The Community Trademark Court of Alicante confirms the infringement of the Diesel trademarks after More than 15 Years of Legal Battles
On March 18, 2016, The CTM Court of Appeal of Alicante rendered its long awaited Judgment 76/16. After a lawsuit that lasts since the middle 90s (see the news item in the Spanish Journal El Mundo, 1 May 2016), the unauthorized use of the Diesel trademarks in the Spanish market by the company COSMOS WORLD S.L. has been confirmed. DIESEL S.p.A. was represented in the first and second instance proceedings by the attorneys of Salvador Ferrandis & Partners
The lawsuit started in years 1989 and 1994 with an administrative battle for the registration of various DIESEL trademarks in the name of DIFSA (DIESEL S.p.A.’s subsidiary company in Spain) on one side, and Mr. Giner and the company FLEXI CASUAL S.L. on the other. In view of the various ongoing opposition proceedings between the parties before the Spanish Patent and Trademark Office (OEPM), several agreements were reached between 1994 and 1997. These agreements stated that the DIESEL signs in dispute would be transferred by Mr. Giner and FLEXI to DIFSA in exchange for the right of distribution in Spain, Portugal and Andorra of shoes, bags and belts, produced and marked by our client, DIESEL S.p.A.. Between 1997 and 1998 DIFSA transferred the trademarks to DIESEL S.p.A. whereas FLEXI and Mr. Giner assigned the aforesaid distribution rights to COSMOS WORLD, S.L. without communicating such assignment to DIESEL S.p.A. Since then, COSMOS has been manufacturing its own products and commercialising them under the DIESEL signs.
Under the aforesaid circumstances DIESEL SPA filed an infringement action against COSMOS, FLEXI and Mr. Giner for the unauthorised use of the DIESEL trademarks. The basis of this claim resided on the fact that DIESEL, S.p.A. had never consented to such use. However, the Court of Appeal of Valencia found, in 2002, that the legal relationship with the defendants could not be limited to a mere distribution agreement and that it amounted to an “atypical” agreement that included a right of manufacture of the products under the DIESEL brand.
In view of the above, DIESEL SPA, filed an action for the termination of the agreements that gave rise to the relationship between the parties. In this case, the Court of Appeal of Alicante found that DIESEL had no legal standing to terminate the 1994 and 1997 agreements between DIFSA (which had been declared bankrupt in 2002) and FLEXI and Mr. Giner (and the subsequent agreements with COSMOS), since it was not a party thereto.
After more than 15 years of legal battles trying to regain control over the DIESEL marks in Spain, this firm conceived a new alternative strategy for DIESEL S.p.A following a different approach: at the end of 2012 a new infringement action was filed against COSMOS, FLEXI and Mr. Giner for the unauthorised use of the DIESEL trademarks. The starting point was acknowledging that the relationship between the parties amounted to a trademark licence and that this was terminated by DIESEL S.p.A. This approach shifted to the defendants the burden of proving that they held a right to use the signs that was exceptionable to DIESEL S.p.A.
One of the main difficulties in this matter lied on the existence of various previous judgements that were final and binding and which brought up the procedural issue of the res judicata. This and other procedural issues were dealt with at the preliminary hearing. In 2014, the Court of first instance found that the res judicata effect applied to most of the claims leaving the infringement action with little effective contents. However, having appealed the CTM Court Order of 2014 declaring the res judicata, DIESEL succeeded in convincing the Court of Appeal that the facts on which the claims were based were new, configuring a new causa petendi that allowed DIESEL to put forward its claims. In particular, the CTM Court of Appeal of Alicante acknowledged the fact that the existence of a direct relationship between the parties and its termination was never used as basis for a trademark infringement action in the past, nor it could have been raised in said previous proceedings, in consideration that its nature was established by the Courts only after the completion of said previous legal proceedings. Said legal relationship, according to the CTM Court of Appeal decision of April 30, 2014 amounted to a trademark licence.
After the decision of the Court of Appeal regarding the res judicata effects, the main proceeding followed its due course.
