Supreme Court rules on 'use' of a trademark

Ever since landmark decisions such as BMW (Case C-63/97) and Arsenal (Case C-206/01) have been issued, there has been an ongoing discussion as to what truly constitutes use of a trademark. The question of what qualifies as 'use' is of utmost importance for proprietors, competitors and consumers alike, as that definition ultimately determines the outer perimeter of the exclusive rights conferred by a trademark.

In Mon.Zon v Layher (T 301-12, July 9 2014), the Supreme Court of Sweden had the occasion to explore this question further when it considered the scope of the exclusive rights conferred by Article 4 of the Swedish Trademark Act (1960:644). The article - as far as the Mon.Zon case is concerned - correlates with Article 5(1)(a) of the Trademarks Directive (2008/95/EC).

Mon.Zon, a Swedish scaffold manufacturer, used in its product catalogues a photograph from a building site showcasing a close up of a scaffold. In accordance with Swedish regulations, all components were marked with the manufacturer’s trademark. However, while some components were marked with Mon.Zon’s own logotype, one bore the mark of a competitor, Layher. It was indisputable that the catalogues had been used in the course of trade, and that there was no consent from Layher.

The Supreme Court found itself having to answer two questions:

1. whether use of Layher's mark in the photography in the catalogues constituted 'use' under the Trademark Act; and 
2. if this was the case, whether Layher could prevent Mon.Zon from using its mark.

In other words, the court had to define the limits of the exclusive rights conferred by a trademark. 

The court recognised that this was a case of so-called 'double identity' (ie, both the marks and the goods were identical). Under Article 5(1)(a), a proprietor is entitled to prevent third parties from using its mark in relation to goods or services that are identical. After examining EU case law, the court stated that the phrase 'in relation to' is to be given a wide interpretation. Consequently, the court found that Mon.Zon’s use was in relation to identical goods, even though Mon.Zon had not used Layher’s mark on its own goods.

However, in accordance with settled case law, the use must also have an adverse effect on the functions of the trademark. In early Swedish trademark law, it was widely accepted that the function of a trademark was its ability to indicate origin. Guaranteeing origin is still considered the essential function of a trademark, but not the only one. Relying on EU case law, the Supreme Court ascertained that there are other functions worthy of protection, such as guaranteeing quality, communication, investment and advertising functions (see L'Oréal (C-487/07), Paragraphs 58 and 60). The Supreme Court proceeded to state that, in case of double identity, the proprietor cannot oppose the use if such use is not liable to cause detriment to any of the functions of the trademark. Referring to the ruling of the Court of Justice of the European Union (ECJ) in Google France (Joined Cases C-236/08, C-237/08 and C-238/08), the Supreme Court developed its reasoning, stating that there is an adverse effect on the origin function if the use implies a financial connection between the companies. 

However, in the Mon.Zon case, the court found it highly unlikely that the average buyer of scaffolds would interpret the advertisement in any other way than as simply demonstrating the compatibility of Mon.Zon's scaffolds with Layher's scaffolds. Thus, there was no risk of confusion regarding the origin of the products. Further, there was no indication of financial or other connection between the companies. The Supreme Court also rejected Layher’s argument that use of its trademark threatened to harm the mark’s investment function and reputation.

In conclusion, the Supreme Court stated that, while it was clear that Mon.Zon had used Layher’s trademark in relation to identical goods and in the course of trade, there was no risk of harming any of the trademark’s functions. Consequently, Layher could not prevent Mon.Zon from using its trademark in that manner.

Inevitably, one wonders whether the ruling is in line with the - somewhat inconsistent - case law from the ECJ. The case also introduces interesting issues into the ongoing debate in Sweden regarding the emerging legislative changes currently being processed in the European Union. Initially, the European Commission proposed a change to the Trademark Directive that explicitly outlined the function of 'guaranteeing origin' as the relevant function of a trademark. However, in the most recent form of the proposal, this change was abandoned. Thus, for now, there seems to be a consensus in Sweden that a trademark has multiple functions that are worthy of protection. However, it is still unclear precisely which functions are relevant, and whether they all carry the same weight.

Tom Kronhöffer and Linnéa Edman, von lode advokat ab, Stockholm