Victory for consumers’ legitimate interests in ECJ’s gas bottle decision

European Union
The Court of Justice of the European Union (ECJ) has given its decision in Viking Gas A/S v Kosan Gas A/S (Case C-46/10, July 14 2011), a reference for a preliminary ruling by the Højesteret (Denmark).

The facts of the case could have come straight out of an exam question: Kosan Gas A/S sold bottles of gas which were protected by a variety of trademark registrations; the composite gas bottles were, by design, reusable and Kosan would refill them for a charge. Viking Gas A/S, a competitor of Kosan, offered a service by which consumers could have their empty composite bottles refilled or exchanged for full ones, the refilled bottles being identified with stickers, although the original Kosan Gas trademarks remained visible. Kosan sued for trademark infringement.

The case turned on the impact of trademark exhaustion on these facts. Kosan took the view that the ‘product’ sold under the trademark was, in fact, the gas contained in the containers and, therefore, while a purchaser would be free to resell an unused bottle of gas, they were not free to reuse what was in effect the packaging of Kosan’s product. Similarly, a competitor was not free to reuse Kosan’s packaging for its own product.

By contrast, Viking asserted that the trademark rights were exhausted in relation to the composite bottle itself, as well as in relation to the gas contained in it, once sold. 

The ECJ began by looking at the legitimate interests of the parties and consumers involved. The composite bottles were distinguished from typical packaging, which had little value independent of the product contained, in that the composite bottle was worth considerably more than the gas contained. This was reflected in the price. The consumers thus had a legitimate interest in refilling and reusing their composite bottle a large number of times in order to recoup their initial outlay. 

Forcing consumers to return to Kosan for refills would limit their freedom to utilise the purchased bottle and would unduly restrict competition in the downstream market for gas refills. While Kosan did have a legitimate interest in exploiting the various marks, this interest was satisfied by the fact that they charged for the value of the bottle in each sale. The composite bottles, being more technically effective than traditional steel bottles, already represented a successful product allowing initial sales of gas-filled composite bottles to command a substantial premium compared to sales of gas in traditional bottles.

The ECJ held that, since the composite bottle itself was a distinct product, the trademark rights associated with that product were exhausted on the first sale. Kosan could not, in principle, contest the refilling of used composite bottles by Viking. 

However, the ECJ also noted, following the established law, that the rights would not be exhausted where Kosan has a legitimate reason to oppose further commercialisation of the goods. This would include cases where third-party use potentially damaged Kosan’s reputation or created an erroneous impression of a commercial connection with Kosan. It would be for the national court to decide this issue given the circumstances surrounding the exchange of the bottles and the labelling used.

Overall, the case is a refreshing reminder of the underlying rationale behind trademark law. By putting the legitimate interests of consumers at the centre of its analysis of exhaustion law, the ECJ reminds us that the core purpose of a trademark is to assist consumers in accessing goods and services from trusted providers and to assist those providers in competing fairly to build effective relationships with consumers.
 
Hastings Guise and Mark Holah, Field Fisher Waterhouse LLP, London

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