In the Decision dated April 28, 2015 rendered in the main proceedings, the Community Trademark Court of First Instance found that Diesel S.p.A. was the only owner of the Diesel trademarks at stake and that any authorization of use granted in the past over them should be deemed revoked. As a result, the defendants had no right to use the DIESEL signs and COSMOS was sentenced to pay compensation for the damages caused by its unlawful use of the DIESEL signs that was to be assessed at the enforcement stage.
The aforesaid decision was subject to appeal by Mr. Giner and FLEXI on one side and COSMOS on the other.
The Court of Appeal of Alicante in its decision of March 18, 2016 dismissed both appeals and confirmed the judgement rendered by the Community Trademark Court in the First Instance.
In the analyzed decision, the Court of Appeal points out, in the first place, that the appeals were not directed against the finding according to which, DIESEL S.p.A. was declared the sole proprietor of the trademarks at stake. In fact, the Court of Appeal confirms that the defendants never questioned the proprietorship of the DIESEL signs by DIESEL S.p.A.
This finding of the Court of first instance is the premise for the declaratory statements according to which COSMOS is carrying out infringement acts causing damages to DIESEL, S.p.a. and their respective condemning statements.
In any case, the Court of Appeal acknowledges the fact that the declaration according to which DIESEL is the sole proprietor of the trademarks would not prevent the defendants from justifying their right of use over them.
In this sense, the core of the appeal resides in analyzing whether the consent to use or authorisation granted by DIESEL S.p.A over the use of its trademarks in the past shall be deemed revoked and, as a consequence, any existing licence of use or whatever other agreement that conferred a right to use to the defendants is terminated. In view of the above, the merits of the appeal analyse the contractual relationship between the parties, its persistence and its effects in the event of termination.
The Court recalls that its decision of April 30, 2014, analyzing the res judicata effects of previous rulings rendered in proceedings between the parties, already described the relationship between the parties as a licence. The aim of the appeal proceedings was thus, elucidating whether after the evidence practiced in the main proceedings, the defendants’ right to use the DIESEL trademarks still existed or, to the contrary, it should be deemed terminated.
The categorization of the relationship of the parties as a licence made by the Court of appeal took into account not only the conclusions reached on the matter by previous decisions but also the fact that COSMOS had attempted to register a licence over the DIESEL signs before the SPTO. This description attained by the Court of appeal had been challenged by the appellants in their appeals where they had referred to their existing relationship as a coexistence agreement including an assignment of a right of use.
In the opinion of the Court, the definition of such relationship as a licence or as any other kind including a right to use certain signs is irrelevant since the real issue to be solved resides on whether the holder of the trademarks can regain, at some point, the use assigned in the past or whether, to the contrary, he can be deprived from it ad aeternam.
In this regard, even if the contractual relationship between the parties were characterized as the appellants stated, the possibility that the ownership and use of a trademark may be torn away from each other without any time limitation is inadmissible. The aforesaid conclusion is confirmed by the fact that the assignment of use of the trademarks was not set forth as perpetual in the original agreements whereby DIFSA, former owner of the DIESEL rights in Spain, assigned the right to use the trademarks to FLEXI and Mr. Giner.
As a result, following the CJEU Judgment of 13 September 2013, C-661/11, “Martin y Paz” cited by DIESEL, S.p.A. and being the agreement between DIESEL and the appellants of an indefinite duration, taking into account that the “shared exploitation” of the trademarks might eventually harm the specific functions of the trademarks at stake (i.e. among others, identifying the origin of the products), the Court of Appeal confirms that the assignor (DIESEL S.p.A.) has the right to revoke its consent and consequently regain the right of use over its trademarks.
On these grounds, the Court concludes that DIESEL showed its willingness to recover the rights on its trademarks in multiple occasions, being completely irrelevant that any of the defendants may have not been “notified” of the letters sent in this sense by the trademark holder. In this respect, the Court of Appeal confirms that authorization to use DIESEL trademarks should be deemed as revoked “at least” since 2005, in accordance with the Court of First Instance findings.
In conclusion, the Court of Appeal dismisses both defendants’ appeals and confirms the First Instance Judgment condemning the appellants to pay the litigations costs incurred in the appeals.
Note that the aforesaid decision is not final and that it may be subject to a cassation appeal before the Supreme Court.
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