DHL Express (France) SAS v Chronopost SA (AG Cruz Villalón for the CJ (Grand Chamber); C-235/09; 07.10.10) (opinion not yet in English)
On 7 October 2010, Advocate General Cruz Villalón (the “AG”) examined for the first time the issues raised by cross-border enforcement of an order granted in one Member State in respect of a unitary right. He gave his opinion on the request for a preliminary ruling from the French Supreme Court regarding the geographical effect of an injunction granted by a Community Trade Mark (“CTM”) court for infringement of a CTM, and its enforcement. The opinion will therefore be of interest to owners of CTMs seeking to enforce their marks across the EU.
Chronopost SA (“Chronopost”) owned French and Community trade marks for WEBSHIPPING in Classes 35, 38, 39 and 42 relating, in particular, to services for the collection and delivery of mail. DHL Express (France) (“DHL”) used the same word to designate its internet-based express mail management service.
The Regional Court of Paris (acting as a first instance CTM court) granted an injunction against DHL using either mark in France under Article 98 of Regulation 40/94 (the “Regulation”) now Article 102 of Regulation 207/2009). In accordance with normal French practice, the court also imposed a financial penalty should DHL fail to comply with the injunction. DHL appealed. Chronopost cross-appealed, submitting that the effect of the injunction and periodic penalty payment should not be limited to the French territory, namely because the mark in question, being used for internet-based services, was visible throughout the EU.
The Cour de Cassation made a reference to the Court of Justice relating to the territorial extent of both the injunction and the coercive measures adopted in order to ensure compliance with the injunction. The questions referred were:
- Must Article 98 of Council Regulation (EC) No 40/94 of 20 December 1993 on the CTM be interpreted as meaning that the prohibition issued by a CTM court has effect as a matter of law throughout the entire area of the Community?
- If not, is that court entitled to apply specifically that prohibition to the territories of other States in which the acts of infringement are committed or threatened?
- In either case, are the coercive measures which the court, by application of its national law, has attached to the prohibition issued by it applicable within the territories of the Member States in which that prohibition would have effect?
- In the contrary case, may that court order such a coercive measure, similar or different from that which it adopts pursuant to its national law, by application of the national laws of the States in which that prohibition would have effect?
The Advocate General’s opinion
The AG split the questions at the outset into those that concern the injunction itself (the first and second questions) and those that concern the associated enforcement measures (the third and fourth questions).
A CTM court has, subject to exceptions, jurisdiction in respect of acts of infringement committed within the territory of any of the Member States (by virtue of Articles 93 and 94 of Regulation 40/94, now Articles 97 and 98 of Regulation 207/2009). Articles 93 and 94 are underpinned by the very objective of the Regulation, allowing a trade mark owner to go to one court, instead of a plurality of jurisdictions, to seek relief from infringement of its mark. Therefore, where a CTM court has jurisdiction under Article 93 (for instance, based on the domicile of the Defendant), it will decide whether the mark has been infringed, regardless of where the infringement occurred, and may grant an injunction and impose sanctions to ensure compliance.
The AG was therefore of the opinion that a declaration of infringement is effective throughout the EU and an injunction issued under Article 98 by a national court acting as a CTM court has effect as a matter of law throughout the entire area of the EU, unless there are reasons for not granting such a wide injunction. The AG emphasised that this premise lies at the very heart of the Regulation, providing a single right which may be cost-effectively and uniformly enforced throughout the EU.
There will be a reason for not granting an EU-wide injunction where: (i) the claimant does not assert infringement of its trade mark outside a particular territory (the AG relied on the opinion of Advocate General Sharpston in PAGO International (C-301/07, 6 October 2009); or (ii) where infringement has occurred in only a particular group of Member States because the existence of confusion is dependent on a specific linguistic usage in those territories. Where the claimant does not specify the territory over which the infringement is alleged, the burden will fall on the defendant to show that it is confined to a limited geographical area. In the absence of any such proof, the decision of the CTM court will normally have effect throughout the EU, as will the injunction.
With regard to coercive measures, the AG noted that the purpose of sanctions imposed under Article 98 can be both punitive and preventative, and this was reflected in the separate sub-paragraphs within Article 98.
Considering the punitive penalty provided for under Article 98(1) and imposed on a defendant who has infringed or threatened to infringe a CTM, the AG acknowledged that the complexity of fines as an instrument of procuring compliance with an injunction is enhanced when considered in a cross-border context. He noted that there are three main issues to be considered which may be subject to different rules and procedures in different territories: setting a fine, calculating the actual amount of the fine, and actually enforcing it against the infringer.
