In the field of industrial property, few questions generate as many disputes as the conflict between the exclusive rights of the proprietor of a trademark and the activities engaged in by so-called “parallel importers”. In this scenario, the crucial aspect is not so much the authenticity of the product, as the legitimacy of its marketing in the European Economic Area. What starts out as a distribution problem can end up being purely a question of evidence: Who must evidence that the trademark no longer confers ius prohibendi on its proprietor?
The free movement of goods in the European Economic Area (EEA) is increasingly leading to situations in which authentically branded products are circulating outside authorized distribution networks. This gives rise to legal conflicts between the holders of the trademark rights and independent traders, also known as “parallel importers”.
Where the proprietor of a trademark seeks to prevent the marketing of its products by unauthorized third parties, it tends to exercise the ius prohibendi conferred by the exclusive rights arising from the trademark registration. However, if the defendant alleges that the trademark rights are “exhausted”, the conflict hinges on who must prove that such exhaustion has occurred. This is not just a procedural issue: it is decisive in the outcome of the lawsuit.
What is exhaustion of trademark rights?
Exhaustion of trademark rights is a legal principle according to which a trademark holder cannot oppose the resale of its products once they have been placed on the EEA market by such holder or with its consent. In other words, the exclusive right conferred by the trademark registration to prevent unauthorized use is “exhausted” following the first legitimate marketing in the EEA.
This principle avoids the partitioning of the European market and stops practices that restrict competition such as territorial segmentation through closed distribution networks. The fact is that price differences between countries arising from commercial decisions or marketing policies, provide an incentive for independent operators to purchase branded products in less expensive countries and then resell them in others where the price is higher. This practice — which is completely legal if it takes place within the EEA, with authentic products — clashes with the control that trademark proprietors seek to exert over their distribution network.
The conflict arises when the trademark holder sues those operators on the grounds that it has not given its consent to the re-sale and their defense strategy is to claim exhaustion of trademark rights. It is at this point that the question needs to be asked: Who must prove what?
The general principle is that the party that affirms a fact must prove it. Therefore, if the parallel importer argues that the trademark rights are exhausted, it is up to such importer to prove that the products were first marketed in the EEA by the proprietor or with its consent. This has been acknowledged by the Court of Justice of the European Union (CJEU), especially in the Davidoff / Levi Strauss case.
However, this rule is not always strictly applicable. In many cases the importer does not have access to sufficient information on the origin of the products: it does not know who marketed it for the first time or if such marketing took place with the trademark holder’s authorization. Moreover, demanding that it must reveal its supply chain could jeopardize its commercial relations. This problem has been recognized by the CJEU in case C‑367/21, Hewlett Packard vs. Senetic (judgment of January 18, 2024), which admitted that, in certain circumstances, the burden of proof falls on the trademark proprietor. Specifically, if the proprietor does not collaborate or is unable to evidence that the products were introduced in the EEA without its consent, the right could be considered exhausted, in accordance with the principle of ease of access to evidence and to avoid an artificial partitioning of the internal market.
Therefore, in lawsuits involving the exhaustion of trademark rights, the assignment of the burden of proof cannot be rigid. It is necessary to adapt to the circumstances of the case in view of who is in the best position to provide the relevant evidence. Spanish procedural legislation, specifically article 217.6 of the Civil Procedure Law, allows the courts to distribute the burden of proof based on each litigant’s ease of access to the information.
What does the trademark holder need to prove?
- When the first sale took place: if it was outside the EEA, the trademark rights are not considered exhausted by default.
- Lack of consent: it must be clear that the proprietor did not authorize the subsequent entry of the product into the EEA.
- Indicative elements: the labels, differences in the labeling or symbols can be sufficient evidence (i.e. NON EEA SALE ONLY).
Once the proprietor evidences these points, the importer must prove, if it wants to maintain its defense, that consent was given for this import.
And what does the parallel importer need to prove?
If the trademark holder cannot prove that the first sale was outside the EEA or that it did not authorize the import, the defendant can benefit from presumed exhaustion. However, if it is evidenced that the products came from outside, it must evidence that:
- The proprietor consented to their reentry into the EEA, whether explicitly or implicitly and unambiguously.
- There are circumstances that reflect the intention to waive the right of exclusion (for example, prior practices by the proprietor or open distribution).
Conversely, in lawsuits where neither party manages to provide sufficient evidence of their statements, the ease of access to evidence criterion is decisive. If the proprietor is able to track the distribution of the product, it cannot simply object: it must provide evidence. In the absence of proof, exhaustion is presumed to exist in order to avoid artificial partitioning of the market.
As can be seen, the general rule is clear, but the ease of access to evidence principle adds flexibility in order to avoid injustice or abuse. Indeed, it enables the protection of both trademark rights and free competition, as well as unity in the European market.
