Budvar one step closer to exclusive right to use BUD in Austria

European Union

In Budejovicky Budvar Narodni Podnik v Rudolf Ammersin GmbH, the European Court of Justice (ECJ) has ruled that a bilateral agreement between Austria (an EU member state) and the Czech Republic (a non-member country) granting the plaintiff the exclusive right to use BUD in Austria does not contravene EU law as it came into effect prior to Austria's accession to the European Union. However, the ECJ noted that it was for the Austrian courts to decide whether to grant the agreement full force and effect.

The case forms part of the ongoing litigation between US brewer Anheuser-Busch and its Czech counterpart Budejovický Budvar (BB). Rudolf Ammersin is an Austrian distributor for Anheuser-Busch's beer sold under the mark AMERICAN BUD. BB filed a suit against Rudolf Ammersin based on its prior trademark rights in BUD, and on the basis of a bilateral agreement between Austria and the Czech Republic, which protects, among other things, indications and designations of origin. Pursuant to this agreement, Austria had agreed to reserve the word BUD exclusively for Czech products and, more specifically, for Czech beer.

The Commercial Court of Vienna issued a preliminary injunction preventing the use of AMERICAN BUD, as requested. Rudolf Ammersin's appeals to the Court of Appeals of Vienna and the Supreme Court of Austria were rejected. The case went to full trial before the Commercial Court, which requested a preliminary ruling from the ECJ on various questions, including whether the bilateral agreement contravenes EU law.

In its ruling, the ECJ held that neither Article 28 of the EC Treaty nor Council Regulation 2081/92 are infringed by:

"the application of a provision of a bilateral agreement between a member state [Austria] and a non-member country [the Czech Republic] under which a simple and indirect indication of geographical origin of such non-member country shall be accorded protection in the importing member state."

It stated that (i) this was the case even if there was a risk of consumers being misled, and (ii) in such circumstances the import of a product lawfully marketed in another member state may be prevented. However, it noted that Article 28 of the EC Treaty does preclude the application of such a provision if the sign - in this case BUD - does not, in relation to the non-member country, "directly or indirectly refer to the geographical source of the product that it designates".

The ECJ pointed out that, pursuant to Article 307 of the EC Treaty, a member state's national courts are permitted to apply provisions of bilateral agreements between that member state and a non-member country, even where those provisions prove contrary to the EC Treaty, provided that such agreements were concluded prior to the member state's accession to the European Union.

Although it was possible that the provisions of the agreement did not contravene EU law, the ECJ stressed that it was for the Austrian courts to decide whether to grant the agreement full force and effect. It reasoned that the bilateral agreement between Austria and the Czech Republic was concluded originally with the Czechoslovak Socialist Republic, which eventually split into the Czech Republic and the Slovak Republic. However, the ECJ stated that it was not clear whether Austria had applied what it labelled the tabula rasa principle (automatic expiry of all international agreements following the creation of a new state) after the formation of the new Republics. If this was the case, the bilateral agreement concluded previously would not be applicable and EU law would prevail.

It is therefore up to the Austrian Commercial Court to decide whether (i) the agreement subsists following the creation of the Czech Republic and the Slovak Republic, and (ii) the protection of the BUD mark granted under the agreement is acceptable pursuant to Article 28 of the EC Treaty or Council Regulation 2081/92. However, even if it is not acceptable, the Commercial Court could determine that the agreement is outside of the control of EU law.

It should be noted that the Commercial Court's ruling will have to take into account that BB's claim is not only based on the bilateral agreement, but also on its prior trademark rights.

For a background discussion of this case see Budvar set to win exclusive right to BUD in Austria.

Hans Georg Zeiner, Zeiner & Zeiner, Vienna

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