how proprietors' desire to maintain the effectiveness of Article 97(5) and to prevent its circumvention by potential infringers. A finding to the contrary – namely that the infringing act is only committed in the territory where the server relating to the website is located – would in many cases result in Article 97(1) and 97(5) both conferring jurisdiction on the same EU trade mark court, thereby depriving the claimant of any choice and Article 97(5) of its intended purpose of providing an alternate forum. Further, such an interpretation would enable infringers to circumvent the purpose of Article 97(5), as infringers could sell infringing goods throughout the EU, safe in the knowledge that an action could only be brought in their home Member State, thereby further diminishing the ability of Article 97(5) to act as a genuine alternative to Article 97(1).

The decision will also prevent potential infringers who, for the purpose of evading justice, hide the location of their operations (making it impossible for claimant or indeed any EU trade mark court, from determining precisely where the infringing act has taken place).

Another key element of this ruling is the CJEU's confirmation that actions for the same act of infringement in a single territory, cannot simultaneously be brought under Articles 97(1) and 97(5). The claimant must choose between either the territory in which the infringer is domiciled or the territory in which the targeted customers reside. Whilst the scope of the relevant EU trade mark court's jurisdiction under Article 98 will clearly be an important factor in determining where to bring a claim, the judgment affords potential claimants the flexibility in deciding where to bring an action – meaning focused, national litigation may be more suitable and proportionate in dealing with specific infringement issues. A proprietor will be able bring an action in the territory most convenient or beneficial for itself, no longer being bound by the domicile of the defendant and/or where the electronic display was instigated.

Following this judgment, potential infringers must be wary that actions may brought before the courts of any Member State in which they have targeted customers, irrespective of the domicile of the infringers or where the electronic display was initiated. Where infringers target customers and accept orders from across the EU, they could face multiple claims across varying EU jurisdictions which operate considerably different court proceedings – leading to complex, time-consuming, resource-intensive litigation.

The Court of Appeal will now make its own findings, informed by the case facts and the CJEU's interpretation of Article 97(5). It seems inevitable that the IPEC will be ruled to have jurisdiction by virtue of Article 97(5).

This outcome will be music to the ears of trade mark proprietors, but infringers really won't like the sound of it.

Includes contribution by Lewis Sanderson, Trainee Solicitor.