Federal Supreme Court: defendant has burden of proving that goods are genuine


The German Federal Supreme Court has issued two important decisions concerning the burden of proving that products are genuine and the doctrine of exhaustion of trademark rights (Docket Nos I ZR 52/10 and I ZR 137/10, March 15 2012). These decisions could represent a major boost for trademark owners in their fight against counterfeiting in Germany.

In the first case, plaintiff Converse Inc took legal action against shoe trader Mawa Sportswear. Mawa sold sport shoes bearing the trademark CONVERSE ALL STAR CHUCK TAYLOR to retailers. Converse argued that the shoes were not genuine, while Mawa claimed that they were genuine products brought onto the European market with Converse's consent and, therefore, Converse could not stop the sale of the shoes.

The Court of First Instance ruled in favour of Converse; the Court of Appeals reversed the first instance decision, but the Federal Supreme Court reversed the decision of the Court of Appeals and remanded the case back to it for further investigations.

Mawa used a trademark identical to that of Converse for identical goods, so it would have been a clear-cut case of trademark infringement if the products had not been genuine and if Converse's trademark rights had not been exhausted. However, it was unclear whether the goods were genuine and whether they had been brought onto the European market with Converse's consent.

The general rule in Germany is that the party seeking a specific legal conclusion or whishing to claim an exception to the general rules has the burden of proof. This was confirmed by the Federal Supreme Court in this case. The court required only that Converse give some indication that the products might be counterfeit, and put the burden of proof on Mawa to show that the goods were original Converse shoes.

Similarly, the court stated that Mawa had to prove that Converse's trademark rights were exhausted - namely, that the shoes had been brought onto the market in the European Union or the European Economic Area (EEA) with Converse's consent. The court stated that there is only one exception to this rule for the burden of proof: if the trademark owner has a selective distribution system which helps prevent the cross-border sale of goods within the internal market, the defendant cannot be asked to disclose its chain of distributors, because the trademark owner could then take steps against those members of the selective distribution system which are selling to outsiders. As this would result in market foreclosure, the defendant does not have to disclose its sources and, therefore, does not have the burden of proof.

However, in the present matter Converse did not have a selective distribution system in place, and there was no risk of market foreclosure. Hence, Mawa bore the full burden of proving that it sold genuine products and that these products had been brought onto the market in the European Union or the EEA by Converse or with its consent. This issue is to be clarified by the Court of Appeals on remand.

In the second case, All Star DACH, an exclusive distributor of Converse shoes, sued major trading company Metro Cash & Carry, because Metro sold Converse shoes in its outlets. In this case, it was apparently clear that the goods were genuine Converse shoes. However, All Star argued that the shoes had been brought onto the US market, but had not been brought onto the European market with Converse's consent. Metro argued that All Star had brought the shoes onto the market in the European Union (namely, in Slovenia) with Converse's consent. 

Metro lost in the lower courts, and the Federal Supreme Court confirmed the decisions. Again, the court clearly stated that the defendant had the burden of proving that the products were genuine and that they had been brought onto the European market either by Converse or with its consent. It again referred to the exception relating to the existence of an exclusive distribution system; however, there was no exclusive distribution system here, so Metro had to show that the shoes had been brought onto the European market in Slovenia with Converse's consent. As Metro failed to do so, it lost the case.

Both cases show that the German authorities will put the burden of proof on the defendants in such situations, which makes it easier for trademark owners to enforce their trademark rights against counterfeiters and parallel importers. In particular, trademark owners are not forced to disclose any confidential information or business secrets in order to show why the products are not genuine. According to the first decision, it is sufficient to give some indication that the goods are counterfeit. The alleged infringer must then prove that the goods are genuine and that the trademarks rights have been exhausted. It remains to be seen how these decisions will impact the daily fight against counterfeiting.

Carsten Albrecht, FPS Rechtsanwälte & Notare, Hamburg

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