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Punching Above Weight in CTM Reputation Claims

As a brand owner in these troubled times, are you looking for ways to make a little go a long way? It seems the ECJ is there to help, as shown by its brief but illuminating judgment last fall in the PAGO drink dispute (PAGO International GmbH v Tirolmilch Registrierte Genossenschaft mbH, Case C-301/07). There, the Court held that a reputation in just one EU member state is sufficient to allow a CTM owner to sue competitors who use similar marks for, in particular, dissimilar goods or services.

Wiener Tipple

In PAGO, the claimant owned a CTM for a figurative mark depicting as its "essential element" a green glass bottle with a distinctive label and lid in respect of fruit drinks and fruit juices. In Austria, it marketed a successful range of fruit drinks packaged in the bottles. A competitor, Tirolmilch, launched a fruit and whey drink in Austria in similar glass bottles, and PAGO sued for infringement of its CTM.

Likely due to uncertainty over whether fruit drinks and fruit juices were similar to fruit and whey drinks, PAGO went beyond a normal confusion case and based its claim in part on a reputation in its figurative CTM in Austria, arguing that the use of the Tirolmilch bottle, particularly in ads prominently depicting it, was likely to take unfair advantage of that reputation under Article 9 (1) (c) CTMR.

PAGO unarguably had a reputation in its bottle shape in Austria, where its fruit drinks were widely known and consumed. But should a reputation in just one EU country bring into play a Community-wide right? The Austrian court was unsure and referred the issue to the ECJ.

A "Substantial Part of the EU"?

In reply, the ECJ turned to its 10-year-old decision in General Motors v Yplon (Case C-375/97) on the meaning of "reputation in a Member State" under Article 5 (2) of the Directive. In that case, the Court had held that a national mark can be regarded as having a reputation sufficient to found an infringement case based on unfair advantage and/or detriment where the mark has a reputation in "a substantial part" of the member state in which it is registered.

By analogy with General Motors, the Court held in a brief and unadorned judgment that an infringement action based on a CTM under Article 9 (1) (c) CTMR requires a reputation "in a substantial part of the territory of the Community."

As the role of the Court on a reference is to interpret EU law and not to apply it to the facts, one might not have expected the Court to wade into the politically-charged debate on whether any given member state might be regarded as "a substantial part of the Community." Yet this is just what the Court did. Echoing a similar foray into fact-finding in General Motors, the Court observed that it had already found that a part of one of the three Benelux countries was effectively "a substantial part" of the territory of the Benelux.

Consequently, the Court felt comfortable in stating that a CTM with a reputation throughout the territory of Austria could be regarded as a CTM with a reputation in a substantial part of the EU. Consequently, a reputation in Austria alone was sufficient to sustain an infringement action based on a reputation claim under a CTM.


Should size really matter? Those surprised by the PAGO judgment might think so.

The value of a CTM is in its geographic spread: for the money, no better value can be had for protecting a mark across the whole of the EU. However, the law relating to CTMs has tended to develop in a way that recognises that the grant of Community-wide rights, which are capable of enforcement against local infringements across the entire EU, should be subject to certain restrictions. For example, CTM protection is not available for marks that lack distinctiveness in one or more EU member states, regardless how distinctive they may be in the others. Likewise, the recent CFI judgment in Mars Inc. v OHIM shows that a CTM sought on the basis of acquired distinctiveness will founder if the case cannot be proved for the whole of the EU. Disregarding minor-league economic players is not, it appears, an option.

Yet in PAGO one glimpses a more schizophrenic side to European jurisprudence on CTMs, after protection has been granted. As matters stand, a registered CTM owner, for example, may fend off a non-use revocation action with proof of use in a single EU member state (although this issue has yet to be examined by the ECJ). The ability to retain EU-wide protection for a mark used only in a small part of the EU is one of the most attractive features of the CTM versus separate national rights. However, PAGO now shows that the benefits do not stop there: the same CTM owner with a business and reputation in a single EU member state can rely on that local reputation to found an infringement claim under a ground, Article 9 (1) (c) CTMR, which does not even require identity or similarity of goods or services nor a likelihood of confusion. The fact that the CTM is a Community-wide right opens the door to such a claim being brought in a member state far-flung from that in which the reputation exists.

In practice, the latter scenario may arise infrequently since a CTM owner may struggle to prove unfair advantage or detriment arising from use in a member state where the CTM has no reputation of at least the spill-over variety. Whether such damage is likely is a factual issue which has to be evaluated on its own merits. Nonetheless, the issue has yet to face a court, and the potential for extremes arising from PAGO's interpretation of the necessary "reputation in the Community" is concerning. An action in France based on a CTM's reputation in Lithuania or Malta would certainly make the headlines if the CTM owner won.

PAGO is not the end of the story on the definition of a CTM with a reputation for the purposes of an infringement action. Far from it: the actual assessment of reputation and what is truly a substantial part of the EU are fact-questions that national courts are entitled to regard as their own rightful provenance. Consequently, PAGO holds an unenviably obscure and uncertain status as authority on the status of any single member state as a "substantial part of the EU." The barebones reasoning set out by the Court does little to redeem the situation.

If there is one golden strand running through PAGO and General Motors, though, it is this: once the summit of registration has actually been reached, CTM owners can reap wide geographical benefits over old-style national rights in terms of breadth of protection, enforceability and injunctions. Whether and to what extent national courts uphold CTM infringement actions based on geographically limited reputation claims will likely remain highly fact-dependent, and not at all the simple formula that PAGO suggests. However, there is little doubt that when compared with vast numbers of nationals, a small portfolio of sturdy CTMs can indeed be more beautiful.