(i) Setting the fine
In the AG’s opinion, despite the diversity of existing national legislation in regard to setting of penalties, unified standards do exist with the aim of providing a common enforcement regime. For instance, Article 11 of Directive 2004/48 (the “Enforcement Directive”) states that, where provided for by national law, non-compliance with an injunction shall, where appropriate, be subject to a recurring penalty payment, with a view to ensuring compliance. This, said the AG, indicated that individual Member States acknowledge that their courts may impose penalty payments for breach of an EU-wide injunction, but it is also the case that they are not prevented from imposing alternative or additional measures under their own national laws. The UK is, of course, an example of a Member State where financial penalties are not imposed but penal penalties may instead be imposed for contempt of court.
(ii) Calculation of the amount and enforcement of the fine
The AG again considered that the law governing the calculation of the fine and its enforcement (or alternative enforcement measures) may be that of the country in which the injunction is breached. This was on the basis that the reference to ‘national law’ in the first paragraph of Article 98 ought to be understood to mean ‘lex fori’. This being the case, enforcement measures should be adjusted to suit the specific national law of the country in which the injunction is being enforced. If that state’s national law does not provide for the same enforcement measure to be applied, the court must impose an equivalent sanction which has the equivalent effect of ensuring compliance with the injunction.
The AG again emphasised that national enforcement measures have in theory been harmonised under the Enforcement Directive with the effect that all Member States should be equipped with the necessary enforcement mechanisms for ensuring compliance with an injunction. He concluded that Article 98(1) must be interpreted as meaning that courts in other Member States are required to recognise the effects of a penalty payment imposed by the original CTM court and, where appropriate, to enforce the sanction under Regulation 44/2001/EC (the “Brussels Regulation”) and national law. Where the national law does not provide for the enforcement of penalty payments, equivalent measures must be imposed to achieve an equivalent result i.e. compliance with the original injunction.
At first glance, the AG’s opinion may not shock or surprise. What is put forward by the AG as the default position, i.e. that an injunction granted by a CTM court will have effect throughout the EU unless there is a reason to the contrary, may be described merely as a reflection of the spirit and wording of the Regulation. The Recitals to the Regulation provide: “...decisions regarding the validity and infringement of Community trade marks must have effect and cover the entire area of the Community, as this is the only way of preventing inconsistent decisions on the part of the courts...and of ensuring that the unitary character of Community trade marks is not undermined”. As regards ensuring compliance with an injunction by means of enforcement, the Recitals also state as follows: “The rules contained in the Brussels Convention of Jurisdiction and the Enforcement of Judgments...will apply to all actions at law relating to Community trade marks”.
However, on closer analysis the AG’s opinion leaves many questions as to its practical effect and raises the question whether the Regulation actually achieves its stated objectives.
At first glance, the potential benefits for trade mark owners seem clear; a single decision in a single action brought in a single jurisdiction will usually result in a single injunction which will have effect and will be enforceable in a plurality of territories. Although there will always be an inherent risk of an adverse decision being delivered by one CTM court which will then have pan-European effect, overall this would appear to promise inevitable cost-savings for trade mark owners.
However, in practice a claimant will need to approach individual courts in the Member States where the injunction is breached in order to enforce the injunction granted by the original CTM court. Although there is certainly an argument that this is still preferable to having to initiate fresh infringement proceedings in each Member State, there is still great potential for different outcomes to be reached in different jurisdictions.
For example, it is in theory foreseeable that a defendant, having infringed the claimant’s trade mark in France and having had an injunction granted against it by a CTM court in France with penalty payments attached, may then go on to breach an injunction in the UK with the result that its directors are imprisoned by a UK court for contempt of court. Although it may be argued that the overarching objective of the Regulation is achieved in that the original injunction is ultimately enforced, can it really be said that the same effect is achieved in the UK as in France, or indeed, as was intended by the French court which granted the original injunction to which it attached a financial penalty?
A less extreme example would be where a claimant applies to, say, a Greek court for enforcement of an injunction granted by a CTM court in France. The Greek court may, under national law, impose a penalty payment as attached to the injunction by the French court, but it will presumably be required to impose a fine in an equivalent amount. A defendant in breach of an injunction in Greece may therefore find itself ordered to pay the same amount in penalty payments as it would have to pay if it were in breach in France. The fine payable by the defendant may therefore be an amount previously unheard of in Greece, which is both greatly disproportionate to the damage actually suffered by the claimant in Greece and the amount which the defendant would otherwise have expected to pay for such a breach in Greece.
