Background

The dispute before the European Court of Justice (CJEU) mainly concerned two distinct companies, Gugler GmbH and Gugler France. The latter manufactured products in Germany that were distributed by the former in France. Gugler GmbH and some associates of Gugler France created a third company called Gugler Europe SA, which registered a French trade mark for and licensed it to Gugler France. Around the same period of time, Gugler GmbH registered a European Union trade mark for an identical trademark, the registration at the centre of this dispute.

More than seven years later, Gugler France argued that this mark should be declared invalid because there existed a likelihood of confusion with its anterior company name. The decisions at all instances were fairly predictable until the case came before the General Court (GC) for the second time in Case T-238/17 where the case took a more interesting turn.

For the first time since the beginning of the procedure, the GC took into account the business relationship that once existed between the parties in order to determine whether there was, in practice, a likelihood of confusion between the goods and services provided under Gugler GmbH’s trade mark and the activities carried out by Gugler France under its company name. In spite of the fact that the conflicting signs and the conflicting goods and services were similar enough for a likelihood of confusion to exist under normal circumstances, the GC considered that the economic link that existed between Gugler France and Gugler GmbH at the date of filing of the contested mark precluded any finding of likelihood of confusion.

The GC highlighted that the finding of a likelihood of confusion is intended to protect the trade mark’s function of indicating origin if there is a risk that consumers may be misled as to the origin of the goods or services in question, on the false assumption that the goods and services covered by the signs at issue come from the same undertaking or from economically-linked undertakings.

The GC then considered that, at the date of filing of the trade mark, the economic links between the parties meant that the fact that the consumer might believe that the goods and services in question come from economically-linked undertakings did not constitute an error as to their origin.

It reached this conclusion after taking into account in particular the following facts:

• Gugler France was the distributor in France of the goods produced by Gugler GmbH
• Gugler GmbH and Gugler France had been in this business relationship for three years
• Gugler GmbH held shares in the capital of Gugler France
• Gugler GmbH and some of Gugler France’s founders created a company called Gugler Europe
• Gugler France was Gugler Europe’s licensee for a French trade mark registration for an identical mark to the one at issue

The GC added that there was no need for the consumer to be aware of the existence of the economic links between the parties for those to preclude a likelihood of confusion.

This judgment was appealed before the CJEU by Gugler France.

CJEU on the business relationship

In its judgment taken in Case C‑736/18 P, the views expressed by the GC were confirmed in full by the judges of the CJEU: the economic links that exist between two parties at the moment of filing of a trade mark application can preclude the existence of a likelihood of confusion, even though there would be a likelihood of confusion in the same circumstances if the parties would be economically independent from one another.

The CJEU also added that the economic links between two parties that can preclude the existence of a likelihood of confusion in practice are not limited to the exact circumstances of this case. The same conclusion can be reached as long as there is a single point of control within a group of operators in respect of the goods manufactured by one of them and distributed by another. In other words, the economic ties between two companies can preclude the existence of a likelihood of confusion where the owner of the earlier right is the distributor of the goods manufactured by the owner of the contested trade mark, but also vice versa.

Irrespective of the specific roles of the parties, the decisive point is whether or not there is a single point of control for the goods and whether or not the remaining circumstances preclude the existence of a likelihood of confusion in practice, which must be assessed globally by taking into account all the relevant factors.

What does this mean for rights holders?

The main takeaway from Gugler is that the owners of distinctive signs (be it trade mark rights or any other type of rights that can be relied on for establishing a likelihood of confusion) must pay a careful attention when acting against trade mark rights owned by third parties. They must in particular determine whether they maintain or have maintained business relationship in the past with those third parties. The existence of distribution agreements between the parties as regards the distinctive signs involved in the dispute is a crucial element in this assessment.

A particular emphasis should be placed on the relationship maintained at the moment of filing of the contested trade mark, which is the only point in time to be taken into account. The fact that the two parties have ceased collaboration at a later date will not compensate the existence of this relationship at the moment of filing.

This judgment is also a reminder of the importance of ascertaining a trademark’s chain of title. The owner of a purchased trademark could face the consequences of the business relationship that its previous owner maintained with third parties.

Next steps

The solution applied in Gugler stands to reason in view of the specific facts and circumstances of the case. What is not so clear is how far this solution can be extended to less clear-cut situations outside the CJEU’s parameters in this case. For instance, could Gugler apply in the context of oppositions, in which the existence of a likelihood of confusion is also assessed?

This judgment may also set the approach for the determination of specific circumstances in which two companies are or aren’t sufficiently linked economically for a likelihood of confusion to be precluded. We look forward to reporting on subsequent decisions of the courts and administrative bodies in the European Union to understand the impact in practice of Gugler on their approach.

Authored by Victor Willaert