Although the AG often refers in his opinion to the Enforcement Directive and the Brussels Regulation to answer the questions relating to the enforcement of penalties, the Court of Justice has not previously, to the writers’ knowledge, delivered a judgment which considers their application to the enforcement of pan-European injunctions. There is therefore, as yet, no guidance from the Court of Justice to assist in the interpretation and application of these instruments to the enforcement of pan-European injunctions for trade mark infringement. It is also worth noting that, since the AG delivered his opinion, the European Commission has announced that it intends to revise the Brussels Regulation to improve the current process for enforcing foreign judgments which it describes as ‘costly and cumbersome’.
There are also potential pitfalls in the default position adopted by the AG that an injunction will have effect throughout the EU unless (i) the act complained of took place in a single Member State; or (ii) the risk of confusion results from an interdependence arising from the linguistic usage in each territory.
The AG cites AG Sharpston in Pago in support of (i), but acknowledges that the Court of Justice did not go on to specifically address this point in its judgment. The second of the AG’s ‘exclusions’ raises further questions. How will a CTM court in one part of the EU be able to judge whether a mark, particularly a mark which has acquired distinctiveness through use, is infringed in another part of the Community where different languages and cultural norms exist?
Furthermore, particularly where a mark is used in relation to a service offered via the internet, as in the present case, can the effect of an injunction legitimately be limited to only one or a few Member States on a linguistic basis? The very nature of the internet means that it is essentially borderless and accessible by anyone with an internet connection anywhere in the EU, who may see the otherwise infringing mark and be confused. Of course, this may include nationals of the Member State where the injunction has effect who may, from within that Member State, access the defendant’s website which is offering goods or services under the mark where the injunction is not effective.
Even where the mark is not used in relation to goods or services offered on the internet, issues arise from the concept of the free movement of persons within the EU. A national of the Member State in which the injunction applies may well be confused by the otherwise infringing mark while in another Member State in which the injunction is not effective. For these reasons, it appears the exceptions to the default position put forward by the AG do not seem to ‘fit’ the modern globalised world where linguistic and cultural barriers have already been significantly eroded by technology and international trade and travel.
Interesting comparisons may be drawn between the EU regime as propounded by the AG and the Chinese system of dealing with trade mark infringement. Often the preferred way for a claimant to cease infringement of its mark in China is to apply to the local administrative authority where the infringement is taking place. Local administrative authorities have the power to actively investigate allegations of intellectual property infringement and to subsequently order the defendant to cease its infringement of the mark, impose a fine or seize and destroy any infringing goods and/or machinery and equipment used in their manufacture. A finding of infringement of a local administrative authority has effect and may be enforced throughout China. Claimants generally prefer to apply to the local administrative authorities for relief from infringement of trade marks because the system of enforcement is more efficient; the authorities take a more active role than the courts in investigating the alleged infringement, and the threat of confiscation and destruction of manufacturing equipment serves as a useful deterrent as well as preventing future infringement.
However, it is the less popular route of applying to the People’s Court of China which is more easily compared to the AG’s EU regime. The People’s Court may order the defendant to cease infringement and pay an amount in compensation to the claimant. Orders of this type will have effect and will be enforceable throughout China. Where the order is breached in a different province to that in which the original infringement took place, the claimant may apply for enforcement of the order to either the court which gave the original order or to the court in the province in which the subsequent breach occurs. The original court has the power to either enforce the penalty itself or to ask the local court for its assistance in its enforcement. Although enforcement mechanisms in China are also often viewed as far from perfect, perhaps it is these elements of cooperation between the courts and the ability to go to a single court, instead of various, to enforce an order which are missing from the AG’s proposed regime.
It should be noted that the AG’s Opinion is not binding on the Court of Justice. It is the role of the Advocates General to independently propose legal solutions to the Court. The Court’s judgment may be handed down in the course of 2011.
In the meantime, the main practice point to be taken from the AG’s opinion is for claimants to allege that infringement is taking place throughout the EU and rely on the free movement of persons or any potential for confusion to occur via the internet to support this if there are linguistic issues around the question of whether or not there will be confusion.
This article was first published in the December 2010 edition of the World Intellectual Property Report.